Earnings call transcript: Salik Company Q1 2025 earnings rise, stock edges up

Salik Company PJSC reported its first-quarter 2025 earnings, showcasing a notable increase in revenue and profitability. The company achieved an earnings per share (EPS) of 0.04 USD, aligning with market expectations. Revenue reached 751.6 million dirhams, marking a 33.7% increase year-on-year. Following the earnings announcement, Salik’s stock experienced a modest rise of 0.55%, closing at 5.48 USD. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.27 out of 5, though current valuations suggest the stock may be trading above its Fair Value. The company’s strategic innovations and operational growth contributed to its robust financial performance.

Key Takeaways

• Salik’s revenue surged by 33.7% year-on-year, reaching 751.6 million dirhams.
• The company’s EBITDA margin expanded to 69.1%, reflecting operational efficiency.
• Stock price increased by 0.55% post-earnings, closing at 5.48 USD.
• Salik introduced new toll gates and launched a barrier-free parking payment solution.
• The company maintains 100% exclusivity as a toll gate operator in Dubai.

Company Performance

Salik Company demonstrated strong performance in the first quarter of 2025, driven by increased toll gate usage and strategic partnerships. The company’s total trips rose by 35.1% year-on-year, while active registered accounts grew by 1.97% quarter-on-quarter. This growth reflects Salik’s effective strategies in expanding its customer base and enhancing service offerings.

Financial Highlights

• Revenue: 751.6 million dirhams, up 33.7% year-on-year
• EBITDA: 519.6 million dirhams, a 37.9% increase
• Net profit: 370.6 million dirhams, up 33.7% year-on-year
• Free cash flow: 626.7 million dirhams, up 77.8% year-on-year
• Cash and cash equivalents: 1.5 billion dirhams

Earnings vs. Forecast

Salik’s earnings per share of 0.04 USD met market expectations. The company’s revenue of 751.6 million dirhams also aligned with forecasts, showcasing its ability to meet financial targets consistently. The slight stock price increase of 0.55% suggests that investors were satisfied with the results, despite the absence of a significant earnings surprise.

Market Reaction

The stock’s 0.55% increase post-earnings reflects investor confidence in Salik’s growth trajectory and operational efficiency. With a current price of 5.48 USD, the stock remains within its 52-week range, indicating stable market sentiment. InvestingPro analysis indicates the stock is trading at a P/E ratio of 34.16x and shows strong momentum with a 78.72% return over the past year. The RSI suggests overbought conditions, warranting careful consideration. The company’s strategic initiatives and exclusive market position in Dubai contribute to its positive outlook. For deeper insights into Salik’s valuation and 13 additional ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

Salik projects a revenue increase of 28-29% for the full year 2025, with an EBITDA margin target of 68-69%. The company aims to generate significant revenue from its parking payment solutions and data monetization initiatives by 2026 and 2029. These projections highlight Salik’s commitment to diversifying its revenue streams and enhancing its market position.

Executive Commentary

CEO Ibrahim Al Haddad emphasized Salik’s market exclusivity, stating, "We have 100% exclusivity in Dubai, being the only toll gate operator in The Emirate." He also reiterated the company’s ambition to lead in sustainable and smart mobility solutions. The Strategy Director assured investors that new business lines would not dilute current margins, underscoring Salik’s focus on maintaining profitability.

Risks and Challenges

• Ongoing concession fee negotiations with the RTA could impact profitability.
• Variable pricing models may lead to fluctuations in traffic volumes.
• Economic conditions, such as Dubai’s GDP growth and real estate market trends, could affect revenue.
• Competition from alternative transportation modes like public transit may pose a challenge.

Q&A

During the earnings call, analysts inquired about the impact of variable pricing on traffic volumes and the status of concession fee negotiations with the RTA. Executives noted that the effects of variable pricing are still being assessed, and discussions with the RTA are ongoing. No immediate plans for new toll gates were announced, reflecting a focus on optimizing existing operations.

