Earnings call transcript: Enav Q2 2025 shows strong cash flow amid revenue dip

Enav SpA reported its earnings for the second quarter of 2025, revealing a mixed financial performance. Total revenues decreased by 14 million euros year-over-year to 447 million euros, while the company achieved a net result of 7 million euros, a significant improvement from the previous quarter’s loss. Despite a decline in revenue, the company nearly doubled its free cash flow to 53.5 million euros, signaling strong cash generation. The stock reacted negatively, declining by 2.53% to close at 3.95 euros. According to InvestingPro data, Enav maintains a notable 6.8% dividend yield and has raised its dividend for four consecutive years, demonstrating strong shareholder returns despite market fluctuations. Analysis suggests the stock is currently undervalued based on InvestingPro’s Fair Value model.

Key Takeaways

• Enav’s revenue declined by 14 million euros year-over-year.
• Net result improved to 7 million euros from a significant loss in the previous quarter.
• Free cash flow nearly doubled to 53.5 million euros.
• Stock price fell by 2.53% following the earnings release.
• 2025 EBITDA guidance was upgraded to 245-253 million euros.

Company Performance

Enav’s overall performance in the second quarter of 2025 showed resilience, with a notable improvement in net results despite a drop in total revenues. The company managed to enhance its cash flow significantly, reflecting its strategic focus on operational efficiency and cash generation. InvestingPro analysis reveals a strong financial health score of "GOOD," with particularly robust profitability metrics including a 98.9% gross profit margin and 10% cash return on invested capital. Enav maintained its position as a leading air traffic management provider in Europe, efficiently handling record traffic levels with minimal delays. The company’s operational performance outpaced its European peers, supported by a 7.3% increase in route service units and a 4.4% growth in terminal traffic.

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Financial Highlights

• Revenue: 447 million euros, down 14 million euros year-over-year.
• EBITDA: 68.8 million euros.
• Net result: 7 million euros, improved from a 29.3 million euro loss in Q1 2025.
• Free cash flow: 53.5 million euros, nearly doubled year-over-year.
• Net debt: 350 million euros, a 35% increase from December 31, 2024.

Market Reaction

Following the earnings announcement, Enav’s stock price fell by 2.53%, closing at 3.95 euros. This decline reflects investor concerns over the revenue dip and increased net debt. InvestingPro data shows the stock generally trades with low price volatility, with a beta of 0.75, and has delivered a positive 22.3% return over the past six months. The stock’s moderate debt-to-equity ratio of 0.49 and strong Altman Z-Score of 5.5 suggest financial stability despite recent market concerns.

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Outlook & Guidance

Enav upgraded its 2025 EBITDA guidance to a range of 245-253 million euros, reflecting confidence in its operational performance and cash generation strategy. The company anticipates a full performance bonus of 13 million euros and targets moderate organic growth in its non-regulated business. Enav’s management remains optimistic about future performance, driven by ongoing efficiency improvements and strategic initiatives.

Executive Commentary

CEO Pascualino Monti emphasized Enav’s operational excellence, stating, "We are managing record levels of traffic volume in Italy, ensuring an operating performance that positions us as the most efficient service provider in Europe." CFO Luca Coleman highlighted the company’s strong financial outlook, noting, "We believe that this strong increase that we are having now and our capability to get the bonus will probably continue also in the future."

Risks and Challenges

• Rising operating costs, particularly in personnel and energy, could impact future profitability.
• Increased net debt may constrain financial flexibility.
• Ongoing wage negotiations could lead to increased labor costs.
• Macroeconomic uncertainties and potential market saturation pose risks to growth.

Q&A

During the earnings call, analysts inquired about Enav’s wage negotiations, which are expected to conclude by year-end. The company also discussed its COVID traffic balance collection, projected through 2027, and potential M&A activities anticipated after the summer break. Additionally, Enav emphasized its focus on cost optimization, particularly in external costs and procurement processes.

