Novaturas AB (NTU1L.VS) Earnings Call Transcript & Summary

Good day, and welcome to the Novaturas Investor Conference for the first half of 2025 Financial Results. I'm Simona from NASDAQ Vilnius, and I'll have the pleasure of moderating today's session. Thank you for taking time to join us today. We'll provide you with comprehensive insights into Novaturas' financial performance and strategic outlook. Before we begin, a few quick notes. This session is being recorded and will be made available on the NASDAQ Baltic YouTube channel shortly after we conclude. [Operator Instructions] I'm delighted to introduce today's presenters, Kristijonas Kaikaris, Chief Executive Officer; and Aukse Kriauciunaite, Chief Financial Officer, who will take you through the company's performance and answer your questions. Without further delay, I'll turn the floor over to our management team. Kristijonas and Aukse. Please proceed.

Good morning, dear investors and guests. As I was introduced, I'm Kristijonas Kaikaris, CEO of Novaturas. And I would like to welcome you to our half year 2025 results presentation and conference. This year, we present our results under slightly different circumstances. Our CFO, Darius Undzenas, as it was informed publicly, has left the company. And today, I'm joined by our acting CFO, Aukse Kriauciunaite. She has stepped into this role with strong commitment and energy. And together, we will guide you through both the financial and operational results of our first 6 months of the year, highlight key developments and share how we are preparing for the future. The past year has been one of transformation. We faced a highly competitive market environment, oversupply across Baltics and the shifting customer behavior. Yet through decisive actions by adjusting our capacity, refining our product mix, and also strengthening our partnerships, we are steadily improving. So let's begin today's presentation with the executive summary. Okay. Looking at the first half of 2025, which reflects both the challenges and adjustments and the rewards of our operational discipline. We generated EUR 74 million in revenue, an 18.8% decline compared to the previous year. On the surface, it looks like a contraction, but in fact, it is a direct outcome of our decision to streamline the travel programs and step away from last year's unsustainable oversupply, especially during the summer months. Result is a company that is smaller in volume, but already healthier and more profitable. And this is visible in our bottom line. EBITDA improved significantly from minus EUR 1.665 million last year to just minus EUR 254,000 this year. Net profit also followed this path. Losses narrowed by 65.3%, improving from minus EUR 2.277 million to minus EUR 0.791 million. These are not yet positive figures, but not up to our -- and not up to our optimistic forecast at the beginning of the year, but the direction is clear and encouraging. In terms of travelers, we served 84,000 customers compared to 113,000 in the first half of 2024. While this is fewer passengers, it is exactly in line with our strategy. Fewer seats and sales meant less last-minute discounts. And that, in turn, helped us to record a load factor of 98.1%, the highest in our history. Importantly, through all of this, our customer satisfaction is up with NPS, Net Promoter Score of our customers of 61%. This confirms the efficiency but has not come at the expense of our service quality. A key milestone of the first half was welcoming our new strategic investor, Mr. Neset Kockar. So in April, the first stage of the agreement was completed and Mr. Neset acquired 23.2% of our shares. The second stage, which will take his shareholding above 33% has been currently delayed due to procedural requirements, but all parties remain committed to closing it. Mr. Kockar's arrival has already had very real impact. He injected a EUR 1 million loan to the company, later increasing it to EUR 2 million. which definitely strengthened our liquidity. His presence also enabled us to secure new tour operators insurance agreement with Euroins, giving Novaturas a EUR 9 million guarantee limit in Lithuania to ensure our obligations to travelers. And in June, we also renewed our EUR 3 million credit line with Luminor Bank, extending repayment until the end of the year. So together, these measures have given Novaturas a much stronger financial backbone. Beyond capital that excites us most are the synergies. Mr. Kockar brings decades of experience in tourism and aviation. And with his network, we're already implementing ways to broaden our hotel portfolio and travel packages. So what do we expect? We expect travelers across the Baltics to begin seeing the benefits of this collaboration from 2026 season onwards. So in short, fewer passengers, but more higher efficiency, a leaner company but stronger financial base and a more challenging environment, but one that we are better prepared for. So I will invite Aukse to take over from me to walk you through our financial slides. Aukse, please. stage is yours.

