Q4 2022 Global Business Travel Group Inc Earnings Call
Speaker 1: F St.
Speaker 1: Thank you.group
Speaker 2: Good morning and welcome to the American Express Global Business Travel fourth quarter and fourth year 2022 Earnings Conference call.
Speaker 2: As a reminder, please note today's call is being recorded.
Speaker 2: I will now turn the call over to the Vice President of investor relations, Barry Weaver. So please go ahead sir.
Speaker 3: Hello and good morning, everyone. Thank you for joining us for our fourth-quarter earnings conference call. This morning we issued an earnings press release which is available on the SEC and on our website at investors.nxglobalbusinesstravel.com. This live presentation that accompanies today's prepared remarks is sponsored by the American Business adrenaline Center at the
Speaker 3: is also available on the Amex GBT investor relations webpage.
Speaker 3: We would like to advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the duration and effects of COVID-19, industry events, and the impact of COVID-19 on our community. We would like to advise you that our comments contain forward-looking statements that represent
Speaker 3: cost savings and acquisition synergies, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these and other risks and uncertainties is contained in our earnings release issued this morning.
Speaker 3: and our other SEC files.
Speaker 3: Throughout today's call, we will also be presenting certain non-GAAP financial measures.
Speaker 3: adjusted use on margin, adjusted operating expenses, pre-cash flow, and net debt. All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items.
Speaker 3: Definitions of these terms and the most directly comparable GAAP measures and the reconciliations for non- GAAP measures are available in the supplemental materials of this presentation and in the earnings release.
Speaker 3: Participate with me on the call today are Paul Abbott, our Chief Executive Officer, and Martin Giroux, our Chief Financial Officer. Also joining for the Q&A session is Eric Lausch, our Chief Legal Officer and Head of Global M&A.
Speaker 3: With that, I'll now turn the call over to Paul. Park LORD PLAY Europe !!
Speaker 4: Well, thank you Barry and welcome to everyone. Thank you very much for joining our fourth quarter earnings call.
Speaker 4: I'd like to kick off by reviewing the fourth order highlights before turning it over to Martin who will take us through the financials in more detail.
Speaker 4: And then we're going to go through our outlook and our guidance for 2023.
Speaker 4: So before I get into Q4 earnings, I'd just like to make a couple of comments to address the 8K that we filed on Tuesday. Martine Gervaux, who is our Chief Financial Officer will step down from her role to take a new position outside of the company. And Karen Williams who joined Amex GBT as Deputy...
Speaker 4: working at Avios which is part of IAG and also American Express where Karen has held a series of senior financial leadership roles.
Speaker 4: Martine is going to be with us until the end of June so we have plenty of time for a very thoughtful and orderly transition. I do want to extend my sincere thank you to Martine for her leadership and her significant contribution to our business in her five and a half years as CFO .
Speaker 4: Martine helped navigate the organisation through the financial impact of a global pandemic and of course was also instrumental in leading the successful listing of the company.
Speaker 4: So, welcome and congratulations to Karen and of course Martine.
Speaker 4: strong finish to 2022 driven by continued recovery, record new wins and margin expansion.
Speaker 4: Our full year revenue and the Just2D Bada were both ahead of guidance at 1.85 billion and 103 million respectively.
Speaker 4: Revenue recovery for the fourth quarter reached 75% of pro forma 2019 levels and that was up from 72% in the third quarter. Our fourth quarter adjusted EBITDA was 43 million with an 8% adjusted EBITDA margin.
Speaker 4: Pleased to say we're also on the path toward positive free cash flow with significantly reduced cash usage in the fourth quarter.
Speaker 4: precast flow usage in the quarter declined significantly to 25 million.
Speaker 4: We also continue to accelerate our momentum in SME.
Speaker 4: The S&E space we benefit from offering a choice of market leading solutions, Amex GBT, Egencia and Ovation.
Speaker 4: in what is a very large and unconsolidated segment, a segment that has the fastest growth rates and the highest margins in the industry.
Speaker 4: Our SME transaction recovery reached 82% in Q4 and that was up from 80% in Q3.
Speaker 4: Our SME new wins value
Speaker 4: Total $2.1 billion in the full year 2022.
Speaker 4: And that is at the current recovery levels.
Speaker 4: Now that we have reached what is a meaningful point in the travel recovery, please note that we are reporting our new wins for SME and overall.
Speaker 4: using the current recovery levels instead of the previous 2019 pre-COVID levels. And that's to make it easier for analysts and investors to model the impact of those new winds on our current volumes.
