Earnings call transcript: Enav reports Q1 2025 loss amid seasonal patterns

Enav SpA reported its first-quarter financial results for 2025, revealing a net loss of €29.3 million, which aligns with the company’s typical seasonal trends. The company’s revenue for the quarter was €181 million, marking a decline of €13 million compared to the previous year. Enav’s stock responded positively in the open market, with a 1.66% increase, reflecting investor optimism despite the reported loss. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.08 and offers an attractive 6.78% dividend yield.

[Want deeper insights? InvestingPro subscribers have access to 10 additional ProTips and comprehensive financial metrics for Enav.] The company maintained its annual EBITDA target of €2 billion and noted a 25% increase in free cash flow year-over-year.

Key Takeaways

• Enav reported a Q1 2025 net loss of €29.3 million, consistent with seasonal expectations.
• Revenue decreased by €13 million year-over-year to €181 million.
• The stock price increased by 1.66% following the earnings announcement.
• Free cash flow saw a significant 25% increase compared to the previous year.
• The company is exploring technology sales opportunities in the US market.

Company Performance

Enav’s first-quarter performance reflected typical seasonal losses, with a net loss of €29.3 million. Revenues fell to €181 million, a €13 million decrease from the same period last year. Despite the revenue decline, the company managed to increase its free cash flow by 25% year-over-year, indicating improved cash management. The company’s strong balance sheet shows more cash than debt, with a healthy current ratio of 2.46 and notably low price volatility (Beta: 0.73).

Financial Highlights

• Revenue: €181 million, down €13 million year-over-year
• Net Loss: €29.3 million, following seasonal trends
• Free Cash Flow: Increased by 25% year-over-year
• Operating Costs: Increased by 2.8% to €182 million

Outlook & Guidance

Enav remains confident in achieving its €2 billion EBITDA target for the year. The company is optimistic about its financial performance in 2025, with potential upside expected. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels. Enav is also preparing for wage negotiations anticipated to begin in June or July, which could impact future financials. Analyst consensus maintains a moderate buy recommendation, with targets suggesting further upside potential.

[Access the complete Enav Research Report and Fair Value analysis with an InvestingPro subscription.]

Executive Commentary

CFO Luca Coleman noted, "Results for the quarters are perfectly aligned with our expectations," highlighting the company’s ability to manage seasonal fluctuations. Coleman also emphasized the importance of traffic growth, stating, "The increase in traffic is important," as Enav continues to capitalize on the recovering aviation sector.

Risks and Challenges

• Seasonal revenue fluctuations may continue to impact quarterly results.
• Rising operating costs, which increased by 2.8% in Q1, could pressure profitability.
• Wage negotiations in the coming months may affect financial outcomes.
• The success of international technology sales initiatives remains uncertain.
• Continued reliance on Eurocontrol’s traffic growth predictions could pose risks if market conditions change.

Q&A

During the earnings call, analysts inquired about Enav’s traffic growth expectations and its potential technology sales in the US market. There was also discussion on the composition of free cash flow and strategies for managing rising costs.

Enav’s performance in the first quarter of 2025 demonstrates its resilience in managing seasonal losses while maintaining a positive outlook for the rest of the year. The company’s focus on technology sales and operational efficiency is expected to support its long-term growth strategy. With a gross profit margin of 98.88% and four consecutive years of dividend growth, Enav continues to demonstrate strong operational execution and shareholder returns.

[Discover more valuable insights about Enav and 1,400+ other companies with InvestingPro’s comprehensive Research Reports.]

Full transcript - Enav SpA (ENAV) Q1 2025:

Fabrizio, Conference Host/Moderator: Good afternoon, ladies and gentlemen, and welcome to the first quarter twenty twenty five results presentation, which will be hosted by 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 for 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 again. And now I hand over to Luca.

Luca Coleman, CFO: Thank you, Fabrizio. I will start with the key highlights of the first quarter of twenty twenty five. The year started with a strong traffic trend with the service units for En route higher than the planned expectations by 1.2 percentage points. Financial results came in as expected. Operational delivery was solid.

Revenues for both the regulated and the not regulated business recorded growth versus the previous year. And then we had a positive operational trend as being also offset by the dynamics of the balances, which are typically of the first year of the new regulatory period and are already taken into account in our plan for us. Free cash flow increased by 25% versus the previous year. Considering the amount of balance to be cashed in during 2025 and the cash generation of the business, we expect free cash flow for 2025 to be around $240,000,000. The visibility we have so far on the operation and financial delivery ensures that our targets for 2025 are comfortably at reach with upside potential.

