Ferrovial's Q3 2025: Contradictions Emerge on Schedule 22 Reversal, Pricing Strategy, and Traffic Forecasts

Guidance:

• New Terminal One (NTO) remains on budget; company is discussing acceleration measures to meet a June 2026 opening.
• RFQ for I-77 South expected in December; bids for I-24 (TN), I-285 (GA) and other North American highway opportunities to be submitted in H1 2026.
• Expect substantial working-capital improvement in Q4 due to construction seasonality.
• Net debt excluding infrastructure projects reported as net cash of EUR 706 million.
• Committed to deliver EUR 2.2bn of cash to shareholders across 2024–2026; buybacks/distributions to continue through end-2026.

Business Commentary:

* Strong Performance in North American Assets: - Ferrovial's North American highway assets saw a 16.4% increase in revenue on a like-for-like basis in the first nine months of 2025, with adjusted EBITDA up nearly 15.1%. - The growth was driven by increased customer segmentation and favorable market dynamics, particularly in the U.S.

• 407 ETR Traffic and Revenue Growth:
• The 407 ETR reported a 9.4% increase in traffic in Q3 2025 and 6.2% growth for the first nine months compared to 2024.
• Revenue surged 18.6% in Q3 and 19.3% for the first nine months, with EBITDA up 20.1% and 15.8%, respectively.

• This was due to targeted promotions that incentivized efficient use of the road and increased mobility from return-to-office mandates.

• Cash Flow and Dividends:

• Ferrovial collected EUR 406 million in dividends from projects and EUR 534 million from the sale of AGS Airports, contributing to a cash inflow of EUR 940 million in the first nine months.
• Shareholder distributions, including buybacks, reached EUR 426 million.

• This substantial cash inflow has led to a net cash position of EUR 706 million.

• Construction Division Profitability:

• Ferrovial Construction maintained a solid adjusted EBIT margin of 3.7% for the first nine months, aligned with the long-term target of 3.5%, with a strong 4.2% margin in Q3.
• The division's profitability was supported by Budimex and Webber, which maintained healthy margins of 7.6% and 3%, respectively.
• The focus on digitalization and design activities for upcoming projects is contributing to this profitability.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly cited "continued strong momentum across our business divisions," highways "delivered outstanding revenue and EBITDA growth," net debt (ex-projects) was "net cash of EUR 706 million," 407 ETR posted double-digit revenue/EBITDA growth and approved a CAD 1.05bn Q4 dividend, and construction margins remain aligned with targets.

Q&A:

• Question from Ruairi Cullinane (RBC Capital Markets): First question on the NTO. What are the potential financial consequences in a scenario where there is a delay to the launch of Phase A? And secondly, the widening of operating losses in the other segment, was that just driven by the divestment?
  Response: Delays beyond June would expose the contractor to liquidated damages and defer revenue recognition for Ferrovial; the operating loss widening was due to commissioning/start-up costs at the Isle of Wight waste plant (investments for ash removal) related to exit/divestment activity.

• Question from Ruairi Cullinane (RBC Capital Markets): Should we expect any impact from the U.S. government shutdown in Q4?
  Response: So far no material impact observed (I-66 traffic only minor tweaks); bidding is state-led and continues as scheduled, but management will monitor developments.

• Question from Elodie Rall (JPMorgan Chase & Co): The provision reversal in Q3 on Schedule 22 surprised us — what drove it and does this mean Schedule 22 penalties could fall to zero sooner? Also any color on NASDAQ-100 inclusion chances?
  Response: Schedule 22 reversal was driven by stronger mobility and promotions outperforming expectations (promotions improved usage), but management declined to project timing or quantify future Schedule 22 outcomes; NASDAQ-100 inclusion is decided end-November and management will not speculate on chances.

• Question from Cristian Nedelcu (UBS Investment Bank): Any color on 407 ETR pricing for next year, should price increases be comparable to the last two years; how to think about the scale of discounts/promotions into 2026; and why did I-66 revenue/transaction decelerate versus Q2?
  Response: On 407 pricing/timing, expect a similar announcement cadence as last year but no pre-disclosure of levels; promotions are treated as incentives driving revenue/segmentation rather than simple discounts and management won't quantify changes now; I-66 deceleration reflects prior dynamic-pricing adjustments (algorithm evolution) but outlook is optimistic as the algorithm improves.

• Question from Ami Galla (Citigroup Inc.): For NTO, can you give ballpark framework of airline fees/revenue structure at start? Were mandatory mode events in managed lanes driven by specific disruptions or general traffic increases? And how is competitive intensity on contracting?
  Response: NTO commercial terms are commercially sensitive and will be disclosed later; mandatory modes reflect general peak-hour traffic increases and higher share of heavies tied to return-to-office trends; construction market remains active but rational with no evidence of aggressive margin compression.

• Question from Dario Maglione (BNP Paribas Exane): On Texas managed lanes, what explains the traffic-mix benefit (heavy and light trucks share)? How close is LBJ to mandatory modes? Which incentives are working best on 407 ETR?
  Response: Traffic mix benefit is from a higher proportion of lighter commercial vehicles/heavies using peak lanes (likely due to return-to-office); LBJ has spare capacity so is not close to mandatory modes in the near term; peak-hour promotions for nearby/commuter users are the most effective incentives on 407.