Full transcript - Salik Company PJSC (SALIK) Q1 2025:

Abhishek Kumar, Moderator/Host, Bank of America: Yes. Good morning, everyone, and thank you all for joining the Salix First Quarter twenty twenty five Earnings Call. My name is Abhishek Kumar, and I’m part of

Sector Representative, Energy Utilities and Goods: Energy Utilities and Goods sector

Abhishek Kumar, Moderator/Host, Bank of America: team at Bank of America in Dubai. We are delighted to host Salix management today for the first quarter twenty twenty five earnings call. With that, I will pass it over to Waseem, the Head of Investor Relations. Over to you, Waseem.

Waseem Al Hayek, Head of Investor Relations, SALEC: Good afternoon, and welcome to SALEC’s earnings call for the Q1 twenty twenty five period. My name is Waseem Al Hayek, Head of Investor Relations at SALEC, and thank you for joining us for today’s call. Our thanks to Bank of America team for hosting today’s call. Our speaker today is from SALEC are Mr. Ibrahim Al Haddad, our CEO Mr.

Majid Ibrahim, our CFO and Mr. Tarek Ismail, our CTO. We are also joined by Mr. Tarek Puntawar, Saric’s Support Service Director and Ari Haran Gopal, the Director of Strategy and Growth, who will be answering any relevant questions that you may have. We will begin our presentation with some key strategic highlights followed by operational overview and then moving forward to the financial review before closing with our financial guidance and concluding remarks.

We will then open the floor for the Q and A. Before we begin the presentation, I would like to remind you of our disclaimer on Slide two, which is relevant to our status as publicly listed company and which we encourage you to read. Please note that this call is recorded and transcript. And by attending this meeting, you consent to the transcription. Also, a reminder that a copy of this presentation is available on our website at saliq.ae.

That’s all from my end. I will hand over now to our CEO, Mr. Ibrahim Al Khattat.

Ibrahim Al Haddad, CEO, SALEC: Thank you, Waseem. We began our operation in 02/2007, over eighteen years ago. And since then, we have come a long way as a business, growing exponentially alongside the Emirates Of Dubai. While SANIC has grown, our unique underlying strength have remained the same. We have 100% exclusivity in Dubai, being the only toll gate operator in The Emirate.

We have an attractive concession framework with the RTA, which extend far into the future and a unique asset light approach, where we are responsible only for the maintenance of our gates. Our ancillary revenue streams are not just complementary to our core business, but are the second pillar of our revenue model. With the rise of technology, there is an incredible future potential in the revenue from ancillary streams. While we may have grown significantly over the years, our ambition has remained the same, to become a leader in providing sustainable and smart mobility solutions. Our business continued to scale rapidly alongside Dubai exceptional growth, driven by a macroeconomic outlook that remains one of the most promising globally.

As a headline figure, the IMF’s outlook for GDP growth in Dubai is a robust 5%, a clear indicator of continued confidence and expansion across sectors. In quarter one twenty five alone, The Emirates will come 3,820,000 international visitors, a 3% increase year on year, reinforcing its appeal as a top destination. Real estate transactions increased by 29%, showing that Dubai is not just attractive to visit but to reside, driving strong population growth. These indicators form a compelling macroeconomic picture, one that continues to support SAREC’s continued strong growth. We’ve been steadily accelerating our strategic momentum since our IPO in 2022.

This includes the introduction of two new toll gates and variable pricing. Both new gates have not only improved traffic flow across the city since their implementation, but contribute a positive long term impact on SAREC’s core tolling business. We also recently announced several exciting partnerships in parking and insurance solutions, which we will expand on later in this presentation. In a post period event, we also signed an MOU with Enoch to introduce a smart payment solutions that enhance the customer experience at Enoch petrol stations. This will enable customer to enjoy a completely seamless experience when paying for fuel and other services.

