Salik Company P.J.S.C. (SALIK) Earnings Call Transcript & Summary

Thank you. Good afternoon, everyone, and welcome to Salik's Full Year 2025 Earnings Presentation. Thank you for joining us today. As we close out a landmark year for our company. My name is Wassim Elhayek, Head of Investor Relations at Salik. On behalf of the team, I would like to thank you all for taking the time to be with us today and special thanks for Bank of America for hosting this session. Our speakers today are Mr. Ibrahim Al Haddad, our CEO; Mr. Maged Ibrahim, our CFO; and Mr. Tariq Ismail, our CEO. We are also joined by Mr. Tariq Al Mutawa, Salik's Support Service Director; and Mr. Hariharan Gopal, our Director of Strategy and Growth, who will be available to address questions during the Q&A. Today's session will begin with an overview for our full year 2025 strategic and operational highlights, followed by a detailed review of our financial performance for the year and the dividend recommendation. We will then conclude with our outlook and guidance for the full year 2026 before opening the floor for questions. Before we begin, please take a moment to review the disclaimer on this slide, which is relevant to our status as a publicly listed company. Today's session is being recorded and transcribed, and a copy of this presentation is available on our website for your reference. With that, I will now hand over to our CEO, Mr. Ibrahim Al Haddad.

Thank you, Wassim, and good afternoon, everyone. Before we begin, I would like to briefly comment on the current developments in the region. These are challenging times for many and our thoughts are with everyone affected. We sincerely hope for stability and for this period of uncertainty to pass soon with safety and peace prevailing across the region. While situations like this naturally bring some concern, I would like to assure our investors that Salik's operations continue as normal with no impact on system performance. Turning to our earnings presentation. 2025 has been an exceptional year for Salik marked by record operation and financial achievements, alongside announcement for a special dividend in addition to our commitment to distributing 100% of net profit. Our core tolling operations remained robust with total usage fees representing more than 88% of our revenue. Excuse me? Driven by 10 gates across Dubai that served nearly 4.8 million registered active vehicles as of 31st December '25. Beyond tolling, 2025 has represented a year of growth and further diversification, enhancing our accelerated revenue streams primarily across parking payment solutions. Dubai's macroeconomic environment continues to be a key driver of our growth with continued population growth, which has grown over 4 million, doubling since 2011. And GDP, which has maintained its growth trajectory being the two primary drivers alongside booming tourism and sustained focus by the government on infrastructure investment, it is clear that the demand for smart mobility solutions remains high, positioning Salik to this momentum and contribute to Dubai's long-term mobility vision. Salik's ambition is to become a global leader in sustainable and smart mobility. That ambition has always been motivated by our strategy, which is anchored around four clear strategic pillars that shape how we operate, grow and evolve the business. While we remain focused on strengthening our core tolling platform and advancing its distribution, we are placing an increasing emphasis on driving sustainable growth and building a future of the organization by diversifying our services across the mobility ecosystem. Since our listing, we've consistently executed our strategy and 2025 has been a standout year for Salik marked by key milestones and impactful developments. During the year, we successfully implemented our variable pricing mechanism, which alongside the first full year operation of the two new gates, provided strong growth to our core tolling operation. We are also proud of our inclusion in the MSCI Emerging Markets Index this year, Fitch credit rating upgrade and Moody's rating reaffirmation alongside ranking first in the transportation and infrastructure sector in UAE as per S&P Corporate Sustainability Assessment. All of which underscores our growing market presence and the confidence of leading reputable institution, Salik's equity story. Additionally, we expanded our mobility ecosystem through strategic partnership across parking payment solutions, EV charging and e-wallet payments, positioning Salik as a comprehensive player in the mobility space. Looking ahead to 2026, we are carrying this momentum forward, highlighted by our recent 10-year agreement with Dubai Airports, which will further solidify our role in Dubai's future mobility infrastructure. In full year 2025 Salik went above and beyond with new heights across all financial metrics. Total chargeable trips reached 639.1 million, driving revenue to AED 3.1 billion, the highest revenue recorded since inception, up by 35.1%. EBITDA also grew by 35.8% to reach AED 2.1 billion delivering a margin of 69.2% while net profit surged by 33.4%, achieving AED 1.6 billion with a net margin of 50.2%. This highlights the strength of our tolling business and the success of strategic initiatives, positioning Salik's for continued growth. I will now hand over to Tariq Ismail, our Chief Technology Officer, to take to take you through our operational performance.

