Yet Another Value Podcast - Pershing Square Challenge 2026 finalists pitch Amadeus $AMS | the toll booth on global travel

Episode Date: June 4, 2026

Amadeus $AMS is down roughly 25% because the market lumped it in with the SaaS names AI is supposed to gut. Team Amadeus, Pershing Square Challenge finalists, argue it's the opposite: a deterministic, mission-critical monopoly that AI makes more valuable, not less. We dig into the 50-year-old systems that planes literally can't take off without, why the GDS is the wrong job for an LLM, the Sabre and Constellation Software angle, and what the stock is actually worth.Full pitch deck (~75 pages): https://www.dropbox.com/scl/fi/5bwef8mz2kplx2sub598w/PSC_AMS_LONG_vSent.pdf?rlkey=x5g0v7t1qk8hpg00ewix95hn3&st=rq9nzl4h&dl=0This episode is brought to you by Trata. Trata is two investors who get on an anonymized call and talk through the real issues in a stock, bull-to-bull, bear-to-bear, or just getting up to speed. If you like this podcast, you'll like Trata. Check it out at trata.comChapters:00:00 Why Amadeus landed on my radar01:00 Sponsor: Trata02:39 Meet Team Amadeus (Pershing Square Challenge finalists)05:20 What Amadeus actually does: the toll booth on global travel09:07 The AI fear that broke the stock11:13 Is it actually cheap? Valuation and stock comp15:26 Why Amadeus tops the AI-risk matrix16:32 Air IT Solutions: the SAP of airlines22:59 The Microsoft AI director who bet against AI eating this24:15 Tech-debt pushback and the JFK field trip29:09 Sabre, Constellation Software, and the monopoly complaint33:16 How Amadeus won share during COVID34:21 The air-distribution network effect35:22 Why LLMs are the wrong tool for the GDS39:50 The $1B biometrics acquisition43:03 Google, Gemini, and the uptime math45:47 Fair value and the bull case nobody's pricing49:01 Amadeus as an AI beneficiary51:02 Closing thoughtsLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

I'm about to listen to the Yet Another Value Podcast with your host, me, Andrew Walker. Today I have another team on from the Persian Square Challenge. This is Team Amadeus. They were finalists, and I think they did great work. Amadeus is a really interesting company. You're going to hear them talk about it throughout the podcast. Again, they did great work. And it's come on my radar multiple times over the past couple months because, A,

I've had a lot of people who have poked me and said, hey, Andrew, this company is down 30% over the past few months. This is about the most AI-proof company in terms of SaaS land that I can think of. and the team has done really great work, and you're going to listen to this and understand why so many people think this is a SaaS-proof company. And then the other reason is because Constellation Software, the big company up in Canada, invested 10% in a publicly traded competitor of Almeidaeus. So if you're interested in kind of Constellation Software,

and the Sabre, who is the competitor, is quite levered. But if you're kind of interested in that, you're going to get some background on the industry and stuff. So those are the two reasons it's come onto my radar. The team does a great job diving into both those and a whole bunch of other things. you know, quick disclaimer up top first, there's a disclaimer of the show notes, nothing investing advice. But the other disclaimer is, my internet turned off during the interview. So these guys were kind enough to come back on and finish taping the podcast the next day

with me. But there might be a little bit of a twitch in the middle because of my technical difficulties. So we're going to get to the podcast in one second. But first, a word from our sponsors. And our sponsors are Trota. Trata.com. Look, if you like this podcast, you are going to like Trada. Trotta.

Trotta is two bysiders who get together for an anonymized call. and they talk about all the issues that are going, that are affecting their research in a stock, whether they're a bull and a bull, a bull, a bear, a bear, two people who are just trying to get up to speed. I absolutely love it. If you love this podcast, you're going to love it too. I have found it just to be an incredible way to get up to speed on new names and to review positions because it's one thing to review a 10K.

It's one thing to review an earnings call. It's another thing to talk to a person who's been following a company for two years and has money involved in the company and who will tell you, hey, you know, in real time, yes, and earnings calls you good updates, but think about if you invested in a SaaS company in December, and then it was February 15th and the company hadn't been reporting earnings yet, and their stock was down 30%. If you weren't following the news or talking to it, you might not know why people are selling off. And the answer was, people are terrified of SaaS. And if you were talking to other people, you might have been able to figure it out. And you might have been able to figure out,

hey, I need to get out or, hey, with Amadeus, this could be an opportunity. So I, and that is just one example of so, so many. But whenever you talk to somebody who is financially interested in this stock, you're going to learn a lot more than if you're just kind of researching the 10-K-A-K, and Trada kind of brings you on the inside of the room for those conversations. So go to Toronto. That's tr-a-ta.com to check it out. All right.

Hello, and welcome to yet another value podcast. I'm your host, Andrew Walker. With me today, I'm happy to have on Team Amadeus from the Pershing Square Challenge. Team Amadeus, how's it going, guys? Oh, good, Andrew. Happy to be here and speaking with you. Well, look, I'm going to let you guys introduce yourselves in one second, but I'll just give a disclaimer, same way I start every podcast, remind everyone, nothing on this podcast is investing advice. There's a full disclaimer at the end of the podcast, and there's a disclaimer in the show notes if anybody wants to go check out all the legalese.

