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 (AMADF, Financial) reported a 13% increase in revenue for the first half of 2024.
- EBITDA grew by 15%, and EBIT increased by 19%, indicating strong financial performance.
- The company confirmed its outlook for 2024, showing confidence in continued growth.
- Amadeus IT Group SA (AMADF) signed 32 new contracts and renewal agreements in the first half of 2024, strengthening its market position.
- The hospitality segment showed a 13% revenue growth, driven by strong performances in both hospitality and payments.
Negative Points
- Bookings in North America saw a decline due to direct connections between a large online travel agency and major carriers.
- The bankruptcy of a large European tour operator, FTI Group, negatively impacted bookings.
- Fixed costs increased due to higher variable costs and increased resources for development activities.
- The company expects cost of revenue growth to be similar in the second half, indicating continued pressure on margins.
- The impact of direct-connect strategies in North America and Latin America continues to affect volume growth.
Q & A Highlights
Q: How do you view the market today given the recent profit warnings and cautious outlooks from airlines? Are you still comfortable with your capacity growth projections for the second half?
A: We are sticking to our guidance. The impact we expect will be more on the yield from some airlines. The projected traffic data remains healthy for the full year. Even if there are small adjustments in total capacity, we feel confident in achieving our figures. Investments in transformational deals are long-term, and we haven't seen any decisions to halt these investments.
Q: Can you explain the discrepancy between the strong international travel growth and the volume recovery in Latin America?
A: Our volumes are more favorable towards global versus domestic travel, which translates into premium traffic. The bookings in the U.S. have seen a drop due to direct connections between large online travel agencies and carriers. In Latin America, we have a similar situation with direct connects impacting volumes but not materially affecting revenue.
Q: What is the outlook for CapEx spend relative to revenues, and should we expect any differences in the phasing of cost of sales for Q3 and Q4?
A: CapEx will be higher in 2024 than in 2025 and 2026. The cost of sales for Q3 and Q4 should be quite similar. We are maintaining our guidance and feel confident about our CapEx projections for the second half.
Q: Can the strong revenue per booking trends continue, and what is the impact of American Airlines' recent changes in NDC incentives?
A: We expect revenue per booking growth to be slower as we move towards normalized traffic. The appetite for NDC adoption remains favorable, and we see good demand for our NDC solutions. The recent changes by American Airlines may have a small impact, but the overall trend of NDC adoption will continue.
Q: What is the current percentage of NDC bookings, and should we expect a significant ramp-up?
A: NDC bookings are still in the low single digits. The adoption of NDC depends on the commercial strategies of airlines. We are seeing a massive increase in NDC bookings, and this trend is expected to continue.
Q: Can you provide more color on the margin evolution in the second half and the expected acceleration in the hospitality segment growth?
A: Fixed cost growth will be higher in the second half due to customer implementations and the impact of acquisitions. Despite this, we feel confident about maintaining flat EBITDA margins. The hospitality segment is expected to accelerate due to customer implementations and underlying growth in hospitality and payments.
Q: What impact did the recent strike have on your business, and what are the expectations for North America in the second half?
A: We have not seen any impact from the strike in our July figures. The North American market has been performing well despite specific impacts. We expect positive growth in North America once the direct-connect effect laps in Q4.
Q: What is the outlook for bookings in Q3 and Q4, and how will the Turkish Airlines GDS surcharge impact Q4?
A: July is trending well, but we expect Q3 to be softer due to a strong August last year. Q4 is expected to show stronger growth due to lapping of domestic bookings and continued traffic expansion. The impact of Turkish Airlines' GDS surcharge is still uncertain and will depend on ongoing negotiations.
Q: What is driving the improvement in gross margin in Q2, and should we expect similar trends in Q3 and Q4?
A: The improvement in gross margin is due to the overall performance of the business. We expect the rest of the year to show similar trends, with the impact of Q1 and Q2 being smaller subsets of the overall performance.
Q: What would it take for North America to return to positive growth, and was the contraction expected in your guidance?
A: Yes, the contraction was considered in our projections. We expect positive growth in North America once the direct-connect effect laps in Q4. Excluding this effect, North America has shown positive evolution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
