Amadeus It Group Sa Ord

Good day, ladies and gentlemen, and welcome to the Amadeus third quarter 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 over to Luis Maroto, President and CEO of Amadeus. Please go ahead.

Good afternoon. Welcome to our Q3 results presentation. Thank you for attending today. I'm joined by Carol Bork, our CFO. So let's begin. We start in slide four. Amadeus had a strong third quarter full of momentum, which brought revenue growth, acceleration, and margin expansion. Year-to-date, good revenue has grown by 8% and adjusted debit increased by 9%, both at constant currency. Our prospects remain strong, and we enter the last quarter of the year with confidence to deliver on our outlook for the year. Amadeus is a B2B technology partner of reference in travel, and it is deeply integrated into the travel ecosystem. Many of the world's most important travel players leverage on us for their core technology. In the quarter, we continue to expand our relevance. We grow our customer relationships with airlines, hotels, travel sellers, and airports. We want new customers across our portfolios and broaden our offering. We are pleased to announce we have won the Ascot Limited as a new customer for Amadeus Central Reservation System in hospitality. Ascot is Singapore based and its portfolio spans more than 230 cities in over 40 countries through Asia, EMEA and North America. ACRS market, leading attribute-based selling capabilities, will empower Ascot to deliver uniquely personalized merchandising, enhanced guest experiences, and drive growth across its portfolio. The current scope of our ACRS agreement covers Ascot's global portfolio, excluding Quest-branded properties and those located in China. Further expansion is expected as Ascot continues to execute its global growth strategy. Investing for the future has been key to our success. In the year, we have deployed over 1 billion euros in R&D into our solutions, technologies, and capabilities to extend our reach in travel and to further connect the travel ecosystem. Today, we want to take the opportunity to share some further insights into how we are leveraging AI to generate further opportunities. As you know, as a leader in the travel and technology space, we have been evolving and applying AI into our products and solutions for almost 20 years. Our journey began with operations research, machine learning, continued with deep learning, and introduction of generative AI, revolutionizing essential functions like flight scheduling and search, airport resource management, passenger disruption handling, and revenue management systems. We use AI to optimize airplane fuel usage to reduce the impact of disruption on passengers, to improve hotel occupancy forecasting, and to improve the creation of shopping recommendations, among others. We use AI at an enormous scale. We have been investing for an AI-driven future, and we are building the technological foundations to excel at agentic AI in travel. As we complete our cloud transformation, we are also creating the first data mesh in travel, a trusted industry data source with several insights across domains and solid governance. For the potential of agentic AI to be realized across travel, this is key. We are embedding agentic AI as a capability of our platform for the benefit of our portfolio, and we are uniquely placed to infuse agentic AI across the travel ecosystem in the years to come. At Amadeus, we are also leveraging on strategic partnerships with world-leading technology players to boost our strengths. We are focused on our strategic partnership with Microsoft and Google to propel our AI innovation, deploy effective multi-public cloud operations, and develop unique business collaborations. GARF is a recent example of AI co-innovation. GARF is an AI agent built on top of our airport data platform. Airport employees with Microsoft Teams can ask questions using natural language, and GARF reasons through problems, make decisions, and learns from experience. Please turn to slide five now for a strategic update. Amadeus is leading the airline retailing transformation with Nevio, our AI-powered next-generation airline IT platform. Navio's leading capabilities have been recognized by assisting and prospective customers, increasing our competitive advantage, and further deepening our customer proximity. Navio has a distinct value proposition. It allows us to offer our customers the possibility of doing much more, and it also allows Amadeus to better attract new customers thanks to its modularity. We are active in numerous RFPs, we continue to advance negotiations, and we aim to expand our group of Nebio customers. In the quarter, we continue to deliver new Nebio capabilities. Finnair has introduced a significant step in airline retailing, becoming the first airline to launch native ancillary combos powered by Amadeus Nebio product catalog. This is part of our offer management offering and consolidates our products and services into one catalog. It is a single repository for all content that an airline can offer to travelers. These products and services can then