Ferrovial N.V. Q1 FY2025 Earnings Call

Good afternoon, everybody. This is Silvia Ruiz speaking, and I would like to welcome you to Ferrovial's Conference Call to discuss the Financial Results for the First Quarter of 2025. I'm joined here today by our CFO, Ernesto López Mozo. Just as a reminder, both the results report and the presentation have been available on the website since yesterday evening after the U.S. market was closed. At the end of the presentation, there will be a Q&A session. As in previous calls, you will have the opportunity to ask questions live — the operator will provide instructions for the Q&A. With all this, I will hand over to Ernesto. Ernesto, the floor is yours.

Thank you, Silvia, and welcome everybody to the first quarter of 2025 operating results update from Ferrovial. Starting with the growth in all business divisions, I would like to highlight the strong revenue performance in highways of the North American assets. In terms of airports, we highlight that construction advances in NTO. And in construction, we have shown a steady profitability with adjusted EBIT margin reaching 3.3%. At the end of the quarter, we have solid net debt ex-infra projects, really a net cash position of €1.9 billion, and the main items in this number are the divestment of AGS of €538 million, and on the other hand, equity injections in NTO for €152 million, and the buyback program where we invested €156 million. In terms of corporate events, this quarter, in March, we announced an agreement to acquire up to a 5.06% stake in the 407 ETR from AtkinsRéalis for a maximum of CAD2.09 billion and the close of this transaction is expected in the second quarter of 2025. In April, we announced the opening of Silvertown Tunnel. This is a highly complex infrastructure project that is expected to really enhance transportation in East London. If we move on to the performance in highways, we see that the division has significant growth driven, of course, by the U.S. managed lanes. In the revenue growth of 14.1%, we have the influence of the U.S. highways revenue that grew 19.1% versus the first quarter of 2024. It's making up close to 98% of the highways revenue. In terms of adjusted EBITDA, the U.S. highways represent 98% and they were growing at 14.6%. Let's move now into each asset summary, starting with the 407 ETR. The 407 ETR had an outstanding performance with double EBITDA growth. Here, I would like to highlight several items, starting with the toll revenue that grew 23.6%. Here, we need to bear in mind that the tolls were raised before the beginning of the year. So we had January with the new toll rates, whereas in 2024, we did not have this effect, so January has a favorable comparison versus 2024. In February, we have the effect of that comparison. In March, we launched some promotions that affected the March performance. These traffic promotions help to steer traffic and really favor our consumers in the peak hours when it's most needed. So March has traffic promotions and this affected the traffic performance. If we look into the breakdown of the monthly traffic, we need to bear in mind that there was substantially worse weather in the first quarter of 2025 than in the first quarter of 2024, which had mild weather. Also, we had a leap year with the extra day in February, so this comparison has to bear that in mind; the performance in terms of traffic is outstanding. In terms of revenue, of course, the weight of the revenues is in toll revenues, but in fee revenues, we see a higher growth. In 2024, some of the account fees remained unchanged. There has been an update in 2025 that brings this additional growth and other activity has been influencing the higher fee revenue as we described in the slide. So, a very strong underlying performance. Please bear in mind what I mentioned that March is the month that will be more business as usual in the coming months because of this comparison. Regarding dividend distribution, we didn't receive any dividends in the first quarter from the 407, but a CAD200 million dividend was approved and was paid in the second quarter. So we already have that cash in the second quarter. In terms of Schedule 22, we see that in the EBITDA, we have included close to CAD26 million of Schedule 22 provision. The way it's calculated is that the 407 does the estimate for the full year and that estimate is a percentage of the estimated revenues for the full year. That percentage is applied to the first quarter. In terms of percentage, it can be extrapolated, but you will have to wait to see quarters of higher traffic to get a better idea of the impact. Moving on to the next slide, in the Dallas–Fort Worth managed lanes we have outstanding performance in terms of revenue per transaction. Also, in January and February, there was a negative weather impact compared to last year, and even with that impact, the traffic performance has been very solid. NTO is still affected by the capacity improvement construction works. This means that traffic in terms of transactions is lower than last year, but we have an outstanding performance in terms of revenues helped by mandatory modes. Mandatory modes and revenues are also benefiting from a better traffic mix in terms of a higher percentage of heavy traffic. Also, bear in mind that for the likelihood of mandatory mode events there's a kind of traffic threshold: for two lanes you have around 3,300 vehicles per hour. Heavy traffic implies roughly twice what a light vehicle implies. In that calculation, you can get an idea that if there is higher heavy traffic, you are more likely to get a mandatory mode. In LBJ, traffic grew despite construction activities in the nearby corridors and in 35 West, we also had solid traffic growth. We have revenue share according to this performance. In the first quarter of 2024, we didn't have any because the accrual was done at the end of the first half. So the second quarter of 2024 included six months of revenue share and now we're doing that quarter-by-quarter. At the bottom of the slide, we have the revenue per transaction growth that is a mixture of all these things I mentioned: more peak activity, better