Earnings call transcript: ENAV sees revenue dip in Q2 2025 but upgrades guidance

ENAV, the Italian air navigation services provider with a market capitalization of €2.8 billion, has reported its financial results for the first half of 2025, revealing a mixed performance with a decline in total revenues but an upgrade in its full-year EBITDA guidance. According to InvestingPro analysis, the company’s stock is currently trading near its 52-week high, reflecting investor confidence in its operational efficiency. The company is navigating increased traffic levels and operational costs, while maintaining its position as a leading service provider in Europe.

Key Takeaways

• Total revenues decreased by €14 million year-over-year to €447 million.
• Core business revenues increased by 17% compared to the previous year.
• ENAV upgraded its 2025 EBITDA guidance to a range of €245-253 million.
• The company is managing record traffic levels with minimal delays.
• Net debt rose by 35% to €350 million from December 2024.

Company Performance

ENAV’s overall performance in the first half of 2025 was characterized by a decline in total revenues, attributed to various operational challenges. Despite this, the company achieved a 17% increase in core business revenues, reflecting its strong market position and efficiency in handling increased traffic volumes. InvestingPro data shows the company maintains a robust gross profit margin of 99% and operates with a moderate debt-to-equity ratio of 0.54, suggesting strong operational efficiency. The company continues to outperform its European peers in terms of operational efficiency and traffic management.

Financial Highlights

• Total revenues: €447 million, down €14 million year-over-year.
• Core business revenues: Up 17% year-over-year.
• EBITDA: €68.8 million.
• Net result: €7 million, a significant improvement from a loss of €29.3 million in Q1 2025.
• Net debt: €350 million, a 35% increase from December 2024.
• Free cash flow: €53.5 million, nearly doubled year-over-year.

Outlook & Guidance

ENAV has revised its 2025 EBITDA guidance upwards to a range of €245-253 million, citing strong traffic growth and operational efficiency. The company expects a full-year traffic growth of around 7%, surpassing the initially planned 6.2%. InvestingPro analysis reveals several positive indicators, including a significant 6.01% dividend yield and a consistent dividend growth track record of four consecutive years. Additionally, ENAV anticipates a full performance bonus of approximately €13 million and potential additional revenue of €6.5 million from traffic growth. However, it also projects a cost increase of about 7% for the full year. For deeper insights into ENAV’s financial health and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

Pasqualino Monti, CEO of ENAV, emphasized the company’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 added, "We believe that this strong increase that we are having now... could be a very positive ground to have a better forecast also for the future."

Risks and Challenges

• Rising operational costs, including personnel and energy expenses, could impact profitability.
• Ongoing labor contract negotiations might affect future cost structures.
• Macroeconomic pressures and inflation could pose challenges to maintaining financial stability.
• The collection of the €550 million COVID traffic balance through 2027 could affect cash flow.
• Increased debt levels may limit financial flexibility.

ENAV’s focus on efficiency and strategic growth initiatives positions it well amidst industry challenges. However, managing rising costs and maintaining its competitive edge will be crucial for sustained success.

Full transcript - Enav SpA (ENAV) Q2 2025:

Conference Operator: Good afternoon, this is the conference call operator. Welcome and thank you for joining the ENAV first half 2025 results conference call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing Star and zero on their telephone. 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 2025 results presentation. The presentation will be hosted by our CEO Pasqualino 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&A session. Before we start, let me remind you that media can be connected to both the presentation and the Q&A session. Thank you, and let me hand over to Pasqualino.

Pasqualino Monti, CEO, ENAV: Thank you, Fabrizio. I will start with the key highlights of the first semester of 2025. Traffic remained strong also in the second quarter and en 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 €53.5 million, marking a twofold increase versus both previous year and the first quarter of 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 through the new guidance for 2025. Last April we shared with you the path to deliver a stronger ENAV 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 Pasqualino 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. En 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 embedded in our business plan by 1.1 percentage point. Terminal grew by 4.4% versus the 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 positions us optimally toward year end.