Speaker 4: So in addition to the strong SME momentum, I am pleased to report that New Winds value and customer satisfaction levels are also both at all-time highs, which I think really demonstrates the value of our industry-leading service and technology and software and savings.
Speaker 4: Our strong momentum positions us well for continued strong growth ahead.
Speaker 4: Transaction recovery reached 72% of pro forma 2019 in the fourth quarter. That was up from 71% in Q3 and importantly up 26 points year over year.
Speaker 4: Our new wins momentum, I think it shows that we continue to deliver on the significant organic growth opportunity that we have. Total new wins value for the full year 2022 was 3.5 billion. Again, that's at current recovery levels. And finally, and obviously equally importantly, our customer retention rate for the full year.
Speaker 4: million synergy target that we have from the Agencia acquisition. And so as we look ahead to 2023. And so as we look ahead to 2023.
Speaker 4: feel that we are well positioned for continued strong growth. So on slide six, let's just take a closer look at the continuing recovery where our performance continued to improve throughout the quarter.
Speaker 4: Transaction recovery was at 72% in 2019. That was up one point sequentially and 25 points versus Q1. And we're clearly outpacing the broader market.
Speaker 4: 72% transaction recovery compares to the GBTA January survey.
Speaker 4: that found the recovery of domestic business travel at 67% and international at 54%.
Speaker 4: So that compares to our 72% transaction recovery and 75% revenue recovery in the fourth quarter, clearly outpacing the broader market.
Speaker 4: Looking at Q4, December was softer than expected across the industry, but we have seen a significant rebound of transaction volumes in January and February . And as I'm going to discuss in more detail, the outlook for business travel demand in 2023 remains strong.
Speaker 4: TTB recovery reached 70% in the fourth quarter. That was consistent with Q3 and it was up 31 points versus Q1. And finally, revenue recovery was at 75% in Q4, up three points from Q3 and up 25 points from the first quarter.
Speaker 4: So here we just take a look at the recovery trends in more detail. First of all, you'll see by customer segments, global multinational customer recovery remained pretty steady in the fourth quarter versus the third quarter, while SME customers continued to lead the recovery.
Speaker 4: Q4 SME transactions were 21% above global multinational.
Speaker 4: and reached 82% of 2019, driven by obviously a faster recovery in that segment, but also by our significant share gains in the SME segment.
Speaker 4: Air recovery was stable in the fourth quarter at 66% and hotel recovery up two points versus Q3.
Speaker 4: Hotel transaction recovery was 14 percentage points above air in the fourth quarter. And this is an important strategic priority for us. We're making good progress increasing that ratio of hotel to air bookings. And we're doing that through improved hotel content.
Speaker 4: and hotel displays in both our Agencia and Neo software platforms.
Speaker 4: And finally here on a regional basis, both the Americas and EMEA continue to improve in Q4.
Speaker 4: Within the Americas, if you unpack that, US recovery actually reached 71% in the fourth quarter. Canada was a little slower to recover.
Speaker 4: EMEA recovered by 2 percentage points versus Q3 and reached 74% of 2019 levels.
Speaker 4: And now that the travel restrictions have been certainly either relaxed or removed in China and Hong Kong and Singapore, it provides additional opportunity for growth and recovery in Asia in 2023.
Speaker 4: So let's turn to our commercial highlights for the fourth quarter.
Speaker 4: Delivered record new wins, we received further recognition of our ESG technology and people leadership.
Speaker 4: We are the clear leader in a $1.2 trillion industry with a significant runway for growth.
Speaker 4: And we continue to gain share with $3.5 billion of total new wind value in 2022.
Speaker 4: Again, based on the current recovery levels and of course supported by strong customer retention of 95%.
Speaker 4: Of course, as I mentioned, our biggest growth opportunity is with SME customers. This represents a total opportunity of 950 billion of travel spent.
Speaker 4: We are already in a number one player in managed travel for F&E customers.
Speaker 4: But only 30% of that 950 billion is actually managed.
Speaker 4: providing us with a significant future growth opportunity. And you can see here that we're making good progress. We signed 2.1 billion of SME new wins value in 2022. Approximately 25% of that value is due to the growth of SME.
Speaker 4: 55% of the number of customers is actually from companies whose travel programs were previously unmanaged. So I think it demonstrates we are gaining more and more traction converting this unmanaged customer travel spend into managed spend.
Speaker 4: We were also recognized as an industry leader in ESG in the quarter. We were awarded platinum eco-vadis status. This actually places us in the top 1% of independently assessed companies across the world. I think it demonstrates how we are helping our customers.