Now we will deep dive on the operating and the financial performance of the quarter. As I have already mentioned, traffic performance was solid in the first quarter. Service units for En route were at 2,200,000, up by 7.4% versus previous year. And most importantly, higher by 1.2 percentage point versus the projected growth embedded in our business plan and tariff. Terminal is up as well, marking a 5.6% growth versus 24 with international flights accounting for almost 70% of total and the positive performance of both charging zones.

Let me remind you that, with the start of LP four in 2025, now we have only two terminal charging zone, both subject to performance mechanism. As a consequence of the regulatory change and route and terminal are now fully aligned under the performance scheme and also have the exact same exposure to the seasonality of the business. With revenues peaking during the summer months while operating costs remain relatively stable throughout the quarters. The next two quarters will be fundamental to assess the overall trajectory for the year as they are historically contributing for around 60% of the total service units. Let’s move to the economic results starting with the revenues.

Revenues reached €181,000,000 in the quarter, down year over year by €13,000,000 as the solid operating performance is offset by dynamics on balances. Core business was stronger, driven mainly by Enroute which recorded a double digit increase in revenues. Net of the negative balance and minus two reversal, which I remind you is neutral at the revenues level, the regulated business recorded an increase in revenues of €5,400,000. The not regulated business continued on its growth trajectory with €7,100,000 in the quarter and an increase of 4.2% versus the previous year. All of these was more than offset by the negative contribution balances worth a total of around 36,000,000 Euro minus 36,000,000 Euro, which was driven by the balance reversal, mainly coming from the cash in of 2020 and ’21 COVID traffic recovery for minus €17,600,000, and the balance for the period.

Accounting for the remaining minus €18,200,000 is driven by the sense of balance that were accrued in 2024, namely inflation and cost recovery scheme for Terminal Zone 3. The inflation balance represent the impact of the business of the regulatory reset on the business, sorry, of the regulatory reset. As values like inflation are realigned with entering a new regulatory period. Instead, the factor associated with the Terminal Zone 3 balance is temporary and related to the switch from cost recovery under nation law to the European performance scheme. This negative will be reassorted over the coming quarters as the seasonality of the business is set to generate positive returns in line with the Temil Zomwa.

Moving to costs on Slide five, total operating costs reported an increase of 2.8% compared to Q1 twenty twenty four, reaching €182,000,000 due to a 2.4% growth in personnel costs and 4.3% increase in other operating costs. Personal costs grew by €3,500,000 primarily driven by contractual salary inflation adjustments effective from July 2024. Variable salary component declined by €1,700,000 mainly as a consequence of the net effect of a slightly higher over time linked to the increased traffic and the positive calendar phasing of public holidays. Other operating costs grew mainly due to increase in energy costs driven by higher prices. Moving on Slide six, EBITDA came in at €800,000 for the quarter meeting expectation and in line with the projected progression embedded in the $2,025,000,000 euro EBITDA target for 2025.

As said, delivery of the operating activities was solid resulting in a growth of net regulated revenue of €5,400,000 Let me highlight that the balance and minus two reversal is not a cash is non cash item at EBITDA level. This is delivery mitigated impact stemming from the change in terminal zones whereby the last year of Zone 3 was still under cost recovery scheme and generated a positive balance worth €8,700,000. As said before, this negative effect will rebalance over the coming quarters as the seasonality of the business will highlight the positive regulatory impact associated with having all charging zones under performance scheme. The absence of balance generation in Q1 twenty twenty five, widely expected as we are in the first year in the new regulatory period, LP4. These dynamics were clearly expected and bode well for the achievement of the fiscal year guidance, which is comfortably at reach.

Moving now to Slide seven on the profit and loss statement. Dynamics below the line reported a negative EBITDA of €26,000,000 impacted by €25,000,000 of depreciation and €300,000 negative effect from provisions. Net financial expenses were €2,200,000 mainly due to the foreign exchange losses, partially offset by lower interest costs with an average annual interest rate of 3.71% down from 4.1% in 2020. Taxes amounted to 900,000.0 Euro down by 500,000.0 Euro. And as result, the group reported a consolidated net loss of €29,300,000 in line with the typical seasonality of the business.