Turning now to our key highlights for the quarter, where we saw continued momentum across all key metrics. Total chargeable trips reached €158,000,000 in quarter one ’twenty five. This reflects the introduction of the variable pricing model considering the movement of traffic across the quarry during peak, off peak and past midnight. Since the variable pricing model was introduced on the thirty first January twenty five, we do not have a comparable year on year performance at this stage. Growth in total revenue increased 33.7 year on year to reach 751,600,000.0.

We also saw very strong profitability in the period with EBITDA margin of 69.1%, up by two ten basis points year on year. Salix generated net profit after tax of 370,600,000.0, an increase of 33.7% compared to the prior year. I will now hand over to Tarek Smail, our CTO, who will take you through the mobility highlights for the period as well as provide an update on our strategic progress.

Sector Representative, Energy Utilities and Goods: Thank you, Brian. Good afternoon, everyone. Now let’s take a look at Salix’s key operational highlights in Q1 twenty twenty five. As the population of Dubai grows, so do the number of trips through our gates. The total number of trips, including discounted trips made through solid installed gates, grew 35.1% year on year.

This was mainly driven by the launch of variable pricing and the two new gates, alongside Dubai’s continued attraction of tourists and strong growth in commercial activities. Our primary performance indicator, total chargeable trips reached 158,000,000 in Q1. This considers the introduction of valuable pricing model and the peak off peak and past midnight traffic flows. The main difference compared to revenue generating trips is the inclusion of traffic past midnight, whereby we have seen an increase in the use of SALIC toll roads during the period past midnight. In alignment with the government of the to drive economic expansion and attract both tourists and residents, we have seen a material increase in vehicle registration and new SALIC account openings.

Active registered accounts reached 2,640,000 by the end of the first quarter, which is an increase on the previous quarter of 1.97.3% year on year. Such growth is also underlined by a 9.3% growth in registered vehicles, which totaled nearly 4,500,000 by the end of Q1. Total trips increased 35.1% year on year, reaching 210,800,000.0 dirhams. Total chargeable trips reached 158,000,000, with Al Baeryshe Gate and Al Makhtou Bridge registering the highest number of chargeable trips during both peak and off peak timings, closely followed by our Sofa South and Business Bay Crossing. Total chargeable trips considers valuable pricing and the use of toll roads during peak, off peak, and past midnight periods.

As instructed by RTA, we introduced variable pricing on 01/31/2025. Variable pricing is designed to ease congestion across device road network and enhance overall transportation efficiency. This approach is based on RTA’s studies, which have highlighted the need for a valuable tariff system that adjust during peak hours and provide exemptions during hours past midnight. As mentioned earlier in the presentation, 2024 marked a key milestone in the expansion of our ancillary revenue streams with the successful rollout of two parking payment solutions. We successfully launched Salix barrier free parking payment solution at Dubai Mall, which has been operational since 07/01/2024.

This initiative has enhanced the parking experience of visitors in line with our strategic partnership with Ahmad Moss to improve convenience at the world’s famous shopping and leisure destination. The performance of the parking solution has been strong with a revenue contribution of 2,700,000.0 dirhams in the first quarter of twenty twenty five. The solution has been received extremely well, in line with our strategy to provide a seamless parking solution and to enhance the guest experience for the residents and visitors of Dubai. In Q4 twenty twenty four, we also announced a strategic partnership with Parconic, the UAE’s largest private parking sector operator. Under this five year agreement, Parconic will integrate with Saric’s wallet across its 107 existing locations as well as any future site it operates across The UAE.

This milestone also marks Zarek’s first expansion of its service offering beyond the emerge of Dubai. These partnerships are a significant step in broadening and strengthening our ancillary revenue streams. One of our key strategic pillars for driving sustainable growth over the medium to long term. In terms of our medium to long term expectations, our parking payment solutions are expected to to deliver revenue of between 30 and 50,000,000 dirhams in 2020 and between ZAR120 to ZAR150 million in 02/1930. In addition to expanding our ancillary revenue streams through parking partnerships, we also entered a strategic partnership with Lever Group, a prominent regional insurance provider.