Full transcript - Enav SpA (ENAV) Q2 2025:

Conference Operator, Chorus Call: Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the ENAV First Half twenty twenty five Results Conference Call. At this time, I would like to turn the conference over to Fabrizio Ragnacci. Please go ahead, sir.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to the First Half twenty twenty five Results Presentation. The presentation will be hosted by our CEO, Pascualino Monti and our CFO, Luca Coleman. In the presentation, we will provide some highlights of the period and then we will walk you through the operational and financial performance of the group. Following the presentation, we will have the usual Q and A session.

Before we start, let me remind you that media can be connected to both the presentation and the Q and A session. Thank you. And let me hand over to Pasqualeino.

Pascualino Monti, CEO, ENAV: Thank you, Fabrizio. I will start with the key highlights of the 2025. Traffic remained strong also in the second quarter and route service units for the first half are up by 7.3% year on year, around 1.1 percentage points above plan forecasts. Business performance was solid, mainly driven by the core regulated business, which recorded net regulated revenues up by more than two times versus the first quarter, driven by the recurring seasonality of the business. The group continued to deliver on cash generation.

Free cash flow reached €53,500,000 marking a twofold increase versus both previous year and the 2025. In light of the performance achieved so far, the visibility on future deployment for both the regulated and non regulated businesses and most importantly, the managerial actions to drive efficiency, we can raise the guidance for 2025. Let’s take a closer look to the new guidance for 2025. Last April, we shared with you the path to deliver a stronger NAV in 2029. Based on the delivery achieved so far and on the visibility we have for the next six months, we can today upgrade our targets for 2025.

Revenues, EBITDA and net income will be driven up by traffic trend ahead of planned projections, the excellent operating performance, which enable us to manage record levels of traffic with almost zero delay and finally, the focus on cost efficiencies. The new targets have been defined as a range. There are multiple variables at play and we will monitor the evolution of the key drivers in the coming weeks and months. Luca will elaborate on this later on. And now I hand over to the CFO for the financial highlights.

Luca Coleman, CFO, ENAV: Thank you, Pascua Lino, and good afternoon to everybody. Let’s start by deep diving on traffic. As mentioned by our CEO, traffic performance was very strong in the first half, confirming the growth trajectory observed in the first quarter of the year. And route service units up by 7.3%, recording the strongest performance amongst the main European countries included in the peer group. As said, this level is currently ahead of the growth amended in our business plan by 1.1 percentage point.

Terminal grew by 4.4% versus previous year, mainly driven by international flights, which accounted for almost 70% of the total. As we enter the third quarter of the year, the record growth experienced in the semester position us optimally towards year end. Total revenues reached €447,000,000 in the 2025, down by approximately €14,000,000 versus previous year as the solid operating performance is offset by dynamics on balances. Core business was strong, mainly driven by Enroute with revenues up by seventeen years on year, offsetting the negative impact associated with the reversal balance N minus two, worth around almost EUR 47,000,000. Let me remind you that the balance end minus two reversal is a cash item for the year, but is neutral at the revenues level.

As a result of the strong performance in the core business, net regulated revenues recorded a positive result of EUR 11,700,000.0, up by 2.2 times versus the 2025. Revenues for the non regulated business were stable as the commercial activity for the year is more tilted toward the second half of the year, in line with historical trend for this segment. Balance for the period accounted for a negative €25,900,000 mainly driven by the balance accrued in 2024 related to inflation, which has been reset in 2025 for the start of the new regulatory period, impacting for minus €26,000,000 The impact of the balance associated with the cost of recovery scheme for Terminal Zone 3 accrued in 2024 that was for EUR4.2 million, which is expected to be reassured as the seasonality of the business is set to generate positive returns for airports under the Performa Charge in Zone 3. Lastly, the negative balance worth around €3,300,000 associated with a delta between the level of euro control included in 2024 tariff and the actual cost of the agency in 2024. Moving to costs on Slide six, operating costs reached €378,000,000 up by 4.5% versus previous year, driven by the increase of both personnel and operating costs.