And I'll also note to people, this is another one of the Persian Square Challenge finalists. They've got a full pitch, and I'm going to include a link in the show notes. So, you know, if you're talking to this and I'm trying to look, I believe it's a 75-page pitch. So if you're listening to this and you say, hey, Amadeus is really interesting. I want to go see a 75 page pitch on it. Boom, there you go. Press the link in the show notes. So, guys, before we dive into, again, Amadeus is what you guys pitched.

I love it if you guys could just start and give a little bit of, you know, a 10-second background and everything on who you are, how you came into the Persian Square Challenge. And Kabir, you're in the top left of my screen. So if you don't mind, I'll start with you and we'll kind of go clockwise just so, or counterclockwise, just so we hit everyone. So I'm Kabir. Prior to the MBA, I worked in consulting, very passionate about investment management, and I just took up the pushing square challenge to learn more and dive deep into a company

that I wouldn't be able to do in any other way. Awesome. Brand, do you want to go next? Yeah, sure. Thanks, Andrew. Hi, everyone. My name is Fran. Prior to CPS, similar to Kabira, I was a consultant.

I was based in the Middle East, actually. And yeah, likewise, I was very excited to work on this project because, you know, we look at one company for around, let's say, four to five months, which I think was a very unique opportunity. Best for last. So, Aetel, before the MBA, I worked in on the BISide and then in corporate strategy. I took up the challenge of working in this speech before and was super excited going into CBS that I would have the chance to do this.

So happy, happy we got to the finance. Awesome. And I will just, a little inside baseball. I look, I've said it on a few of the pods I've done so far. Every judge told me this was the best set of contestants they'd had in the Virgin's Court challenge by far. And I know one judge who was over the moon about Amadeus. Now, I think you might be long Amadeus, but I know one judge who was really founding the table

on your pitch and everything. So let's dive into you guys chose Amadeus. And before we get into what, maybe quickly what they are, and then I want to ask why you chose them. But who wants to start with kind of what Amadeus is? because they are certainly not a household name, even though I would guess every single consumer, every single podcast listener has indirectly interacted with their products.

Yeah, I guess I can go for that. So to anyone viewing, I think Amadeus is like the door booth on global travel. They're a company that makes money every time a flight is booked through a travel agency or an airline boards a passenger. They get a fee of the booking. It is a number one player in that space with roughly 50% share and score segments. And they've been growing revenue at 7%

and compounding EPS at 11%. So they operate across, I think, three segments. Air Distribution is the two-sided platform connecting 400 plus airlines to travel sellers. Air IT Solutions provides those systems that serve passengers, which is the backbone of airline operations.

And hospitality sector provides reservation and guest management systems for hotels. And in general, they hold a lot of data and handle a lot of transactions per second, which is sort of similar with Google search. That is a fantastic background, and I'd love to dive more into the company in a second, but I've been asking all the teams from the Persian Square Challenge, so I'd love to just ask you, you know,

this is a semester-long project for you guys with the final pitch, kind of being the deck, and hopefully, as you guys said, you get finalists and you get chosen and everything, but you can choose pretty much any company, in the world with sufficient size. How does the process look like for you guys where you're sorting through a lot of things? How does Amadeus come on the radar?

How do you guys decide, hey, I want to spend a semester researching, crafting and pitching and pitch, all this sort of stuff. And you've got an eye towards the pitch. So what makes you think Amadeus will make a good pitch? Megan, talk a little bit about this one. So, of course, we wanted to pitch something that would be interesting for the judges.

and we knew, of course, what the portfolio of Pershing Square was, so we took that into consideration. But also, we wanted to be something that was interesting for us to do research on, right? That might be useful down the line. So we took those two things into consideration. Actually, the process was really fun. We thought every three days we would meet, and we committed to each of us kind of pre-examination,

kind of presenting like a primer on two companies. So we did that for like a couple of weeks. And then we ranked them and we voted. And we came to a conclusion that this was interesting, not only this related to travel, but also because it had the implications of software and AI. We also look for feedback from our professors and TAs and they liked it. So it was a consensus in the end that this was a good, good idea to work on.

Anyone else want to add anything there? No, just what Aitl said, like, it's exactly how we approach it. I mean, just on top of that, we did look at also other names. So we were each responsible for bringing every three days, like two to three names of companies that we found interesting that kind of fit the Persian Square criteria that we were given. And then we will just start, you know, discussing the company, kind of having some high-level points on what the thesis would look like. And at the end of the day, you know, similar to what Ethan said,

Amadeus just turned out to have the most interesting thesis, mostly because of the AI, of the AI setting during that period. Well, look, I think, great description. I think between Kabir's overview of the business and both of you mentioned AI, I think we can start diving into the company. So, you know, if I'm not going to, I'll try not to put too many words into your y'alls, But I think for a long time, this was viewed as kind of attacks on global airfare, right? They handle a lot of the global airfare.

And as Kabir said, every time someone books a ticket, they're probably getting a cut of that ticket for handling the software. The business, you know, you're starting to hear some AI risks and everything. So I'd love for you guys to talk to me about, hey, you know, how ingrained is this? How are you guys thinking about AI risk? And how is the market thinking about AI risk when it comes to this business? Oh, it's on your unmute. Oh, sorry. I can take this one. So yeah, when we started doing research and doing it, it was clear from earnings called transcripts and saleside reports that they had completely overtaken the narrative.