Speaker 4: and our partners achieve their sustainability goals.
Speaker 4: Another sustainability example we've integrated with TEWS.
Speaker 4: sustainability example we've integrated with TEWS. TEWS climate tech
Speaker 4: This allows us to actually integrate carbon emissions data at the point of sale across all of our channels, whether it's voice, whether it's gensia, neo.
Speaker 4: We present our carbon emissions data consistently and accurately across all channels so that both travelers and travel managers can track and be more aware of their carbon emissions data.
Speaker 4: So supporting our technology leadership, Agencia was ranked number one in two categories of the G2 winter 23 report, most implementable solution and best results.
Speaker 4: G2 is the largest and most trusted peer-to-peer review site. It has more than 60 million people viewing. It has many Fortune 500 companies using it to inform their software decisions.
Speaker 4: In addition, Agencia also ranked as a leader in 15 categories in the G2 study. So I think it's just validation that we're providing excellent software solutions and an excellent experience to our customers.
Speaker 4: Additionally, in the quarter, Agence was named a leader in corporate travel applications by IDC MarketScape.
Speaker 4: IDC is an independent voice that evaluates TravelTech solutions and again it's an important influence over the B2B buying process. IDC specifically recognized and I quote here, our data led intuitive product experience.
Speaker 4: and our ability to embed machine learning and AI into the user experience.
Speaker 4: And finally here we were voted the number one business services company in the Forbes America's Best Large Employers report in February of this year.
Speaker 4: And I would like to extend a sincere thank you to all of my colleagues around the world for their commitment and their leadership that makes this valuable recognition possible.
Speaker 4: So moving on to our strategic priorities. When we became a public company, we shared these strategic priorities and I'm pleased to say we are clearly delivering on these priorities and it's creating strong momentum for 2023.
Speaker 4: First of all, business travel recovery continues. Q4 revenue recovery reached 75%, up 3 points from Q3 and a dramatic improvement from the start of Q22.
Speaker 4: Second, our recovery is significantly ahead of the industry due to continued share gains. New wins value $3.5 billion at current recovery levels.
Speaker 4: Third, we said our focus on winning in the SME segment would accelerate growth, and our results show exactly that.
Speaker 4: Q4 SME transaction recovery reached 82%. We reported SME new wins value of 2.1 billion for the full year with approximately 25% of those wins coming from unmanaged customers.
Speaker 4: Fourth here, we're clearly delivering on the agency of synergies. We continue to expect total opportunity of 109 million synergies.
Speaker 4: In full year 2022, we achieved approximately 45 million of synergies from the Agensia acquisition, which exceeded our target of 25 million. Fifth, our business model is clearly delivering significant operating leverage.
Speaker 4: In the fourth quarter we delivered 71% revenue growth with only 16% growth in adjusted operating expenses.
Speaker 4: And finally, all these results combine to deliver significant margin expansion.
Speaker 4: In the fourth quarter we reported 66% adjusted EBITDA fall through and an adjusted EBITDA margin of 8% and delivering financial results ahead of guidance.
Speaker 4: To sum it up, I think our fourth quarter performance.
Speaker 4: provides yet another proof point of our continued strategic and commercial and financial progress.
Speaker 4: So, that completes my review of the Q4 highlights. I'd like to hand it to Martine to discuss the financial results in more detail before we move on to our 2023 outlook.
Speaker 5: Thank you, Paula, and good morning, good afternoon, everyone. So as you heard from Paul on page 10, we continue to deliver on our strategic and financial priorities, and you did finish 2022 on a strong note.
Speaker 5: Our revenue recovery was 75% of 2019 pro forma, which is three points above where the third quarter was, and it is three points above the transaction recovery.
Speaker 5: in the fourth quarter, which we're turning to.
Speaker 5: Our yield, which is measured as revenue over TTV, which is total transaction value, was 8.9% in the fourth quarter. We benefited from improved yield across both air and hotels.
Speaker 5: And fourth quarter products and professional services revenue were actually up 14% sequentially in the new versus the third quarter driven by solid growth in management fees and particularly in the community events.
Speaker 5: Our TTV recovery reached 70% in the fourth quarter. Transaction recovery was 72%. That's an improvement of one percentage point versus the third quarter. On a constant currency basis, TTV recovery was actually in line with transaction recovery.
Speaker 5: And while we did notice the softening of the trends going into the holiday period, we are pleased to report that we are seeing a very strong rebound in January and February volumes, which is in one with our expectation for the first quarter of this year.
