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    AZUL4   BRAZULACNPR4

AZUL S.A.

(AZUL4)
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End-of-day quote. End-of-day quote Bolsa de Valores de Sao Paulo - 06/18
46.82 BRL   +1.94%
06/11AZUL S A  : Reports May 2021 Traffic (Form 6-K)
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06/11AZUL S A  : announces its traffic figures for May 2021
PU
06/11AZUL S A  : Announces Pricing of Offering of Senior Notes (Form 6-K)
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Azul S A : Transcrição da Teleconferência de Resultados 1T21

05/10/2021 | 02:18pm EDT

Conference Call

Azul

1Q21 Earnings Results

May 6, 2021

Operator

Hello, everyone, and welcome to Azul's First Quarter 2021 Results Conference Call. My name is Beatriz, and I will be your operator for today. This event is being recorded, and all participants will be in a listen-only mode until we conduct a question-and-answer session following the company's presentation. Should any participant need assistance during this call, please press *0 to reach the operator. I would like to turn the presentation over to Thais Haberli, Investor Relations Manager. Please proceed.

Thais Haberli -- Manager of Investor Relations

Thank you, Beatriz, and welcome all to Azul's fourth quarter earnings call. The results that we announced this morning, the audio of this call, and the slides that we'll reference are available on our Investor Relations' website. Presenting today will be David Neeleman, Azul's Founder and Chairman; and John Rodgerson, CEO; Alex Malfitani, our CFO; and Abhi Shah, our Chief Revenue Officer are also here for the Q&A session

Before I turn the call over to David, I'd like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance constitute forward -looking statements. These statements are on a range of assumptions that the company believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings. Also, during the course of the call, we will discuss non-IFRS performance measures which should not be considered in isolation.

With that, I'll turn the call over to David. David?

David Gary Neeleman -- Founder and Chairman

Thanks, Thais. Hi, everybody. Thank you for joining us for our first quarter 2021 earnings call. As always, I'd like to start by thanking our incredible crew members. I continue to be extremely proud of how they take care of each other and our customers. The sense of family, our culture and our positive energy is strong, and I know this is a key to our success going forward.

Thanks for the team, we have created the best airline in the world. 13 years ago, when I founded Azul, I saw unique opportunity here in Brazil. As you see on Slide 3, I feel like we have taken advantage of that unique opportunity. With the broadest network, a sustainable competitive advantage, unique fleet flexibility, customers who love to fly us, customers who are in the best jobs of their lives, and industry-leading financial performance, we have truly created something special.

What makes me just as proud is our commitment to Brazil and our support of its pandemic response. We have transported millions of vaccines to every part of the country. We have delivered vaccine materials and over 140 tons of medical supplies. Things are getting better, but there is still some way to go. We will continue to do everything we can to support Brazil in this effort.

Environmental, social and governance responsibility is another way we support Brazil. Our sustainability report will come out later this month, in which we will set our bold targets for net-zero carbon emissions. Our social responsibility is providing safe, efficient and cost effective air transportation to the entire the country. This has created thousands of jobs and economic opportunities, which Brazil -- which makes Brazil more equal for everyone.

But above everything for me, it's very simple, Azul will always do what is right for our crew members, our customers, our investors and for Brazil. Since we started Azul, we've always said we wanted to build a different airline.

On Slide 4, you can you can clearly see that we did just that. Azul is the only airline to serve 115 cities in Brazil, we are alone in 80% of the routes we fly. We entered into the pandemic crisis with sustainable advantages. These have served us well in the crisis and now as the industry emerges, our advantages are stronger than ever.

Turning towards a recovery now, as you can see on Slide 5, Azul is one of the fast - has one of the fastest recoveries in the world. Our disciplined recovery strategy is focused on our strength, which is our main hubs. Thanks to our broad network, our demand base is diversified and less dependent on a single region. As a result, we are able to access and collect demand where others cannot create a unique opportunities for network recovery.