traffic mix and more mandatory modes, and this has helped the revenue per transaction performance. We also have the update on the slide of the soft cap that grew by 2.9% in 2025. Moving on to the following slides, we have the I-66. Increased mobility in peak hours combined with dynamic pricing means that revenues grow very healthily and revenue per transaction as well, so very solid performance from this highway. Also remember that all the traffic figures are compared to 2024 which had one day more, so bear that in mind when comparing traffic. If we look into the I-77, also very strong performance: traffic is still favored, not as much as in the last quarter of 2024, but this is still favored by the closure of the alternative I-40 that has reopened with limited capacity. So there's more heavy traffic in the I-77 and that's helping the performance of the asset, but on the negative side it was affected by severe weather and you have to compare with the leap year effects, so very strong performance from the asset. We also have revenue share here and the same explanation that I commented in Dallas–Fort Worth applies here. Last year, the revenue share was accounted for in the second quarter for the full first half. Now we're doing it quarter-by-quarter. So we had $4 million of revenue share and we have an additional $2 million of extended vehicle payments. This is good news because in the last year we had the extended vehicle agreement that was expiring at the end of 2024. The grantor was receiving 50% of the revenues from these extended vehicles that were not part of the original concession agreement. Now the agreement to allow extended vehicles has been extended till the end of the concession. The flip side is that the grantor gets two-thirds of the revenue from extended vehicles, but it goes to the end of the concession. So it's good news, but when you're looking into the comparison, please bear that in mind. Moving on to airports, at JFK development is ongoing. In the first quarter, we had a physical progress relevance, 6% advancement and also advancement with airlines. There's agreement with 18 airlines, 13 executed and 5 letters of intent. We continue investing: as I mentioned at the beginning, €152 million have been invested in the first quarter and we have pending €167 million. This is a crucial year for JFK. It's advancing on budget. In terms of Dalaman, it's really a quarter that is not that representative because this is an airport activity based around the tourist season that starts in the second quarter. Nevertheless, domestic traffic was also higher than expected and it grew versus last year. Moving on to construction, we see steady profitability across the board. Budimex, Webber and Ferrovial Construction are showing solid margins. Budimex profitability is slightly lower than the previous year, but remember that in 2024 there was an updating of the indexation cap in public contracts, so there was a retroactive capture of that part. So that was a higher impact, but the margins remain very solid. Both Webber and Ferrovial Construction have higher margins than in the first quarter last year. In terms of order book, it is at peak level and we have lower weight of large design-and-build projects. Our focus is to be on local markets with lower weight of large design-and-build projects that are not with group companies. The order book reflects that and we'll talk in the closing remarks about the uncertainty that could affect performance. We are comfortable with this order book. More on that in the closing remarks. When you look into the breakdown by geography, it's concentrated in the U.S. and Canada and second in Poland. In terms of outlook, we remain with our long-term target of 3.5% adjusted EBIT margin. On the main figures, strong growth in revenue of 7.4%, adjusted EBITDA up 19.1% and adjusted EBIT up 28.3% — a very solid start of the year. Moving on to the net debt position, we have the breakdown of the effects on cash. Dividends from projects are very small; the main component in the €19 million is dividends from Heathrow. Then we have the operating cash flows from construction and other activities. It's useful to have this working capital effect at the beginning of the year. Then we have tax payments that are basically related to our operations in Poland. And then we have the cash flows used in investment activities, the interest received and the investments that I mentioned at the beginning, together with the treasury share repurchase. The cash flow used in financing activities is related to repayment of external debt that results in the reduction of debt, so very solid net cash position and negative net debt at the end of the first quarter. To conclude before getting into the Q&A, this is a very solid set of results where we benefit from the performance of our North American infrastructure assets. This performance is benefiting from increased customer segmentation — we are tailoring more to our customers' needs. The underlying growth in the asset locations is a long-term underlying trend. Then of course, we are looking forward with a great appetite for the pipeline that's coming. The I-24 is still pending pre-qualification results; the I-285 pre-qualification was published and all these bids are expected in the first half of 2026. In terms of construction order book, it has limited exposure to macroeconomic uncertainty: we have a lot of backlog in the U.S. and Canada, but it's in a much more comfortable position than in the past because the percentage of design-and-build projects in early phases — when you're finalizing design and you need to quantify what is going to be built by subcontractors and what supplies are required — is lower. The biggest one in the backlog, the Ontario Line project, has price protection and we don't have any large design-and-build projects in early stages where you have to take procurement and final design risk. With this condition and also with price indexation in areas like Poland and Spain, we think that we have limited exposure to macroeconomic uncertainty. Thanks for bearing with me through the presentation. Let's get into the Q&A. Thank you.

