Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amadeus IT Group SA (XMAD:AMS, Financial) reported a strong financial performance in the first half of 2024, with revenue increasing by 13%, EBITDA growing by 15%, EBIT rising by 19%, and adjusted profit expanding by 22%.
- The company generated robust free cash flow of EUR530 million, resulting in net financial debt of EUR2.6 billion, representing 1.15 times last 12-month EBITDA.
- Amadeus IT Group SA (XMAD:AMS) continues to advance well on its NDC strategy, with 60 NDC airline agreements signed and 27 implemented to date.
- The hospitality segment saw significant growth, with Accor implementing Amadeus' market-leading cloud-based Central Reservation System for its extensive portfolio of properties globally.
- The company is making significant strides in the airline retailing transformation with its next-generation airline IT product suite, Nevio, which has already secured contracts with Finnair, Saudia, and British Airways.
Negative Points
- Bookings in North America continue to be impacted by volumes channeled through direct connections between a large online travel agency and a few large carriers, affecting local bookings in the region.
- The bankruptcy of a large European tour operator, FTI Group, negatively impacted bookings in the second quarter.
- The company expects volume growth in Q3 2024 to be softer than in Q2 2024, due to a strong recovery in August 2023 and other comparison effects.
- Fixed costs are expected to increase in the second half of 2024, driven by customer implementations, R&D investments, and the consolidation of Vision-Box.
- The company faces challenges in maintaining its EBITDA margin due to increased transaction processing and cloud migration costs.
Q & A Highlights
Highlights from Amadeus IT Group SA (XMAD:AMS) H1 2024 Earnings Call
Q: You reiterated the guidance for the year despite changes in the industry. How do you view the market today, and is the capacity growth in the second half still comfortable for you to hit those numbers?
A: Luis Maroto, President and CEO: We are sticking to our guidance. The impact we expect to be more on the yield from some airlines. Projections in terms of traffic are healthy for the full year. Even if there is some small adjustment in total capacity, we feel confident that we'll be able to achieve the figures provided.
Q: How do you see budgets in the travel industry versus the pressure on software spending elsewhere?
A: Luis Maroto, President and CEO: Investments are long-term for many of these transformations. We have been signing contracts with a majority of the players in the industry. For now, things are business as usual, and we have not seen a decision not to continue investing.
Q: Can you explain the discrepancy between IATA's figures for international travel and your volume recovery in Latin America?
A: Decius Valmorbida, President - Travel Unit: We have a more favorable mix towards global versus domestic. In Latin America, we have direct connects between large airlines and travel agencies, impacting volumes but not materially affecting revenues.
Q: What is driving the faster rate of fixed cost growth in the second half, and how do you ensure flat EBITDA margins?
A: Luis Maroto, President and CEO: The increase in fixed costs is due to customer implementations, acquisitions like Vision-Box, and cloud migration. Despite these, we feel confident about maintaining flat EBITDA margins, excluding cloud implementation impacts.
Q: What percentage of your bookings are NDC, and should we expect a ramp-up given the agreements signed?
A: Decius Valmorbida, President - Travel Unit: NDC bookings are still in the low single digits but are increasing massively. Adoption depends on airlines' commercial strategies. We expect the trend to continue with more airlines adopting NDC.
Q: How do you view the impact of Turkish Airlines' GDS surcharge starting in October?
A: Decius Valmorbida, President - Travel Unit: It is early to position ourselves on Turkish Airlines' approach. We have ongoing renegotiations and will provide more color once concluded.
Q: Can you explain the gross margin improvement in Q2 versus Q1?
A: Luis Maroto, President and CEO: The impacts between Q1 and Q2 offset each other. Year-to-date figures are a good representation of what we expect moving forward.
Q: What is the outlook for North America bookings in the second half?
A: Decius Valmorbida, President - Travel Unit: We expect positive growth in Q4 as we lap the direct connect impact from a large OTA. The underlying trend is positive, and we anticipate growth in Q4.
Q: How do you expect hospitality segment growth to accelerate in the second half?
A: Luis Maroto, President and CEO: We have customer signatures and seasonality in implementations. We feel confident about achieving mid-teens growth based on current projections.
Q: What is the impact of the Microsoft Crowdstrike turmoil on your business?
A: Luis Maroto, President and CEO: We do not expect any impact. It is extremely difficult to analyze cancellations' origins, but we have not seen any impact in our July figures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