And there was there were two components to it. The first one is the the potential disintermediation of the distribution business, but also on the potential of airlines to develop their own IT systems more cheaply and replace the passenger service systems, so also implications for air IT solutions. And I would say we did most of our primary work around this area because we wanted to really be comfortable with the downside risk coming from this. So I would pause there and maybe, I don't know, if you have your friend want to add something. Yeah, I can just add that like the market sees the AI risk

similar to how they see other software service companies. So we've seen like a multiple compression from first COVID in 2021 and then now again in the span of the last couple of years. So with what Ether said, I think the market has, seen that multiple compression, which has affected the stock tremendously. You know, so I want to provide a few, I don't have any huge disagreements with this. And there's one slide I want to get to in a second that I just thought was the best slide in the deck.

And I thought it was awesome. I thought it was one of the best slides I've seen it in here. But, you know, we'll cover valuation more fully in a second, but you look at the stock chart, right? And the stock's gone from low 70s a year ago to mid-50s today, right? And that's a decent size move. you know, it's a little bit more than a 20% drawdown. And this is a, there is some debt here, but it's not a highly levered company or anything. So it's not like your talk, you know, that is a pretty big drawdown for a not that levered company.

But on the other side, I look at this and I say, hey, you know, they, they grew 6% in 2025. The core business is kind of a mid to high single digit grower, you know, which kind of makes sense for a pretty penetrated. You know, this is the number one player in kind of the airline distribution backend software. It makes sense that it's growing GDP Plus because that's kind of what the air travel grows at. But it's trading it like 10 times EBDA. So I look at this and I say, hey, you know, I keep when I've had several friends pitch this or some version of this to me. And it's, hey, there's SaaS spheres here. And I'm going to get to your slide in a second.

But when I look at the valuation, I'm like, hey, it doesn't look that obviously cheap to me, you know? And like the company, I think they, I was just looking at their Q1 report, which I was. I realize it's kind of after your presentation, but they've started buying back shares a little bit, you know, especially for a European company, it might be kind of aggressive. But I can point to, you know, several other SaaS companies where the stock is off 75% and the companies out here saying, we're going to be okay, we're going to be okay. And they're buying back shares. It's just like, it's not striking me as like this huge dislocation.

And that might be fine for the Persian Square challenge, right? Because I think a lot of people leave this as a compounder. But I feel like I came in this thinking it was a SaaS. victim and it's just not obvious that it is to me. So I throw a lot out there. I do want to get to the slide in a second, but I'll let anyone who wants to respond. I'd just say it is cheap to me. This stock used to trade around 22, 23, 24 times earnings and it's trading out 15 times earnings. If you run a DCF, that's like a fair multiple 22, 23 times. Consensus EPS growth is like 12%, which is in line with guys.

So for a 12% PPS grower, as you said, unlevered training at 15 times, 15 times gap or IFRS, right? If you look at other SaaS names, you would have to look at the gap numbers to be comparable. And even though software has come down quite a bit, like more than this stock specifically, if you look at gap earnings, it's a lot more expensive than 15 times. 15 times. No, look, you do hit the nail on the head there because one of the things, and I've hammered people on this before, you look at these companies, say, oh, it looks cheap. And everybody says, oh, it trades at 10 times free cash flow.

And I keep hammering you on, hey, you're saying they've got $500 million of free cash flow, but they've got $700 million of stock comp, right? And that's a real expense. And maybe when the stock was treating it at a $50 million valuation, you could kind of ignore it. But when the stock's down 90%, and now it's a $5 billion company, and they're doing $700 million in stock comp, even if you want to ignore it, that diluted share count is going to go up real fast.

And this company, I mean, the EBIT on the adjustments here is very clean. And as you're saying, it's 15 times, it's a very clean. I said 10 times EBTA, 15 times P, whichever you want to say. Anybody else want to say anything on the multiple? I'd love to talk about the slide I keep alluding to. I think I want to see something on the SaaS business. I wouldn't see it's directly comparable to like another SaaS copy. just because it's not a per seat business.

They sell directly to airlines, which controls the software all the way from check-in to boarding. Similarly, they have distribution business, which aggregates data for all the online travel agencies. So you're not really selling per user. And so it's not impacted by whether there's going to be lesser users in the future. It's perfect. This slide I keep alluding to, and again, there'll be a link in the show notes.

But you've got a, it's slide 15 in your deck. And it is Amadeus is insulated from kind of the SaaS apocalypse and AI. Not all software is created equal. And you laid out, you know, it's your classic kind of two by two matrix. And you have, hey, this is, you have how likely something is to get disintermediated. And you guys have Amadeus rated as the least likely to get disintermediated by AI. You know, you've got it better than Visa. Oracle, SAP, like everything.

You've got Amadeus Air IT solutions as the best, and Amadeus air distribution is like kind of the best there. So I'd love to just ask you, you know, why do you guys think this is so ingrained, so sticky, so un-A-Iable, unreplaceable? And then I will have some, I don't disagree that it's very hard, but I will have some gentle pushback on perhaps the most insulated in the entire world.

Sure. So I can take a first. is tabaret and then Asel Kavir, you can continue. So, as you said, we have divided into two, right? You have the Air IT solutions and you have the Air Distributions. I can talk about the Air IT solutions. If we start with the AIT solutions, again, these are systems that were built around 40, 50 years ago that have been updated, right?