Thank you very much, Ernesto. So let's go into the Q&A. Operator, please go ahead.

Thank you, ladies and gentlemen. We will now begin the Q&A session. The operator has provided instructions for participation. Our first question comes from the line of Luis Pietro from Kepler. Please go ahead.

Thanks a lot. Sorry, good afternoon and thanks a lot for taking our questions. Today, I had a couple, if I may. The first one, I was wondering if you could help us with the math of Schedule 22. Extrapolating the rest of the year on the basis of revenue seasonality leads to a full-year payment figure that I suspect is in the lower part of the consensus. Is there anything we need to take into account to better understand what is behind this figure? And the second question, if I look at U.S.-wide construction sector indicators in Q1, so construction macro indicators, Webber's double-digit revenue growth suggests very strong performance versus the rest of the industry in the context of adverse weather. How should we interpret the situation? Thank you.

Thanks, Luis. Regarding Schedule 22, you are probably right: the consensus is wide, so revenues estimates that the market has with this kind of percentage would likely be lower than what some expect. There is a lot of variance and it will depend on performance going forward. As a percentage of revenues, your way of reasoning is reasonable. In terms of the Webber performance, I think that the backlog of Webber is more of our core activity — typical size of contracts in road and civil construction where we excel. Those contracts have had fewer complexities in that regard, and that relates to our perception that the risk in our order book is much more limited than it may have been in past years.

Thanks a lot, Ernesto.

Thank you.

Our next question comes from the line of Graham Hunt from Jefferies. Please go ahead.

Good afternoon, Ernesto and Silvia. Thanks very much for the opportunity to ask questions. Just two from me. First, I wanted to dig into the exceptionally strong pricing you've reported in Q1 across both 407 and the managed lanes. You reference customer segmentation as being a key driver. Could you speak to a little more color on that in terms of what you're doing differently? And also how you're seeing elasticity — has it changed at all for those assets given the very strong pricing we saw? Second question, on the U.S. line, seeing volume starting to pick up more meaningfully there from a low level. Is there anything you're seeing on the ground or hearing from U.S. investors in terms of getting more interactions there? And given we're around 12 months away from New Terminal One starting to open, is there a Capital Markets Day we could look forward to in 2026? Thanks.