be provided by the airline directly or by third parties, and they can be offered individually or bundled into an offer tailored to the traveler, and they can also be self-serviced purchases by the traveler. In hospitality, we have become a leading IT provider to the hospitality industry. We believe the Amadeus 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. The first Marriott International properties are now live on ACRS and progressing well, with more to be rolled out around the world over the next you months. Feedback on capabilities has been positive. Intercontinental Hotel Groups, MGM, Marriott International, Accor, and now the Ascot Limited, we are creating a global community platform of world-leading hotels on a mission to transform relationships with guests. The Maureus Travel Platform is a platform that enables travel providers around the world to retail through third parties everywhere on the globe. This quarter, we expanded its reach by adding new travel sellers and increasing our share of wallet with existing travel seller customers, for example, with Trip.com. We also expanded the content bookable on our platform, for example, with low-cost carrier Flyadeal, enhancing the platform's attractiveness. We also continue to sign new NDC agreements. Our goal is to become the undisputed aggregator of NDC content, and we believe Amadeus has the most advanced and compressive NDC technology in the industry, and we aim to do NDC at scale. Finally, regarding our technological capabilities, including AI, Agentic AI promises to transport travel in positive ways, bringing increased personalization to travelers, as well as productivity and efficiency gains across the value chain. We are uniquely placed to deliver Agentic AI functionality into our installed customer base and into new customers. Amadeus can build solutions for the travel industry that others cannot easily replicate. Our technology is natively integrated into travel players, covering critical end-to-end flows and managing vast amounts of extensive data in travel. We have identified over 500 potential use cases whereby applying generative AI, we can bring value to our vast customer base through the enhancements of our products or the creation of new ones, as well as for internal efficiencies. We are enhancing our solutions together with our customers with very positive feedback. Some that have been launched already are SiteRickety, AI Assistant, and AI Assistant for employees to plan and book personalized corporate travel within Microsoft Teams. Namadeus Advisor for leveraging business intelligence in hospitality. We have trained and deployed several productivity-boosting AI agents for travel sellers on top of our selling platform, Connect. We are additionally investing in call center automation for airlines. We have received huge interest for this, and it is a clear opportunity for all travel providers and travel sellers to gain efficiency and productivity at call centers. We are expanding our hospitality platform as well with ASKOS for an AI-automated call center powered by Amadeus and Salesforce. And we are also actively engaging with AI platforms to assess how we can best serve them within the travel industry. Let's turn to slide six for our most recent developments in RIT solutions. We continue to see great success in revenue management through the quarter. Amadeus' innovative modular AI-powered and data-driven revenue management technology enables customers to optimize pricing, enhance operational efficiency, and respond dynamically to market changes. Qatar Airways, Vietnam Airlines, and Jazeera Airways have contracted for Amadeus revenue management solutions. Also as part of its acceleration towards modern retailing, Singapore Airlines has implemented Amadeus Dynamic Pricing. We expanded our Altea customer base in Asia with both Sun Pucot Airways and Air Borneo, contracted for our Altea PSS. Several customers expanded the scope of solutions adopted from our portfolio, including Whitsair, Aero Italia, Malaysia Airlines, Firefly, and RCL. In ERPORT-IT, we continue to deliver innovative solutions. As I previously mentioned, we introduced GARF, an agent that enables better decision-making. Also together with Lufthansa, we successfully tested the biometrics-enabled EU digital identity wallet. This is an initiative led by the EU Commission that aims to have a digital version of EU ID, passport, and driving license in an EU digital identity wallet by the end of 26. We also had commercial wins with customers such as Manchester Airport, Sankey Airports, Aeropuertos Mexicanos, and Elysia Handling, who added solutions from our portfolio. Moving on to our volume performance, in the first nine months of the year, Amadeus PV grew by 3.7% or 4.3%. We excluded the leap year effect in the base. Driven by the global air traffic evolution in the period, supported also by the Vietnam Airlines implementation, which slumped in April 2015. All of our regions, excluding North America, reported solid growth. Asia Pac was our fastest growing region, reporting 8% PV growth. In North America, Amadeus PV evolution was