But these are systems of records that already have a lot of data from the airlines. And these are very highly mission critical. Again, like if the system is not working, the plane will just not take off. That's it, as simple as that, right? And planes and airlines, they cannot afford to have any downtime whatsoever, which is why we have the AI as something that is highly insulated from AI, which is why we have it as very different from, let's say, other type of software companies. We validated this as well with our calls, with multiple people that are at.

experts in the field. For example, we talked with a Microsoft AI director who told us exactly the same thing, that they're not seen at Microsoft at least when they're helping clients when it comes to AI. At least they're not seeing any of these type of softwares that are deterministic in nature, that are highly mission critical being replaced by AI because it's very hard to replace it. And this is in terms of money, in terms of time, in terms of training as well, a lot of these systems, people are already trained on them. Even switching from one system to another is a nightmare for these airlines. All right.

We had some extreme technical difficulties completely on my side. I know a lot of people who are, I don't know if you guys ever looked at it. IWG is the kind of we work competitor that owns a bunch of different brands. I'm at an IWG brand and it seems like they forgot to pay their cable bill because my internet just completely shut out yesterday. But for any of you, have been kind enough to rejoin. We're going to finish the podcast and hopefully could be your control. friend i was asking when it cut out and i'll try to edit and everything i was asking about slide 15

which is this great two by two slide which has you know um how exposed to AI software is and you know if you're all the way on the bottom left you are just the most exposed you have duolingo as kind of the most exposed and then if you're all the way at the top right you are the least exposed to a iar you are mission critical and deterministic in what you do for a business and you guys have uh you guys have amadaises two businesses air it's a and air distribution as basically the least exposed. So I was kind of reviewing some of the stuff we've been talking about. I'd love if you could just clearly define first,

what is Air IT and what is air distribution? Because I think people know, hey, they do flights at this point, but what specifically are they doing? And why do you guys think these are so unexposed to AI? Yeah, sure. So maybe I can start with that and then easily, you can complement on it. But basically, as we said before, Amadeus has three main businesses.

right? The two most, let's say, famous one or non ones are RIT solutions and air distributions. In RIT solutions, the way that you should think about it is like the SAP of airlines. RIT solutions basically runs the whole IT infrastructure of airlines all the way from checking and passengers and the luggage and the system in the airport and when the plane needs to take off and all of that. Everything that the airline is doing under IT infrastructure, is basically done and run by Amadeus. That's how you should think about the RIT solution, just as a SAP. Air distribution is different.

In air distribution, basically what Amadeus is doing is connecting or showing the content of the airlines to the travel sellers. By travel sellers, it can be online travel agencies, like, for example, atspedia booking.com, which are, you know, the two most, let's say, the two biggest ones. Or brick and mortar travel agencies as well, TMCs, which are travel management corporations, for example, Amit's travel, BCD, which are used by a lot of big companies. So there are the ones that are enabled them and showing this content of flights and prices and seeds and really everything from the airlines do to these travel sellers.

And they handle the booking internally for them to do the booking through these systems. So in a nutshell, this is what these two lines of businesses are. Now, in terms of AI, I don't know if you have any questions, but in terms of AI, we have divided it in the matrix that we have, we have divided it into rail. We have RIT solutions and we have air distributions because we believe they have different levels of AI, risk exposure, let's say. I can talk about RIT solutions, but when it comes to RIT solutions, as I mentioned before, this is like the SAP of airlines. This is a system of record that has been going around for around, you know, that was invented around 50 years. ago, airlines rely on it fully, right? If an airline is using the Amadeo system,

they rely on it fully. And to put it simply, if the system is not running, the plane will not take off as simple as that. And as we know, airlines, they cannot afford to have any mistakes. They need to be constantly running. They need to be constantly flying their planes to make money, which is why we have it

as the most probabilistic system, and at the same time as the most critical system there is because the airport, the airline system is very critical. So it's very hard to replace. Even based on our discussions with a lot of the experts, for example, even with airlines themselves, they don't even switch from one system to another. Let alone, they're going to replace the whole system just to build, just to vibe code their own, you know, airport, air IT solutions.

So this is not going to happen, especially because it only represents around 1% of their revenue. So it's just that small and that highly mission critical, that that's why we have it as highly insulated from AI risk. Maybe I tell or Kabir, you guys can discuss about air distribution. I can have something that what's important here is that this isn't something we just came up with out of the blue. It was informed by, through our research of some of the most sophisticated software investors out there. But critically, with this conversation that we had with the Microsoft, software director.

He is basically the one that is going into like a company or into government and trying to help them develop agents to simplify their processes. And so he, he, you would think that he would be the most bullish on AI is going to eat software and we got the complete opposite. He was like, when you're talking about mission critical systems of records, He said, like, there's no way companies are going to take the risk to develop their own systems. And perhaps the most interesting example he gave is he had experience with one of the competitors in the space. So he knew very deeply about what type of systems, specifically talking about RIT solutions to passenger service systems.

And he was like, yeah, like, no way. Like, I would bet my money on that this is not going to go away in five, ten years. So that's how we formed our view around kind of like we got comfortable with the downside risk from the eye. That's great. And Kabir, welcome back. Thanks for joining. Do you want to add anything there?