Thanks, Graham. When we talk about customer segmentation, promotions in the 407 are tailored along rush hours. For instance, some promotions target heavy users with minimum consumption thresholds while others target more infrequent users to give them a chance to try the service. We are addressing promotions differently across segments. In the U.S. managed lanes, we have differentiated heavy traffic components more accurately, which also helps. We have a higher percentage of heavy vehicles in some roads, which increases the probability of mandatory mode events given the traffic math. Regarding elasticity, people generally make the trips they need to do, and our capacity is most valuable when demand is highest. Thus elasticity is low — trips are often necessary. On the U.S. line, trading that has extended to different platforms in the U.S. is above the levels needed to qualify for NASDAQ indices inclusion, and that is positively affecting circularity and outreach. Feedback from U.S. investors remains positive; they like the business and pricing dynamics of our assets, and the pipeline compounds that attractiveness. Regarding NTO, it's a crucial year; we haven't discussed any capital markets events today. After opening and ramping up, more information will be needed and it would be natural to discuss additional capital markets activity, but right now the focus is on delivery, schedule and negotiating ramp-up with airlines. It's early to talk timing for a Capital Markets Day.

Thanks very much.

Thank you.

Our next question comes from the line of Ruairi Cullinane from RBC. Please go ahead.

Hi there. Good afternoon. Yes, first question on I-77: would you be able to comment on how revenue or revenue transaction growth in March compared to the Q1 average given the reopening of the I-40? Secondly, thank you for the comments on exposure to geopolitical risk in construction. Are you seeing any sort of labor availability issues given the new administration's approach to immigration? Thank you.

Thanks. On I-77, the reopening of I-40 was a full reopening, and we still benefited early in the quarter from more heavy traffic around the I-77 corridor. Our dynamic pricing took advantage of that and drove good performance in revenue per transaction. Overall, despite worse weather and the leap year effect, the underlying performance in the region was strong. Regarding labor availability and geopolitical risk in construction, we have not seen pressure so far on our workforce. We have a validated workforce with all the permits and so on, and while a lot depends on future levels of activity, currently we do not see material constraints.

Thank you.

Thank you.

Our next question comes from the line of Elodie Rall from JPMorgan. Please go ahead.

Yes, hi. Thanks for taking my questions. First, on the 407, could you give us a bit of insight about your overall expectations for the year — could traffic return to 2019 levels? Second, on the 407 you increased your stake but remain below 50% and do not seem to want to consolidate the asset; would consolidating help simplify the structure for U.S. investors? And on the U.S. investor feedback and liquidity progress with regard to a potential NASDAQ listing: do you think inclusion could happen this year? If not, what kind of pushback are you getting from U.S. investors — are they asking for more forward-looking guidance? Thanks very much.

Thanks, Elodie. Regarding traffic for the 407, we don't provide guidance on traffic levels. Mobility has increased with office mandates returning and traffic promotions, and the region is seeing more mobility, but we will see how GDP performs for the remainder of the year. Regarding the 407 transaction and ownership, there was an opportunity to make a strong investment. We are agnostic about being above or below 50% — our decisions are driven by financial attractiveness rather than cosmetic simplification. The asset is in great shape. On U.S. liquidity, trading is above the minimum required by NASDAQ. The aim is to increase liquidity further and outreach with U.S. investors is ongoing. U.S. investors focus heavily on dividends and dividend expectations; we have dividend guidance for three years and beyond that we will need to revisit going forward. They are warming up to a business they don't have in other companies in the U.S., but we need to go much further.

No, that's fine. Thanks very much.

Thank you.

This question comes from the line of Marcin Wojtal from Bank of America. Please go ahead.

Thank you so much. A couple of questions. First, regarding the acquisition of an additional stake in the 407 ETR, does this give you anything incremental in terms of governance? Do you get incremental influence over price increases and dividend payments since you are now the largest shareholder in the asset? Second, you have previously commented that generally on new projects you look for double-digit equity IRRs. Can you confirm that this transaction at the agreed price also generates a double-digit equity IRR for Ferrovial? Thank you.

