Amadeus IT Group, S.A. ($AMS)

Good day, ladies and gentlemen, and welcome to the Amadeus intention to acquire Idemia Public Security Conference Call. [Operator Instructions] I would now like to turn the conference over to Luis Maroto, President and CEO of Amadeus. Please go ahead.

Good afternoon, and thank you for joining us at such short notice today. Today, we were pleased to announce our intention to acquire Idemia Public Security or IPS. This is a complementary and travel-centric acquisition aimed at creating seamless end-to-end travel journeys of the future. Desius, Carol and I will walk you through the strategic and financial rationale for this acquisition as well as our time line to obtain regulatory approvals. So let's begin. Please turn to Slide 5. Let me start by explaining why this acquisition is strategically important for Amadeus. IPS is a world-class market-leading end-to-end biometric technology platform with a strong global blue-chip client base. IPS fits naturally within our strategy. We already connect airlines, airports, hotels and border systems today. By bringing together the Amadeus travel platform with IPL's leading biometric and identity capabilities, we deepen our own capabilities and also strengthening our offering. We link a larger part of the travel journey, enabling Amadeus to deliver more connected end-to-end travel experiences in a more seamless, consistent and trusted way. We operate in a fast-evolving AI world. The ability to connect physical and digital identity is becoming increasingly important. Trusted identity links the traveler across each stage of the journey from booking to airports, borders, boarding and beyond. This acquisition is about extending trusted traveler identity across more touch points, reducing friction and improving the traveler experience. All this while the traveler remains in control of their personal data. It reflects our strong -- our long-term commitment to biometrics as a core component of our platform strategy, and it also builds on the progress we have made already with Vision-Box. IPS brings Amadeus' scale today and expansion potential for tomorrow. It adds a large and growing addressable market, a resilient and diversified revenue base and a geographic and commercial footprint that reinforces our ambition to become an orchestrator of the travel ecosystem. Beyond passenger processing, IPS capabilities also extend secure identity into adjacent complementary and regulated environments such as access control and government-grade biometric identification and data solutions. In each of these areas, trusted identity and privacy by design are critical and operational reliability is paramount. So the combination will strengthen and expand Amadeus' capabilities in secure identity while also naturally extending the breadth and reach of our offering across the travel ecosystem and beyond. IPS employs 3,300 people worldwide. It serves over 600 public and private sector customers globally, bringing scale and depth in secure identity solutions. In addition to the strong strategic alignment, there is also a strong cultural fit between the 2 companies. Additionally, IPS has a highly skilled management team and employee base. This is an all-cash acquisition for $1.2 billion, which reflects both the quality of the asset and our confidence in the long-term strategic value, including synergies of bringing these capabilities together within Amadeus. With this combination, we see a strong opportunity for incremental revenue as well as for cost synergies. Cost synergies, we believe, can reach in the range of $50 million annually in the midterm. Overall, we see a compelling business case. The transaction is immediately EPS accretive and reflects an effective and disciplined use of our balance sheet, supporting sustainable value creation and enhance shareholder returns. Let me give you a few last points on the transaction before I hand over to Decius and Carol to tell you more. IPS generated $711 million in revenue in '25 with an estimated adjusted EBITDA and EBIT of $112 million and $70 million, respectively. On a stand-alone basis, we expect IPS to grow into the future at a high single-digit rate with expanding operating margins. Our valuation of $1.2 billion represents a 9.8x '26 EBITDA multiple. We have also agreed to an earn-out structure of up to a further $150 million. Finally, in terms of timing, completion is expected in mid-'27, subject to regulatory approvals and customary closing conditions. We are excited about the acquisition of IPS. The complementary and travel-centric acquisition combines a strong strategic fit with disciplined capital allocation and clear, but shareholder value creation. I will now hand over to Decius, who will go into more detail about the strategic alignment and the opportunities this combination creates.