I did have some follow-up questions I want to ask. No, I think they covered pretty comprehensively. I think once, after your questions, we can probably discuss the air distribution segment. No, it's a great overview. you, but let me just give you one pushback. And I don't know if I firmly believe this, but, you know, the one thing I keep saying is the AI systems we're working with today are the worst we're ever going to work with. Like I use Claude cowork all the time and I get pinged like four times a day.

Hey, we've got an update. Hey, we've got update. Like they're all going so fast. And I do hear you on these things like when you're flying planes, you can't be down for a second, right? And I think they have a slide in there. I hear it's them or someone else is looking at it. It's like, hey, 99.9.9% up time doesn't work.

It's got to be like, you know, the old. old six sigma thing. It's got to be up all the time. And even if you're doing just connecting to travel agencies, if you're down for an hour, that could be so much loss revenue. But I guess my pushback would be, I've interacted with the airlines. Like I know one of your research, you've got the photo, you guys went out to JFK and we're talking to the people who are actually putting the things. You go behind the counter and you look at that computer there and it's like running 1990s tech sometimes, right? And that's a great thing, right, in terms of, hey, it shows how hard it is to upgrade and change these.

But I would just have to imagine, like, when I just think of this, the technical debt has to be so high. Like, at some point, aren't you going to see, isn't one airline going to want to replace or startup airlines? You know, airlines start up all the time. Our startup airline's going to start with, like, tech debt free things on new systems of record. So I guess that would be where my pushback is. Like, just at some point, it just seems the tech debt is so high here. So I'll pause there.

Yeah, my initial thoughts on that is. that the system is already working well for them. And while speaking to someone who was a former senior VP at Engineering and Amadeus, they said that you wouldn't just replace a system that's working too well that costs about 1% of your revenue with something that might work well. And what an implementation replacement really looks like is you run one instance of your software that's running today and then you run a second on where you're really developing another instance because you can't have one that's being created while the other one is not working.

So that adds a lot of incremental cost to a carrier to implement. And secondly, we see that Amadeus is spending a lot on their R&D to make their software new and really adapter airline needs. We saw that with Nebue more recently and Finner has been an earlier adopter specifically on the Air IT solutions. I know that that doesn't really impact the back end of what someone sees when they're checking into an airport. But we know that Amadeus is really looking for

airlines' needs, and we know that they aren't exercising much pricing power to actually gain much more out of the airline, because it's already a very thin margin for airlines. So, at least from my opinion, they wouldn't

just go with any other carrier than a rather established Amadeus. You guys mentioned a little bit some of the research you did in terms of talking to the Microsoft people, I mentioned that you guys went to JFK and talked to people. I know you guys, if I'm just glancing at the slides quickly, I think you guys talked to about 12 customers of there.

Were there any customers who you talked to who gave any pushback along the lines of, it doesn't even have to be, hey, we're ready, we would switch. But were there any customers who kind of alluded to what I said, where they said, hey, there's a lot of technical debt here. And like, you know, doing any implementations, like trying to rip your heart out while you're running. but like doing a on an airline that needs to be up all the time be like ripping your heart and brain out. But were there any customers saying, hey, it's getting technical dead enough that maybe we would consider it at some point if somebody like really could hold our hands through it?

We heard that. But mostly around. So in the RIT solution space, right? I was as 50% market share. Second player is three times smaller, saver with 15% percent. and market share. And then you have some larger airlines in the US that have their own internal software that they've used for the last 20, 30 years.

The commentary about the technical debt that we heard was about those airlines, specifically about a like this is getting obsolete. At some point, they're going to have to, some CEO is going to come in and it's going to have to bite the bullet and just either completely upgrade their systems or hire someone else to do it. And the commentary we got from experts was that the biggest, that was one of the biggest opportunities for, for Amadeo's to come in and take share. I'm glad you mentioned Sabre, who is the number two player here, because this happened after you guys made the presentation, but I was laughing.

I was prepping for this call. I reviewed the Sabre Q1 call. And Sabre is interesting to a lot of value investors because Constellation Software, you know, maybe the best performing Canadian stock of all time, bought like 10% of them on the open market and they're quite levered and it's a very interesting play.

But Sabre on their Q1 call came out and was like, Amadeus is taking chair because they are a monopoly and we want the DOJ to investigate them. They wanted everybody to investigate them. And Amadeus got asked on it on their call. And I've never heard an analyst ask someone on a call like, hey, your competitor accused you of being a monopoly. And Amadeus basically said what Ethel is kind of driving to,

they said, look, customers are choosing our people, choosing us. And I don't think switching, because switching is really hard. But customers are voting with the dollar because our products is just better. You know, it's like, why do people watch Netflix instead of legacy cable? Well, Netflix has the stuff they want to watch without ads. It's just the, and it's cheaper, just a better product. So I don't know if you guys want to comment anything there, or I'm sure some of the value heads would be interested in your take on Sabre,

if you guys have done any work on that company. Yeah. I would say what pops in my mind is like, it's funny that they're complaining, but at some point, a couple of decades ago, Sayre was the number one player. And the reason why Madeus is the dominant player now, it's of course a combination of like better product,

like reinvesting into the business and constantly improving their platform. But also is their saver's ongoing, right? Saver has went through the hands of private equity, I think, a couple of times and was always quite levered. So they didn't have the ability to reinvest into the product. And they suffered a lot through crisis and most recently COVID, right? COVID was a big event where they lost, Saler lost a lot of share because of the going into

You said COVID was a big event and they lost a lot of share, right? And I think that comes back to my other worry, right? How this is supposed to be unreplaceable? How was Sabre losing share? Was it just the airlines they were at went bankrupt? And no new airline would dare start on Sabre because they have so much technical debt. Or was there something else that came

that was causing them to lose share? Well, I think as As I said I mentioned, it was two things. So, for example, let's talk about air distribution first, right? So as I said I mentioned, a couple of decades ago, Saber was actually the number one player. But then what happened is that the company had internal issues. The company was private equity-owned as well at some point. It became highly levered.