Thank you, Marcin. Regarding 407 governance, the transaction has to be finalized before commenting further, so no additional comments until it's closed. On IRR, yes, we aim for double-digit equity IRRs. When there's construction risk, expectations are higher than for brownfield acquisitions, but I can confirm we were aiming for the levels you mentioned.

Thank you very much.

Thank you.

Our next question comes from the line of Dario Maggiore from BNP. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. Four if I may. First, on the U.S. managed lanes, how sensitive do you think traffic is to U.S. GDP? Second, could you give color on the profile of people who use the U.S. managed lanes? Third, on the 407 ETR, is there a political backlash brewing given tariff increases? And finally, on NTO JFK, in terms of financial attractiveness or IRR, how do these airport projects compare to U.S. managed lanes? Thanks.

Thanks. Traffic is positively correlated to regional GDP, more than national GDP; we don't provide a precise elasticity number but region performance matters. The profile of users varies by managed lane: 35 West has more commercial heavy traffic and longer routes; NT12 has a variety including commercial traffic with local connectivity to the airport; LBJ has a higher component of suburban commuters and connects to the airport. Across all lanes you cover the spectrum of customers, with a high percentage of customers using lanes several times per week. Regarding the 407 political backdrop, the only public item I'm aware of is that authorities have asked to start a feasibility study of a tunnel under the 401, which is the parallel route to the 407. No other major public developments in the quarter. On NTO and replicability, opportunities may exist in other airports, but nothing public or immediately available right now. Airports and managed lanes are different asset types: airports, particularly international hubs like JFK, have strong medium- to long-term international travel prospects, and attractiveness depends on capacity constraints and demand. Managed lanes' attractiveness depends on capacity use and demand dynamics. I won't comment on specific IRRs here; each project's return depends on specific risk and demand profiles.

Okay. Thank you.

Thank you.

Our next question comes from the line of Jose Manuel Arroyo from Grupo Santander. Please go ahead.

Hello, Ernesto. I have three, if I may. On NTO, you mentioned agreements with 18 airlines — how many more agreements are needed before the airport can be full? Second, on the managed lanes, was there an unusually high share of heavy vehicle traffic in the quarter, maybe trucks coming from Mexico in anticipation of higher tariffs? Could this normalize going forward? Finally, on the acquisition of a five percent stake in 407 ETR, you previously mentioned the transaction included two steps and closing could happen in Q2. Does the two-step still hold? If it takes up to 18 months, what needs to happen before Ferrovial can buy the full 5% and could a lower price apply? Thank you.

Okay, Jose. Regarding NTO, 18 airlines is a lot — New Terminal One is fully international so you should expect a higher number of carriers. In terms of capacity, JFK is not expected to be constrained in the first three years of operation; capacity constraints are more likely further out. In the initial stages there will be capacity and terminals will compete for international traffic. On managed lanes and potential Mexico-related truck movements, if anything that would affect 35 West, but we have no specific indication that this had a meaningful one-off effect; patterns were not materially different from expectations. The increased share of heavy vehicles as a percentage is something to monitor but not necessarily unusual going forward. Regarding the 5.06% of 407 ETR transaction, the two-step process still holds. There is an incentive to pay earlier rather than wait the full period. The detailed mechanics will be visible once the transaction closes financially; we cannot comment more until then. The press release remains accurate.

Okay. Thank you.

Thank you.

Our next question comes from the line of Nicolas Mora from Morgan Stanley. Please go ahead.

Ernesto, just a couple from me. First, on a proportional basis you've pushed prices around mid-double digits in Q1 for North American motorways, which is tough given the traffic backdrop. Do you feel comfortable being able to continue flex pricing at such levels even with quasi-zero traffic growth, just relying on mix and dynamic pricing? These assets are well past ramp-up in many cases. Second, on dividend stream from the U.S. managed lanes, where do we stand on potential refinancing or re-leveraging given U.S. 10-year yields at 4.5%? Thank you.