impacted by soft performance of some of our customers in the region. Western Europe and Asia Pac were our largest regions. In the third quarter, Amadeus PV grew 2.2%, moderating slightly relative to quarter two, mirroring global air traffic growth, but with an improving trend within the quarter. As you will see, PV volume growth moderation in the quarter was more than offset at revenue growth by unaccelerating revenue per PV. In the first few weeks of October, we have seen our PV volume growth trending ahead of quarter three. Slide seven for our developments in hospitality and other solutions. In the first nine months of the year, the segment's revenue grew 8% at constant currency, supported by positive trends and evolutions by new customer implementation and increased volumes at both hospitality and payments, particularly in quarter three, which supported revenue growth acceleration in the quarter. We had commercial wins in the third quarter across our business domains. I was saying before, we are pleased that the Ascot Limited has contracted for Amadeus Central Reservation System. It represents a step forward in Amadeus' journey to transform the hospitality industry through its CRS community, and it demonstrates the value of our open and scalable technology for hoteliers of different sizes and needs. We'll also span our hospitality platform with Ascot with our AI power automated call center for hoteliers. Our business intelligence solutions continue to attract new customers such as EOS Hospitality and Scandic Hotels. Our business intelligence solutions include Amadeus Advisor, an AI agent designed to simplify data access and empower hoteliers with smarter insights to drive more informed decisions. Part of the AI front in hospitality, we have built an AI power solution with the meeting broker to automate and accelerate hoteliers' responses to group and events RFPs. TripBits, part of Trip.com group, expanded its hotel distribution agreement with Amadeus to support its continued growth outside of China. And Abu Dhabi's Department of Culture and Tourism, and Adira Hotel Group, based in Saudi Arabia, are adopting Amadeus digital media technology. In the quarter, we expanded our partnerships. We have partnered with SIGI, a global provider of hospitality technology solutions to offer hotels a combined offering, including industry-leading reservation, property management and guest experience solutions through a single provider. We have also partnered with Sensible Weather, the leading weather warranty provider for travel and hospitality to integrate automatic reimbursement capabilities for unexpected adverse weather conditions into the Amadeus iHotelier central reservation system. In payment, Outpace has made progress in scaling our payment software. We have initiated the issuing of prepaid virtual cards and implemented various new customers such as HBX Group, who are now in production. Also, Sweden-based tour operator Sembu and Hong Kong-based Jantin Travel has expanded their B2B wallet agreements with Amadeus. Let's start with slide eight for our distribution highlights. During the third quarter, we signed 14 new contracts or renewals of distribution agreements with airlines, including low-cost carrier flyer deal, taking the total to 43 for the first nine months of the year. To date, we have signed 75 NDC agreements with airlines, including ReJet Air in the third quarter and 35 airlines NDC Contel accessible through the Amadeus travel platform. We had great commercial developments with major travel agencies. We expanded our travel seller's customer base with travel management companies such as Corporate Information, Travel in Malaysia, and EOB Travel in Singapore, as well as with leading French tour operator Voyager Demonde. All of these travel sellers will benefit from access to the broadest range of travel content, including NDC. We strengthen our relationship with online travel agencies such as Trip.com, which expanded its agreement with us, and Fairportal, which continues to scale its NDC adoption through the Amadeus Travel Platform. Retail travel agency Internova Travel Group and tour operator Circle de Vacances expanded their partnership with Amadeus to also include NDC content. To review our volume performance, in the first nine months of 2025, Amadeus bookings grew by 2.7% or 3.1%, excluding the leap year effect, supported by continued commercial gains across regions, most notably in Asia Pac, which was our fastest growing region, growing 12% over prior years. In third quarter, Amadeus' booking growth accelerated to 4% from a softer Q2 growth, backed by a more stable overall global environment compared to first half. Growth accelerated across most regions, particularly the Middle East and Africa, Asia-Pac and Western Europe. The volume growth acceleration in the quarter offset the expected moderation we saw in revenue per booking growth in quarter three, which can sometimes be lumpy. Into the first weeks of October, we have seen a moderation in our booking growth relative to quarter three. With this, I will now pass on to Carol to review our financial performance.