Personnel costs is up by 4.5% mainly driven by the increase in fixed salary, mainly driven by a contractual salary inflation adjustment that was active from July 2024. And the increase of the variable component associated with the growth of traffic volume. Other operating costs as already experienced in the first quarter are up mainly due to an increase in energy costs. EBITDA came into EUR 68,800,000.0 as a result of a solid operational performance in a growing traffic environment. The robust operating performance is highlighted by the increase in net regulated revenues, which at €11,700,000 mark at a 2.2 times increase versus Q1 twenty twenty five.

As already commented, in the first quarter, the result is impacted by balanced dynamics and in particular, the absence of positive balance generation in the first half twenty twenty five, which is the first year of the new regulatory period and before, it is worth to highlight that in the second quarter, we recorded a negative balance of EUR 3,300,000.0 associated to the variation of euro control costs for 2024. The impact stemming from the change in terminal zones that decreased from Q1 twenty twenty five and will be balanced mainly in the third quarter in line with the seasonality of the business. Based on these results and on the visibility that we have for the second semester, we have upgraded our EBITDA guidance for 2025. Let’s take a closer look to the key drivers of EBITDA guidance upgrade. The revision of our guidance for 2025 is predicated on operating performance and managerial actions.

Here are some main drivers. High traffic volume ahead of expectations. The first semester could be 1.1 percentage points higher than the figures included in the performance plan. For year end, we believe that the traffic growth will land in a 7% area. Let me remind you that our plan assume two point sorry, 6.2% growth in 2025 and then one percentage of the incremental growth corresponds to around €6,500,000 in additional revenues.

The second point is quality of service. On the basis of the current levels of punctuality, we are extremely confident to obtain the full performance bonus, which is worth around €13,000,000 for them both. And then focus on efficiency. Overall costs in the first six months increased by 4.5 year on year. And based on the projected efforts to handle traffic the higher traffic, we see the increase on a full year basis to reach around 7% versus the 8.8% unbranded in the strategic plan.

These operational tailwinds will allow us to offset in a negative impact of a delta balance related to 2024 not embedded in the plan and worth roughly €6,500,000 like the one associated with the euro control costs described earlier and another potential regulatory adjustment currently under discussion with the regulator. All the above and in light of the potential range in outcome for each of the bring us to a new range of EBITDA guidance for 2025 between EUR $245,000,000 and EUR $253,000,000. Let’s now move to the profit and loss. D and A decreased by EUR 8,200,000.0 to EUR 49,000,000 as the negative impact from provisions of EUR 2,500,000.0 is offset by the reduction in depreciation due to the full depreciation of some assets. Net financial expenses at €4,500,000 remained broadly stable versus previous year.

Net result was equal to EUR7 million, up from minus EUR29.3 million in Q1 twenty twenty five in line with the business seasonality. Now let’s move to the cash flow and net debt on Slide 10. Net debt for the period is equal to EUR $350,000,000, up by 35% versus 12/31/2024. The increase is mainly associated with open inflow of EUR96.2 million, up by EUR29.4 million, cash CapEx of EUR42.7 million and the payment of dividend in June 25 for €146,200,000 Free cash flow for the period at €53,500,000 shows a significant increase nearly doubling year on year and versus Q1 twenty twenty five, confirming the solid cash generation of the company. And now I hand over to the CEO for some closing remarks.

Pascualino Monti, CEO, ENAV: Thank you, Luca. We are managing record levels of traffic volume in Italy, ensuring an operating performance that position us as the most efficient service provider in Europe. The leading operating performance is coupled with the focus on efficiency, which allowed us to identify opportunities to improve our cost curve already in 2025. Cash flow generation continues to be strong, a priority for our strategy. And the level of delivery achieved so far and the visibility on the next six months are the basis for the upgrade of the 2025 targets.

And now let’s open the Q and A session.