Total revenues reached €447 million in the first half of 2025, down by approximately €14 million versus previous year as the solid operating performance is offset by dynamics on balances. Core business was strong mainly driven by en route with revenues up by 17% year on year offsetting the negative impact associated with the reversal balance N2 worth almost €47 million. Let me remind you that balance N2 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 regulatory revenues recorded a positive result of €11.7 million, up by 2.2 times versus the first quarter of 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 the historical trend for this segment.

Balance for the period accounted for a negative €25.9 million 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 -€26 million. The impact of the balance associated with the cost recovery scheme for terminal zone 3 accrued in 2024, that was for €4.2 million, which is expected to be reabsorbed as the seasonality of the business is set to generate positive returns for airports under the performance charges zone 3. Lastly, the negative balance worth around €3.3 million associated with a delta between the level of cost control included in 2024 tariff and the actual cost of the agency in 2024. Moving to costs on slide 6, total operating costs reached €378 million, 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 in to €68.8 million 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 the €11.7 million mark is a 2.2 times increase versus Q1 2025. As already commented in the first quarter, the result is impacted by balance dynamics and in particular the absence of positive balance generation in first half 2025, which is the first year of the new regulatory period.

It is worth to highlight that in the second quarter we recorded a negative balance of €3.3 million associated to the variation of Eurocontrol costs for 2024. The impact stemming from the change in terminal zones that decrease from Q1 2025 will be rebalanced mainly in the third quarter in line with the seasonality of the business. Based on this result 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 high traffic volume ahead of expectations. The first semester is 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 assumes 6.2% growth in 2025, and then 1% of the incremental growth corresponds to around €6.5 million in additional revenues. The second point is the 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 million for them, goods, 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 higher traffic, we see the increase on a full year basis to reach around 7% versus the 8.8% embedded in the strategic plan.

These operational tailwinds will allow us to offset any negative impact of a delta balance related to 2024 not embedded in the plan and worth roughly €6.5 million, like the one associated with the Eurocontrol 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 variables, bring us to a new range of EBITDA guidance for 2025 between €245 million and €253 million. Let’s now move to the profit and loss. D&A decreased by €8.2 million to €49 million as the negative impact from provisions of €2.5 million is offset by the reduction in depreciation due to the full depreciation of some assets. Net financial expenses at €4.5 million remained broadly stable versus previous year.

Net result was equal to €7 million, up from minus €29.3 million in Q1 2025, in line with the business seasonality. Now let’s move to the cash flow and add that on slide 10, net debt for the period is equal to €350 million, up by 35% versus December 31, 2024. The increase is mainly associated with inflow of €96.2 million, up by €29.4 million. Cash CapEx of €42.7 million and the payment of dividend in June 2025 for €146.2 million. Free cash flow for the period at €53.5 million shows a significant increase, nearly doubling year on year and versus Q1 2025, confirming the solid cash generation of the company. I hand over to the CEO for some closing remarks.

Pasqualino Monti, CEO, ENAV: Thank you, Luca. 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. 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. Now let’s open the Q&A session.

Conference Operator: Thank you. This is the call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1. At this time, we will pause for a moment as callers join the queue. The first question today comes from Carlos Cabarracci with Kepler Cheuvreux. Please go ahead.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Hi, Pasqualino. 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 to €28 million to better.

Amal Patel, Analyst, UBS: Than expected traffic, cost efficiencies, etc.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Can you confirm if it’s fair to assume that something similar could be expected for your 2029 target of €361 million in EBITDA by 2029? One additional question is related to this. I think you’ve mentioned, Luca, that 100% of the bonus is around €13 million. That €30 million in bonus plus a maximum increase of €30 million in revenue from 1015 to 1028 is already €26 million higher EBITDA. The high end increase in EBITDA is €28 million. You expect maximum €2 million 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.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: It.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you. Thank you for your patience.

Luca Coleman, CFO, ENAV: Okay, so for what concern the first question about EBITDA in the future. We believe that this strong increase that we are having now, and you know, our capability to get the bonus will probably continue also in the future. Let’s wait the end of the year. We believe that could be a very positive ground to, you know, to have a better, I mean, forecast also for the future. 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%, be more or less, say €6.5 million increase of revenue. If it is, will be confirmed by end of the year, the bonus is around €13 million. You should consider a delta balance.