Thank you, Luis. Hello, everyone. We move to Slide 8. So as Luis mentioned, Amadeus is on a mission to create seamless end-to-end travel journeys of the future. We are reinforcing our broader ambition to be an orchestrator of the travel ecosystem. Today, identity sits at the heart of the travel journey. As you can see on the slide, from inspiration and booking through the airport, order crossing, delivery of destination, travelers are repeatedly asked to answer the personal information or to prove who they are. This process is fragmented, manual and often frustrating, requiring the same actions to be performed again and again across multiple touch points and stakeholders. Our vision is of seamless travel and to remove friction entirely. As digital identity and biometric technologies rapidly gain adoption worldwide, they create a unique opportunity to fundamentally redesign the travel experience. making it simple for travelers, more secure for governments and more efficient for the industry as a whole. And this is where Amadeus is uniquely positioned. Over recent years, we have deliberately expanded beyond our traditional travel verticals into adjacent and complementary domains such as biometric, payments and corporate IT. The broader reach give us privileged position in the travel ecosystem, long-standing and deep customer relationships, mission-critical platforms and the ability to connect stakeholders across the travel journey. Our technology road map in this space is, therefore, focused on one clear ambition, orchestrating the traveler experience across stakeholders using secure identity as its backbone. So let me turn on to the size of the opportunity and the current revenue split on Slide 9. The combination of Amadeus and IPS materially expands our addressable market to $50 billion. Let's start with borders and travel. This market is underpinned by strong structural tailwinds, rising global passenger volumes, increasing pressure on infrastructure and growing demand on automation. Regulation is playing an important role here with initiatives such as the entry exit systems in Europe accelerating adoption as well as airlines and airports themselves pushing for frictionally travel models to improve efficiency and passenger experience. If we turn to law enforcement, it represents a different but highly attractive profile. This is a stable, resilient and profitable market, characterized by long-term contracts, high renewal rates and strong customer retention. Demand is driven by advanced biometric technology, strict certification requirements and mission-critical use cases, making it structurally defensive and complementary to travel. Access control, the third segment is the fastest-growing segment. Growth is driven by modernization cycles across both public and private infrastructure, contactless access, Zero Trust security models, regulatory compliance and the replacement of aging systems. This segment benefits directly from the same biometric innovations we deploy in travel, creating clear technology and go-to-market synergies. Turning to IPS' current revenue profile. So borders and travel and law enforcement each represent around 40% of the revenues, with access control accounting for the remaining 20%. This mix provides immediate scale in core travel adjacent segments while also giving us exposure to fast-growing the access control segment. IPS significantly complements Amadeus existing footprint. The business has a strong presence in North America and Asia Pacific with highly strategic customers such as the TSA, the FBI and Singapore's immigration and Checkpoints Authority. This only strengthens our access to strategic markets. This not only strengthens our access to strategic markets, but also deepens our relationships with sovereign and government stakeholders globally. So turning to Slide 10. Let me highlight what makes IPS such a compelling business. First, it's a world-class market-leading end-to-end biometric technology platform. IPS operates one of the most advanced biometric platforms in the market, consistently delivering best-in-class performance in fairness, accuracy, speed and robustness. Their technologies are independently validated and regularly rank highly on international benchmarks. This is underpinned by sustained innovation with more than EUR 70 million invested annually in R&D, over 1,000 patents granted and a portfolio coverage covering face, fingerprint and iris recognition. Second, a strong global blue-chip client base. IPS serves more than 600 public and private sector customers globally, many of whom operate mission-critical systems. These relationships are deep and long-standing, and the market requires significant technology investments through long development cycles. Contract visibility is strong with an average contract length between 5 and 10 years, 70% -- 75% win rate for new contracts and a contract renewal above 90%. So third, strong expertise and operational depth. IPS brings over 3,300 employees operating across 29 countries, supported by 8 global R&D centers. The average tenure of the talent employee base is almost 8 years, reflecting deep domain expertise and strong talent retention in a highly specialized field. This depth matters in regulated high-stakes environments where trust, certification and operational reliability are essential. These strengths demonstrates that IPS is a trusted, reliable partner with a secured order backlog of approximately $2 billion, providing multiyear revenue visibility and resilience through the cycle. This combination of technological leadership, long-term contracts and strong backlog underpins a robust and predictable business profile. So now let's go on Slide 11. Here, we try to show you the combination of Amadeus and IPS drives further digitalization of core travel processes. Building on our mission and ambition stated previously, let me share how this acquisition accelerates our path to seamless travel. Over the past years, Amadeus has been executing a deliberate and consistent strategy, bringing biometric identity capabilities directly into our core travel platform rather than relying on fragmented third-party integrations. The acquisitions of Vision-Box in 2024 and WCC Hermes border control solution in 2025 were important milestones in that journey. The IPS acquisition is the next and most transformative step. IPS brings critical mass, depth and technological leadership to some of the most important identity touch points in the traveler journey. Together, this reinforces our ambition to become an orchestrator of the travel ecosystem around Trust Digital Identity. Let me highlight this through 4 key dimensions. First, technology leadership and journey coverage, enhancing and complementing our existing technology. IPS is a global leader in biometric technologies, consistently ranking high in independent valuations, such as the American National Institutes of Standards and Technology. By acquiring IPS, we significantly strengthen our coverage of the border control segment while extending identity use cases across the end-to-end journey. Just as importantly, we add best-in-class face, iris and fingerprint technologies to our portfolio, giving us extensive modality breadth and performance across travel environments. Second, strategic customers and geographic expansion, expanding our presence commercially and regionally, adding new travel use cases. IPS brings a highly diversified and strategically important customer base into our footprint. This includes a strong presence in the United States, one of the most critical markets for aviation, borders and government technology as well as exposure to adjacent travel verticals such as rail, land and sea borders. This meaningfully broadens both our market access and our ecosystem reach. Third, new growth opportunities across the travel ecosystem. The combination of IPS' biometric expertise with our deep travel and platform capabilities create a powerful foundation for growth well beyond today's use cases. We see biometric identity rapidly expanding into new travel touch points such as hotel, car rental, check-in and mobility hubs. With our joint capabilities, Amadeus will be uniquely positioned to bring secure, scalable identity orchestration to these markets. Finally, extension into new adjacent customer segments. Beyond passenger processing, IPS all extends our role into adjacent complementary and regulated environments such as access control and government-grade biometric identification and data solutions where trusted identity is critical. This would deepen our capability in secure identity and naturally extend the breadth and reach of our offerings and naturally extend the breadth and reach of our offerings. These expansion ensures that our biometric and digital identity offering remains relevant for the customer segments that value it most. IPS accelerates our strategy on multiple fronts. stronger technology, broader journey coverage, deeper customer relationships and expand growth optionality, ensuring that our ambition of orchestrating the travel ecosystem remains at our core. And with this, I now hand over to Carol for a financial overview of the transaction.