The partnership aims to streamline the policy renewal process, enhancing both convenience and efficiency for our customers. Now in Q1 twenty twenty five, we are actively building on the foundation by leveraging our comprehensive driver and vehicle database to provide timely renewal reminders and other value added services. This collaboration reflects our ongoing strategy to harness SALEX’ unique technology and data capabilities to enhance the overall travel experience of road users in The UAE. Our data monetization activities are expected to deliver revenue between 10,000,000 and 20,000,000 in 2026 and in the range of BRL 40,000,000 to 60,000,000 in 02/1930. I will now pass over to Majid, our CFO, to take you through a solid Q1 twenty twenty five financial performance.

Majid Ibrahim, CFO, SALEC: Thank you, Tarek. Thank you, Ibrahim. Good afternoon, everyone. Looking at our key highlights before taking a look at our financials in more detail. The total revenue growth for the Q1 period increased 33.7% year on year to reach 751,600,000.0 dirhams.

Our total chargeable trips, which is now the new terminology that you will hear more often, reached 158,000,000 dirhams to 158,000,000, accounting for the introduction of the variable pricing model. We also saw very strong profitability in the period. EBITDA increased by 37.9% year on year to 519,600,000.0, with EBITDA margin expanding by two ten basis points year on year. We generated net profit after tax of NIS 370,600,000.0, an increase of 33.7% compared with the period year. Overall, it’s another strong quarter and solid start to the year.

Looking at our revenue cost base and profitability, toll usage points, other revenue contributions such as activation fees and transaction fees amounted to 751,600,000.0 dirhams. And when accounting for concession fees, operation and maintenance related costs and other costs, such as commissions and employee benefits, resulted in EBITDA of 519,600,000.0. Accounting for depreciation and amortization and net finance cost, profit before tax totaled million, an increase of 33.6% year on year. Net profit for the Q1 twenty twenty five period totaled 370,600,000.0, representing a strong 33.7 percent increase year on year with a strong net profit margin of 49.3. We delivered a very strong performance in the first quarter with total revenue increasing by 33.7% year on year to 751,600,000.0, and this is mainly due to a 35.5% year on year increase of revenues from total usage fee, supported by the introduce of the two new gates and implementing the variable pricing model along with strong inflow of tourists and movement of individuals across Dubai.

A 16.2 year on year increase of revenue from fines and 17.4% year on year increase of revenue from tag activations. Let’s turn now to look at closer look at the trend. While our business cycle is cyclical quarter by quarter, we have seen consistent growth in our revenue from total usage over the years. Our first quarter total usage revenues increased 35.5% year on year to 665,600,000.0 dirhams supported by the recent introduction of the two new gates and variable price. You can get profitability.

Salix has a clear history of consistent EBITDA growth and strong margins. We generated EBITDA of 519,600,000.0 dirhams in the three months period, growing 37.9% year on year, TALIC’s highest quarterly EBITDA performance since inception. Our EBITDA margin reached 69.1 in Q1, representing a two ten basis point year on year expansion, as said before. As well as our strong EBITDA generation, our margin performance, our net profit after tax totaled 370,600,000.0, representing a strong 33.7% increase year on year. Looking at our cash flow dynamics.

We generated a free cash flow of dirhams 626,700,000.0 dirhams in the three month period, growing 77.8% year on year with a free cash flow margin of 83.4. Alex balance sheet remains solid with a strong cash and cash equivalent and short term deposits balance of dirhams 1,500,000,000.0. Net debt at the end of the three months period totaled dirhams 4,700,000,000.0 from dirhams 5,200,000,000.0 at the end of the full year period, mainly due to the increase in cash and deposits due to increase in SALIC recharges. This translates to a trailing twelve month net debt to EBITDA ratio of 2.7 times, significantly below SALIC’s debt covenant of five times. And as a reminder, here we have also secured strong investment grade credit rating from both Mundit and Fitch.