Let’s move to cash flow and net debt on slide eight. Net debt for the period is equal to $223,000,000 Euro down by 13% or 35,000,000 Euro versus 12/31/2024. The reduction is mainly associated with operating cash flow of €53,100,000 up by €3,300,000 and a cash CapEx of €25,100,000 and the positive change for around €7,000,000 in non current commercial debt mainly related to the gross negative bonds to be returned to airlines. Free cash flow was equal to €28,000,000, up by 25.5% proving the cash generation capabilities of the company. And now some closing remarks.

Results for the quarters are perfectly aligned with our expectations and the business plan projections. The only deviations are positive like traffic that has shown a strong trend. The supportive operating environment and the regulatory stability offer us a great visibility. And as a consequence, our targets for the year are comfortably at reach. Such announced visibility give us a confidence on the potential upside compared to the planned targets, starting already from 2025.

As you have seen in the presentation, cash generation has been strong and is expected to remain solid also in the coming years, which underpins our commitment to shareholder remuneration for the full plan period. And now let’s open the Q and A session.

Fabrizio, Conference Host/Moderator: Thank you. Thank you, Luca. We can now start with the Q and A session for those which are connected. Operator, if you could please open up the line to the analysts that want to ask questions. Thank you.

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

Carlos Caburazi, Analyst, Kepler: Hi, Luca. Hi, Fabrizio. Thank you for the presentation. I just have a quick question on traffic. Q1 should have been somewhat harder in terms of comps, given the leap year impact in February and the seasonality in Easter holidays in March.

Nevertheless, traffic has grown 7.4% year on year and stands 1.2% ahead of Europontrol’s estimates. Considering that the aviation sector is pointing towards another solid summer season, could you please share your views on traffic for the rest of 2025? And if you see further outperformance versus the plan? Thank you.

Luca Coleman, CFO: Yes, Carlos. This is a really good question because we just had also April just a couple of hours ago from Eurocontrol. So the after of April is only the April demand is a 7.1. So still continue the strong increase of traffic also in the second quarter, I would say. We all set some meeting in the last days with our colleague at German, French, Spain.

And all we expect a usual increase of traffic, a huge amount of traffic to manage during the summer season. And the Euro control is already asking us help to manage this important flow as some of our colleague and neighbors as have some capacity problem. So we will expect that also during the summer, the traffic that we will manage it will be quite important. Yeah. So I think this is to have a final view for the year.

We need to wait for the the summer. I mean, the end of the I mean, at least to start the summer. But this increase that we are having now is 1.2 percentage different from end of the one piece of traffic. Believe this is could be easily considered also by the end of the year at the moment.

Conference Call Operator, Chorus Call: Okay. Next question is from Amal Patel, UBS. Please go ahead.

Amal Patel, Analyst, UBS: Luca. Hi, Fabrizio. Thank you very much for taking my questions and thanks for the presentation. Three questions from my side. So number one, on the wage negotiations, do we have any update you can provide here?

Secondly, just looking at your OpEx performance for the quarter, I believe OpEx grew around 3% year over year. And I guess in the context of the 9% year over year, you showed that the FY 2024 results and strategic update, how should we think about the evolution for the rest of the year? And then finally, maybe any comment on the bonus malice and whether you believe you’re on track for that? Thank you.

Luca Coleman, CFO: Yes. For what concern the negotiation with the the new contract staff contract, it hasn’t still beginning. I mean, it’s not yet started. So we probably open the platform, the discussion in June, July. Sorry.

Yes. June, July this year. But we will, you know, start the discussion. And now, you know, the the the feeling is is good, is positive. But we don’t have any other, you know, particular information to give to you as, you know, this the token is not already started.

Official token is not already started. For what concern the cost of ex late to OpEx, you should consider, I mean, we are quite in line with what we expected in terms of cost increase. More or less, this could be the increase that we may also have by the end of the of the of the year at this moment. So the trajectory could be more or less this one. We should look at the we should wait and see what’s happened in the summer with this very important increase of traffic that we are going to to manage and try to understand to better manage it.

We are also in the discussion with the staff. So coming back to the first question. We are trying to remodulate some some some part of the contract above all the one related related to the to the sorry. I’m looking for the English name for the MBO, the the the variable part of incentive. Right?

And the incentive to to our our controller to where we try to push on on the flexibility and on having more, you know, more time from from them too. So this is something that we are working on and it the the feeling’s good. The talking are quite quite quite good at the moment. We will give you more update in the in the next in the next. So what concern about us, Malos, at the moment with this traffic that we are manage, the target the target that is given to end up of our concept of bonus is 100% taken.