Thank you, Luis. I'm delighted to be presenting our strong Q3 results today. So please turn to slide 10 to review our solid financial performance to date with high single-digit revenue and adjusted EBIT growth at constant currency, coupled with steady free cash flow generation, reinforcing our expanding relevance in travel. Given that the first nine months of the year, the US dollar has depreciated significantly in relation to the Euro, we are displaying our performance of revenue, EBITDA, adjusted EBIT and free cash flow versus prior year also at constant currency to facilitate understanding of Amadeus's underlying financial performance. More details on our exposure to FX on our constant currency calculations, as well as complete information on our IFRS figures and their evolution are available in the appendix of this presentation and in the Amadeus January to September 2025 management review. In the first nine months of the year, we've delivered strong growth across many of our key financial metrics. Revenue of $4,895 million, 8% growth at constant currency, 6% reported growth. Operating income of $1,420 million, 8% reported growth. Adjusted EBIT of 1,471 million, 9% growth at constant currency, 8% growth reported. Profit of 1,088 million, 10% growth and diluted EPS at 11% growth. Adjusted profit of 1,109 million, 8% growth and diluted adjusted EPS of 9% growth. Free cash flow of $955 million and expected 2% below prior year. Leverage at 0.9 times net debt the last 12 months EBITDA as at the end of the period. And as you know, we have an ongoing share repurchase program for a maximum investment amount of $1.3 billion, which I can announce just completed yesterday. Our 2025 outlook at constant currency remains unchanged. So now let's go to slide 11 for our revenue evolution at constant currency. Our group revenue grew by 8% 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 that Louise has just described previously and a 4% higher revenue per PB, which is fundamentally resulted from positive pricing impacts from new agreements and renegotiations, upselling of our incremental solutions, including those from Nevio, and inflation. And in addition to that, we delivered strong growth of our airline expert services and our airport IT businesses. These effects were partially offset by a negative platform mix as Navitair New Skies outperformed Altea. We expect that revenue per PB growth to moderate in Q4 relative to Q3. Hospitality and other solutions revenues grew 8.1%, which was largely driven by the hotel IT, hotel distribution, and business intelligence domains supported by customer implementations and increased volumes. As we communicated in H1, digital media revenue growth showed an improvement in Q3. Revenue growth was also driven by payments where both our merchant services and payout services businesses expanded notably. As we have communicated previously, we expected revenue growth for this segment to accelerate into the second half of the year. In Q3, we have delivered faster revenue growth relative to the prior quarter, and we expect this growth to continue to accelerate again in Q4. Air distribution revenue growth of 8% was driven by the booking evolution that Lewis has just described previously, coupled with a strong revenue per booking growth of 5.2%, primarily resulting from positive pricing effects, including contract renewals, new agreements and inflation. As Lewis mentioned, these effects can be lumpy in nature. And as we communicated in our half one results, Revenue per booking growth in Q2 was exceptionally high, with revenue per booking growth in Q3 moderating as expected, and we expect that moderation to continue into Q4. So now let's go to slide 12 for a review of our adjusted EBIT evolution. At constant currency, our adjusted EBIT grew 8.7%, resulting from the 8% revenue evolution discussed on the previous slide. And in addition, our cost of revenue growth of 3.1% is fundamentally driven by an increase in transactions, such as in air distribution and hotel distribution bookings, and in payments due to the B2B wallet expansion. Reported fixed cost growth of 8% mostly resulted from, firstly, an increase in resources, particularly in our R&D activity, coupled with a higher unitary cost, secondly, Higher cloud costs due to a combination of our own volume growth and also to our progressive migration of solutions to the public cloud as we continue to mature. And thirdly, to the vision box consolidation impacting Q1. Fixed cost growth is expected to moderate in Q4 relative to Q3. Ordinary DNA expense increased by 4.2% as a result of higher amortization of internally developed software. partially offset by a lower depreciation