Release Date: November 07, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Group revenue increased by 23% for the first 9 months of 2023.
- EBITDA grew by 34%, and adjusted profit expanded by 68%.
- Strong free cash flow generation resulted in net financial debt amounting to EUR 2.1 billion, representing 1.1x last 12-month EBITDA.
- Amadeus announced a new share repurchase program to acquire a maximum of 5.8 million shares, representing a maximum investment of EUR 625 million.
- Amadeus signed 11 new contracts or renewals of distribution agreements in the first quarter, totaling 47 for the first 9 months of the year.
Negative Points
- Bookings evolution in October was impacted by an increase in cancellations in several regions, including the Middle East, APAC, and Western Europe.
- International traffic remains below historical levels, affecting overall volume evolution.
- Revenue per PB in Air IT Solutions decreased by 6% due to a proportion of Air IT revenues not linked to passengers boarded growing at a softer rate.
- Cost of revenue grew by 25.5% in the 9-month period versus 2022, driven by volume expansion and several factors impacting Air Distribution variable costs.
- P&L fixed costs increased by 12% in the first 9 months of 2023 compared to last year, excluding the government grant in the second quarter of 2022.
Q & A Highlights
Highlights of Amadeus IT Group SA (XMAD:AMS, Financial) Q3 2023 Earnings Call
Q: Can you comment on the growth outlook in Hospitality? Is the 15% growth on a constant FX basis in line with your expectations? Should we expect a reacceleration of growth in that segment?
A: Yes, 15% to 16% growth is in line with our expectations. We expect healthy growth in the future, but not at the 30% to 40% levels seen in some past quarters.
Q: What is your approach to capital allocation going forward? Are M&A opportunities more limited now, leading to a higher proportion of buybacks?
A: M&A remains a priority for us to continue growing the business. However, with our leverage at the lower end of our target range, we will consider share buybacks and extraordinary shareholder remuneration.
Q: Can you provide an update on the cloud transition and its expected completion? How much temporary costs are currently in the P&L that will drop away once the transition is completed?
A: The cloud migration is progressing according to our original plans, which span 3 to 5 years. We are already seeing cloud costs related to our migration. The migration costs and capacity on demand costs represent about 3 to 4 percentage points of our cost growth range for the year.
Q: Can you comment on the economics of NDC agreements and the impact on international air traffic volumes?
A: NDC agreements vary by region. Our goal is for NDC to be neutral on a net basis, with potential for incremental fees. International traffic recovery is influenced by factors such as capacity issues and geopolitical events, but we expect it to normalize over time.
Q: What proportion of your airline customers are NDC-enabled, and how does this compare to IATA's reported 10% NDC volume?
A: We have around 30 airlines NDC-enabled on the GDS, out of 70 certified by IATA. Our NDC volumes are growing but still from a low base. The industry is on a journey, and we expect volumes to increase in 2024.
Q: Can you provide insights on the Nevio platform and its impact on revenue per passenger?
A: Nevio is a long-term transition that will take years. It aims to provide better technology and service, potentially leading to incremental revenues. The commercial model is still being developed but will likely be transactional.
Q: How do you see the evolution of revenue per booking and fixed costs into next year?
A: Revenue per booking is influenced by booking mix, customer mix, and pricing effects. Fixed costs will continue to include migration costs and capacity on demand costs related to the cloud transition. We will provide more detailed guidance in February.
Q: Can you elaborate on the impact of geopolitical events on bookings and cancellations?
A: The impact of geopolitical events like the Middle East conflict led to increased cancellations, particularly for international flights. However, we have seen a progressive improvement in booking levels, returning to normality in early November.
Q: What are your expectations for CapEx and working capital in Q4?
A: CapEx growth is expected to be slower than last year, and we are on track with our full-year guidance. Working capital performance was strong in Q3, benefiting from better gross margin and collections. We expect normal seasonality to continue in Q4.
Q: Can you provide an update on the Marriott CRS project and its expected revenue impact?
A: The Marriott CRS project is progressing well and according to plan. However, we have not disclosed specific migration dates or revenue impact timelines.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
