Amadeus IT Earnings: Solid Revenue and EBITDA Growth Support Static Outlook

Narrow-moat Amadeus AMS reported solid third-quarter results and reiterated its 2023 sales and EBITDA guidance. Our fair value estimate for the company is EUR 62 per share. We view shares as appropriately valued after its 5% move in reaction to results.

Third-quarter and year-to-date revenue were up 15% and 23%, respectively. Importantly, third-quarter and year-to-date total bookings were up 13%, and 16%, respectively, driven by 75% growth in the Asia-Pacific region for the first three quarters of 2023. Compared with 2019′s level, third-quarter total bookings were at 72.7%, an improvement from 70.3% last quarter. This was better than narrow-moat peer Sabre’s total quarterly bookings that reached 63.4% of 2019′s level versus 63.7% in their prior quarter. While the gap is largely explained by Sabre and narrow-moat Expedia not renewing their contract in late 2021 (a low-margin business for the Sabre), the relative sequential improvement for Amadeus is noteworthy, although we think a portion could be tied to geographical mix.

Amadeus’ third-quarter EBITDA margin was up 230 basis points to 39.3% (year to date at 39%, up 310 basis points), driven by lower labor cost growth and leveraging of fixed costs. Management maintained its 2023 revenue and EBITDA guidance for 20%-22.5% growth and EBITDA margin expansion, respectively. This compares with our 2023 forecast for 21% sales growth and EBITDA margins of 39.8%, up from 36.6% in 2022. Looking out to 2024, we model for 9% and 12% revenue and EBITDA growth, respectively. We will continue to monitor economic growth and industry dynamics.