So we are now the delay that we have is around zero. So actually, as as the target by the end of the year is 0.14, you you know, we are quite at the moment confident. Also, think it’s important to underline these you know, the increase in traffic is important. But as we said also in our presentation, this is seasonality in the first quarter is quite important. So most of the traffic and most of the impact of the traffic on the punctuality will come in the second and third quarter.

And this will be the, you know, the most important quarter to look at to see how good we are to get the punctuality box. But at the moment, the management foresee to get the bonus at the most.

Amal Patel, Analyst, UBS: Thank you.

Conference Call Operator, Chorus Call: The next question is from Marco Limit at Barclays. Please go ahead.

Marco Limit, Analyst, Barclays: Hi, good afternoon. Thanks for taking my question. I’ve actually got just one question. So we’ve seen over the last week’s headline about Mr. Trump in The U.

S. Talking about need for new software for their own ATC system. So just wondering to what extent you have been involved in discussion in selling some of your softwares to The U. S? Thank you.

Luca Coleman, CFO: Okay. If you look at what’s happening from one side, obviously is an opportunity also for Renault as, you know, they have to update their technology. You know, that we sell part of our technology also. We we may sell part of our technology also to to them. So for in term of not regular business for us would be an opportunity.

In term of traffic, will say that we will doesn’t that we will not really impact our, you know, that our forecast is is something really internal US internal problem, internal how to manage all these volume of traffic during the summer, not to Europe, I would say. Did I answer you, Marco?

Marco Limit, Analyst, Barclays: Yes, yes, of course. I was referring to the non regulated business. Yes. Just wondering if like there is a proper process in place yet or we’re still at very, very early stage.

Luca Coleman, CFO: I would say that something is moving, but yes, that’s what I can do at the moment.

Marco Limit, Analyst, Barclays: Okay. Thank you.

Conference Call Operator, Chorus Call: The next question is from Luca Bacocoli, Intesa Sanpaolo. Please go ahead.

Luca Bacocoli, Analyst, Intesa Sanpaolo: Hello. Good morning, everyone. Can you hear me?

Luca Coleman, CFO: Yes. Yes. Yes.

Luca Bacocoli, Analyst, Intesa Sanpaolo: Okay. Good. So a few questions from my side. The first one regards the free cash flow generation that you got for this year at EUR $240,000,000. So I was wondering if you can split out this guidance between the, let’s say, normalized cash flow and what is coming from the reversal of the balance?

The second question regards M and A during the strategic update plan. You mentioned that there are advanced stage negotiation on few deals. So if there’s any update on this, it would be helpful. And also a clarification on the traffic growth on April, you said 7.1%, if I got it right, which is basically in line with the first quarter trend. But in April, the comparison was much easier.

So I was wondering why it’s not well above the growth seen in the first quarter. And finally, the other question is on the guidance for this year. You were repeating during the presentation that the results for the guidance are comfortably at reach. So should we expect that if traffic growth remains at this level, you may increase the target for 2025 at EBITDA level? Thank you.

Luca Coleman, CFO: Okay, Luca. I guess it’s more than three questions. See if I remember all, otherwise, I will ask you back. I start with the last one maybe is when we said that we are comfortable at the region, we think not only thinking about the traffic, but also taking in consideration the cost efficiency that we can put on place. Also some as the bonus punctuality bonus.

So there are several leverage that we are looking at what we said that we are comfortable that, you know, the plan at the $2.25 billions EBITDA, you know, could could could we’ll see, could could be beaten. That’s that’s it. So that’s the three leverage that we our in our mind when we said we we are comfortable. For what concern free cash flow, 240 is our forecast by the end of the this year. You should consider that the balance reversal.

So, you know, the the twenty twenty, twenty twenty one COVID and also the inflation. All, you know, the balance that we we have in the tariff in 2025. Tariff will cover around 200 millions of free of cash flow actually. And the rest would be based on 02/2025 EBITDA. So just consider this 40 millions is related to the to the target that we have given in term of EBITDA.

If the EBITDA will increase, probably also this part will would increase. M and A, we don’t have any other update other than say that we are working on the opportunity that we, in some way, anticipate in in our Capital Market Days. Things are going quite well and, you know, we need wait some some more months to have some some other information. But this is acting in line with what we said months ago. Traffic, I guess it was 7.1 in April.

Confirming that we are actually I mean, the forecast that the result that we had in the first quarter. So this 1.2 percentage point higher than the, you know, the the plan and the the tariff traffic in terms of service joint make us think that, you know, this this could be the target that we can still have in in the in the by the end of the year. We should wait for the summer because summer really move a lot. In this moment, having this 1.2%, this mean that in the summer you still have this this increase with volume that is much higher. At the moment, we believe this this this will happen.