Thank you, Decius. Hello, everyone. Let's turn to Slide 13. So firstly, I echo what both Decius and Luis have said. We are excited about this potential opportunity -- this potential acquisition and the opportunities it brings Amadeus. It is a complementary acquisition that delivers on our growth ambition and long-term commitment to biometrics as part of our broader platform strategy. It increases the breadth and scale of our offerings and makes us more relevant in one of the most transformative technologies alongside AI for delivering fast, convenient and secure end-to-end traveler journeys. The IPS transaction is a compelling business case with enhanced shareholder returns. At a purchase price of EUR 1.2 billion, we believe it is a fair valuation for a high-quality asset, representing 9.8x FY '26 EBITDA multiple. We have agreed to an earn-out structure of up to an additional EUR 150 million. There is also an attractive opportunity to produce revenue and cost synergies, not reflected in the economics I have just mentioned. IPS is complementary to Vision-Box, which was acquired in 2024, as Decius said. Integration planning will identify potential product alignment, operational efficiencies and corporate integration initiatives, which will produce cost synergies that we estimate in the range of EUR 50 million annually in the midterm. Whilst not fully quantified yet, we see high synergies on the revenue side. As Decius was saying, under our ownership, we expect to generate benefits from the combination of Amadeus and IPS by joining IPS' technology with our touch points across the traveler journey. IPS' best-in-class technology will enhance our offering, open cross-sell opportunities of IPS solutions to Amadeus customer base and the possibility for Amadeus to further expand biometrics and digital identity into travel adjacencies. We expect IPS to deliver midterm high single-digit revenue growth with expanding operating margins, and the transaction will be immediately EPS accretive to Amadeus. Finally, the long-term contractual relationships, coupled with the high win rate and renewal rates and a significant order backlog gives us confidence in underpinning a robust and predictable business profile. Regarding IPS' contribution to our organic outlook, which we announced in February this year. As I have just mentioned, we expect IPS to deliver revenue growth at a high single-digit pace into the midterm. This is pre-synergies, and it is in line with our organic midterm revenue outlook -- growth outlook for Amadeus, supporting our growth ambitions and maintaining our midterm guidance. IPS' EBIT margin is lower than Amadeus' EBIT margin. So when we consolidate IPS in 2027, we will experience a onetime EBIT margin dilution. However, we expect IPS EBIT to grow faster than its revenues, delivering EBIT margin expansion annually and supporting the consolidated group positive EBIT margin evolution in the following years. We expect that with this acquisition, we will be accretive to our adjusted diluted EPS growth, our organic outlook and its free cash flow generation is consistent with our organic growth outlook. Overall, IPS is a strong cultural fit with a talented management and employee base. We are confident that this is a disciplined use of capital that will result in the delivery of enhanced shareholder value. So on Slide 14, talking about the debt financing arrangements. The IPS transaction will be fully financed through a combination of existing cash and debt facilities. Our year-end 2025 leverage pro forma for this acquisition would be 1.3x net debt to EBITDA. The cash generation capabilities of both companies give us confidence that we would rapidly deleverage following completion. And with this, I'll hand back to you, Luis.