Thank you, Ibrahim, and good afternoon, everyone. I will now walk you through the key operational highlights for the period. Salik's core tolling business continued to deliver strong growth during the period. Total trips increased to 224.3 million in Q4 2025, up 22% year-on-year and 9.9% quarter-on-quarter, reflecting sustained mobility demand and the continued contribution from the new gates. Total chargeable trips reached 168.6 million in Q4, up 10.8% quarter-on-quarter, driven by higher peak and off peak traffic volumes across the network. Registered active accounts increased to 2.79 million, up 7.7% year-on-year, while registered active vehicles reached 4.76 million, representing growth of 8.7% compared to the previous year. Traffic growth in Q4 2025 was broad-based across Salik's network, with total trips rising 22% year-on-year to 224.3 million. Business Bay Crossing and Al Safa South were the largest contributors to growth, continuing to scale following their late 2024 launch, while Al Barsha and Al Safa North remained the leading gates by volume of trips. Chargeable trips increased 10.8% quarter-on-quarter to 168.6 million with Q4 marking 11 months under variable pricing. Variable pricing has played an important role in supporting Salik's annual revenue growth by improving the timing mix of trips across the network. As a result, the blended tariff reached AED 4.2 for the financial year 2025. Since its introduction in January 2025, the model has encouraged a greater share of travel during off-peak and past midnight periods, while preserving demand during peak hours. This shift in timing has supported higher toll revenues while also contributing to smoother traffic flow across the network. Traffic distribution has remained relatively stable quarter-on-quarter, highlighting consistent commuter behavior. Building on the strength of our core tolling business and the benefits of variable pricing, Salik continued to expand its ancillary revenue base through the rollout of seamless parking payment solutions enabled by strategic partnerships in 2025, including those with Emaar and Parkonic. The partnership with Parkonic marks Salik's first geographic expansion outside Dubai with a 5-year agreement covering 197 locations across the UAE, of which 110 are already live. In addition, more recently, in January 2026, Salik signed a 10-year agreement with Dubai Airports, to enable seamless e-wallet parking payment across approximately 7,400 spaces at Terminals 1, 2 and 3 and the Cargo terminal, establishing a long-term platform for growth. Together, these partnerships demonstrate Salik's ability to scale its digital mobility platform beyond tolling and unlock new recurring ancillary revenue streams. Our ancillary revenue platform continues to benefit from a series of recently signed MOUs through our partnership with LIVA, formerly RSA. We are leveraging Salik's customers database to deliver timely motor insurance renewal reminders, seamlessly directing customers to LIVA's digital platform and enabling bespoke insurance solutions for drivers across the UAE. In parallel, we have recently signed new MOUs to extend our e-wallet beyond parking and tolling. Together with the Schneider Electric and VCharge, we have successfully completed a proof of concept for EV charging payments, with integration expected across more than 1,800 charging points from the third quarter of 2026. We have also signed an MOU with Enoc to pilot seamless payment solutions at 4 to 5 fuel stations in the second half of 2026, with a formal agreement expected to follow subject to the successful completion of the pilot. With that, I will hand over to our CFO, Maged Ibrahim, to review our financial performance.

