ENAV S.p.A. ($ENAV)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabrizio Ragnacci, Head of IR of ENAV. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and welcome to the First Quarter 2026 results presentation, which will be hosted by our CFO, Luca Colman. In the presentation, we will provide some highlights of the period, and then we will walk you through the operational and financial performance for the group. Following the presentation, we will have the usual Q&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 for joining us. And now let me hand over to Luca.

Thank you, Fabrizio, and good afternoon. I will start with the key highlights of the first quarter 2026. The year started with a robust growth of traffic volume. in Q1, which includes the 1 month of the conflict in Middle East, service units for a route market and year-on-year growth of 8.6%. ahead of plan expectations by 4.5 percentage points. We are facing high levels of volatility triggered by the Middle East conflict in a prolonged crisis scenario, the dynamics on availability and price of fuel, jet -- jet fuel can have an impact on traffic during the summer season. To this end, as we approach the summer season, we will continue to monitor closely the evolution of traffic. Financial performance and cash generation were solid, EBITDA came in at EUR 5.1 million, and free cash flow was around EUR 41 million, up by 1.5x versus previous year. Finally, let me remind you that May 14, the AGM will appoint a new Board of Directors. Let's move now to the operating and financial performance of the quarter. In the first quarter of the year, we experienced a remarkable growth in traffic with an recording high single-digit growth. and confirm in Italy as the best performer amongst the European peer group. The performance for root growth was largely driven by overflight and international traffic up, respectively, by 14.3% and 7.4% year-on-year, more than offsetting the slowdown in initial traffic. This level of traffic positions us ahead of plan expected and 4.5 percentage points. Terminal traffic increased by 2.7% year-on-year, growing in both charging zones. The overall performance is driven by international traffic, which more than offset the contraction of [indiscernible]. Despite a very promising start of the year, we will closely monitor the evolution of traffic over the coming weeks as the potential shortage and price dynamics for jet fuel could impact traffic trend for the summer season. Let's move now to the economic results, starting with revenues. Total revenues for the period amounted to EUR 196 million, supported by the continued strength of our core regulated activities and the positive performance of the nonregulated business. Looking at the regulated business. net regulated revenue contributed for EUR 13.6 million, driven by the solid growth of Enwood and a stable contribution from terminal. balance and minus 2 impacted positively for EUR 2.7 million as a result of negative balance and minus 2 for EUR 37.3 million in Q1 '25 and negative EUR 34.6 million in Q1 '26. The nonregulated business contributed with EUR 3.4 million, mainly driven by the commercial activities in India where we have recently opened our branch. Balance for the period impacted for a negative EUR 2.2 million as a result of negative balance for the period for around EUR 0.3 million in Q1 '25 and a negative EUR 2.6 million in Q1 '26. Moving to on Slide 5. In Q1 '26, total operating costs reached EUR 191 million, up by 4.9%, mainly driven by the increase in personnel costs. Personnel costs stood at around EUR 159 million, up by 7% year-on-year as a consequence of growth in fixed and component due to the contract wage adjustment mainly linked with inflation and agreement signed with the trade unions and higher variable component, mainly driven by high over time and operation needs linked to the higher traffic volume management. Let me highlight that the renewal of the lower contract signed in April, is fully in line with the assumption of the industrial plan for 2026. Other operating costs are up by 1.9% mainly due to higher maintenance activities and other personnel expenses linked to the increase of traffic. These were partially offset by lower utilities expenses. Moving on Slide 6 on EBITDA. EBITDA came in at EUR 5.1 million, well above the value recorded last year. As said, the result was underpinned by the positive performance of the core business in a supportive traffic environment as well as the acceleration in the deployment of commercial activities and not related to the main, particularly in India. Cost evolution is in line with the planned expectations and confirms the expected trajectory for 2026. Moving now to Slide 7 on the profit and loss statement. D&A and provisions were broadly stable, probably stable year-on-year with increase in depreciation broadly offset by lower provisions. Net financial expenses worth EUR 1.2 million, down by approximately EUR 1 million versus previous year, mainly due to lower debt and lower interest rates. Group net income came in at negative EUR 22.8 million, in line with the business seasonality. Let's move to cash flow and net debt on Slide 8. Net debt for the period stood at EUR 99.4 million, down by EUR 38.1 million versus December 31, '25. Cash flow from operating activities amounted to EUR 65.9 million and the investment in period for EUR 21.2 million. Free cash flow in Q1 '26 was equal to EUR 41.4 million marking 1.5x increase versus Q1 '25, confirming the group's solid cash generation profile. Free cash flow for the full year is expected at EUR 250 million, as already communicated in the fiscal year 2025 results. I will now move to the closing remarks. The operating environment in the first quarter 2026 proved to be solid and continued to show record growth rates. well ahead of the European average. Nonetheless, the persisting crisis scenario related to the Middle East conflict might trigger consequence for our business as the summer season could be impacted by shortage and or spikes in price for jet fuel. The high cash generation profile of our business is confirmed with a 1.5x increase year-on-year of free cash flow. and around of EUR 250 million expected for the full year. Finally, let me remind you that the next AGM called for May 14, we'll appoint the new Board of Directors and approved the DPS of EUR 0.29 share for 2025. Thank you. And now let's open the Q&A section.