This is an important milestone that underscores Salix solid financial foundation, operational resilience, and commitment to transparency. It also enhances our ability to access capital market efficiency. Now we are handing over to mister Ebrahim Al Khadad, our CEO, to take you through our guidance and outlook.

Ibrahim Al Haddad, CEO, SALEC: Thanks, Majid. Turning to our business outlook. Our guidance for 2025 remains unchanged, with revenue expected to increase in the range of 28% to 29% compared to full year of 2024, alongside EBITDA margin of 68% to 69%. These projections include contributions from the implementation of variable pricing and our two new gates. Given the strong performance this quarter and the various new initiatives recently implemented, we will look closely over the year at whether we need to adjust guidance.

And as always, we will update the market when relevant to do so. We are also pleased to provide additional guidance on the expected growth and contribution from our ancillary revenue streams. We expect total revenue from our Partnering Payment Solutions to be between 30,000,000 to $50,000,000 in ’twenty six and between 100 and 20 million to $150,000,000 in 02/1930. For data monetization activities, we expect revenue to be in the range of 10,000,000 to 20,000,000 in ’twenty six and 40,000,000 to 60,000,000 in 02/1930. Other ancillary streams, which includes the recent MoU signed with ENOC, are expected to deliver revenue in the range of 10,000,000 to 50,000,000 by 02/1930.

Now you can turn. In summary, we are very pleased to report a strong start in 2025 with quarter one, a seasonally strong quarter for Starek. We are also pleased to have reported such a robust financial and operational performance in the first quarter across both our core growing business and our growing ancillary revenue streams. Salix continues to perform strongly, and we remain focused on expanding and diversifying our portfolio to drive long term value. With that, we are happy to open the floor for your questions.

Thank you so much.

Abhishek Kumar, Moderator/Host, Bank of America: Thank you. Thank you, Ibrahim. If anyone on the call has questions, please raise the hand button, and we can direct them towards management. So we have first call, Akhura Agrawal from HSBC. Please go ahead.

Akhura Agrawal, Analyst, HSBC: Yeah. Good morning. Thank you for the presentation or good afternoon. Thank you for the presentation. So I think my two questions.

So my first question is, given the introduction of the dynamic pricing, what are the early trends that you are seeing, and has it solved the problem of peak condition that was the purpose of introducing variable pricing for SALET? So that’s my first question. And my second question is that, can you give us an idea of the margins for the ancillary revenue stream? It’s very helpful that you provided guidance by different ancillary revenue streams. But if you can give some color on the expected margin on those segments.

Thank you.

Majid Ibrahim, CFO, SALEC: Okay. Thank you.

Sector Representative, Energy Utilities and Goods: I can take the first question, Brahma.

Majid Ibrahim, CFO, SALEC: Okay.

Sector Representative, Energy Utilities and Goods: So variable pricing aims to enhance traffic flow across the city, right, and improve transportation efficiency. So this is based on the studies conducted by RTA. So early data shows the introduction that the introduction of this valuable pricing has contributed to a 9% decline in traffic volumes and about 4% increase in public transportation ridership. But it’s too early to comment on any significant change in behavior. And the higher than expected uptick in revenue at peak times needs to be considered in the context of Q1 being a seasonally very strong quarter.

And that and given variable pricing is still in early days, we need to, I think, gather more data to assess the true impact. So we think it’s better to do it once we have full quarters to compare each other to.

Majid Ibrahim, CFO, SALEC: And and if you if you allow me, if I if I can add something that give some more clarity to the to to to the investors and the the question asked. At this by charts, you can see before and after implementing, we we had it was the the peak. It’s 40% of the traffic, and the off peak was 52% of the traffic. And as you see here, even though it’s as as as as you mentioned, it’s too early to assess. We see a slight reduction in the peak time, but this is not coming from the total traffic because we need also to consider that during the past midnight, now whoever doesn’t use SALIC, he used to come and use SALIC.

So the the traffic during past midnight did not take a portion from the peak or off peak. Instead, it’s an additional traffic came from whoever used to take the free road before implementing the variable price.