Thank you, Nicolas. Pricing dynamics in the managed lanes are driven by mandatory modes on top of inflation-linked uplifts. Mandatory modes are not easy to forecast, but the underlying trends — population and business growth in these regions — increase demand and make available peak capacity more valuable. You could see mandatory modes repeating in the future due to these trends, but you cannot simply extrapolate current quarter performance linearly. Regarding gearing and refinancings, we don't typically comment on potential actions until they are executed; when there is an opportunity we pursue it and will communicate it to the market. The dividend guidance from the Capital Markets Day remains the guidance we have provided.

If I may follow up on mandatory pricing: from the pricing you show, some assets switched to mandatory modes several times during the week. Do you expect this to expand in the short term, especially LBJ, into next year as feeder traffic returns?

We don't provide specific guidance. LBJ will depend on how adjacent roadworks finish; adjacent works are expected to continue through 2026, so ramp-up in mandatory modes may be more apparent after those projects complete, perhaps in 2027. Right now we are not near consistent mandatory-mode levels on LBJ, so we need to wait for the surrounding infrastructure to finish to better gauge that.

All right, thank you.

Thank you.

Our next question comes from the line of Nicolo Pessina from Mediobanca. Please go ahead.

Hi, good afternoon. A couple of questions on the 407 ETR. Can you provide qualitative comment on the promotions underway — how many potential users have been targeted so far, and the level of acceptance and utilization of these promotions? Second, the 22% increase in average ticket: does that suggest that the positive impact from the double toll increase in January is larger than the dilutive impact from the promotions in March? Thank you.

First, on promotions, we've approached about one million customers as a round number. Promotions go on and off for different segments, so we will keep covering the customer base over time. In terms of the 22% increase in average ticket, we don't provide detailed attribution or compare whether one effect is larger than another. We monitor cannibalization and the net effects — often the revenue impact of promotions is small relative to the positive effect of increased traffic and Schedule 22 charges. We are not providing further breakdowns at this stage. As for acceptance rates, we are not providing those details because the program evolves and customers move on and off offers; it's early days.

Sure. Fair enough. Thanks a lot.

Thank you.

Our next question comes again from the line of Dario Maggiore from BNP. Please go ahead.

Thanks for taking a follow-up. On the 407 ETR Schedule 22 payment, how do you see this developing over the next few years? Will it stop at some point or should we expect a long-term cash outflow?

While we do not provide specific future guidance, you should expect Schedule 22 to continue. The 407 provides a quality product with higher travel speeds, and maintaining that quality implies ongoing investment and associated Schedule 22-type payments. These payments were expected prior to the pandemic and are likely to be an ongoing component in the coming years, as the concession seeks to maintain service levels and avoid excess congestion that would undermine the product.

Thanks.

Thank you.

There are no further questions from the conference call at this time. I'll hand the conference back to Silvia Ruiz.

Thank you. There is one question coming from the webcast. The question from Fernando La Fuente from Atlanta: can you provide more details on the pipeline for new assets, specifically motorways and U.S. managed lanes, but also airports and other potential ventures?

Okay. We can comment only on the public pipeline. For managed lanes that are public, you have in Atlanta the I-285 East and I-285 West projects, big projects. You have two in Tennessee; the I-24 is the first one to come out. You have the I-77 in North Carolina in Charlotte and potentially the I-495 in Virginia. This is the public pipeline. Full details are in the fact book. Other opportunities hinge around competitive dialogues and bespoke opportunities and can be commented on when they become public. We are excited about these managed lanes opportunities; the infrastructure is needed and customer appreciation fits positively into the business building up, and that's our main focus.

Thank you very much, Ernesto and everyone. There are no further questions.

Okay. Thanks a lot. I hope to see you all in the near future and stay tuned. Thank you. Bye-bye.