Amadeus It Group Sa Ord

keypad at any moment during the presentation. I am now pleased to hand over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

Good afternoon. Welcome to our 23 first half results presentation, and thanks a lot for joining us today. I'm joined by Till. I will start with an overview of our most important developments. Till will elaborate on the key financial aspects. Stand to slide four to review our performance in the period. In the first six months of this year, our group revenue increased by 28% over prior year. The EBITDA grew 41%, adjusted profit expanded by 85%. This positive financial performance supported a 57% increase in free cash flow, resulting in net financial debt of 1.870 million, which represented one times last 12-month EBITDA. Our results in the first half of the year were driven by our segments' strong operating performance, which were supported by the continued strengthening of the travel industry. Global traffic continued to advance to the second quarter, with domestic traffic posting positive growth over pre-pandemic levels and international traffic advancing steadily. Additionally, we have remained highly focused on our R&D efforts and capex programs in the period as we are investing for the future. Our key areas of focus include the evolution of our hospitality platform, partnership with Microsoft and our seed to the cloud, the implementation projects of new customers across our business, NDC-related solutions and capabilities, including our next-generation airline retail offering under the Offers and Orders initiatives, and portfolio enhancements and expansion, including airline IT, digitalization, and enhanced shopping and retailing, and evolution of our portfolio for travel sellers, airports, and in-payments. Finally, we were pleased to resume shareholder remuneration in full at Amadeus, an important piece of our capital allocation strategy. In June, we announced a shared repurchase program of over 430 million, and in July, we made payment of our ordinary dividend at 74 euro cents per share amounting to a total of 333 million. Let's now review the key developments of each of our reported segments. Please turn to slide five, starting with our distributions. In the past quarter, we signed 16 new contracts of renewals of distribution agreements, taking the total to 36 for the first half of the year. We continue to advance with our NDC strategy to expand our customer base and to upsell technology to a number of our airline, travel agency, and corporate customers. With regards to our volume evolution, in the first six of the year, Amadeus Booking grew by 17% relative to prior year. Please remember that the recovery experience by the travel industry throughout 2022 impacts our booking growth rates in 2023. Relative to 2019, Amadeus' booking in the second quarter improved for the first quarter performance by 3.4 percentage points to minus 21.7 versus 19. This resulted in a minus 23.5 versus 19 performance for the first half of the year, outperforming our industry-supported market share gains. Our best performing region remains North America, which grew 4% in the first half relative to 2019, and was Amadeus' largest region in the period, accounting for 29% of our bookings. Over the first half, APAC has been the region experiencing the strongest improvement in growth relative to 2019. Finally, into July, we continue to see an improvement in our booking evolution. Let's turn to slide six for a review of Air IT solutions. In terms of business developments, we recently signed a new Altea PSS contract with an undisclosed airline carrying 25 million passengers annually. Also, several airlines' customers signed for additional solutions, pre-implemented new solutions such as Tunisair, Vistara, Air Corsica, and KLM. In Airport IT, we continue to expand our reach through new agreements with several players, including Noida, International Airport, the operator of Terminal 4 at John F. Kennedy International, Munich T1 Airline Club, a group of carriers operating from Terminal 1, and Spokane International Airport. In relation to our volumes, Amadeus PV was 37% higher in the first half of the year than in the same period of 22, driven by continued progress in travel industry and new customer implementations. Please remember that the recovery experienced by the travel industry through 2022 impacts our PV growth rates this year. While those passengers boarded for the months of the year were 5% below 19%. This was composed of organic growth of minus 6, planning organic growth from customer implementations, the more recent ones being Etihad, ITA, and Hawaiian Airlines in 2023, and Air India in 2022, partly offset by airline customers ceasing or suspending operations or demigrating from our platform, including the demigration of Russian carriers during 2022. In the first half of 2023, North America remains our best-performing region, delivering 28% growth over 2019, and Western Europe was our largest region, representing 32% of Amadeo's passengers' borders. Over the first half, North America and Asia-Pac were the regions reporting the strongest improvements in growth relative to 2019. Into July, based on the most recent data that we have, our PV performance versus 2019 has continued to advance. Slide 7, we have an update on our hospitality segment. Hospitality and other solutions continue to advance well, supported by new customer implementations and volume expansions. As a result, our revenues in this segment grew by 24% in the first half relative to prior year. Both hospitality, which generates the majority of the revenues in this segment, and payments deliver strong growth versus prior year. We also saw continued interest in the video from customers for solutions across our portfolio. With this, I will now pass on to Till for further details on our financial performance.