• Question from José Arroyas (Banco Santander): Any potential to deleverage managed lanes or to have dividends exceed free cash flow? And can you explain how promotions increase customer segmentation at 407 ETR?
  Response: There is scope to relever assets (notably I-66) in coming years though not immediate; promotions segment customers by converting infrequent users into more trips with targeted offers, thereby increasing revenue and yielding better segmentation-driven growth.

• Question from Marcin Wojtal (BofA Securities): Is the EUR 500m buyback on track (EUR 142m spent) to complete by mandate end, and why is buyback executed only via the U.S. line? Also, will you present a new business plan within ~18 months?
  Response: Management remains committed to the EUR 2.2bn distribution target through end-2026 (buybacks/distributions will catch up; buybacks have been U.S.-centric due to liquidity but could be executed elsewhere); a business-plan update is expected in future but no date is set.

• Question from Alvaro Lenze Julia (Alantra Equities): Recent small data-center acquisition — does this signal a strategy change toward data centers?
  Response: The acquisition is a small tuck-in to add Construction capabilities (installation/maintenance) for data-center clients; group remains opportunistic with no change to overall data-center strategy.

• Question from Miguel González (JB Capital) [webcast]: Reasons behind the acceleration in highways headquarters and other costs, and will this trend continue?
  Response: Higher overheads reflect absence of a prior-year short-term spend (SR 400), plus increased investment in engineering for upcoming bids and IT/digitalization initiatives; these are deliberate investments to support growth.

Contradiction Point 1

Schedule 22 Provision Reversal

It involves differing explanations of the reasons behind the Schedule 22 provision reversal, which affects financial expectations and operational strategies.

Explain the Q3 Schedule 22 provision reversal? How optimistic are you that Schedule 22 will reach zero sooner? - Elodie Rall (JPMorgan Chase & Co)

2025Q3: Schedule 22 reversal due to increased mobility and effective promotions. - Ernesto Lopez Mozo(CFO)

Why was Schedule 22 provision lower in Q2 despite higher revenues? What is the outlook for the U.S. Managed Lanes project pipeline? - Elodie Rall (JPMorgan)

2025Q2: The lower Schedule 22 provision is due to better user traffic at peak hours, which has reduced expected payments. - Ignacio Madridejos Fernandez(CEO)

Contradiction Point 2

Revenue Growth and Pricing Strategy

It highlights differing views on the impact of discounts and pricing strategies on revenue growth, which are critical for financial projections and market positioning.

Regarding ETR, can you provide details on next year's pricing and discounts' impact on future revenue trends? - Cristian Nedelcu (UBS Investment Bank)

2025Q3: Pricing announcement timing similar to last year expected. Discounts viewed as promotional incentives rather than negative impacts, focusing on revenue growth and client satisfaction. - Ernesto Lopez Mozo(CFO)

Can you explain the significant increase in average revenue per transaction on I-77 and I-66, and the rise in average tariffs per transaction on NTE despite declining traffic? - Luis Prieto (Kepler Cheuvreux)

2025Q2: The growth in revenue per transaction is driven by increased traffic and customer segmentation in the metropolis, allowing capture of added value provided to users. Toll rates are increased to reflect this value. - Ignacio Madridejos Fernandez(CEO)

Contradiction Point 3

Schedule 22 Payment Seasonality

It pertains to the seasonality of Schedule 22 payments, which is important for understanding the company's cash flow and financial planning.

Can you explain the Schedule 22 provision reversal in Q3? How optimistic are you that Schedule 22 will reach zero sooner? - Elodie Rall(JPMorgan Chase & Co)

2025Q3: Schedule 22 reversal due to increased mobility and effective promotions. - Ernesto Lopez Mozo(CFO)

What is the status of potential investments in U.S. infrastructure projects, especially airport terminals? Could the buyback program be extended beyond this year? What is the seasonality of Schedule 22 payments? - Luis Prieto(Kepler Cheuvreux)

2024Q4: Schedule 22 payments will be clear from the second quarter onwards, based on first quarter performance. - Ignacio Madridejos(CEO)

Contradiction Point 4

Traffic Expectations at 407 ETR

It involves the company's expectations for traffic at a key asset, which directly impacts revenue projections and investor expectations.

Can you provide details on NTO's revenue structure and fees? How have mandatory mode events impacted traffic this quarter? - Ami Galla (Citigroup Inc.)

2025Q3: Traffic expectations for 407 ETR are not provided here. - Ernesto Lopez Mozo(CFO)

What are the expectations for traffic at the 407 ETR? What are the plans to consolidate the asset and any obstacles to acquiring a 50% stake? - Elodie Rall (JPMorgan)

2025Q1: Traffic expectations for 407 ETR are not provided here. - Ernesto Lopez Mozo(CFO)

Contradiction Point 5

I-66 Traffic and Revenue Performance

It involves the explanation for the deceleration in revenue per transaction at I-66, which is crucial for understanding the company's operational performance and financial health.

What caused the decline in revenue per transaction on I-66 from Q2 to Q3? - Cristian Nedelcu(UBS Investment Bank)

2025Q3: Dynamic pricing algorithm improvements in 2024 led to initial growth. Deceleration reflects ongoing algorithm improvements, with optimism for future performance. - Ernesto Lopez Mozo(CFO)

What is the traffic ramp-up status for I-66 and LBJ? What is the status of NTO's airline contracts and opening date? - Gregor Kuglitsch(UBS)

2024Q4: I-66 is ramping up. - Ignacio Madridejos(CEO)