Thank you. Thank you, Ibrahim and Tariq. Good afternoon, everyone. I will now walk you through our key financial highlights for the fourth quarter of 2025 and full year of 2025. As you can see, Salik delivered strong growth across all key financial metrics in full year 2025 and the fourth quarter of 2025. 2025 revenue increased 35.1% year-on-year to AED 3.1 billion with a Q4 revenue up 26.3% year-on-year to AED 821.9 million, driven by a higher number of chargeable trips and the impact of variable pricing. 2025 EBITDA grew 35.8% year-on-year to AED 2.1 billion, delivering a margin of 69.2% while Q4 EBITDA increased 20.7% year-on-year to AED 560.2 million with a margin of 68.2%. The net profit increased 33.4% year-on-year to AED 1.6 billion for the full year of 2025 with a net margin of 50.2%. In the fourth quarter, net profit rose 19.6% year-on-year to AED 409.6 million resulting in a margin of 49.8%, reflecting a strong operating leverage and continued cost discipline. Salik continues to benefit from a lean asset-light operating model that supports high margins and efficient cost controls. During the period, toll usage fees remained a core source of revenue, contributing 88.4% of the total revenue, while fines accounted for 9.1% and other income made up the balance. Operating leverage improved during the year, supported by the contribution of the two new gates and continued revenue uplift following 11 months of variable price. Core discipline remained strong with concession fees, operation and maintenance and related expenses are aligned with underlying business growth. The increase in finance costs primarily reflects the funding associated with the two new gates commissioned in November 2024. In Q4 2025, revenue increased 26.3% year-on-year to almost AED 822 million and grew 9.9% quarter-on-quarter, reflecting higher chargeable trips and the continued impact of variable prices. For the full year, revenue rose 35.1% year-on-year to AED 3.1 billion with toll usage remaining the primary contributor complemented by a solid growth in ancillary and other revenues. Toll usage revenue has continued to build on a quarterly basis, with Q4 2025 recording a 27% year-on-year increase. This performance reflects sustained growth in mobility across Dubai alongside a continued positive impact of variable pricing and the contribution from the expanded toll gate network. 2025 EBITDA performance remained strong, increasing 35.8% year-on-year to AED 2.1 billion with margins sustained at 69.2%. As illustrated in this waterfall chart, revenue growth was a primary contributor to EBITDA expansion, while higher concession fees, operation and maintenance and other expenses remained aligned with the growth of the business. Salik's net profit margin of 50.2% in 2025 was primarily driven by higher revenue from increased chargeable trips, partially offset by higher concession fees, operation and maintenance expenses, finance costs and income tax. In Q4, net profit rose 19.6% year-on-year to AED 409.6 million with margins remaining strong at 49.8%. Talking about the cash generation, Salik continued to generate strong cash flow supported by high profitability and disciplined working capital management. Free cash flow -- free cash flow increased 42.7% year-on-year to AED 2.1 billion, reflecting strong EBITDA conversion and a healthy free cash flow margin of 67.1%. As illustrated on the free cash flow bridge, cash generation was driven by EBITDA growth, partially offset by income tax payments, working capital movements and relatively limited CapEx with noncash impairment add backs supporting the overall cash flow. Salik maintained a healthy balance sheet as of December 2025 year-end. As of 31st of December 2025, net debt stood at AED 4.8 billion with net debt-to-EBITDA at 2.24x, well within covenant limits, supported by AED 1 billion in cash. In November 2025, Fitch upgraded Salik's long-term issuer rating to A from A-, while Moody's Ratings affirmed an investment-grade rating of A3 in December 2025, both with a stable outlook. Salik continues to offer an attractive and highly visible dividend profile supported by strong cash generation. In light of the strong full year performance, the Board of Directors has proposed a total dividend of AED 890.3 million to be paid during the first half of 2026. This comprises a cash dividend of AED 782.5 million, representing 100% payout of the second half of 2025 net profit, as well as a proposed special dividend of AED 107.8 million, which represents the portion of retained earnings equivalent to the implied finance costs for both 2024 and 2025 financial years, net of tax after deducting the tax that has been paid on this portion recorded on net debt with RTA. Accordingly, the following -- and following to the distributed cash dividend for half 1, 2025, which amounted to AED 770.9 million, the total full year 2025 dividends will reach AED 1.66 billion, subject to the AGM approval. Our dividend policy reflects the strength of Salik's cash flows and our confidence in the company's long-term earnings growth potential. With that, I will now hand it back to our Chief Executive Officer, Mr. Ibrahim Al Haddad to share Salik's outlook and closing remarks.

Thank you, Maged. We are pleased to announce that our performance for 2025 came in line with our guidance across all key metrics. Looking ahead to 2026, we maintain our revenue guidance of 4% to 6% increase as driven by organic growth. Additionally, following the approval of the new concession fee calculation formula, the EBITDA margin guidance remains at 68% to 69% considering the expected increase in the concession fee to 23.12% from 22.5% based on 2025 blended tariff of AED 4.28 and inflation rate of 2.78%. Our commitment to 100% profit distribution remains fair, supported by strong cash generation and visibility into long-term earnings. We are also excited about our expanding ancillary revenue streams. Parking Payment Solutions are expected to grow from AED 35 million to AED 50 million in 2026. And over the long term, it could scale up to AED 120 million to AED 150 million by 2030. Data monetization is expected to reach AED 5 million to AED 10 million in '26 and could scale to AED 20 million to AED 50 million by 2030. Other streams, including smart mobility and insurance, are also expected to grow substantially. This area will contribute significantly to our long-term growth and diversification. In conclusion, '25 has been a transformative year for Salik with continued robust traffic growth, a clear focus on diversification and disciplined operational execution. Finally, we are proud to have met our full year targets and set the stage for sustained growth in 2026 and beyond. Thank you, and we now welcome your questions.

Thank you very much, Ibrahim. [Operator Instructions] Our first question is from [ Giuseppe ] from Morgan Stanley.

