Amadeus It Group Sa Ord

Good day, ladies and gentlemen, and welcome to the Amadeus first quarter, sorry, first half of 2025 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference call over to Luis Moroto, President and CEO of Amadeus. Please go ahead.

Good afternoon. Welcome to our 25 first half results presentation. Thank you for attending today. I am joined by our CFO, Carol Bor, who will be presenting Amadeus results for the first time. Carol has had the opportunity to meet a lot of you as part of her onboarding and is ready to address your questions. We have made some changes to our quarterly presentation and may make some more in the future. We aim to simplify how we communicate and to ensure that the strengths of our business are clear to the broadest group of investors. To start, I will focus on our most important business developments in the period, and Carol will elaborate on key financial aspects. Let's turn to slide 4 for our headlines in the first half. The first six months of business in 2025 evolved in a challenging macro and geopolitical environment. Despite this context, Amadeus delivered steady and profitable growth throughout the period. Our top line grew 8% at constant currency, and our profit grew faster than our revenues, while we continued to drive our strategic plans forward. As a leading IT provider to the travel industry, we continued to invest decisively to support future revenue generation. For the first six months of the year, we invested about $700 million in R&D, over 20% of group revenue. We are just completing one of the largest and most complex cloud transformations with 90% of our applications now activated in the public cloud. Our cloud transformation unlocks greater flexibility, scalability, speed, and innovation potential. In the first six months of the year, we continue to expand our relevance in travel. We won't renew to extend the business deals across our businesses. We advance in negotiations with others. and we progressed on our industry-transforming strategic customer implementations of leading industry players, such as British Airways, Air France KLM, Marion International, and Car-Anne Akoi. We have long-standing strategic partnerships with world-leading technology players to boost our strengths. We were pleased to announce our newest strategic partnership with Google, which together with Microsoft, supports our multi-cloud strategy. Additionally, Amadeus will explore AI-driven innovations by leveraging Google Cloud's AI technologies. And we are also collaborating to enhance flight search accuracy and airline offer management by integrating Amadeus Navio and MetaConnect with Google's offer management system and Google Flights, which will improve user experience and market presence for airlines. It's time to slide five for a brief strategy update. Amadeus is leading the airline industry's retail transformation. We are advancing with the implementation of our first Amadeus Nebio customers. Nebio is our next-generation early IT platform, offering advanced retailing capabilities beyond offer and orders, consisting of fully flexible modular cloud-native solutions and the latest advances in AI. Nebio has a distinct value proposition which allows us to offer our customers the possibility of doing much more than before and to attract new customers thanks to Nebio's deep modularity. We continue to advance negotiations with potential Nevio customers. Finnair, an early Nevio customer, has become the world's first airline to create a native order aligned with IATA's one-order init directives. In the Middle East, Saudi Arabia is leading the industry by adopting our smart bridging capabilities, a first step towards offer and orders implementation. The French KLM, the latest airline to select Nevio, has already started the program to implement the solution. Additionally, Bridge Service has completed the transition from its in-house revenue management system to our Amadeus Network revenue management. This marks a major milestone in VI's transformation program and retailing strategy supported by Amadeus. We also aim to become the IT provider of reference to the hospitality industry. We believe the Amadeus hospitality platform offers the most comprehensive portfolio of core capabilities to the hotel industry and is the most broadly connected ecosystem of partners. We are uniquely placed to address industry needs and expand in this large and growing market. We are progressing well with the implementation of Marriott International and Accor to the Amadeus hospitality platform, following Intercontinental Hotel Groups and MGM Resorts International. We are creating a global community of world-leading hotels on a mission to transform relationships with guests that will run their core technology on our platform. Amadeus also praised the Amadeus Travel Platform, a leading platform that enables travel