Speaker 5: Now looking at year-over-year results on a pro forma basis, fourth quarter TTV was up 93% to reach $5.9 billion. Our average transaction value was up 19%. That's largely driven by the strong recovery in international booking versus...
Speaker 5: versus prior years. Our fourth quarter total revenue increased 71% to 500.7 million. Now within this travel revenue was up 101% in Q4. Again, revenue yield outperformed in the other quarters due to very strong end of year air and hotel performance.
Speaker 5: Traditionally Q4 is our strongest yield quarter as certain incentives are on an annual performance measurement
Speaker 5: Product and professional services increase 12 to 10 year over year.
Speaker 5: And as we shared in the previous goal, the growth in this line is more limited when you compare it to 2021 because this revenue component was relatively protected from the reduction in demand in 2021.
Speaker 5: Our adjusted operating expenses increased only 16% in the quarter, which compares favorably to a 71% increase in revenue in the quarter. And as a result, we delivered 43 million of positive adjusted to the big down in the fourth quarter, which is an improvement of 145 million year over year.
Speaker 5: our adjusted down margin was 8%, which is 41%.
Speaker 5: margin with 8%, which is 41% improved year over year.
Speaker 5: On page 11, turning to the full year, as Paul mentioned, our 2022 results came ahead of guidance. Our full year revenue came at the top of our revenue guidance range, which was $120 to $125 billion. Our adjusted to be dealt with above.
Speaker 5: our guidance range which was 90 to 100 million. Now versus 2021 pro forma our TTV was up 187% to approximately $23 billion.
Speaker 5: Our revenue increased 108% to $1.85 billion and within that,
Speaker 5: Travel revenue was up 159%, product and professional services revenue increased 23%.
Speaker 5: Again, more in the key growth in this slide because this revenue component was again relatively more protected from changes in demand in 2021. Our adjusted operating expenses were up 23% for this whole year compared to revenue growth of 108%. Under results transition wasn't always appropriate but it was able to obviously have its major
Speaker 5: are adjusted to reach a reflection point and turn them state positive, beginning in the second quarter of 2022.
Speaker 5: For the full year, adjusted to be down again was 103 million. That is a very significant year over year improvement of 623 million and our adjusted to be down margin of 6% increased, 64 percentage points as compared to 2021. We maintain a very high level of culture.
Speaker 5: We're going to adjust the default of 65% for the full year which demonstrates our very strong operating leverage as well as the execution of our cost savings program in delivering on the GNCR synergy. Now turning to cash flow.
Speaker 5: On page 12, as you just heard from Paul, as you had shared your view on previous goals and as we expected, our cash consumption significantly eased in the fourth quarter.
Speaker 5: Our free cash flow usage is 25 million in the quarter. That is an 87 million improvement from the third quarter and it is driven by a lower ability working capital. As we shared on previous calls, we do expect to reach positive free cash flow during 2023 as
Speaker 5: will continue to recover meaningfully and as a working capital bill continues to normalize. As of December 31, 2022, we had an unrestricted cash balance of $303 million and our net debt was $919 million.
Speaker 5: Finally, we have a very strong liquidity position, our total available liquidity. It's approximately $500 million dollars. That is pro forma, the additional term loan and revolver extension which we completed in January this year. There are 4 main
Speaker 5: The perceived additional financing rate will be used for general corporate purposes, which include completing the agencies integration, accelerating growth and driving further efficiencies.
Speaker 5: And I will now turn it back to Paul to share how you are thinking about 2023.
Speaker 4: Okay, thank you, Martine. Let's talk about 2023. As we said last quarter,
Speaker 4: There are several tailwinds that set us up for growth in 2023. First of all, the business travel recovery continues and the outlook remains positive with our customers. Industry experts predict business travel spend will continue to grow and capacity will continue.
Speaker 4: to increase all supporting continued growth in 2023. Secondly, as we predicted, distributed teams and hybrid work are clearly creating new business travel meetings and event demand. And we see this particularly in our meetings and events results.
Speaker 4: Third, airline capacity is expected to improve throughout 2023 and this incremental supply will of course support increased demand. And fourth, our sales pipeline leads us to be confident in continued share gains in the year ahead with specifically continued momentum in the SME segment.
Speaker 4: All in all, I think this results in expectations for strong revenue and earnings growth in 2023.
Speaker 4: Now, I think importantly, these tailwinds and our expectations for the year ahead are supported by data from customers and data from suppliers and data from across the industry.
Speaker 4: According to GBTA's Q1 2023 Business Travel Outlook Poll, this was published at the end of January .