[Operator Instructions] First question is from Carlos Caburrasi from Kepler Cheuvreux.

Two from my side. First, I wanted to go back to the jet fuel situation, given that some airports in Italy already announced -- already introduced, sorry, restrictions last month, I was wondering if you could give us some color on the trend you have seen so far and the potential implications that a fuel shortage could have on the EUR 250 million free cash flow target for the year? And second, considering the change in management. I was wondering if we should expect any kind of changes to either the nonrelated strategy or long-term duty outlooks?

Carlos. So talking about the jet fuel impact -- possible impact, let me say, the tone from our lines appears to be, from our point of view, supported at the moment, for the time being, and we have not seen particular critical -- criticalities and problems until April. Even the April data were quite good. We have recorded a growth of around 3%, the number of flights. We don't have yet -- we don't have the service unit, April service unit published yet by Eurocontrol still the flights in April was quite with a supportive 3% increase versus same period of the previous year. A trend that seems to be confirmed also in the beginning of May as well. Nonetheless, we need actually to wait to see what will -- what happens in the Middle East at risk of the impact from the shortage and or an increase in price of jet fuel can always happen. But it seems to be also from the communication. I mean, the press release of some airline and as are public, there seems to be not particularly impacting at the least for next 2, 3 months. We heard from either way something with there. So I mean there are some public press release that they say that they should have particular impact for the next few months. So we are, at the moment, positively confident even if no is a very particular appeal. So we have to wait to have more data. But at least at the moment, what we have recorded even in the first days of a still an increase of traffic in terms of flight. For more on the second question, I think it's correct to wait a couple of days where, as I said, the AGM will appoint to the new Board of Director, the strategy would be released actually some change of the strategy to be released plans, no particular answer on this point, just wait. If I may, just consider that within the regulatory period in the 5 years scenario, agreed with European commissions of a concern, the regulated business, the regulated business, as worse is regulated. So even it is some possible to pull them. But the main scenario agreed with per commission with the regulator is something that is some way a picture [indiscernible]. It's a framework that you more or less taken so this in some way stabilize at least the tariff and some figures for the regulated business.

Next question is from Aleksandra Arsova from Equity.

So a couple of questions from my end. The first 1 is on traffic again. If I remember correctly, at the end of March, your control published released its latest forecast for traffic, let's say, forecasting for Italy a 5% growth in traffic for 2026. I was wondering if you can provide some the same color on the assumptions behind this 5% and whether it already accounts for some slowdown in traffic due to the situation in Iran. The second 1 is on cost evolution. Again, if I remember correctly, during your March presentation, you guided for a plus 6% roughly increase in your P&L costs. So from that time, now you closed the new labor contract. And so I was wondering if this plus 6% is still valid at least for what you know up to date.

Yes, for what concern the traffic, see, as you said, Euro control by the end of -- I mean, last March published to the new forecast or either for the other European countries, that the increase what is the forecast for 2026 MBC unit for Italy by 1 percentage point. So they move from 1.1. That is the 1 that is part of the 1 we have in tribudget, increase to 5.1% to more concern the base scenario, and this is definitely positive. But at the same time, as you probably remember, they also gave a disclosure related to the fact that they still had to analyze all the impact of what is happening -- I mean, what is going on with the Middle East work and crisis. And so the open end, what is the itinaryendolutionary range in a big range. So from the total impact may go from a positive still a positive low scenario at an increase of 1.2% through a big scenario of 5.1 that the 1 will normally take into consideration, but we can also get to 9.2% increase. So this magnitude is morely related to the fact there's still some other analysis that the Euro Control has to do and still probably -- and that's reason why we take this big monitor -- big range. But yes, you think they increased by 1 percentage point, what is the base scenario for the end of 2026 for us. So we think that it could be something that we can take into consideration. But we -- as I said, we prefer to wait the next month and the summer season to -- I mean to understand well what will happen in the next weeks just to be sure to be very, I mean to have old element to add our forecast confirmed. For what concern the cost evolution, yes, let me tell -- let me say that, yes, even if we still need to wait the part of the summer season, you know how much summer season can move some variable part of our cost. But the current year-end forecast is broadly in line with what we said before, and I would say, with the performance reported in 2025. So if you look the cost evolution in 2025, it's what we expect also by the end of this year, if nothing changing will not apply. So the impact of -- or even the impact of the renewal of the staff contract as we considered in what I just said. So take that number, take a number close to the performance recorded in 2025. But I remember, I guess it was increased 6.4% maybe. So something between this way.