Right now, I think the leverage is around nine nets. It's big. It's big. The last time we research, yeah. And, you know, usually when a firm, let's say it's private equity own, usually, you know, the private equity firm's interest is really just to take cash out of the, it's to make returns, right? So they want to take cash out of the company.

It's not really on reinvesting and making the product better. And across all of this time, Amadeus was making, you know, their systems better, their products better, so they were able to gain market share, especially because when it comes to air distribution and also RITS solutions, but when it comes to air distributions, the network effects are really important. So because Sabre went through this, let's say, downturn, right, when they were private equity on, and then they weren't reinvested as much in the business. And then Amadeus started to make their product better. most airlines want to be connected with the platform that is showing content to most agencies and vice versa. Agencies want to be connected with a platform that has the most content from airlines. So with time, because of the fact that, you know, Sabre had a downturn and because of the

fact that Amadeus was able to make their product better, and because of the network effects, it's just a compounding effect of Amadeo's how they have been gaining market share along the way, which is why for now it's around 50%. Specifically, I think we'll jump on that real quick. Specifically for the pandemic, what Amadeus did was brilliant. So all their customers, the airlines were like all the flights were grounded. They were like severely constrained. And they were trying to get cash anywhere they could find it.

So Amadez actually gave them better payment terms in exchange for larger content deals. So that's how they took a lot of share in the pandemic. Of course, Saver couldn't do that because it was nine, I don't know, it was probably five, six times later going into the pandemic. And there was one event, right? But also jumping into Air IT solutions, you need to constantly do implementations with clients and improvements. This is an investment that comes out of the pocket of the PSS company. And again, since Saver was always high levered, couldn't really. invest into the integrations and the developments of their clients.

So that's going to be going to go. And Kabir, I think you were going to talk air distribution. So maybe I'll switch there with you. But if they'll just mention Amadeus invested very smartly in COVID and gave people extended terms and returns for more content in air distribution. I guess when I look at air distribution as just an outsider who, you know, spent a half a day looking at this, I look at and say, oh, well, similar to Uber, right, with Uber drivers.

Uber would always say we've got this network effect, and then a lot of people push everybody like, well, Uber drivers, it's just a lot of them are buying multiple phones, right? They go on Uber, they go and lift, like wherever the rides come and they're going to grab it. And with the distribution business, because you guys have this as the most irreplaceable business and software in your two-by-two matrix, right? I look at that and say, hey, why wouldn't, if I was any airline, why aren't I on Amadeus? I'm on Sabre. Somebody comes with an AI air distribution network and says, hey, we'll plug you into travel agents or, whoever will plug you into the OTAs, whatever, through this. Why is it so your, why am I working with a thousand people on this?

I can tackle that one. So, so fundamentally, the GDS business is not a very good use case for LLMs. And the reason is that it's more deterministic than probabilistic. And today, as it stands, the cost of inference is 30 times, more than the cost of using an API. So cost-wise, it doesn't make the more sense. And even in the future, I know you mentioned that AI is only going to get better. The cost of entrance is only going to go down.

Let's say that happens. There's still only two ways to extract airline flight data, and one is through web scraping. So if a new competitor is coming into the business, like a disrupt a small company, who wants to get airline data. Instead of forming partnerships, they scrape through the airline's website, pull all their flight, prices and that's one way they can aggregate content. However, that today is against the terms and conditions of the airline. So there's still only one way, which is the way where you form these partnerships with the airlines and get their content. That's also partly because this content is

today a very dynamic to scrape. So prices change very quickly based on what customer you are because the airlines are learning more about you. So the way to do it is with an API. And Amadeus has connections with over 400 airlines, which is what they've built over the last 30 audios. So this is not something a disruptor can come in and replace right from day one. So even if you have... I definitely agree with that, but let's say the four of us pull our money and we're going to start a new distribution network.

Like what would preclude all these airlines? Like, why would an airline say, oh, we don't want to connect with you, right? Because my worry is, and I understand this evolves into like Amadeus is approaching nothing, but I'm just trying to understand why this isn't just a free-for-all and everyone's connecting to everyone in the same way I use the Uber Lyft driver just who I've got five different phones. Yeah, so I guess to begin with, first is that airlines are trying to make the push to direct connections and eliminate any third parties overall. However, the main benefit Amadeus has today is the network effects. They have these 400 plus airlines. So for a large carrier to leave this,

this two-sided platform means that customers don't really see their content. So essentially, if I'm a traveler and I no more see American Airlines flight through Amadeus content, I am very likely not to even see their flight overall. So it's not in the airline's best interest to leave Amadeus.