Thank you very much, Kristijonas. Hello, everyone. Thank you very much for joining the webinar. And today, I'm going to introduce you with financial figures of Novaturas Group for first half of 2025. Firstly, let's begin with sales. As Kristijonas has already mentioned, number of sales decreased almost 90% compared to the last year, the same period. This happened due to travel program optimization impact by competitive environment in tourism sector. Passenger volumes were almost 26% below last year levels as during 2025 first half as Novaturas continued to focus on optimizing load factor to minimize last minute sales as these have usually negative impact on company's profitability. Therefore, as we can see, profitability per passenger was higher in 2025 compared to the same period 2024. Overall, competition remained intense, especially in Turkey and Egypt regions as these ones main winter and summer destinations and highly affect Novaturas sales performance. Let's continue with EBITDA. EBITDA for 2025 first half amounted to minus EUR 0.3 million as an increase of almost 84% compared to the minus EUR 1.6 million in the first half of 2024. Better results were reached via optimization of the travel program, managing the oversupply in the tourism sector. And therefore, this led us to avoid a lot of last-minute sales and higher load factors. As we can see, Novaturas managed to increase load factor from 95% in the first half of 2024 to the 98% in the first half of 2025. Gross profit for first half of 2025 reached almost EUR 9 million with a gross profit margin 12% compared to the EUR 8.5 million last year with 9.3% margin in the same period of last year. Mentioning more precise numbers of sales profit per passenger. In first half of 2025, the number nearly doubled, rising from EUR 28 from 2004 to EUR 55 to 2025. Okay. Kristijonas, we can move to the next slide. Talking about the total amount of selling, general and administration expenses, we can mention that this decreased in 2025 as these were impacted by optimization process as well. The total amount of selling, general and administration expenses in first half of 2025 is lower by 7% compared to the last year. However, the percentage of selling, general and administration expenses remain higher to the revenue -- remained higher in the first half of 2025 compared to the same period last year as optimization impacted more revenue than the expenses as part of the expenses are fixed. Talking about the structure of selling, general and administration expenses. The structure changed a little bit, but these changes are not major. Sales, salaries and related taxes decreased 40% compared to the last year. Administration sales and related taxes decreased 2% compared to the last year. However, advertising and marketing expenses decreased by 32% compared to the same period last year as Novaturas Group continues to focus on own channel performance and position in the market. Other expenses increased by 25% compared to the same period last year. And we can move to the next slide. Let's talk about market performance. Leaders of this market does not change. The part of the revenue attributed to the Lithuanian market is 55%, where another 45% are shared by Latvia with 21% and Estonia with 24%. Lithuania market leadership follow with the gross profit and operating profit as well, where Lithuanian market provides positive operating profit, while Latvia and Estonia have negative ones. That's all about main financial figures. Kristijonas please continue.