Thanks, Carol. So to finish, let me describe the expected transaction time line we are working towards. Amadeus has signed a pre-agreement to acquire IPS with the seller in the form of a put agreement while we await IPS Workers' Council opinion. This is standard practice when acquiring French companies. We expect to go through this process over the coming weeks and then proceed to sign the share purchase agreement. Following signing, the transaction will be subject to a comprehensive regulatory review process. This will include foreign investment approvals in the United States, non-U.S. foreign investment reviews and applicable antitrust clearances as it is customary for a transaction of this nature. Given the scope of these processes, we expect completion in mid-'27, and we will continue to keep the market updated on any key developments. With this, we have finished the presentation, and we'll now open for Q&A. Thank you.

[Operator Instructions] Your first question comes from the line of George Webb from Morgan Stanley.

Carol, congratulations on the deal. I've got a few questions, if I can. Firstly, just on the border and travel side of the IPS portfolio, could you just lay out in a bit more detail where you see IPS sitting alongside the portfolio you already had from the likes of Vision-Box from a technology perspective, whether does this fill in on that piece a bit more strongly than what you already had? Secondly, just as you look to build on where IPS has reached and digging a bit more in some of the areas you laid out. What are the kind of top immediate priorities with regards to IPS once the deal closes? And where are the kind of areas you think you're looking at where you can accelerate the business? And then just lastly, clearly, IPS brings pretty significant scale exposure outside of the travel domain around those law enforcement and access control areas you flagged. It sounds like those are still strategically important to you even if they're slightly more adjacent than they are core to where Amadeus has historically been. How do you think about the investments you maybe continue to make into those areas and the strategic importance?

Okay. All right. Let's start. So let's start with the, let's say, areas in common and the differences that we have between what was Vision-Box and what we have now with IPS. So essentially, IPS has trusted traveler programs. It adds the other types of borders. We are talking about land and sea instead of just air that we had with Vision-Box. We are talking about complementaries in terms of geographies because Vision-Box was very much focused on Europe and Middle East, and we are talking now about bringing U.S. and Asia Pacific. So I think that all in all, it creates, let's say, a true full global business. And we believe that IPS then can benefit on our side from manufacturing capabilities, from the fact that we are servicing many customers together. So it means that we can be more productive in that area. It means that both of the companies will be able to invest on the same biometric capabilities, which means we believe we will produce a superior product for our customers. So I think for me, that's where differences and complementary on the border forces and travel space. As we move into the other 2 segments, access control is essentially a licensing of the biometric information through third parties. So essentially is a servicing more horizontally, let's say, the biometric capabilities, but not necessarily being a high-touch business for us. So we feel that this is very complementary because we will continue developing the biometric capabilities, and we think we can leverage not only IPS' set of partners, but as well Amadeo's set of partners in what is going to be the journey moving forward, accelerating growth. Law enforcement, as we have described, if we simply take the headline, this can be a very, very vast market. But if we look at the capabilities of what this company does in law enforcement, essentially is about biometric and trusted identification. So we feel that, that is an interesting business for us because it leverages the capabilities that we're going to be investing. We count with a team that is experienced, that has had leadership in this space. And we feel that with our partnerships, with our global reach, with all of the synergies that we can bring, this not only derisks the management case, but we feel that there is an opportunity for us accelerating into this vertical. And we find based on the nature of law enforcement, long contracts, high investment, very sticky business and so on and so forth. This is very much similar to other types of sales motions that we have on the travel sector. So we feel confident that we can take that business and expand it.