Speaker 4: Domestic and international bookings are currently at 67% and 54% at 2019 levels and this is up from 63 and 50 in October . So industry momentum continues.
Speaker 4: And you can see that we are clearly outpacing the industry with Q4 revenue recovery at 75%.
Speaker 4: out-pacing the industry with Q4 revenue recovery at 75%. Turning to customers.
Speaker 4: 78% of travel managers expect more or a lot more trips in 23 versus 22. 86% of travel suppliers are expecting higher spending from corporate customers in 23. And that's an improvement versus 80% in the survey in October .
Speaker 4: finance, insurance,
Speaker 4: professional services, consulting other sectors where we're seeing the strongest growth trends for the year ahead.
Speaker 4: So GBCA expects total business travel spending to grow by 24% in 2023 to reach over a trillion dollars.
Speaker 4: This expected increase in demand will be met by increased supply. Biata expects capacity growth of 18% globally.
Speaker 4: This looks a little different by region. You've got 5.5% increase in North America, 6.1% in Europe and then 48% growth in capacity in Asia Pacific largely driven by the opening China.
Speaker 4: So you can see here that there is strong evidence from customers, from suppliers, from industry experts supporting our confidence in solid industry growth for the year ahead. And of course, very importantly, we expect to augment.
Speaker 4: these tailwinds with further share gains driven by our industry leading software and services.
Speaker 4: So let's just go through our strategic priorities again and really highlight how.
Speaker 4: they are positioning us to deliver strong growth in 2023. So, as I just said, business travel recovery continues. GBTA survey found 78% of travel managers expect more business trips in 2023 and I also expect more capacity across all regions.
Speaker 4: Share gains. We reported $3.5 billion in total new wins.
Speaker 4: in 2022 and we expect to continue this strong growth in 2023 and we have a pipeline to support that strong growth.
Speaker 4: SME acceleration, we have moved to a new global segment driven operating model and structure for the company and that is going to intensify our focus on scaling the SME business around the world.
Speaker 4: A segment with the fastest growth and the highest margins represents by far the largest addressable opportunity for us. And we are now taking a much more consistent and even greater focused approach to capturing this opportunity around the world.
Speaker 4: On Agencia Synergies in 23 we plan to deliver additional synergies through exiting additional TSAs, realizing additional technology and real estate savings.
Speaker 4: And on operating leverage we are going to continue to operate our business with really strong focus on operating leverage. We expect single digit operating expense growth in 2023.
Speaker 4: And that is going to drive strong margin expansion with 17 to 20% revenue growth. And finally, these efficiencies of course lead to continued strong margin expansion in the year ahead.
Speaker 4: So this all results in full year 23 expectations as you can see here. 17-20% revenue growth, 220-259% adjusted EBITDA growth with approximately 10 percentage points of adjusted EBITDA margin expansion.
Speaker 4: Importantly, as growth continues beyond 2023, when we look at the financial and commercial drivers of the business.
Speaker 4: we remain on track to deliver pre-COVID adjusted EBITDA of approximately $500 million at the 86% revenue recovery level.
Speaker 4: or achievement of $2.4 billion in revenue.
Speaker 4: So I'm now going to turn it over to Martine to go over our 2023 guidance in more detail. Martine, over to you.
Speaker 5: Thank you all. So on page 17.
Speaker 5: In 2023, we expect to deliver double-digit revenue growth and margin expansion, and we project to turn precastually positive during the year and actually come within our target net leverage of two to three times, just to be done. Thank you.
Speaker 5: We do review what are the key drivers for our 2023 guidance in which we assume a measured view of the macro environment this year. We're starting with the components of our expected 17 to 20% revenue growth.
Speaker 5: 12 points of bad growth really results from carrying forward the fourth quarter runway.
Speaker 5: And another five to eight points of additional growth is expected to come from a combination of shared gain and organic growth.
Speaker 5: We project an overall revenue recovery of 77 to 79 percent in 2023. That's about two points above where we project transaction recovery.
Speaker 5: revenue recovery of 77 to 79% in 2023. That's about two points above where we project transaction recovery. On the cost side, while we budget
Speaker 5: As you heard from Paul, we expect single-digit growth in operating expenses.
Speaker 5: as we improve operational efficiencies, fully realize our cost synergies, and achieve benefits from the reorganization in January .
Speaker 5: Now in 2022, particularly in the second half, and that impacted the fourth quarter as well, our operational productivity was negatively impacted.
Speaker 5: really a consequence of having to recruit and train a number of, significant number of new agents, travel agents, and a consequence of the travel disruptions as the industry was facing very similar challenges.