Just a quick one from my side. In terms of visibility on the new gates, are you having any discussion with the RTA? Do you have a little bit more visibility now of what could be the potential timing, financial allocation? Do we have any information on that?

As of now, we don't have any visibility in where gates will be, as we always say, the gates is a traffic management tool. And RTA, as we are having the bird eye, we can see all the places where the congestion is and whether this can be solved through a gate or can be through expanding the road by adding extra lanes or building parallel road. So it's all about RTA to decide where and when we will have those gates. And -- but as of now, we don't have any visibility on when or where will be the gates.

Our next question is from Ankur Agarwal from HSBC.

Thank you, management, for the presentation. So my question is around the special dividend, right? So can you walk us through the -- how did you arrive at this amount? And what's the context of the special dividend? So we know that obviously, you're paying for the new gates in a staggered manner that added to the shareholder equity. But if you can walk us through the thought process around the amount? And the second question that I have is that if, let's say, you add a new gate, right? So timing is unclear, as you mentioned. Would we still have the same payment mechanism in vogue for a new gate?

Talking about the first question, let me just stress on a point that this special dividend does not represent a change in our dividend policy. Our policy remains unchanged, and it will remain 100% of the net profit. The proposed special dividend effectively, it's some kind of return to the shareholders a portion of the retained earnings attributable to this noncash interest expense when we got the agreement -- reached the agreement with RTA to install the upfront payment towards the new gates over 6 months. As per IFRS, we have to book an interest for that and because we are not paying interest for anyone, it has to go as a profit for the company as retained earnings. And to be fair with investors, we proposed to our Board of Directors and the Board of Directors will propose to the AGM, to distribute the portion related to the interest expense that were charged in '24 and '25 back in a form of a special dividend after deducting the tax that has been paid on this portion. This is regarding the first question. The second question was talking about the new gate payment mechanism, we cannot comment on this right now as we don't have any visibility on any new gates coming in the future, but when it comes, it will be subject to the discussion with RTA, and we cannot assure that this will be a similar treatment that will happen for all the coming gates. It's a ad hoc process, and we will disclose whenever we have an information in that.

So one final question, right? Short one. So given the special situation we are in right now, is there any clause that gives you a waiver around concession fee given the circumstances that we are in right now or not really?

I don't think the current situation reflects a situation that will activate a force majeure or something similar to that. But other than that, we have no clause in the concession agreement to not to fulfill our obligation by paying our fees of concession for this -- as per the concession agreement.

Our next question is from Alexander Estefanous.

Congrats on the results. Just a very quick question just describing sort of what we're seeing on the ground in terms of the current conflict. For the sake of sensitivity analysis I'm looking at from a scenario perspective, are you seeing sort of a rough reduction in volume going through the gates? We've anecdotally seen maybe roughly 60% reduced traffic volumes. Would that be fair to say?

It's too early to assess right now, to be honest, it's -- I mean, at this stage, it's too early to comment on any very near-term movement that took place over the last few days. We continue to monitor the traffic and revenue trends closely and we reassess as more data becomes available. If any material development, we will communicate with our shareholders.

And this I think just to add one more point, I think if you base the analysis of the forecast on what you see today is really going to be misleading because this is like an immediate, immediate reaction that days before whatever occasions happen. But that's, I think, in my opinion, it's going to be misleading. So it's still early, as Maged, to draw a conclusion or forecast the traffic in the future.

[Operator Instructions] While we wait for questions, maybe just one question from my side. You obviously have a growing contribution from ancillary revenues. Can you walk us through how the uptick in some of the measures you've taken so far has been and probably talk about the growth from this segment over the next 12 months?

Sorry, Sashank. What were you saying on the uptake on the segment?

On the ancillary services segment, the parking and things like that.

Correct. So we've grown this business significantly over the last 1.5 years. I think parking alone, if you look at -- compare the performance last year as compared to the earlier years, it was almost 280% growth. We are seeing significant expansion in this area. Today, as we speak, we have already expanded the locations, 120 locations across UAE, and this continues to expand on a day-by-day basis. So we are looking quite bullish on this, and we feel that this ancillary revenue streams will contribute significantly in the long term.

It doesn't seem like we have any further questions, so Wassim, I'll just pass it back to you if management has any concluding remarks.

Yes. Thank you, Sashank. I would like to thank you all for attending today's call. Also thanks for Bank of America for hosting today's call. Please, if you have any follow-up questions, feel free to reach out to me directly or send email on the Investor Relations at salik.ae or visit our website, salik.ae. Thank you very much, and have a good day.

Thank you, everyone.

Bye-bye.