And I might complement Decius because I guess I've had some defense and security experience prior to joining Amadeus. I think the qualities that you mentioned, why we like this part of the business, it's a unified tech platform play. It ensures that we maintain our relevance in terms of our capabilities across biometrics. I think it enhances our value proposition across into new regulated environments. And the structural -- the market conditions of that type of industry are similar to what we're experiencing, right? They're low risk, cash generative, long-term contracts, customer relationships, as you were just saying. So we're excited about this. We see that the business is that business is attractive. I agree with you on access control. It extends the travel ecosystem. Beyond there, you can think about stadiums and things like that. So all in all, I think this is a very complementary acquisition for Amadeus whilst maintaining travel at the core.

That's really helpful. I appreciate it. If maybe just throw one last one. I mean, I guess as you think maybe longer term, and this I suspect is not a near-term consideration. But when you think about the product architecture where there is a bit of an overlap between Vision-Box and IPS, is there an intention longer term to convert into more of a single platform? Or would you kind of maintain parallel solutions for different customer segments?

And we can take the experience of what has been Vision-Box with Amadeus. We have launched within 12 months what is a single portfolio to customers. And I think that would be the same approach is to say, specifically in travel and borders is for every vertical, we would like to have a single offer. I think that on law enforcement, then it's a different offer. And thus, it is us learning from IPS, what needs to be done and how we're going to be evolving that.

Your next question comes from the line of Alex Irving from Bernstein.

I hope all is well. Congratulations on the deal. First off, could you help me understand how the high single-digit growth algorithm fits together? Is the leverage of passenger volumes? How much is pricing? How much is in penetration or market share from incumbent competitors? Maybe within that, what share of passenger volumes are currently processed with biometric technology at airports? How is that penetration trending? And is there an annual price uplift? Second question, to what extent is this investment in part because you see IATA's OneID program accelerating? Or is that not a meaningful part of your own M&A case here that it stands really on its own merits of a deal?

Okay. Let me start with the last one because I think it's important to do a clarification. Our strategy is to orchestrate IDs. So it means that we're not going to be prescribing IATA ID or a Google ID or a country ID. We will be treating individuals and we're going to be matching whatever number of IDs they have with their biometric information. That is the value we believe that we can bring in terms of orchestrating. So it is like all of these initiatives are compatible with our strategy, meaning we hope that all of these ID rollouts are successful, and we can support on orchestrating, making them available on the touch points and helping enrolling because the big thing about biometrics is making sure that we can match the face to the ID that is going to be on the phone of the person. So we feel that with our footprint, we're going to be able to accelerate the adoption and the enrollment of biometric across the globe. Now when we go into what is going to be the growth equation, I think we have mentioned here about the backlog that this company has. So this means that a lot of the growth that we expect is based on realizing contracts with the same existing customers. We do have some pricing effect on it because these are long-term contracts that have adjustments in terms of price. And we have discussed that the fact that we see some overlaps within the product structure, we believe that we're going to be able to grow, but not necessarily having to grow cost and investment at the same pace as revenue, thus creating the expansion. So like I think these are the 3 main hypothesis. We leave a little bit on the open for the future, which is we do see a potential upside on selling more IPS portfolio within Amadeus customers and vice versa. We do feel that we can look into further synergies in terms of cost, but these remain as upsides as well as what is going to be the future use cases once we have the full end-to-end chain and what we're going to be able to deliver in terms of innovation once we have the biometrics, not only within the airflow, let's say, this way, but going to overall travel flows.

Yes. So to complement that, I think the structural conditions of the market with the addressable market also indicate growth and running into that space and filling that in. I think the combination of the Amadeus customer relationships, proven track record, brand, market trust coupled with the talented individuals and the technological prowess of IPS also gives us very good confidence in ability to achieve the revenue growth here. And as Decius' last point, revenue synergies, and I think I mentioned this as well, revenue synergies, we believe exist, but we have not quantified that yet. And we do think that there's an opportunity to further enhance on there. So we are confident in the delivery of the high single-digit revenue growth for this asset.

Just to maybe follow up quickly. So there's no explicit industry-wide penetration growth assumption for biometrics that forms part of that. That would come on top. I'm understanding your answer correctly?