Thank you so much, Aukse. So I'm moving to the next slide. And when we look at passenger volumes, the numbers clearly reflect our strategic choices. In the first half, 84,000 passengers traveled with us, about 25% less than last year's 113,000. But again, this is not a sign of weakness, but of discipline. We continuously reduced capacity to remove pressure from the last-minute sales and protect profitability. Breaking down by market, Lithuania accounted of 24,900 travelers, Estonia for 18,700 and Latvia for 17,300 travelers. The decline was consistent across all 3 countries, and it is very much in line with our planning. This reduction was not easy, but it was necessary. It allowed us to balance supply with demand, maintain pricing discipline and support the record load factor what we posted. In other words, we gave up on empty seats in order to build a healthier business model. Continuing on the passengers served, it is equally important how many passengers we serve is where they travel. Here, we see a real progress. On average, selling price has reached above EUR 780, continuing a steady climb since 2022. And this shows that while volumes are lower, the revenue per customer is improving. We are also less dependent on our top destinations. As you can see, Turkey fell from 36% in our travelers -- of our travelers in 2023 to 31% this year. Egypt declined from 20% to 18% and Greece from 10% to 8%. Even though Turkey remains our largest supply market with 26 less passengers, the load factor here actually improved by 3.2 percentage points. Meanwhile, to share -- well, the share of other destinations, including long haul, grew from 37% in 2023 to 43% for this year. Our reliance on 3 big highly competitive markets, which are Turkey, Greece and Egypt, dropped from 65% to 58%. And this shift is deliberate and important. It means Novaturas is no longer dependent just on 1 or 2 countries, but it's offering much broader and more resilient portfolio. And the stars of this portfolio are the long-haul destinations. Passenger numbers to Vietnam rose by 76%, Cancun by 38%, Colombo by 29% and Zanzibar by 28%. We also expanded from 10 long-haul destinations in 2023 to 13 in 2025 with Gambia recently joining the list. So the story here is clear. This destination diversification is working. It's giving our customers more choice. It's improving yields and making our business less vulnerable to competition in just a few markets. Of course, efficiency and diversification would mean little if customers were unhappy. But here, the story is also positive. Our Net Promoter Score has risen sharply. In H1 2023, it stood at 46% and today, it is 61%, comfortably above the 60% benchmark that signals very high loyalty. By market, Lithuania scored 64%, Latvia 62% and Estonia 58%. Estonia is especially remarkable, moving from 19% in 2023 to 58% now. That's not just an improvement. It's a transformation. It reflects that our changes in service, product design and communication are being felt by customers and felt positively. Now looking at destinations. The highest rated destination in H1 this year were Alanya, Tenerife [indiscernible] Antalya, Kemer and Montenegro. This shows that both traditional and newer destinations can deliver excellent customer experiences. So here, the message is also clear. We are changing the structure of our business, but not at the cost of quality. Customers recognize and value our experience we deliver. Another encouraging trend comes from booking behavior. We saw a 5% increase in share of bookings made more than 3 months in advance and a 6% decrease in those made closer to departure. And this is critical because earlier sales -- because earlier sales strengthen our cash flow, improve planning and reduce dependence on the last-minute discounts. On the operational side, punctuality on-time performance is also moving to the right direction. So our OTP was 73% this year, slightly down from 75% last year, but significantly higher than 68% in 2023. But most importantly, the number of flights delayed more than 3 hours, the kind of delay customers really remember, dropped from 11 in 2023 to just 5 this year. This combination, earlier booking and less long delays gives customers greater confidence in us and gives us stronger control of our business. Let's go to operational efficiency and operational discipline is now one of our strongest areas. Our load factor reached 98.1%, up from 94.8% a year ago. This is the highest level that we have seen ever in our company and a sign that we're no longer flying with excess capacity. By country, Lithuania improved by 3 percentage points, Latvia by 2.6 percentage points and Estonia by 5 percentage points. The Estonian result is particularly strong and shows that optimizing strategy is working across Baltics, not just only in our home market in Lithuania. Winter long-haul flights deserve special mention. Nearly all of them operated at 100% load factor. That is not only efficient, it also shows how strong the demand is for exotic destinations. So overall, these results demonstrate that our focus on optimizing supply is working, reducing oversupply, increasing efficiency and supporting our path towards the profitability. Okay. Let's look at our sales channels, which remain stable but are evolving with customer behavior. The B2B segment through travel agencies is still the core channel, accounting for 71.9% of revenue, up slightly from last year's 70.7%. Commissions remain stable, and these relationships continue to be a foundation of our distribution. Our own retail offices contributed 18.2% of revenue, which is a small increase from 18.1% last year. It may seem modest, but it shows steady progress in direct sales. Meanwhile, the web and GDS channels made up about 10% of revenue. After the challenges in 2024 we experienced, we shifted our strategy. Today, our website, I would say, is primarily a landing page for inspiration and hotel search, while most of actual bookings are taking with and are completed with the travel agent. And this reflects the reality of Baltic market. Customers like to explore online, but we prefer to finalize purchases through personal interaction, either with our partner agencies or directly at our own sales offices. And our channel mix reflects exactly this preference. Looking at the distribution by country, the picture becomes even more clear. In Lithuania, 78.2% of sales come from partner agencies. In Latvia, this figure is 67% and in Estonia, 60.9%. So while the agency channel is strongest in Lithuania, customers in Estonia are more likely to book directly or digitally. At the same time, Novaturas is the first row in online visibility, holding 35% share of total web traffic across the Baltics. This leadership is really valuable even if more bookings are made in person, most customers begin their travel or their journey online. And we continue investing to keep this lead position and the first line in the racing grid, so to say. In the first half of 2025, we improved stability and reliability of the web platform and launched new user-friendly features. Among them are AI, artificial intelligence generated hotel descriptions and summaries of customer reviews available publicly, which make the search process clearer and faster. We also rolled out hybrid packaging connected to our reservation system, which already expands hotel choice in most challenging destinations as it is being tested in other directions. So the strategy is dual, a strong and reliable agency network, which remains the core channel today, combined with digital innovation, which secures our competitiveness for tomorrow. And this brings me to the end of financial, operational and distribution review. Moving to -- looking ahead. where we expect to serve from 170,000 to 190,000 passengers this year in 2025, generating revenues of EUR 160 million to EUR 180 million. Based on current trends, our forecast of full year is an EBITDA of EUR 1.1 million to EUR 1.6 million and the net profit between breakdown and EUR 0.5 million. But more important than numbers are, I would say, the priorities. Firstly, we already started selling summer 2026 earlier than usual to lock in early commitments. Also, we are enhancing operational efficiency through AI and IT integration, streamlining processes and improving decision-making. Fifth, we are leveraging strong buying power, both in hotels and aviation, supported by our new shareholder. And finally, we're working on product differentiation, ensuring that Novaturas is not just another travel provider, but one of a distinctive portfolio that creates value for our customers. And these steps make Novaturas stronger, more competitive and sustainably profitable. This concludes our formal presentation of half year results, and I want to thank you once again for your attention.