Thank you, Luis, and hello, everyone. Please turn to slide nine. Before starting with the review of our financial evolution, let me clarify that for purposes of comparability between 2023 and 2022, there are a number of non-recurring elements impacting our performance on the P&L. In the second quarter of 2023, we changed our tax provision fundamentally due to the positive resolution of certain proceedings with the Indian tax authorities. As a consequence of this change, Our income taxes were impacted positively by an amount of 29.2 million euros and our net financial expense increased by 6.6 million euros together combined resulting in an increase in adjusted profit of 22.6 million euros. Let me also clarify EBITDA is not impacted by any of this. Also, as you know, in the second quarter of 2022, we received a non-refundable government grant amounting to 51.2 million euros pre-tax or 38.9 million euros post-tax, which reduced our fixed cost base and resulted in an increase in our EBITDA. In order to facilitate the understanding of the evolution of our business in 2023, we've excluded these effects from the performance overview we are providing you with in this presentation. Further details on these effects and the full reconciliation to the reported figures can be found in the half one 2023 management review. Now, to review our revenue evolution, in the first half of 2023, our group revenue grew 28.2% versus half one 2022, supported by revenue growth across our segments. In air distribution, revenue in the first six months of the year was 31.1% above 2022, primarily driven by the booking evolution Luis described. And by a revenue per booking, which was eleven point eight percent higher than in half one twenty twenty two fundamentally driven by a lower weight of local bookings in the first half of twenty twenty three compared to twenty twenty two and pricing effects, including impacts from inflation and yearly price adjustment. With regards to RIT solutions, revenue in the first half of the year was 26.2% higher than in half 1, 2022, driven by the PB volumes evolution, coupled with a 7.7% lower revenue per PB. The decrease in the revenue per PB in the period was expected and was primarily driven by a proportion of RIT revenues not linked to PBs growing at a softer rate than PBs. more than offsetting positive pricing impacts from the Altea-Navitea customer mix, inflationary or price adjustments, and from upselling of incremental solutions. To briefly recap on the implementation front, in line with plan, as of now, we have implemented Etihad Airways, Ita Airways, and Hawaiian Airlines, and continue working to implement Allegiant and Bambu Airways during the second half of 2023. As we said in February, This should bring us an approximate incremental 45 to 55 million PBs in 2023, resulting from the 2022 and 2023 migrations. Let me remind you that this is off a 2022 PB base reduced by the Russian carrier demigrations, which in 2022 brought us 25 million PBs. Regarding hospitality and other solutions, revenue in the first six months of the year was 23.6% above half one 2022, driven by strong performances of both hospitality and payments on the back of new customer implementations and volume expansion. Within hospitality, hospitality IT reported healthy growth, mainly driven by sales and event management, service optimization, and Amadeus CRS revenues. supported by new customer implementations and higher reservation volumes. Media distribution revenues increased notably, backed by an increase in media transactions and bookings. And business intelligence revenue also expanded in the period, driven by customer implementations. Within payments, all its revenue lines reported strong growth rates, supported by higher payment transactions and customer implementations. Please now turn to slide 10 for a review of segment contribution and net indirect cost evolution. Air distribution's contribution grew by 33.2% in the first six months versus 2022 as a result of the revenue growth I've just described and by a 29.3% net operating cost increase which resulted from higher variable cost driven by the bookings evolution and other effects such as customer and country mix and an increase in fixed costs largely caused by R&D investment expansion and a higher unitary personnel cost. R&D investment in the period was mainly focused on the implementation of NDC contracts on the airline and travel agency side, as well as the evolution of our portfolio for airlines, travel sellers, and corporations. The contribution margin of the segment in the first half was 47.4%, an expansion of 0.7 percentage points from the first half of 2022. With regards to AI IT solutions contribution in the first half of the year, this was 28.5% higher than in half one 2022, resulting from the revenue evolution described before and an increase in net operating costs of 21%, which was fundamentally driven by the expansion of our development teams focused on the enhancement of our portfolio for airlines, customer implementations, and services, and the unitary personnel increase. ARIT solutions contribution margin in the first half was 71.2%, expanding 1.3 