So I think what Carol has mentioned is we believe that penetration will continue to expand, and that is part of the acceleration that we'll see because of the backlog, as I was mentioning, of orders. So it is like the intention of the current customers that we'll continue investing and replacing, let's say, old infrastructure by new infrastructure with biometric capabilities.

Yes. And if you believe the addressable market growth as we do, just fulfilling that addressable market without increasing market share gets you to high single digits. And then, of course, we've had a track record of improving market share in the verticals that we serve. So I think there is structural room within the market conditions to enable us to deliver high single-digit growth.

Your next question comes from the line of Sven Merkt from Barclays.

Congrats on the deal. I just want to maybe start by diving a bit deeper into your ambition to become an orchestrator of the travel ecosystem. Here would be particularly interested in your views where covering the complete travel process end-to-end is really driving network effects and becomes really strategic rather than just covers individual kind of use cases and how IPS really fits into that? And then it would be also great if you could speak a bit about the EBIT margin profile of the business. The company has been in private equity ownership for a while. So how much has the margin been optimized already? And what would you consider a mature margin profile for the business?

Okay. So let's start a bit with the strategic part and then Carol follows on, on the margin question. So on the strategic side, we believe that the network effects come from -- if we are able to provide convenience to travelers and that we're going to be able to tie all of these touch points, we become an interesting execution layer because for all of what is going to be the strategies and the preferences of travelers. So essentially is this is a fragmented world. So on a typical trip, you were talking about 2 airports that are going to be involved, multiple airlines, different ground transportation. So it's like who can be the player that can unify and take friction across all of these touch points. We believe that then we create a benefit that as Amadeus grows, more touch points are going to be available for travelers and more possibility of us removing friction. So it creates this flyingwheel and positive spin, let's call it this way, on the adoption of biometric technologies and a preference from providers in counting on our technology to provide convenience to travelers in airports, airlines, lounges, trusted traveler programs, so on and so forth.

And on the EBIT margin product, I guess you don't want to take that one -- on the EBIT margin profile, just to remind, we already have a business within our portfolio that does -- that performs this way. It's our airport ops business that sits within the airline IT business. It is true that this type of business is structurally lower in terms of margin, EBIT margin than the Amadeus Group, and we know that. What we can see is that the IPS asset has been performing profitably better than our current airport ops business. So again, we're quite encouraged by that. This asset has been under the ownership of private equity and has been as a result of a carve-out. So I guess there are still some synergies that we think we can leverage off as we've committed, $50 million cost synergies within the midterm, predominantly on manufacturing and procurement that we think that we could materialize. And I've also mentioned that we're expecting that EBIT will outgrow the revenue. So we're expecting that there is going to be margin expansion similar to our organic outlook at the Amadeus level. So in short, it is a structurally lower EBIT profile, but we feel confident that we can both drive out the cost synergies, which will be in addition to that and also continue to expand EBIT margin of this asset under our ownership.

Your next question comes from the line of [indiscernible] from UBS.

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Michael Briest from UBS.

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Your next question from Michael Briest.

Yes, we are not hearing you. We are trying to check if we can understand who is next. And go to the next question. Okay.

Sorry, there's some problem with the audio there. Yes. So just a couple of sort of connected questions from me. I think Fitch downgraded the debt outlook for the group in November last year, and I appreciate there's more parts to the business than what you're buying. But I mentioned the Dodge headwinds from procurement. Can you say something about revenue growth in 2025? And as we look out to next year, do you think the growth will be sort of high single digit for the next 2 years? So we should be looking at revenues approaching EUR 850 million when you buy the business? And then, Carol, I mean, are you taking on any of their debt because I assume they're paying quite a high interest rate. Will there be any stranded costs that come across because it's part of a group or transfer pricing from them? And can you say something about the means by which they achieve their earn-out? And then Luis, just one on the -- there's a slide there you showed of the many steps in a traveler's journey. Do you have any ambition in things like hotel check-in, biometric onboard payments, logging in or identification for OTAs because they were part of the journey.