Conference Operator, Chorus Call: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question today comes from Carlos Cabarracci with Kepler Cheuvreux. Please go ahead.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Hi, Pascalino. Hi, Luca. Thank you for the presentation and for taking my questions. Two quick ones from my side. You’re upgrading your 2025 EBITDA guidance by 20,000,000 to €28,000,000 due to better than expected traffic, cost efficiencies, etcetera.

So can you confirm if it’s fair to assume that something similar could be expected for your twenty twenty nine target of €361,000,000 in EBITDA by 2029? And one additional question is related to this one. I think you’ve mentioned, Luca, that 100% of the bonus is around €13,000,000 Then that €30,000,000 in bonus plus a maximum increase of €30,000,000 in revenue from $1,015,000,000 to $10.28 is already 26,000,000 higher EBITDA. So, high end increase in EBITDA is 28,000,000. So, you expect maximum 2,000,000 in cost efficiencies?

Thank you.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you, Carlos. Give us a second, then we’ll come back with the answers. Thank you. Thank you for your patience.

Luca Coleman, CFO, ENAV: Okay. Sorry. For what concern the first question about the EBITDA in the future, we believe that this strong increase that we are having now and our capability to get the bonus will probably continue also in the future. So let’s wait the end of the year, but we believe that could be a very positive ground to have a better, I mean, forecast also for the future. So we are not updating now our forecast for I’m sorry, our guidance 2029, but we believe that in the future that will be definitely positive.

For what concern the guidance, let me come back to some number. We believe that the traffic impact is 1%, it will be more or less, let’s say, 6,500,000.0 increase of revenue. If it is, we’ll be confirmed by end of the year. The bonus is around EUR 13,000,000. And then you should consider a delta balance, we say a negative balance coming from the 2024 adjustment that should be around EUR 6,500,000.0.

So this is a negative adjustment, so to be taken out. And then, so if you consider our EBITDA guidance, you should consider probably a cost performance efficiency that will be around 13,000,000 to add to the revenue impact. So if you put all these four figures together, you will lend to the guidance that we have given.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Very clear.

Conference Operator, Chorus Call: The next question comes from Amal Patel with UBS. Please go ahead.

Amal Patel, Analyst, UBS: Hi, Luca. Hi, Pasquale. Thanks very much for the presentation and for taking the time to answer my questions. Three from me. First one, please, can you provide an update on the wage negotiations with the union?

Has there been any progress there or anything incremental? Secondly, can you talk a bit about the phasing of the non regulated contracts? I mean, looking at this year and the performance so far, we’ve seen broadly flat revenues in 1H, which assuming the 52,000,000 target for 2025 would hold, it would imply around a 10% growth in 2H. Does this still hold? And then can you talk about the phasing of these contracts in 2H?

And I guess what to expect midterm, both from the existing operations as well as potential M and A, how that will be phased? And then thirdly, could you just remind us the COVID balance? How much is left to pay for both the terminal and the en route? And how is this expected to be phased and over what period? Thank you.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you. Thank you, Amal. As usual, just a few seconds of patience and we will be back with you. We’re back. Thank you.

Thank you, Amad. We will take the questions. Sorry, we will go with the answers right now.

Luca Coleman, CFO, ENAV: Okay. Going with the LIBOR contract, the question there is no formal deadline, as you know, for the renewal of the LIBOR contract. The negotiation actually, we expect to end within the end of this year and the beginning of next year. I’ll say, we don’t see any particular pressure or issue at the moment. Relationship is very good, no strike.

So we believe that at the moment, issue is no issue. Pasquale, maybe you want to answer to the second one?

Pascualino Monti, CEO, ENAV: Yes. Yes. So on the non regulated business, commercial efforts are more in the second half of the year. The same dynamic happened also last year. So the target is confirmed.

After a record 2024, we set a consistent path to 2029, which included moderate growth in 2025 based only on organic deployment and taking into account also the necessary hirings, which are going to be fundamental to support the projected revenue growth for the coming years.

Luca Coleman, CFO, ENAV: Okay. For what concern the number three question, the balance or the traffic balance, the COVID traffic balance. I mean, total amount I don’t have all the figure here with us, the total amount was €550,000,000 still to cash in from business plan period. So from 2025 through 2029. We are planning to finish all the collecting by 2027.