Speaker 5: Now in 2023, we expect to achieve significant productivity gains as we improve our operating metrics from where they were in the fourth quarter.
Speaker 5: And as a result, we expect to continue to deliver high operating leverage with an adjusted flipped off oil standard down a thousand percent.
Speaker 5: in 2023 and a margin expansion of 9 to 11 points. As previously mentioned, we anticipate reaching positive pre-cash flow during the year. We expect this to take place in the second half of the year, even the seasonality of our working capital.
Speaker 5: Finally, we expect to exceed 2023 with a leverage ratio that will be at the high end of our 2 to 3 time long-term leverage target.
Speaker 5: The assumption I just shared with you results in the following full year 2023 guidance. Revenue comprised between $2.17 and $2.22 billion. That equates to revenue growth of 17 to 20% year over year. They're adjusted to be dull.
Speaker 5: between 330 million to 370 million that equates to an adjusted UBDA margin.
Speaker 5: of 15 to 16% and a margin expansion of 9 to 11 percentage points as compared to
Speaker 5: Now let's go to the first quarter guidance.
Speaker 5: And the key drivers are underlying this first quarter guidance.
Speaker 5: As you would expect, we anticipate a much higher rate of growth in the first quarter as we overlap the first quarter of 2021, which had a lower recovery because of Omicron.
Speaker 5: Before the first quarter, we expect a transaction recovery in the mid-70s and TTV recovery to be.
Speaker 5: A couple of points, the transaction recovery is very consistent with what we have seen in the previous quarters. And our quarter to date transaction recovery through January and February is trending in line with our expectation for the quarter.
Speaker 5: We expect our revenue recovery to be six months ahead of volume recovery in the first quarter, too.
Speaker 5: above what we project on a fully basis. And this is really driven by a quarterly saving of revenue in the 2019 baseline, which is different from what we expected to be in 2023.
Speaker 5: Because if you think about our revenue yield, our first quarter is actually largely in line with our full year expectations. Much more a function of the 2019 baseline than our trend.
Speaker 5: Moving to expenses, we anticipate operating expenses to be flat to the fourth quarter of 2022 as the cost to support the first quarter volume really went up in the fourth quarter of last year and as we achieve higher productivity in our operation as I mentioned. Finally, we expect operating leverage to result in a very significant improvement.
Speaker 5: adjusted to give them a margin with
Speaker 5: about 23 to 24 points year over year. Our first quarter 2023 guidance has a revenue that is comprised between 550 and 570 million. That's a revenue growth of 57 to 63 percent year over year.
Speaker 5: We expect adjusted to between $75 to $90 million. That's a margin of 16%.
Speaker 5: and growth in adjusted to be the margin of 23 to 24 percentage points versus Friday.
Speaker 5: And so in summary,
Speaker 5: We are delivering on a strategy. We're delivering on our commitment to customers and shareholders and we are positioned for strong growth in 2023 and beyond. We exceeded our 2022 revenue and adjusted our guidance.
Speaker 5: The business travel recovery has strong momentum. We are delivering on our shared gains and S&E acceleration.
Speaker 5: We are executing on the Agencia synergies and delivering.
Speaker 5: on the Agencia synergies and delivering high operating leverage.
Speaker 5: We are positioned for strong revenue and adjusted to be diagnosed in 2023 and we remain on track to deliver an adjusted to be done at approximately 500 million with a revenue recovery of 86% which equates to approximately 2.4 billion in revenue.
Speaker 5: So, you know, we're delivering on what we committed to, and we're confident in our position for continued momentum ahead. So thank you very much for your interest, and we will now open for questions.
Speaker 6: operators.
Speaker 6: for you. Thank you.
Speaker 2: If you would like to ask a question, please press star then 1 on your telephone keypad now.
Speaker 2: If you would like to ask a question please press star then 1 on your telephone keypad now. If you change your mind please press star 2.
Speaker 2: We have our first question from Dwayne Peniswaf of Evertcore ISI. You may proceed. Hey, thank you. Just with respect to your outlook for transaction volume recovery...
Speaker 2: in the month of March versus the levels that you saw in the fourth quarter.
Speaker 2: versus the levels that you saw in the fourth quarter.
Speaker 5: I'll take that. In terms of the geography, we expect somewhat higher recovery in the other countries that were up to date.
Speaker 5: So that would be more for the Southeast Asia. Canada is another market. Outside of those, in China, China has a relatively slow impact because we don't consolidate China. Outside of those particular geographies, we expect a fairly...