Now let's continue with Q&A session. And I will start with a couple of questions we have received a couple of days before this presentation. And both questions were about when Novaturas is planning to pay dividends to the shareholders. Well, thank you for the question. It is an important one for many of our shareholders. And as you can see in our financial statements, Novaturas currently carries several obligations. We will have -- we still have more than EUR 5 million bond issued during the COVID period, which matures in 2025 -- 2027, I'm sorry, it matures in 2027. In addition, we are using a EUR 3 million credit line from Luminor and EUR 2.5 million credit line from SEB Bank. And earlier this year, our strategic investor, Neset Kockar provided a EUR 2 million loan that further strengthened our liquidity. But as you can understand from it, our priority must be to ensure that these obligations are properly managed and gradually repaid. At the same time, we are working to bring Novaturas back to sustainable profitability. And once we have a stable profit base and our debt burden is meaningfully reduced, the company will be then in the position to consider dividend payments. So to summary, in short, our current focus is on strengthening the balance sheet and delivering profit. And dividends still remain a goal, but only after we have first secured financial stability and fulfilled our obligations. So that was the end of the answer of the 2 questions we have received prior to this presentation. I will ask Simona if during the presentation, we received any more questions.

Yes. Thank you very much for insightful presentation. Indeed, we have received 2 more questions. So one of them is when can one reasonably expect Mr. Kockar to complete his acquisition of 33% shares in Novaturas. What is hampering the process?

Well, we are -- as a company, we are not part of this process between Mr. Neset Kockar and the party which is selling the shares. So the information we have been provided with is that there are more things to do before the transaction happens, some procedural things, and they are now working on it together, 2 parties. So we were informed about this, but not about the potential date of acquisition.

And the next question is, could you please elaborate a bit more on why digital push didn't bear fruit as expected? Why customers like to still visit partner agencies?

Well, because, first of all, we have very competitive market in Baltics in all 3 countries in Lithuania and Latvia and Estonia. We have 2 strong tour operators competing for each customer. So for most of those customers, it's rather obvious to visit tour operators and also the tour operators partners, agencies looking for different deals, getting consultations. And also, as I mentioned, the behavior of our majority of customers in Baltics is on the preference of contacting an agent because the purchase is not that small and not every customer or the group, the families, which travel together are keen to convert or to complete the purchase on the website. And we were observing this trend for quite a while. The higher the competition, the higher the probability that customers are searching wider, right? So we see a very healthy traffic, which actually dropped after this new e-commerce platform, web platform was introduced at the second half of 2023, but we made some significant improvements, as I already mentioned during today's presentation. We see that the organic traffic is recovering. We focus a lot now on SEO optimization, content, also using AI tools, as I also mentioned. And we see that customers are looking, browsing, selecting hotels, destinations, but not all. But as I gave you numbers, 90% of our customers in Lithuania and less in Latvia and even less in Estonia are still keen to have a contact over the phone or visit the office to meet the agent for some deeper discussion and sometimes negotiation.