Next question is from Amal Patel from UBS.

Just 2 questions from my side. I appreciate the lack of visibility on traffic heading into summer, but the EUR 250 million free cash flow guidance you set, when you set that guidance, what would the underlying traffic assumptions embedded in this. And secondly, just a bit more color on the strikes that took place yesterday in Rome and Naples. My understanding was you reached a formal agreement with the unions. I guess, what is the motivation for work is continuing to strike?

First question, let me say that the target we have considered the -- I mean the traffic increase that we have in our budget in 2026 is 4.1% increase of not -- is it the 1 that was agreed with the regulator in the performance plan and is also in the target so very in line. So let me say it in now we are -- I mean, in the first quarter, we are at good result, as you may have seen from presentation much higher that volume, even Eurocontrol 5.1%. So that's cash flow generation is related to this value, this line. So at the moment, we feel -- I mean at the least from the information we have now, we feel comfortable to confirm that generate cash flow generation, looking the evolution of traffic in these weeks. For what concern, the stride that we had, just a minor trade in on the tenants sign. I mean all the different trade unions signed the contract, that is it was just 1 minor that from what I know didn't sign, and so it was just a way to show that they agree with this renewal. But it was just a local if I am right. There was a local strike. This did impact actually all the vanaspati were just a local strike with a minimum part of what this information came to me with a minimum impact on the service.

[Operator Instructions] Next question is from Luca Bacoccoli Intesa Sanpaolo.

So some questions from my side as well. The first 1 is on the service unit growth mix. as you were pointing out, look, most of the growth comes from the international and above all the other flight. So I was wondering if this growth in the overflight is driven by any rerouting which may occur in March because of the conflict in Iran. And if you see any, let's say, benefit or headwinds from the war on the routes taken by the aircraft or the airlines? And the second question is again on OpEx, maybe on staff costs. On the press release, you -- in the press release, you mentioned the impact of the performance bonus. So what would the staff cost growth be excluding the, let's say, clawback of this performance bonus. Finally, on the nonregulated growth-related revenues growth, which was very, very strong. And I think organic, so my question is, what should we expect for the remaining part of the year? Is this growth driven by some phasing of some new contracts coming in or there's, let's say, a structural underlying trend in this growth? [Audio Gap] Okay. Look, sorry, we just had to check -- just be sure to understand understood your question. So for what concern, the is in March, above overflight. March was the first month after the Middle East crisis started and there was a kind of -- let me say, a little bit not panic, but just rerouting readjusting everything. So there was a lot of movement on some flight from 1 part to another part. And so this is -- there was a lot of rerouting. But then they adjust by the end of March, in April to go, they readjust to the old say, a normal situation still affected from the closing -- I mean, to the fact that the area speed is closed. So there's most some flight was below that aerospace and then they move up to Northern Europe coming from the Middle East, actually passing Edge then decide to pass through Italy or through the bacanic area. The good thing is we still continue to perform very well in terms of delay. We are the passing in class in terms plus services. So we don't give delay. And this truck traffic in our overflight in our aerospace. And this is 1 of the reason why we are still having a very important factor of the overflight on our figures. So, yes, if I'm right in at well case the second question in terms of the agreement with the personnel this is more or less EUR 5 million impact on cost for concern the ex feasibility that we have asked to our controllers. For what concern the -- what was the last one? No, regular growth. The nonregulated growth. We confirm at the moment what is our guidance. So as said, we foresee, we forecasted to get a EUR 62 million revenues from not regulated business, and that is actually confirmed at the moment.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you. So we actually have a last one, which is going to come through our inbox at rate. And the question is on the 2026 target and basically, they're asking us why we did not disclose the target for the full year and when we think we will be in a position to share with the market the target for 2026?

Okay. Thank you, Fabrizio. So the reason is mainly related to this scenario. Until the Middle East crisis does not stabilize or sold, we believe that is really difficult to define which traffic forecast can be considered viable. And this is able for the summer season. Therefore, we prefer to postpone the outlook for the year to the first half release of next August. Further to the potential volatility on traffic, a postponement to August was also preferable also from a governance perspective. In fact, on May 14, so only in a couple of days time, the AGM will appoint a new Board of Directors that will be then in a position to be included in the valuation of the scenario going forward. So these are the 2 main reasons why we [indiscernible].

Thank you, Luca. So with this, there are no other questions that we have received on our end. So if there are no other questions from the audience, I think that we can wrap up. And thanks, everybody, for joining our call this afternoon.

Ladies and gentleman the conference is now over. You may disconnect your telephones.