Sector Representative, Energy Utilities and Goods: From other corridors?

Majid Ibrahim, CFO, SALEC: Yeah. From other corridors. And I I think Gubad can take the second question for the ancillaries.

Director of Strategy and Growth, SALEC: Yeah. Thank thank you, Majid. So regarding the ancillary revenue streams, think we’ve given the guidance on expected revenue. But unfortunately, due to confidentiality and confidentiality reasons, you know, we will not be able to provide, you know, exact margins, from this. But all that I can say is that the all these ancillary business lines, obviously, this will not dilute the current margins that we have from the overall business.

Abhishek Kumar, Moderator/Host, Bank of America: Thank you. The next question is from Ana Anatoba from JPMorgan. Please go ahead.

Ana Anatoba, Analyst, JPMorgan: Yes. Hello. Good afternoon. Thank you for the presentation and congratulations on a solid set of results. One question from our side.

I think on the last earnings call, you talked about the inflation adjustment and the changes to the concession agreement with the RTA following the introduction of variable pricing. You please comment what what’s the current current status of that? I think we we didn’t see any announcements related to that yet.

Majid Ibrahim, CFO, SALEC: Thank you. True. Thank you, Anna, for your question. I I would take this question. Currently, we are in in in the final stages with RTE to finalize the the addendum or the new documents that will reflect the new formula for calculating the inflation protection.

And the discussion was about whether we can take the study outcome on on that the tariff has been increased as per the study outcome, the blended rate or not. And what we agreed on that we will freeze the concession fee as of now because we still we don’t see any actual results. We don’t have actual blended rate. It’s all based on studies. And we agreed that going forward, we will rely on a blended actual blended rate in calculation for the inflation protection.

So the mechanism will almost remain the same. The same concept of of monitoring the inflation and apply for tariff increase. But instead of comparing to 4 dirham like before, we start compare comparing to an actual blended rate that will be cleared by the end of the year. We are currently in the in the late stage of official signing the document. And once it’s done, we will start we will go with MDR and press release and explain the details.

So for 2025, the concession fee will remain 22.5 as per our guidance.

Ana Anatoba, Analyst, JPMorgan: Very clear. Thank you.

Abhishek Kumar, Moderator/Host, Bank of America: Thanks. Again, if anyone on the call on has to ask any question, please raise your hand. At this point of time, we don’t have any additional hand raised. Maybe I can ask a question. Given the Y o Y growth in revenues this year, why the 2025 guidance has been kept the same?

I mean, when we should think of increasing the the guidance?

Majid Ibrahim, CFO, SALEC: Thank you for the question. And I believe it is too early to assess. As of now, we just implemented the dynamic pricing or variable pricing just a couple of months as as you see the numbers. It’s just implemented end of year. Also, for the new gates, it’s recently introduced, and it needs some time for the computer to adjust to the new system and use to it.

So we thought it’s too early right now to to give a revised guidance based on on just one month of data or couple of months of data. So definitely, will consider to revise the guidance if needed based on the actual results by the end of the q two.

Abhishek Kumar, Moderator/Host, Bank of America: And and is there any any guidance on new gates that you can tell us about?

Majid Ibrahim, CFO, SALEC: No. Nothing new right now. It’s all about RPA to decide when and where it’s a traffic management tool. It’s not our call. So as of now, we have no no instructions from RTE for any new gates anywhere.

Abhishek Kumar, Moderator/Host, Bank of America: Alright. Alright. Thank you. Once again, if there is any other question, please raise your hand. I see no raised hands.

In that case, I will hand it back to management for the closing remarks.

Waseem Al Hayek, Head of Investor Relations, SALEC: Yeah. Thank you. Thank you, Kumar, and thanks for everyone. Thanks for Bank of America for organizing today’s call, and thanks for attending by all our investors, the current and potential investors. Please, if you have any follow-up question, please feel free to reach out to us at investor relations at Select today or visit our website at Select today or contact me directly, please.

Thank you very much, and have a good day.

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