percentage points from prior year. Regarding hospitality and other solutions contribution in the first six months of the year, this was 42.3% above path 1, 2022, as a result of the revenue growth described before, and a higher net operating cost of 15.8%. And growth in net operating costs resulted from higher variable costs, primarily driven by volume expansion at our B2B wallet payment solution, as well as at our media distribution and CRS hospitality business, and an increase in fixed costs fundamentally caused by expanded R&D teams, dedicated to the evolution of our hospitality and payment solution portfolio and to customer implementations and by and by a higher unitary personnel cost as well hospitality and other solutions contribution margin in the first half was 34 which is 4.4 percentage points higher than the same period of 2022. finally Net indirect costs expanded by 11.8%, mainly resulting from an increase in transaction processing and cloud costs as a result of the volume expansion and our progressive shift to the public cloud and a unitary personnel increase. Please now turn to slide 11 for a review of our EBITDA running machine. In the first half of 2023, our EBITDA was 41.3% higher than in 2022. EBITDA margin expanded by 3.6 percentage points to 38.9. Our EBITDA performance resulted from the revenue evolution explained before and the higher cost of revenue and an increase in our combined personnel and other operating expenses cost lines. Cost of revenue grew by 35.3% in the six-month period versus 2022, resulting from volume expansion across our segments particularly in air distribution, in our media distribution and CRS hospitality businesses, and in our B2B wallet payments business. Cost of revenue was also impacted by several factors, including customer, country, and business mixes. Our P&L fixed costs in the first half of 2023 compared to the same half last year were 12.7% higher, excluding the government grant in the second quarter of 2022. This cost evolution resulted from increased resources, particularly in our development activity to support our R&D investment, as Luis has described, coupled with higher unitary costs resulting from our global salary increase, growth in non-personnel-related spend like travel and training, among others, driven by the business expansion relative to prior year, and higher transaction processing and cloud costs caused by the volume expansion and our shift to the cloud. Just to recap on what we said in February, our P&L fixed cost growth in 2023 should range between 10 to 40% over 2022, excluding the 51.2 million Euro government grant received in 2022. We expect fixed cost growth to have in half two, a similar growth pattern than we saw in half one. To review the evolution below the EBITDA line briefly, in the first half of 2023 compared to 2022, DNA expense decreased slightly by 2.2% with a lower depreciation expense from a reduction in hardware investment, largely driven by our shift to the cloud, offsetting higher amortization expense from internally developed assets. Net financial expense also declined in the period by 55.3%, driven by an increase in financial income and exchange gains. Interest expense was in line with prior year as a result of higher average cost of debt relative to last year, offset by a lower gross debt. Income taxes increased by 92.6% in the six-month period versus prior year, largely driven by higher taxable income. And finally, resulting from all of these effects, adjusted profit grew 85% in the first half versus 2022. Please turn to page 12 to review our R&D investment and capex. R&D investment grew by 20.2% in the first half versus 2022. And as Louis has described, we are investing for the future and focusing on several strategic areas, hospitality, cloud, and VC, one order to highlight a few. as well as on new customer implementations across our businesses. In the first six months of 2023, our capex increased by 52.8 million euros or 20.6% compared to the same period in 2022, mainly driven by higher capitalized R&D investment and represented 11.5% of revenue in the first half. Please turn to slide 13 for a review of our free cash flow generation and leverage. With regards to free cash flow, we generated 482.4 million euros in the first six months of the year. And in the second quarter of 2023, we collected 42.8 million euros from the Indian tax authorities linked to the positive resolution of the proceedings I mentioned before. Excluding this collection, we generated 439.6 million euros free cash flow in the first half of the year, driven by our EBITDA evolution, by a change in working capital outflow as expected, and higher capitals in taxes. Relative to prior year and excluding the government grant and cost saving program implementation costs paid in 2022, as well as the collection from the Indian tax authorities in 2023, our free cash flow was 56.9% higher than in 2022. Free cash flow generation in the six-month period supported our net debt evolution. Net debt amounted to 1.870 billion euros at the end of June, with leverage amounting to 1.0 times net debt to EBITDA. And with this, I'll pass back to Luis for final remarks.