providers around the world to retail through third parties everywhere on the globe. In the first six months of the year, Amadeus partners strengthened its leadership in airline content distribution by adding new travel seller customers and increasing our set of wallets at existing customers, as well as expanding the content bookable on our platform. In the first half of the year, Amadeus has signed 29 new contracts or renewals of distribution agreements with airlines. On the NDC evolution, we continue to implement and expand the NDC content made available through the Amadeus Travel Platform. At present, we have 74 NDC agreements signed with our flights. Our goal is to become the undisputed aggregator of NDC content. We believe Amadeus has the most advanced and comprehensive NDC technology in the industry and we aim to do NDC at scale. We are bringing the global travel industry together on a modern technology platform to connect the entire travel ecosystem. In addition to our ongoing cloud transformation, we are continuously harnessing the power of AI, data, and modern technologies. AI and machine learning are key to improving user experience, breaking trial trends, personalizing customer journeys, and optimizing operations. We have integrated GenAI on our platform, offering our customers a solid path to deploying gigantic AI solutions. Technologically, we aim to power the largest most vibrant ecosystem of open, connected and flexible solutions in travel. Please turn to slide 6 to review our commercial developments and operations in RIT solutions. Our most recent commercial developments in RIT included upselling Wins with Gold, one of Brazil's leading airlines, and also with flag carrier Bulgarian Airlines. We renewed our Altea agreement with Luxair, which brought adoption of incremental solutions. and also our New Skies Agreement with Ryanair, marking 25 years of collaboration. During this quarter of a century, New Skies has supported Ryanair's impressive growth trajectory and expansion, enhancing the airline's operational efficiency, customer experience, and revenue generation capabilities. With our new Google partnership, we are implementing a collaboration on QPX, the Google Offer Management System, through Amadeus Navio, which will create the opportunity for more airlines to leverage Amadeus Navio. In Airport IT, London Gatwick, the UK's second busiest airport, is expanding its use of Amadeus Biometric technology. With this rollout, all outbound passengers at London Gatwick's terminal will be processed through the Amadeus Singlet Journey platform, enhancing passenger experience. Also, Amadeus has expanded its collaboration with the Australian Department of Home Affairs, supporting enhanced automated border processing capabilities at the departures of the country's 10 international airports. Italy alone expanding Altea Departure Control System has further expanded the use of the leading solution to include Florence and Pisa airports. Expanding the use of our biometrics technology into an adjacent Space, a casino operation in France, has deployed Amadeus' seamless gate and seamless journey platform, delivering a premium contactless VIP entry experience. Our biometric solution has reduced checking times by 30% and significantly improved customer satisfaction. Moving on to our volume performance, in the first half, Amadeus passengers boarded grew by 4.6%, driven by the global traffic evolution in the period, supported also by the Vietnam Airlines implementation in April 24. Screwed timing effects in the first half, we estimate Amadeus PV growth at 5.2%. In the first half, global traffic growth was impacted by geopolitical situations in different regions, such as the Middle East and South Asia, by a moderation in travel demand to and within the U.S., and other events such as aircraft incidents both in first quarter and second quarter. In the first months of this year, all of our regions, excluding North America, reported solid growth. Asia Pac was our fastest growing region, reporting 10% PV growth. In the first few weeks of July, we have seen volumes trending slightly below the second quarter. However, there have been several extraordinary events that may have impacted early July traffic in various regions, such as the controller strike in France, and the Israel and Iran conflict in the Middle East. Please turn to slide 7 to review our operating performance in hospitality and other solutions. This segment's revenue increased by 8% in the first half at constant currency, where the majority of our business deployed strong growth throughout the period supported by transactions and new customer implementations. We had new commercial wins in this quarter across our business domains. To highlight a few, Accor, will expand its use of Amadeus industry, leading sales and catering solution Delphi in its premium brands. Delphi empowers sales