Let me start even if Decius is covering detail. But again, I mean, we feel biometrics is going to expand in general. And in travel, this is a reality. Digital identity is becoming, as you know, something that people are talking about that is must in the way it will operate. And therefore, yes, we are not just thinking about in general, even when we acquired Vision-Box in the specific use cases that we have a lot, but we are convinced it will extend to other parts of the traveler journey because it makes a lot of sense that the combination of digital identity, our capability to orchestrate and our biometrics capabilities should give us a way forward where we expect to really bring additional revenues to the company. Part of that is not part of the business case that we are managing today. But yes, there is clearly the trend and the idea that this can be played in other segments such as the one that you mentioned, hotels or other parts of the traveler journey.

Okay. And then I'll take the historical performance and the earn-out debt question. So it is true in late 2024, some parts of this asset did experience some commercial headwinds. An example of that was the TSA offering where it lost its monopolistic position and was introduced to competition. And it also is true that this company has been suffering from some, let's call it, headwinds as associated with preparing this asset for sale. There's been some management changes and things like that. So the performance to date has been a little less than what we are expecting and predicting moving forward. However, having said that, I go back to what we were saying previously that we are buying for the future, not for the past. And we feel that there is a structural conditions, the combination of our brand market trust relationships, the technical capabilities of the asset will all contribute to the high single-digit revenue growth that we have committed and Decius has shared previously. In terms of the earn-out structure, we have introduced a 2-tiered earn-out structure. There's a revenue threshold and then an EBITDA metric on top. This is incremental to the business case and the base case and any benefit on earn-out is shared between both Amadeus and IPS. So we feel that with that earn-out structure, we are also aligning the 2 intentions of both parties, particularly through this close period around protection of revenue and also delivery of profitability. And then your final question on debt. This is an all-cash transaction. We will not inherit any debt -- and we will take this asset debt-free when we complete in mid-2024.

Your next question comes from the line of Nooshin Nejati from Deutsche Bank.

Congrats on the deal. I was -- I'm wondering about the capital-intensive nature of some of IPS' offerings, hardware in borders and travel and the R&D spend of $70 million. What is the expected capital expenditure profile for the combined entity post acquisition? And how might this affect the pace of deleveraging or future dividend policy?

Okay. So I think they're both financial questions, so I'll read those again. So in terms of capital intensity, this asset is less capital intense than we are at Amadeus. I think in the presentation, we mentioned $70 million R&D, and it has about a similar relationship or ratio than what we have at Amadeus. 50% runs through the P&L and 50% runs through CapEx, more or less broad terms. So that would equate to a 5% to 6% CapEx on revenue profile. So there is a hardware component to this asset, 20%. It's largely a software play, but a less capital intensive than what we are today. And then the question on dividend policy, I mean, we are expecting that we maintain the Amadeus dividend policy. I think it's a very attractive dividend policy of 40% to 50% of a distribution through to shareholders, of which in FY '25, we announced 50% dividend payout. So we don't feel that this asset or this acquisition will cause to question our dividend policy.

Your next question comes from the line of Toby Ogg from JPMorgan.

I just wanted to just come back on that 2024 dynamic where there were commercial headwinds linked to the TSA offering and the sort of losing of that monopolistic position. Could you just expand on that a little bit more just in terms of what the drivers were that led to that? And then perhaps just expand on who really are the key competitive players in the market that IPS is serving? And just what differentiates IPS' offering relative to those players and just how you see the competitive intensity evolving going forward?

Okay. So let's start with travels and borders as we are discussing about the TSA contract. So majority of the revenues around the borders are related to airports or border forces themselves in long-term type of contracts. So it is like we participate in bids. So typically, competitors in there, we have SITA, ourselves, Collins, Thales, so it is like it's a competitive market, where we are competing for service and for features. So the fact that we are -- would make a combined entity, we believe that we're going to be coming out of this process. with a value proposition that is going to be richer, both in terms of features as well in terms of services and coverage geographically. So that's -- I think that's what we have already tried to illustrate. Thus, we believe that today, we are having the performance of growing this business, in fact, above what is the average of Amadeus. So it's like we feel that by the combined entity, we're going to be able to keep the revenue growth on the travel and border element with the performance that we're having today by the fact that we're going to improve it moving forward. Access Control, the profile of the growth is strong. So -- and it should continue to be strong because it is pulled by the trend, meaning more and more companies are moving into trusted identity, biometrics and so on and so forth. So the fact that travel is a leading investor in biometrics and the fact that this is government grade allows simply to be a component that can be used horizontally. So it's like we feel that there we are on the trend and we'll continue. So I think that the question market is always around the law enforcement that within our plans, we'll have a lower growth than what these other 2 segments that we have represented. So it's like we feel that that's where we're hedging our bets, even though, as we discussed, trends regarding defense and the digitalization of government in general, leads us to believe that with the proper investments and those trends materializing that, that can be another vertical that we can accelerate. So that's a bit the hypothesis that we have on the revenue side.