So if I just, what you're kind of saying is, look, and everyone who's done this on Expedia or whatever, like all the airlines always try to get you to book to wreck with them, right? It's higher margin and they'll give you incentives. Like they generally can't do, and hotels do this too. They generally can't give cheaper flights, but they can say, hey, if you look through us, you get extra rewards or better, like all this sort of stuff. And what you're kind of saying is, look, if we started a distribution company right now, airlines would not be incentive. They don't want more plugins coming in from new people, but they're already on the Alamedias network.

And if they actually pulled, you know, you think about Delta pulling and cool, you're not on booking. and Expedia anymore. They'd be losing so much revenue that they kind of can't make that switch, but they're not going to just be like, hey, new guy who's going to give us no revenue. Yeah, come grab all our data. Come get all our APIs. We'd love to look up with you, even though it's no cost. Like, it's just not what they want to do.

Am I kind of driving that correctly or is there a piece of the story? I was going to go there that if you, let's think for a moment, if you're an airline living on a video's platform, you're leaving incremental revenue on the table, right? And if you're leaving, if you're a travel center, you're a travel agency and you leave the Madoos platform, you're leaving revenue from incentives that you're getting from Madoz. So that's kind of like the two things in reinforcing kind of things that are going on that keeps the platforms going. And I think also to that point, should keep in mind what's the industry structure. There are only three EDS companies in the world. That's for a reason, right?

if it was so easy, then this would be a very fragmented market, and that's not the case. And it hasn't been the case for the last 20 years. No, that was a, I think I'm really starting to drive home why I've had several friends who are more into like the really good business, the saying, hey, you've got to take, you've got to take a look at that. And I can see why, you know, Constellation famous for buying businesses, holding them long term. It seems like they're just going to sit at temporary.

I can see why they said, hey, Saber, you know, maybe a little undermanaged, but damn sticky business. it's tough to get them. Let me, one more thing. And I believe this happens after, humorously, after you guys submitted the presentation, but I think the day before you actually present at Persian Square, Amadeus buys a biometrics company. And we don't have to talk about the acquisition per se. But, you know, it does jump out to me, like, whenever I've looked at a business, one of the telltale signs that they're kind of about to go X growth or they're starting to plateau is they go buy something, right? And the biometrics

business. I saw that acquisition. I was kind of like, hey, I get there saying there's a little synergies there, but it's not core. And it seems like maybe they're trying to find a new growth avenue. So we don't have to talk about biometrics specifically, because I know that might have occurred after. But I just, what would you say if I was just pushing back and saying, hey, it looks like they're really trying to find some growth vectors here. Yeah, we got, I can talk to this one. We got completely caught by surprise. I remember beautifully waking up the morning before the finals. and getting an update on the quarter app.

You know, $1 billion acquisition, Amadeo's, and part of our kind of narrative, especially in the appendix slides, it was that they had gone from like large acquisitions before the 2016, 2017, into like more, you know, smaller ones full tons. So, yeah, we were called by surprise. I'd say when we looked at the merits of,

the transaction a little bit more deeper, we were more comfortable with it for a couple reasons. First is that our take was that this is a very high quality asset in the biometric space. And I believe he owned and they had to exit. So it was more like opportunistic. They have very sticky clients in airports around the world and governments. So very high quality customer base. Second, I'd say biometrics does make sense.

And the company has said it. It aligns with their long-term strategic vision of being an orchestrator of all of travel. So of course, they see some kind of long-term optionality value from having an asset like this. It reinforces their position and there are some benefits of having in the technology provider for the airport and the airline as well. And finally, we, we like the price a lot. So they pay 10 times Ibit to Ibit. When you factor in the growth outlook for that business and the cost

synergies that they put out, it actually turns out to be like six times EBTA by 2028, 2029. And when we did a quick IRA calculation, it was actually a creative to the IRA of our thesis. So that's kind of what we thought, by looking quickly at what came out from this transaction. I'm just looking through my notes as we, I've got one or two more things I want to touch on. But one thing in my notes, and Kabir, I think you said it, but I'd love to just touch on it one more time is when I was asking about the LLMs on the distribution business, I think you said, hey, inference is 30x more expensive than deterministic, which they do for the inference. We don't have to talk about that specifically, but I think you talk to someone anthropic who said, hey, this is doing this through LLMs and inferences. I just love to talk.

And now that I'm looking, you talk to someone at Gemini too. When you talk to the AIs, just click on that one more time on why they were kind of telling you, hey, this isn't in the roadmap. There's probably easier roads to hoe than this. Yeah. So I think while speaking of a Gemini person, we learned that. Google as a firm has already looked at this problem and for a reason decided not to pursue it further. Now, in the mid-2010s, they acquired ITA to get into the space. However, that technology became obsolete and then they realized that instead of integrating further into this industry,

which didn't make financial sense, they came back and partnered with Amadeus last year. And the confidence that this gave us is that it's very difficult for a large AI firm to justify the spend on building a distribution system that has a combined revenue pool of $6 billion when they operate at the top of the funnel aggregating demand with a $65 billion revenue pool of the largest ODAs of like Expedia and Booking.com. So we learned that since they're able to perform better that space, they might as well not really dig into development and focus on a $6 billion pool because they're also much larger companies and are focusing on those bigger projects. Secondly, LLMs today have like an uptime requirement. I know we spoke about 99.99%, which in a year means about 87, which means about 15 minutes of downtime.