Speaker 5: in both Europe and the US. And in terms of trends, as I was indicating, actually we are, based on what we're seeing in January and February , we saw an improvement in the recovery which is consistent with what we expect for the first quarter. So very strongly rebound after the holiday season. It may be more of a US phenomenon, but I would have guessed that...
Speaker 5: And again, we're very encouraged with what we saw in February , which we saw an improvement over what we saw in the fourth quarter, particularly the accident in the fourth quarter where we were impacted as we see industry with the holiday. Thanks, Evan.
Speaker 2: Thank you.
Speaker 3: Just for my follow up on the seasonality of working capital, nice improvement in that line over the balance of 2022. But can you help us think about kind of the seasonality of that working capital build around the bookings build here into 2023? Thanks for taking the questions.
Speaker 6: come with next year.
Speaker 5: So in terms of working capital, we tend to have...
Speaker 5: The working capital build is going into the first quarter and the second quarter because that's where most of the volume seasonality is. We tend to then dig back down in the third quarter. And the fourth quarter is usually favorable as well from the working capital. So that's usually where we work in the quarter.
Speaker 5: So expect it to come up in the first half and then reduce going into the fourth quarter. Okay, thank you very much.
Speaker 5: I expect it to come up in the first half and then reduce going into the fourth quarter. Okay, thank you very much.
Speaker 2: As a reminder, it's Star 1 to ask any questions. And we now have Hilary Lee as Wogan Stanley.
Speaker 3: Hi, thanks for taking the question. I just wanted to kind of come back to the remaining 20% of the permanent cost savings you guys are waiting on. I know you said in the past you expect it to come back once volumes return to around 100%. I just want to famously thank you.
Speaker 3: recovery nearing high 70s in 2023. Just wondering if you could kind of give what you expect for cadence in realizing those savings and could you kind of give an approximation of how much you would expect to realize at say 86% of pro forma versus 95%? walked, than side to side Look around crutched
Speaker 6: Sure, so.
Speaker 5: We would expect that remaining 20% which is about 40 million, we would expect to start realizing some of that obviously this year as we're in the high 70s from a recovery standpoint and then the remaining of that going into 2024 and 2025 as we...
Speaker 5: here at the higher recovery level. It should be very, it should be pretty linear to what the volume recovery is.
Speaker 7: Okay, great. Thanks. And just one more question for you. And you guys talk about the 3.1 billion in new wins. I guess could you just kind of give an idea of how much it takes for those wins to ramp and turn that into revenue on your guys' income statement?
Speaker 5: Sure. So the way to think about it is it takes
Speaker 5: It takes two to three years depending on the customer. You don't have necessarily a hard time of conversion for two reasons. One is some of that is what we call partner volume so it's not a cartoon market but a partner market. And some of that is leakage. So you typically have. These are the rules of how by default we have to accommodate a partner in a relationship
Speaker 5: around a 70% conversion. And that conversion broadly takes place for the majority over a two-year period. And by the third year, we have all of that 70% volume converted.
Speaker 5: And that conversion broadly takes place for the majority over a two-year period. And by the third year, we have all of that 70 percent volume converted. All right. Great. Thank you.
Speaker 2: Thank you. It is now 1 to ask a question. And we now have Lee Horowitz of Deutsche Bank. You may proceed. Great. Two or five minutes. I'd like to dig into the full year 22 guide. You guys highlight the GBTA spend expectations.
Speaker 2: incremental share this year. Can you tell us better understand the disconnect between those two?
Speaker 4: Yeah, Martine, maybe I'll start on that one.
Speaker 4: Well, I think the GBTA prediction is a prediction at this point, but it's actually also travel spend.
Speaker 4: And if you look at our plan, that's sort of the equivalent of our TTV.
Speaker 4: And our TTV plan for 2023 is somewhere in that low to mid 20s as well.
Speaker 4: So our kind of TTD plan is pretty consistent with that GBTA outlook.
Speaker 2: And then maybe to get a set back, a question we often get from investors is around the outlook you're seeing from distributed teams. Can you help us maybe get a quantifier what you saw in 2022 regarding distributed teams driving incremental events volume and maybe what you're thinking about in terms of expectation as it goes to 23 and 24?
Speaker 4: Yeah, I'm sorry, I didn't quite catch the question. You just cut out. I don't know, I apologize if it was, I don't know if it was my end of yours. Do you mind just repeating that?
Speaker 2: It's regarding the uplift you're seeing from distributed teams. We get this question from investors a lot, how much incremental meeting demand from distributed teams is offsetting some degree of compression across the industry due to proliferation of zero and those sorts of things.