expense at our data center, given the migration of our systems to the public cloud. At constant currency, EBITDA margin was 39.1%, slightly below prior year, and adjusted EBIT margin was 29.8%, a small expansion versus last year. So now onto slide 13 for a review of our adjusted profit evolution. Adjusted profit grew by 8.2% as a result of our adjusted EBIT growth, lower net financial expenses and higher taxes than last year. Diluted adjusted EPS grew by 8.9% 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 higher effective tax rate at 22%, which was impacted by the changes in local tax regulations and lower tax credits expected for the year. Adjusted profit evolution in Q4 2025 will be impacted by the unusually low effective tax rate that we had in the same period last year, Q4 2024, resulting from positive effects coming from previous years compared to the 22.1% tax rate expected for Q4 2025. Now on to slide 14 to review our R&D and capital expenditure. As Louise was saying before, reinvesting into our business is the number one priority for us. To evolve our technology, capabilities and solutions for the benefit of our customers is something we are proud of and it is hugely important to continue to enrich the competitive advantages we have built through the years of leadership in travel. At September, our year-to-date R&D investment grew by 10.6%. Half of our investment was dedicated to the expansion of our portfolio and the evolution of our solutions and AI capabilities, including Amadeus Nevio, Navitas Stratos for airlines, our hospitality platform, NDC technology for airlines, travel sellers and corporations, and solutions for our airports and payment services. A quarter to a third was dedicated to customer implementations across our business, such as Marriott International and Accor for ACRS, our new Nevio customers, as Louise was previously saying, and airline portfolio upselling, and customers implementing NDC technology, as well as efforts related to bespoke consulting services provided to our customers. The remainder was dedicated to our migration to the cloud and our partnerships with Microsoft and Google, as well as the development of our internal technology systems. In the nine-month period, our capital expenditure increased by $80.5 million, or 15.3%, mainly driven by higher capitalizations from software development. Capital expenditure represented 12.4% of revenue in the first nine months of the year. And now onto slide 15 for a review of our free cash flow generation and net debt evolution. In the first nine months, we generated $955.2 million of free cash flow. Free cash flow was slightly below our prior year by 2.1% as we expected and as a result of increase in our capital expenditure, as I just previously discussed, deployed to elevate our portfolio of solutions and to strengthen our value proposition. We also had an increased change in working capital outflow and taxes, partially offset by our EBITDA expansion and a reduction in interest payments backed by lower gross debt and cost of debt versus prior year. In Q4 and the full year, free cash flow growth will be impacted by non-recurring tax collections that increased free cash flow in 2024 by $107 million in Q4 and $116.2 million in the full year, as we described in the full year 2024 management review. Net debt amounted to $2,219.9 million at the end of September, $108.6 million higher than at the end of December due to the acquisition of Treasury shares under the share buyback programs, including our ongoing $1.3 billion program, which, as I said previously, has just completed, as well as the dividend payment and a small acquisition in the travel intelligence space, partially offset by our free cash flow generation and the conversion of bonds into shares. Our leverage is 0.9 times net debt to EBITDA as at the end of September. And finally, please turn to slide 16 for our current views on 2025. In the first nine months of the year, we've delivered steady and profitable growth, demonstrating the resilience and diversity of our business. We enter the last year of the year with confidence to deliver our group results within our 2025 outlook guidance range at constant currency. with revenues growing at the lower end of the range and EBITDA and adjusted EBIT growing faster than revenues. With that, we have finished the presentation, but before we open to questions, I'd like to share that this year we'll be presenting our full year 2025 results in person in London at the London Stock Exchange. We will be publishing a save the date on our website and circulating the information soon. We look forward to seeing you there. With that, We can now open the call to take any questions.