But, you know, just to be sure, we we need to wait for just to be more, you know, more confident. We need to to at least start with the summer season. Actually, the summer season is just starting now. So having a couple months going and see if this is confirmed. But by April, this is confirmed.

Did I answer to your question, Luca?

Luca Bacocoli, Analyst, Intesa Sanpaolo: Yes. But just on traffic, I was wondering why it’s only 7% up year over year despite this comps.

Fabrizio, Conference Host/Moderator: Sorry, Luca. We couldn’t understand the last part of your question. So April being 7% higher year on year despite, sorry, the line broke down.

Luca Bacocoli, Analyst, Intesa Sanpaolo: Yes, the easy comps because Easter this year fall in April, while last year was in March. So I was expecting a nice growth of the service unit in April vis a vis the average you reported in the first three months of the year?

Luca Coleman, CFO: Okay. I don’t remember when we was last year actually. But, you know, 7% point are still a very seven point, you know, 7.1 are still quite quite good to resolve. It also because the volume is higher. April volume is much higher than January and February.

In general term, I don’t have any, you know, particular answer to to to this this question. Had just the number the the value couple couple hours ago from your control. Now we will go deeper on this this and check what the what’s the the internal dynamics. So what we see over trough over overflight is going very well. International is going well.

I think we we are seeing a lot of tourism going around. So in general term, we don’t have any complain of these actually. The complain of our operative structure is really is really to how to manage all this traffic that they expect to have. I mean, the forecast, we saw that oh, that’s the we call the operative forecast. Every three weeks, the operative makes the new Euro contract a very operative forecast of the traffic for the next three weeks.

Every three weeks, we have these really deep. Just to just to to to give the the ACC in Europe the right volume and the right weight of, you know, what they they should expect in the in the in the in the next three weeks. And for what we saw, the last one is really, really important volume of traffic manage all over Europe actually. But in Italy, we go as we don’t give delayed as you know, as we actually are quite efficient to tariff is good. So we are attracting traffic.

And when there is a conjunction around, I mean, is some country, I cannot tell you name very close to us that has announced for the summer. Two minutes of delayed per per per average flight. Two minutes two minutes is really we are talking about zero point something. We are talking about a planned delay of two minutes already now. So you can imagine, you know, how I mean, what we should expect in the next in the next month in term of traffic that will continue to come over Italy.

Probably, these forecasts could be even even, you know, too too too small to to to sorry? Too conservative, right, too conservative.

Luca Bacocoli, Analyst, Intesa Sanpaolo: Okay. Thank you.

Conference Call Operator, Chorus Call: The next question is from Francisco Sala, Banco Acros. Please go ahead.

Luca Bacocoli, Analyst, Intesa Sanpaolo: Good afternoon. Sorry, if I go back to the operating costs, just a clarification. I wonder whether your present assumption for the rest of the year is that costs will keep on going up at the same growth as the one we saw in Q1? Thank you.

Luca Coleman, CFO: At the moment, you know, this is just the first quarter. But at the moment, the first quarter, this is our best forecast. We believe that the increase that we had in the first quarter could be, you know, forecasted also by the end of the of the year. A lot will depend. But we’ll not for what concern the other operating cost, but for the staff cost.

How much traffic we should who will have to to manage it because, you know, within the the 7%, seven point two, seven point five, you know, the the increase of traffic versus the previous year, the company is putting on on on on table all the leverage and all the the the the the thing that can can I mean, all the action that they can, you know, contain the calls, manage the traffic in the right way, having the bonus bonus. And but if the traffic will increase by 10%, for example, we have to put some other, you know, action on place. So in general, I will say at the moment, with this increase of traffic, look this increase of cost and forecast by the end of the of the year. If the traffic will will increase more, probably we’ll have to look at some percentage point different. At least we will concern the the personal only for what concern the personal cost.

Carlos Caburazi, Analyst, Kepler: You.

Conference Call Operator, Chorus Call: Gentlemen, Mr. Ranjati, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Fabrizio, Conference Host/Moderator: Thank you. Thank you, operator. So thank you, Luca. Thanks to everybody that has joined the earnings call. Of course, for whatever follow-up or additional questions you might have, the IR team is available.

So again, thank you, Luca, and thank you everybody. Have a great day.

Luca Coleman, CFO: Thank you. Bye.

Conference Call Operator, Chorus Call: Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.

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