Speaker 2: I'd understand maybe what you saw in 2022 in regards to incremental volume coming from distributed workforces and or what your expectations are for that to sustain as we look back to 23 and 24. Thank you so very much.
Speaker 4: Yeah, sure. No, thank you. So as we exited 2022, so you look at the fourth quarter, the number of meetings and events that we were managing was actually...
Speaker 4: you know, above 2019 levels.
Speaker 4: above 2019 levels.
Speaker 4: So it gives you a sense of the level of demand, but it does have a slightly different mix. We have a division that deals with meetings for under 50 people, so smaller meetings, and that is the fastest growing part of the business. So the number of meetings is at 2019 level as we exited.
Speaker 4: but the mix has moved more towards a larger number of smaller to mid-size meetings. As we look out to 2023,
Speaker 4: Our, just to be a bit dull from our meetings and events division, we will see that at or above 2019. That's.
Speaker 4: how we kind of see the year ahead.
Speaker 4: And it's one of the businesses where we have frankly a better view of the future because the booking windows are so much further in advance for meetings and events. So we're pretty confident in the outlook for 23 for meetings and events.
Speaker 5: Thank you. Thank you. To ask a question, it's Starbone. Thank you.
Speaker 2: And we now have Stephen, your line is open. Okay. Thank you. So, just switching focus a little bit to the SME segment, given what looks like a very high level of fragmentation there.
Speaker 2: There is still a wide open field for not only yourself, but for others to look to consolidate share as well. So, I'm wondering if there is any step up in competitive intensity you may be seeing in the industry as the sector continues to recover. And second, in terms of the booking type that you guys have discussed.
Speaker 6: Right.
Speaker 6: Yes, I think.
Speaker 4: In terms of the SME competitive landscape, I think you hit on both points there Stephen. I mean, yes there are some new entrants and there's increased competitive activity, but very few have gained any significant share or scale. And when you look at that, alongside the size of the opportunity,
Speaker 4: We don't see any change. In fact, if you look at 2022, we had a record win-loss rate in the SME segment.
Speaker 4: And looking at our pipeline for the year ahead, I'm confident we'll set a new record. So yes, there's activity, but it's certainly not impacting our ability to aggressively grow in that segment. And I think one of the major advantages that we have is the...
Speaker 4: is the range of solutions that we offer. It's not one single segment with one homogenous set of needs. If a customer is looking for that kind of high touch, white glove service that includes both business travel and access to premium leisure, we have a fantastic solution for them in Ovation.
Speaker 4: if they're looking for a turnkey SAS solution.
Speaker 4: key SaaS solution with an intuitive
Speaker 4: customer experience with access to fantastic content, you know, we have agencies. And if they're looking for that more sophisticated outsourcing of travel end to end, perhaps on a regional global basis, then that really tends to fit Amex GBT more. So one of the major advantages that we had is going out into this very large segment is being
Speaker 4: Now, one of the key elements that's driving the increased recovery is that it has been a strategic priority for us to increase content and what we call attachment rates. So to increase the number of hotel bookings in relation to air bookings.low
Speaker 4: Bringing in all of the content from Expedia, for example, which we do through APIs, we bring it into our supply management platform and we are able to present that content through our Agencia platform, through our Neo platform. So improving the content and the displays is definitely increasing.
Speaker 4: in conversion and increasing that attachment rate. But it is a broader trend as well across the industry where we have seen hotel recovery above air and I think one of the trends supporting that is what we talked about before in terms of meetings and events.
Speaker 4: there's a lot more demand for small meetings and events which often are more localised and more hotel driven than air driven. I'd say those are the two key trends.
Speaker 4: Thank you. One other trend that is more specific to Europe is we are seeing growth in rail and I think in Europe this pattern of this prices Apart from our last weather event it was
Speaker 4: Obviously certain dynamics in Europe where there's on certain routes significant increased efficiency and frequency of rail and so that is a factor when you look at Europe specifically.
Speaker 8: Thank you. If you would like to ask a question please press star then 1 on your telephone keypad.
Speaker 8: If you have no questions at this time, I'd like to hand it back to the management team.
Speaker 4: Great, well look, thank you very much for your questions. In closing, I just want to thank.
Speaker 4: our team across Amex GBT for their dedication to our customers and the strong results they've delivered. We are excited about the year ahead and very confident in our position and our outlook for growth in 2023. So thanks for joining us and your continued interest in the company. Thank you very much.
Speaker 8: Thank you very much. Thank you all for joining. This does conclude today's call. You may now disconnect your phones and have a lovely day.
Speaker 1: And that.