So we still have ’25, ’26 and part in 2027 as we are collecting from 2023. Say that, so you should divide this 50 between let me say three years, ’25, 2026 and ’27. Is that enough detail or you need more?

Amal Patel, Analyst, UBS: Thank you. That’s very clear. Thanks.

Luca Coleman, CFO, ENAV: You should consider the other balances, like inflation balance and all other balances that we will cash in the next years.

Conference Operator, Chorus Call: Okay. The next question comes from Niccolo Pessina with Mediobanca. Please go ahead.

Niccolo Pessina, Analyst, Mediobanca: Hi, good afternoon, everyone. I just wanted to ask if we could have more color on the OpEx savings that are driving for this full year 2025 guidance improvement? I mean half of the improvement at EBITDA level comes from cost savings. So I just wanted to understand what is working better considering that the guidance was provided only four months ago. Second question on the performance bonus.

If I understand correctly, 13,000,000 this year, if we assume that this is confirmed also for the rest of the regulatory period, that should be €65,000,000 in total, which would bring the 2029 EBITDA to I mean, the target above €420,000,000 So is it a reasonable assumption? And maybe an update on the M and A strategy in the non regulated business. It looked like the closing of deal back in April was imminent, but we haven’t seen anything so far. So, I’m wondering if anything is happening on this front.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you. Thank you, Niccolo. Just again, a couple of secs on our end. Thank you. Thank you.

Thank you.

Luca Coleman, CFO, ENAV: Okay. For what concern costs, just consider that the costs we have presented are the one we have just negotiated with the regulator a couple of months before. So the one we have presented in 2025. Say that day after having the business plan approved what we did that we just work on how to reduce our cost. Let me say the more impact that we expect to have, it would be more on the external costs other than personal staff costs.

So what we are optimizing is all costs around. So from the review of internal procedures and the process and our idea to more practical solution like higher share of purchasing made through tenders, we are doing tenders to every purchasing. And this will allow us to optimize costs on several supplies. So we are just right. We are tackling cost all the cost of the company.

As you can imagine, as the traffic is increasing, it will be more difficult with the personal cost for us much easier with all the other external costs. So what concerning step the performance bonus you should consider in this is always two percent of the is more or less $13,000,000 that is going to increase in the future because this is a 2% of the cost base presented in the performance plan for each year. So as actually the revenue will increase, the cost is increasing also year after year, this will slightly increase year after year. This you shouldn’t had these year after year because it just every year is 13 or whatever is the value. So we consider at the beginning of each year if and we are going to get the target 100% other than depends on the traffic, depends on several things.

So now we are quite confident. I mean, are definitely confident in 2025 and we believe that we can get also for the next year. From M and A?

Pascualino Monti, CEO, ENAV: On the M and A, we expect to have a material progress after the summer break.

Niccolo Pessina, Analyst, Mediobanca: Okay. Thanks a lot.

Conference Operator, Chorus Call: There are no more questions registered at this time. I’ll turn it back over for any closing remarks.

Fabrizio Ragnacci, Investor Relations, ENAV: Yes. No, actually there is a final question that we received offline and the question is essentially linking the upgrade into the guidance with what the company intends to do with the dividend?

Pascualino Monti, CEO, ENAV: Yes. As said during the strategic plan presentation, shareholder remuneration is one of our priorities. But first, let us work on 2025 because there are many variables at play. Once we will have full visibility on the landing point for the year, we’ll consider we are clearly open to consider how the incremental result can contribute to shareholder remuneration.

Fabrizio Ragnacci, Investor Relations, ENAV: So thank you, Pasqualeino. Thank you, Luca. That concludes our earnings call. As always, the IR team is available for any questions or follow ups that might be necessary. Thank you.

Thank

Conference Operator, Chorus Call: you for joining. The conference is now over. You may now disconnect your telephone.

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