And one more question just arrived about dividend. When are you expecting that dividend payout would start happening to shareholders in 2026, '27 or further down the road?

As I already said, we have to manage the loans and the obligations what we currently have on our table from the COVID period, also from the earlier periods. And before we manage that, we cannot talk about the dividends. But once we see, as I also mentioned, the benefits of our cooperation with the new shareholders' resources and experience, especially in the hotel and aviation area, I truly believe that we are in a much stronger position than last year to have better results with the profit. And once we have a profit, once we manage the loans by 2027, I think then will be the right time to look at the dividend at the possibility of paying the dividends. So it's about managing our current financial commitments and also being profitable. So once these 2 come together and are properly managed, we can look at our results when we earn the money, we earn, of course, not just for the company, but for you, for the shareholders. That's when the dividends will come into picture again.

I have just received a question about this unequal competition in the Lithuanian travel market from Latvian tour operators and especially from those who have negative capital and there are those who should declare themselves insolvent in Lithuania and have the operator licenses revoked. So what steps and actions do you take and/or do you intend to take to prevent from it and to protect Lithuanian market and Novatura's financial situation near future. So maybe some more comments, maybe this was not answered yet in full.

Okay. It's, well, not in our direct control of making direct impact to our competitors. And I think those competitors can give you maybe a better answer if asked directly. But of course, there are authorities in all 3 markets, which oversee the performance and the business of tour operating companies. And definitely, we are aware and informed and it's on their backs to react one or other way.

Thank you very much. We addressed all questions so far, and we encourage you to take advantage of this opportunity to engage directly with the management team of Novaturas. [Operator Instructions] One more question arrived. Other costs is what?

Other costs are mainly related with increased bank charges for the loans, which were already mentioned by Kristijonas.

There is a question here. Do you consider destination?

I'm sorry, can you repeat what destination?

This is Peru -- the question is about Peru.

Peru maybe yes.

Okay. Well, normally, when we are working with the team before launching the season, we basically, so to say, look at the globe and look at all the possible destinations. And then, of course, we are trying to understand what are the ways of getting our potential customers to those destinations. Are there regular flights? Are there -- is there a charter possibility, especially with long haul like Peru and other destinations, having a charter for our rather boutique Baltic countries, Lithuania, Latvia and Estonia is not really feasible apart maybe some destinations like Vietnam, Thailand and some others. But still, it's evaluated every time. And then, of course, we look at the seasonality, how long is the season in those countries, what is the hotel availability in each new potential destinations. And there is a big puzzle to put things together. And then, of course, it's about our appetite of risk taking because opening new destination is usually an investment. And looking at our current situation based on the competitive environment in the Baltics, we are trying to be cautious about experiments and some new markets, especially long hauls, which can be very costly in the end. And as we can see in our market, sometimes tour operators, they try to introduce either new destination or a direct charter flight to any long-haul destination like, for example, Vietnam. But even after introducing it before even the season starts, it's canceled. So it's very, very precise and thoughtful thing to do to work on the new destinations especially which are long hauls. So to answer, we consider all the countries around the globe, but there are many, many factors to take into account and see if this is feasible to be introduced now or maybe later.

[Operator Instructions] It appears we successfully addressed all of the questions. So on behalf of both Novaturas and NASDAQ Vilnius, I want to extend our gratitude to everyone who joined us today. Thank you, Kristijonas and Aukse for sharing such comprehensive insights into Novatura's performance. Your expertise and transparency are truly appreciated. To our attendees, thank you for your questions and participation. It's been a pleasure having you with us today. As mentioned earlier, the full recording of today's session will be available on the NASDAQ Baltic YouTube channel shortly. We encourage you to share it with colleagues who may find the insights valuable. We look forward to connecting with you again at future investor events. Until then, have a wonderful day, and thank you once again for your time and attention.

Thank you so much. And also bye-bye from me and Aukse. Hear you soon.

Thank you. Bye.