On Slide 6, I want to describe to you one of the key features of our competitive advantage, our fleet flexibility. I knew back in 2011 that bringing the ATRs into our fleet was the right thing to do. I also knew that as the airline grew, we would need larger planes for our network. Today, this combination gives Abhi and his team unbeatable flexibility and how they plan the network.

As the slide shows we optimized the fleet on our routes multiple time all the way up to the day of departure. This gives us the capability to maximize earnings potential for any given flight to a range of demand scenarios.

In the intro, I talked about our focus on ESGs -- on ESG. So first I wanted to introduce our newest board member, Peter Seligmann. Peter is a globally renowned conservationist, just as passionate about Brazil as I am and even more passionate about the environment and sustainability. Peter is the Chairman of the Board and Co-Founder of Conservation International, and his appointment reinforces our commitment to long-term ESG targets.

A key aspect for us in this journey is our fleet transformation. On Slide 7, you can see the major impact the next generation fleet has in reducing fuel consumption and carbon emissions. Already our CO2 emissions are down 20% compared to 2016 per ASK. As you know, this has a lot to do with the fleet transformation and there's really a lot more to come. I'm excited to get back to our fleet transformation plan, making the airline more efficient, more profitable and more sustainable.

Our first quarter results show that our business is resilient. We are emerging stronger and confident as we have put ourselves in a position to continue growing the best airline in the world. With that, I will now turn the time over to John to give you more details on our results.

J o hn Peter Rodgerson -- Chief Executive Officer

Thank you, David. I would also like to express my gratitude to our crew members for all their dedication and passion for Azul and for Brazil. We are so proud to be supporting the vaccination efforts in Brazil and are ready to fly even higher.

As you can see on Slide 8, in the first quarter, we grew our top-line revenue by 2.4% to BRL1.8 billion. We also generated BRL130 million of positive EBITDA. This was the second consecutive quarter of positive EBITDA. We are one of the only airlines in the world that was able to deliver positive EBITDA in the first quarter.

This is a remarkable accomplishment considering the second wave of COVID peaked in March and impacted demand throughout the quarter. It shows the strength of our business model. As David highlighted, the network strength and our fleet flexibility has served us well during these uncertain times and with superior pre-pandemic as well.

I'm most proud of the progress we've made on the cost side of the business. Compared to first quarter 2020, we flew 23% fewer ASKs. Even with less capacity in the system, our unit cost remained flat. Even more impressive with fuel price increasing 24% year-over-year and the depreciation of the real we faced in the last year. This clearly shows that we are on the right path in making Azul a leaner more efficient organization going forward.

On Slide 9, you can see the improvement in our unit cost quarter -over- quarter and our operational leverage. Compared to 4Q 2020, we increased our ASKs 11% and reduced our CASK 5%. Again, it's by the fuel price

increases and the depreciation of the real. Normalizing our CASK for FX and fuel, you can see, the drop in CASK would have been over 10%, which gives you an idea as to our operating leverage post pandemic. We will be able to grow our revenues again with a new and improved cost structure, proving we will exit this crisis a more profitable airline than we entered.

Turning to Slide 10, I want to talk about Azul Cargo, our logistics business. Azul Cargo had another record quarter, increasing revenues 63% year - over-year.

On Slide 11, you can see that 2021 is shaping up to be a very good year for our logistics business. Our working model shows that revenues this year will double compared to 2019, incredible when you consider the reduction in total flights that have taken place over the last year. Just as we did with the passenger market, we're helping to grow the entire logistics market in Brazil. The combination of the largest domestic belly network together with the most flexible fleet means that we're capturing new customers and creating new demand in the area of logistics business.

Moving to Slide 12, while we're happy with our past performance, we've been more excited about the future. Studying the market in Brazil, we believe the total logistics market is well over BRL300 billion per year. While the addressable air cargo market could be as large as BRL45 billion; moving high-value consumer goods from road to air.

That is an incredible 15 times the current market size of BRL3 billion. This gives you an idea of the growth potential of our logistics business. Azul can truly transform logistics in Brazil through an unmatched fast and reliable service.