and catering teams to more efficiently sell, organize, and manage events. B2 Hotels, an hotel chain in Thailand, will adopt a comprehensive suite of Amadeus solutions, even on seamless, personalized shopping and booking experience to guests, from initial search through to post-stay engagement. In the U.S., New York-based Soho 54 Hotel has selected a hotelier suite and Sunset Tower, a landmark hotel in California, contracted Amadeus Digital Media for hotels. Amadeus Destination Marketing Organization signed for Amadeus Digital Media for destinations. And United Arab Emirates, based on Mayor Travel Agency, will access hotel content through Amadeus Value Hotels, our laser-oriented distribution solution beyond the GDS. In partnership with Microsoft and leveraging OpenAI's model on Azure, we have introduced advanced AI tools, including AdvisorChat, integrated into Demand360 for instant marketing sites, and a new email RFP feature, Emitting Broker, to automate and accelerate group booking responses. These innovations empower hoteliers to make faster data-driven decisions and streamline group sales, marking a significant step towards more efficient AI-powered hospitality operations. Paneling payments, we have launched a next-generation fully automated payments reconciliation system for airlines leveraging smart algorithms and synchronized data to match sales and payments across channels. Amadeus Casco developed the solution with British Airways, which is now scaling the deployment of the module across its operations. OutPace is also making the solution available to the wider airline industry. Let's turn to slide 8 for our air distribution highlights. In the second quarter, we signed 17 new contracts or renewals of distribution agreements with airlines, taking a total to 29 for the first half. We also had 74 NDC agreements signed today with airlines. As Catholic Pacific NDC content became available through the Amadeus Travel Platform to travel sellers in selected markets, we now have NDC content from certified airlines accessible through the Amadeus Travel Platform. We had commercial wins over the period with major travel agencies. In Europe, Idris Odigeo has extended its long-term partnership with Amadeus for its content distribution. Travel Perk, a business travel management platform, also extended its scope which now includes access to Amadeus NDC content. In Asia Park, we signed via Philippines, the Philippines' leading travel seller, to migrate all of its international bookings to the Amadeus travel platform. And we have successfully expanded key strategic partnerships with long-standing customers such as with Perk Hansen and CBC Corporation. We have also expanded our non-air content offering for travel sellers on the Amadeus travel platform, adding content from Brightline, a passenger railroad in the state of Florida in the US, and from each Irio, Spain's first private high-speed rail company. Amadeus and Google have also announced an agreement that will fit Amadeus MetaConnect into Google Flights, more easily improving flight search accuracy. For airlines, this means greater control over their commercial strategy by distributing dynamic offers more efficiently, with increasing pricing accuracy and enhancing the overall user experience on Google flights. We continue to see strong momentum regarding our corporation business with new customers such as Deutsche Telekom signing for our self-booking tool-related solutions. As we continue to strengthen our partnerships with Kia Madeo's Cyprix reseller partners such as VCD Travel and Globospan Travel Management, GlobeSpan issued the first live for Canada NDC booking via Citric in the Canadian market, expanding access to premium content for corporate travelers. We are glad to share that Amadeus has won the Gold Award for Amadeus Citric EC in the Customer Experience category at the 25 National Marketing Awards in Spain. To review our volume performance, in the first half Amadeus bookings grew by 2%, supported by Amadeus' continued commercial success across regions. We are starting to see some of our travel agency customers bringing volumes from aggregators, most recently in Europe. We estimate first half bookings growth, excluding timing effects, at 2.7%. As I described before, during the first half, global air traffic growth was impacted by geopolitical situations in several regions, a moderation in travel demand, to one within the US, and several events, including airline incidents. In the first six months of this year, our fastest growing region was Asia-Pac, where our bookings increased by 10%. In the first few weeks of July, we have seen a strong performance in bookings ahead of second quarter, with bookings growth picking up in many regions, most strongly in Middle East, Western Europe and Latin. With this, I will now pass on to Carol for further details on our financial performance.