We say a negative balance coming from the 2024 adjustment. That should be around €6.5 million. This is a negative adjustment to be taken out. If you consider our EBITDA guidance, you should consider probably a cost performance efficiency that will be around €13 million to, you know, to add to the revenue impact. 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.

Amal Patel, Analyst, UBS: Thank you.

Conference Operator: As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from Amal Patel with UBS. Please go ahead.

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Hi, Luca. Hi, Pasqualino. Thanks very much for the presentation and 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 million target for 2025 would hold, it would imply around a 10% growth in 2H. Does this still hold? Can you talk about the phasing of these contracts in 2H? I guess what to expect midterm both from the existing operations as well as potential M&A, how that will be phased, and then thirdly, could you just remind us the COVID traffic 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, Amal. We will take the questions. Sorry, we will go with the answers right now.

Luca Coleman, CFO, ENAV: Okay, going with the, you know, the labor contract, the question there is now a formal deadline, as you know, for the renewal of the labor contract. The inquisition, actually, you know, 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. In relationship is very good. No strike. We believe that at the moment no issue is not an issue. Pasqualino, maybe you want to answer to the second one.

Pasqualino Monti, CEO, ENAV: Yes, yes. On the non-regulated business, commercial efforts are more in the second half of the year. The same dynamic happened also last year. 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, 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 concerns number three, a question. The balance of the traffic balance, the COVID traffic balance. I mean the total amount. I don’t have all the, you know, the figure here with us, but you know, the total amount was €550 million still to cash in from business plan period. From 2025 through 2027 we are planning to finish all the collecting by 2027. We still have 2025, 2026, and part of 2027 as we are collecting from 2023. Say that. You should divide this €550 million between these, you know, these, let me say, three years, 2025, 2026, and 2027. Is that enough detail or you need more?

Carlos Cabarracci, Analyst, Kepler Cheuvreux: Thank you, that’s very clear. Thanks.

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

Conference Operator: As a reminder, if you wish to ask a question, please press star and one on your telephone to join the question queue. The next question comes from Nicolo Pacina with Kepler Cheuvreux. Please go ahead.

Amal Patel, Analyst, UBS: 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 improvement at EBITDA level comes from cost savings. 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 million this year. If we assume that this is confirmed also for the rest of the regulatory period, there should be €65 million in total, which would bring the 2029 EBITDA to, I mean, the target above €420 million. Is it a reasonable assumption and maybe an update on the M&A strategy in the non-regulated business? It looked like the closing of the deal back in April was imminent, but we haven’t seen anything so far.

I’m wondering if anything is happening on this front.

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

Carlos Cabarracci, Analyst, Kepler Cheuvreux: It.

Fabrizio Ragnacci, Investor Relations, ENAV: Thank you. Thank you.

Luca Coleman, CFO, ENAV: Okay, for what concern costs. Just consider that the costs we have presented are the ones we have just negotiated with the regulator a couple months before. The ones we have presented in 2025 say that, you know, the day after having the business plan approved, what we did, we just work on how to reduce our cost. Let me see. The more impact that we expect to have, it would be more on external costs other than personnel staff cost. What we are optimizing is all costs around, from the review of internal procedures and the process and our idea to more practical solutions 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. We are just right, we are tackling all the costs of the company.

As you can imagine, as the traffic is increasing, it will be more difficult with the personnel cost for us, much easier with all the other external costs. For what concerning step, the performance bonus you should consider in this is always 2% of the. It’s more or less €13 million that is going to increase in the future because this is a 2% of the cost base presented in the performance for them for each year. As you know, actually the revenue will increase. The cost is increasing also year after year. This will slightly increase year after year. You shouldn’t add these year after year because it’s just one. Every year is €13 million or whatever is the value.

We consider at the beginning of each year if and you know, we are going to get the target 100% other than, you know, depends on the traffic, depends on several things. Now we are quite confident, I mean we are definitely confident in 2025 and we believe that we can get also for the next year from M&A.

Pasqualino Monti, CEO, ENAV: We expect to have a material progress after the summer break.

Amal Patel, Analyst, UBS: Okay, thanks a lot.

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

Fabrizio Ragnacci, Investor Relations, ENAV: 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.

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

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

Conference Operator: Thank you for joining. The conference is now over. You may now disconnect your telephones.

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