Next question comes from the line of Ted Wang from ExodusPoint.

I'm just curious on the financing side, you have put on the chart of pro forma leverage calculation. I'm just wondering, is that a reaffirmation of your full year guide? And second of all, I have a question on -- just in terms of the customer overlap, how much of the -- do you have any customer overlap in terms of the existing customers of IPS and your own solution? And just in terms of like any cross-sell opportunities, where do you see the most? Is it like into more the governments and authorities in Europe? Or is it more just the commercial side with airlines and airports?

Okay. Should I take the financing leveraging and then Decius you can take the other one. So we will come back to you on the 8th of May with our Q1 results. But this transaction, just what we were trying to illustrate here, this transaction generates or adds about 0.5x turn on our leverage position. So what we were trying to do from that slide is demonstrate based on our pro forma results at December 2025, we would be -- if we had done the transaction then, we would be at a leverage of 1.3x, which is well between our targeted leverage range of 1 to 1.5x. So we'll give you more on our guidance expectations next Friday or Friday week, but that's how you should interpret that slide on leveraging.

Yes. And if we go -- then let me go a little bit more in detail how typically the dynamics on a customer work on this kind of market. So airports will tend to bid and to tender terminals. So it means that you may have multiple vendors for multiple terminals within an airport. And border forces typically will tender entry and exit systems in parallel. So you may have a biometric solution for you to enter into the country and another one for you to exit. So it is like when we look into the combined footprint, we see an opportunity with presence in airports and with Border forces is if both we are servicing the same physical location, we see the possibility of synergies. And then when we are talking about cross-sell and upsell, for any customer that we have only part of the terminals or any customer that we have only either an entry or an exit system, we have the opportunity of trying to consolidate that. So like -- so we feel that there are these 2 sides. Number one, there is synergies on how we're going to service airports and border forces. And second, we believe that there is opportunity for both on expanding what we can sell to these customers. not to mention the richness of the offer. As I was saying, here, we're adding iris, we're adding fingerprints. We're adding back-end systems. We're backing customization sort of like I would say we have a much greater upsell path that we can do for the customers. So all of these are potential that we can use in order to perform the outlook that we have mentioned.

Your next question comes from the line of Nicolas David from ODDO BHF.

The first one, could you help us understand better the revenue model of IPS, that the revenue split between what is software, hardware and services? And within that, what is the share of recurring revenue between what would be contractually recurring or what is de facto repeat business that comes every year? And also second question, sorry to come back on that, but regarding the growth profile. So it's clear that you are aiming for high single-digit midterm growth. But what would be the growth profile for '26, '27, for instance? And what was the profile for '24, '25? Was it more mid-single digit or even low single digit? What are we talking about?

Yes. So I can start on that. So the revenue profile of IPS, I think Decius has mentioned, 40% borders and travel, 40% law enforcement, 20% access control. And within those different segments, and we've included actually a slide in the appendix to articulate the business model around that. So some of it is implementation costs, some of it is servicing costs. So I'd refer you to the appendix for further details on that. In terms of hardware/software split, hardware represents about 20%. And so then software services related represents 80%. Again, very similar to some things that we've been comfortable with in Amadeus. In terms of the question around the peak business, I think I'd point to the backlog. The backlog is quite healthy. Decius mentioned $2 billion covering already contracted contracts for delivery of revenue in the period 2025 to 2030. So I mean, it's not linear clearly because it's probably more weighted to the front. But you can imagine it's probably about $0.5 billion a year in the early years of revenue coverage, meaning that these contracts are already secured and inverted commerce, all that is left is to execute on the one contract. And then, of course, our dedicated sales teams will continue to fulfill out the revenue on new order wins. So that's kind of the revenue profile that we're describing in this deal.

There are no further questions at this time. I will now hand the call back to Luis Maroto for closing remarks.

So thank you very much for attending the call. We are very excited about this opportunity that we have shared with you, and we are looking forward to next week as we present our first quarter results. Thank you.

The conference has now ended. Thank you for participating. You may all disconnect your lines.