Thank you, Luis. I'm delighted to be presenting the Half One 2025 results on behalf of Amadeus. During the last 12 weeks, I've been doing a lot of listening, meeting people, and really getting a deeper understanding of this amazing business. As you know, I joined Amadeus as I was attracted to a tech-driven people business, working alongside a high-caliber team with the objective of creating further value, particularly building on our potential, capacity, and appetite for further growth. What has positively surprised me is how unique the travel industry really is and the role that Amadeus plays in being the technology partner for airlines, travel sellers, airports and hoteliers. I'm convinced that those who will succeed are those who deliver reliably, at scale and in sync with the travel ecosystem, all of which are features of Amadeus' strategy. Now let me present a new look to our H1 results. Please turn to slide 10. As you know, in the first half of the year, the exchange rate between the US dollar and the euro has been notably volatile, with the US dollar depreciating significantly in the last months. 40% to 50% of our group revenue is generated in US dollars, and we also have exposure to foreign currencies in our cost base, with 35% to 45% of our operating expenses generated in US dollars. Foreign exchange effects have been negative for us on both revenue and EBIT in the first six months and more notably in the second quarter. As referenced in Q1, we will now show our performance of revenue, EBITDA, adjusted EBIT and free cash flow versus the previous year at constant currency as we believe this information is more useful in evaluating Amadeus' underlying financial performance. More details on our constant currency calculations as well as complete information on IFRS figures and their evolution are available in the appendix of this presentation and the Amadeus first half 2025 management review. In the first six months of the year, we delivered strong growth across all of our key metrics, namely revenue of €3,260 million, 8% growth at constant currency, 7% reported growth. EBIT of €938 million, 8% reported growth, and adjusted EBIT of €973 million, 8% growth at constant currency, 7% reported growth. Profit of €727 million, 12% growth, and diluted EPS also at 12% growth. Adjusted profit of €739 million, 9% growth, and diluted adjusted EPS also at 9% growth. Free cash flow of €469 million, 12% below the previous year, as expected, and leverage stood at 0.7 times net debt to last 12 months EBITDA at the end of the period. As you know, we have an ongoing share buyback program for a maximum investment amount of €1.3 billion, which was launched in March. Our 2025 outlook at constant currency remains unchanged. As Luis mentioned, We have experienced a challenging macro and geopolitical environment. However, despite this, we continue to deliver steady and profitable growth and expect to deliver revenue growth at the lower end of our guided range of 7.4% to 11.4%, with EBITDA and EBIT growing faster than revenue. Please turn to slide 11 to review our revenue evolution. Our group revenue at constant currency grew by 7.6% as a result of revenue expansion across all of our segments. Air IT Solutions' revenue growth of 7.9% was driven by the PB volumes evolution Louise has described previously and a 3.1% higher revenue per PB, which largely resulted from positive pricing impacts from new agreements and negotiations, upselling of incremental solutions and inflation, fast growth of our airline expert services revenues, and strong performance of our airport IT business, which includes VisionBox, which we acquired in April 2024. These effects were partially offset by a negative platform mix as Navitare New Skies outperformed Altea. Revenue per PB growth accelerated in Q2 relative to Q1 when excluding vision box consolidation impact and FX effects, driven by the positive pricing effects I've mentioned previously. Hospitality and other solutions, revenue growth of 7.5% was driven by hotel IT and distribution, particularly the Amadeus, CRS and hotel distribution, transaction-driven business and business intelligence. supported by customer implementations. Digital media revenue growth has been experiencing some weaknesses since the beginning of the year, mainly due to a reduction in media spend by our customers, particularly in North America. Our hospitality revenue growth was also driven by payments, where both our merchant services and payout services businesses expanded notably. Air distribution revenue growth of 7.5% was driven by the booking evolution, again, as Louise described previously, coupled with an unusually high revenue per booking growth of 5.4%, primarily resulting from positive pricing impacts, including contract renewals, new agreements and inflation. Please turn to slide 12 for a review of our adjusted EBIT evolution. At constant currency, our adjusted EBIT grew 7.6%, resulting from the 7.6% revenue evolution discussed on the previous slide. And cost of revenue grew as a result of revenue expansion across the business. Reported fixed cost growth of 9.3%, mostly resulting from an increase in resources, particularly in our R&D activity, coupled with a higher unitary cost. higher cloud costs due to volume expansion