Moving to the next slide, I want to talk about our cash position. We ended the quarter with BRL3.3 billion in cash and receivables. This is BRL1 billion more in cash than when we started the crisis last year. We have BRL552 million in cash inflows minus current operating expenses. We amortized debt, made rent payments and started paying down our deferrals in the quarter.

We also invested in CapEx of over BRL300 million to prepare Azul for the upcoming market recovery. As we've said all along, we only fly when it makes sense to fly. The flying we are doing generates cash that helps us prepare and lead the industry into the demand recovery.

On Slide 14, our total liquidity remained strong at BRL6.3 billion. We also have access to an additional BRL540 million at any time, including this, the number increases to BRL6.8 billion. It's important to mention that we have no restricted cash and this liquidity does not include our unencumbered assets such as spare parts, hangers, etc.

In addition, we own strategic assets, our loyalty program TudoAzul and our cargo business, which were also not included in these numbers. The first

quarter of the year historically is the quarter Azul burns cash, and we expect to end the year with cash at the same levels we ended this quarter. We have no significant debt repayments expected for the next 12 months and we expect cash inflows improving quarter-over-quarter as recovery continues to make progress with vaccinations.

Moving to Slide 15, you can see how our bond traded pre -pandemic with a price above 100% and now at 96% of par. We issued an unsecured bond of 6% and it's currently trading at 7.25%. The capital markets are open to Azul and it was prudent to not raise debt before this time. The debt markets recognize all the work we've done over the last year to put Azul in a better position to exit the crisis on solid footing, ready to capture additional demand from the market.

There is significant upside potential in our stock. Azul ADRs are trading 50% below our pre-COVID levels, while our debt is almost at par. Most U.S. carriers are trading at or above pre-COVID levels. With the improvements in our cost structure, we're forecasting 2022 EBITDA of roughly BRL4 billion, higher than our best year in 2019.

Turning to Slide 16, I would like to focus on the most important topic at the moment, vaccines. The good news is that Brazil has made significant progress. We have 50 million doses applied and we're averaging 1 million doses per day with the capacity to do over 2.4 million doses a day. Brazilians are eager to get vaccinated, and we see a steady pipeline of vaccine availability in the coming months.

We also know that Brazilians want to travel. We are seeing the result of the pent-up demand in the United States. Slide 17 shows the U.S. domestic demand hitting an inflection point in the month of March. This coincides with the total number of doses applied proportional to 20% to 35% of the population. In Brazil, we're currently at 25%. So, looking ahead there's strong reason to believe the domestic market will experience a similar inflection point within the next two to four weeks. We have already seen significant increase in bookings over the last 10 days as the economy reopens.

Finally, turning to Slide 19, I want to remind you of our competitive advantages. Our strong liquidity position, our improved cost structure, network advantages along with opportunities in Azul Cargo and fleet transformation, we are ready for the recovery. I have been accused of being optimistic, but with vaccinations accelerating, an improved cost structure and the greatest team in the world, how can I not be optimistic. The future is bright and the world is coming back to life very quickly.

With that, David, Alex and I will take your questions.

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Azul SA published this content on 10 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2021 18:17:00 UTC.


© Publicnow 2021
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Financials
Sales 2021 9 260 M 1 829 M 1 829 M
Net income 2021 -2 543 M -502 M -502 M
Net Debt 2021 17 255 M 3 409 M 3 409 M
P/E ratio 2021 -6,36x
Yield 2021 -
Capitalization 16 182 M 3 205 M 3 197 M
EV / Sales 2021 3,61x
EV / Sales 2022 2,43x
Nbr of Employees 12 435
Free-Float 77,5%
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Technical analysis trends AZUL S.A.
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 10
Average target price 43,53 BRL
Last Close Price 46,82 BRL
Spread / Highest target 60,2%
Spread / Average Target -7,02%
Spread / Lowest Target -65,8%
EPS Revisions
Managers and Directors
NameTitle
John Peter Rodgerson Chief Executive Officer
Alexandre Wagner Malfitani Chief Financial Officer
David Gary Neeleman Chairman
Antonio Flavio Torres Martins Costa Chief Operating Officer
Sérgio Eraldo de Salles Pinto Independent Director
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