LLMs have a 99.3% uptime, which is about 87 hours. So that big gap today as it stands will not work for an airline because it means grounded planes, short airports, a loss of revenue for these large airlines and also just disruption across the global economy. And so just for, I know for Gemini will be easier to build a platform that has a much higher uptime. It's just not worse the entire investment that they would have to make. Perfect.

I want to go back, and I believe, it's hard to remember. I can't remember we talked about it was a for a dream, but I believe in the first half before my internet went out, we talked about valuation. I kind of said, hey, look, it's down 20 or 30%, but it's not screaming cheap. That was just the pure quantitative cheapness side. But I do want to come back to the valuation

and just ask, hey, you know, forget the multiple, toss the multiple out. This is probably, I think you guys have talked a lot about why this is good business. This is trading 55 euro per share right now. How do you guys look at and what do you think the fair value for this company is? Yeah, I can talk a little bit about that. I think we did, we talked some of it before the internet issue we had.

But so this company has over the last 15 years grown 7% top line and 11% EPS, right? through our research and the thesis that we put out, we think for the next three, four years, top line is going to grow eight and EPS is going to grow 15%. Historically, this is a company that has traded 22, 23, 24 times B. It's now trading at 15 times.

Now, so our thesis was not, we don't expect any multiple re-rating because we don't know if this overhang from the AI narrative is going to persist. But we do think the fair kind of value P.E. of this business is around 22 times, and that's actually what comes out if you run a DCF. That's a fair P.

But again, going back to the thesis, at 15 times earnings, you're getting 15% growth on EPS. You're getting, I think it's probably close to a 3% dividend yield at this price. And I think we're just holding this without any multiple expansion, you're going to get close to a 20% return over the next three or four years. You know, it's an interesting one because obviously I think some of the sell-off is driven by the AI fears that you guys have hopefully dispelled throughout this podcast.

But, you know, one interesting thing here is, and you guys start to allude to this in the presentation, but if you really believe this is extraordinarily difficult to rip out, kind of non-AIable, you would view them as a massive AI beneficiary, right? Because AI is going to really, at minimum, really improve their efficiency, you would hope, right? You had 1,000 engineers before. Well, you can probably do it with 500 engineers now, or you can keep 1,000 and just be much more productive. So you would think it's going to improve margins. And I would argue, like, AI might make, I mean, travel is always a GDP plus business because just as people get richer, they travel more.

I'd argue if you see a productivity boom, you might even see. more travel, it might be GDPC plus plus. So I'd argue both in terms of a tail increase in growth rate and margins expanding from AI benefit, I wouldn't be surprised if these guys are ultimately an AI beneficiary. I got a little bit Galaxy Brain. Anyone can talk to that if you want and then we can probably wrap this up. Yeah, I can take that one. I think we spoke to the SPP of Engineering Amides like I mentioned. And in terms of AI, we are seeing an increase in productivity of engineers. And what we learned was that today, they have more engineers at Amadeus than Microsoft Office and Outlook combined, which requires many more updates. Then to dive deeper into this, we dug deeper into how other similar companies compared to the space in terms of revenue per full-time employee.

Saber, which is the closest competitor, has a high productivity by 30%, which shows room for growth. So in general, our conversations around just the productivity boosts with experts in Gemini and Anthropic, we learned that they expect about a 1.5 to 10x productivity boost. And even if we take the lower end of that scale, which is, I think, 1.5x, we see that earnings will grow by 10%. So in addition to what you mentioned about the GDP growth, there's also the scope of increasing earnings, just by the reduction in employees needed at Amadeus. My only pushback to what you said was, A, they have more employees than Outlook and Office combined.

I am on Microsoft Outlook, and I don't know how much engineering work is going into Microsoft Outlook these days. And then on the Sabre point, you know, it's interesting you say, hey, Sabre gets 30% more revenue per employee, but then you say, Sabre is over levered, and maybe it's not, hey, Amidates can catch up in terms of margin expansion. Maybe it's a bull case for Amadeus on the other side.

I was like, look, Sabre is, as Ethan mentioned, they have underinvested and they have lost market share because they're underinvesting. And that gap might be more of a signal of, hey, they continue to really underinvest in this thing and kind of run a bare-bones product that will seed share over the long run to Almodaus as the Sabre CEO basically admits when he says, hey, I need somebody to go investigate them for an antitrust disruption. Guys, this has been great. I think we've covered most of it. Again, we'll have a link to the deck in the show notes. I think this is a fascinating one, and I know I've got a lot of people on the quality compounder side who have been kind of saying what you guys are saying, this has been unfairly sold off. But was there anything you guys wanted to hit or any last thoughts you want to have before we kind of

wrap this up? No, I'll just say what a great experience was researching it. We had help from many people that kindly answered the phone when we called them, and including the head of IR, which was very, very nice to talk to. to her, to Christina. So overall a very nice project and enjoy a lot of experience and happy to do it with these two. Well, look, you guys did a great job. Congrats. Again, I know a couple people who were really pushing for this. I think it's great work in a fascinating company. So I appreciate anybody wants to reach out to them. We're going to include a link in the show notes to the deck

and I'll have some contact information from there so we can kind of go from there. But guys, thanks so much and we'll talk soon. Thank you. Thank you. Thanks, Andrew. A quick disclaimer. Nothing on podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.