and the migration of our solutions to the public cloud, and the vision box consolidation impact in Q1. Ordinary DNA expense increased by 3.1%, mainly driven from higher amortization of internally developed software, partly offset by a lower depreciation expense at our data center as a result of the migration of our systems to the public cloud. At constant currency, EBITDA margin was 38.9%, slightly below prior year, and adjusted EBIT margin was 29.8%, in line with prior year. So now let's turn to slide 13 for a review of our contribution by segment at constant currency. Air IT Solutions contribution increased by 5.5%, resulting from the revenue evolution described previously, offset by cost growth of 13.9%, fundamentally driven by increased R&D investment focused on the enhancement of our portfolio for airlines and airports, customer implementations, and our fast-growing airline expert services business, variable cost growth driven by airport IT's business expansion, and the consolidation of VisionBox. Air IT Solutions contribution margin was 69.8%, 0.8 percentage points below the previous year, excluding the vision box consolidation impact due to business mix. Hospitality and other solutions contribution was 5.5% above the previous year as a result of the revenue growth described previously, offset by cost growth of 8.5% which resulted from higher variable costs driven by the volumes expansion in both hospitality and payments and an increase in fixed costs caused by an increase in resources and higher unitary personnel costs to serve this growing segment. Hospitality's contribution margin was 33.6%, 0.6 percentage points below the previous year. Air Distribution's contribution grew by 12.4% as a result of the revenue growth described previously, offset by a 3% cost increase, which mainly resulted from Booking's evolution. The contribution margin of this segment expanded by 2.2 percentage points to 50.7%. Now on to slide 14 for a review of our adjusted profit evolution. Adjusted profit grew by 8.5% as a result of our adjusted EBIT growth, lower net financial expenses and higher taxes than the previous year. Diluted adjusted EPS grew by 8.5% in the period. Net financial expenses declined, driven by lower average gross debt and cost of debt, and taxes increased as a result of higher taxable income and a slightly higher tax rate at 21.6%. Now on to R&D and capital expenditure on slide 15. In half one, 2025, R&D investment grew by 14.9%. Half of our investment was dedicated to the evolution of our portfolio, including Amadeus Nevio and Navates Stratos for airlines. Our hospitality platform, NDC technology for airlines, travel sellers and corporations, and solutions for airports and payment services. A quarter to a third was dedicated to customer implementations across our businesses, such as Marriott International and Accor for ACRS. new Nevio customers and airline portfolio upselling, and customers implementing NDC technology, as well as efforts related to bespoke consulting services provided to our customers. And the remainder was dedicated to our migration to the cloud and our partnership with Microsoft, including developments on our own internal technology systems. In half one 2025, our capital expenditure increased by 71.2 million euros, or 22.1%, mainly driven by higher capitalisations from software development. Capital expenditure represented 12.1% of revenue in half one. And now on to free cash flow generation and net debt evolution on slide 16. In half one 2025, we generated 468.6 million euros of free cash flow. As expected, free cash flow was below the previous year by 11.6%, as a result of increases in our capital expenditure, change in working capital outflow and taxes, and partially offset by the EBITDA expansion and lower interest payments. Net debt amounted to €1,715 million at the end of June, €396.3 million lower than the end of December, due to our free cash flow generation, the conversion of bonds into shares, partially offset by the acquisition of treasury shares under the share buyback programs, including our ongoing $1.3 billion program, which is currently 45% complete. Also included in that is the interim dividend payment and a small acquisition in the travel intelligence space. So our solid cash flow generation and balance sheet management has resulted in a leverage of 0.7 times net debt to EBITDA as at the end of June. And finally, please turn to slide 17 for our current view for 2025. So despite a challenging macroeconomic and geopolitical environment, we delivered steady and profitable growth, demonstrating the resilience and diversity of our business. We enter the second half with confidence to deliver our group results within our 2025 outlook guidance at constant currency, albeit with revenues growing at the lower end of the range based on the current industry outlook. And EBITDA and EBIT growing faster than revenues. We continue to remain extremely relevant for our customers as a leading IT provider to the travel industry, deploying effective resource management. We continue to invest decisively to support future revenue generation and deliver our expected EBITDA and free cash flow. Thank you. And with that, the presentation is finished and we'll open the call to take any questions.