Q1 2024 Global Business Travel Group Inc Earnings Call

May 7, 2024

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Operator: Good morning, and welcome to the American Express Global Business Travel First Quarter 2024 Annual Conference Call. As a reminder, please note today's call is being recorded. I will now turn the call over to the Vice President of Investor Relations, Jennifer Thorington.

Speaker Change: Good morning, and what kind of drove American Express global business travel first quarter 2024 earnings conference call.

Please note today's call is being recorded I will now turn the call over to the wife's Preston of Investor Relations Jennifer Thorington. Please go ahead.

Jennifer Thorington: Hello, and good morning, everyone. Thank you for joining us for our first quarter 2024 EARNS conference call. This morning, we issued an earnings press release, which is available on sec.gov and on our website at investors.amexglobalbusinesstravel.com. A slide presentation, which accompanies today's prepared remarks, is also available on the Amex GBT Investor Relations webpage. We would like to advise you that our comments contain certain forward-looking statements that represent our beliefs or expectations about future events, including industry and macroeconomic trends, cost savings, and acquisition synergies, among others.

Jennifer Thorington: Hello, and good morning, everyone. Thank you for joining us for our first quarter 2024 earnings conference call.

Jennifer Thorington: This morning, we issued an earnings press release, which is available on Sec's Dot Gov, and our website at Investor Amex Global business travel Dot Com is live.

Speaker Change: Presentation, which accompanies today's prepared remarks is also available on the Amex GBT Investor Relations Web page.

Jennifer Thorington: 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 and our other SEC filings. Throughout today's call, we will be presenting certain non-GAAP financial measures such as EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Expenses, Free 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 Change: We would like to advise you that our comments contain certain forward looking statements that represent our beliefs or expectations about future events.

Speaker Change: Many industry macroeconomic trends cost savings and acquisition synergies among others.

Speaker Change: 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, and our other SEC filings.

Speaker Change: Throughout today's call, we will be presenting certain non-GAAP financial measures such as EBITDA adjusted EBITDA adjusted EBITDA margin adjusted operating.

Speaker Change: Cash flow.

Speaker Change: All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items.

Jennifer Thorington: Definitions of these terms in the most directly comparable GAAP measures and reconciliation for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release. Participating with me today are Paul Abbott, our Chief Executive Officer, and Karen Williams, our Chief Financial Officer. Also joining us for the Q&A session today is Eric Bock, our Chief Legal Officer and Head of Global M&A. With that, I will now turn the call over to Paul. Paul?

Speaker Change: Definitions of these terms and the most directly comparable GAAP measures and reconciliation for non-GAAP measures are available in our supplemental materials of this presentation and in the earnings release.

Speaker Change: Participating with me today are Paul.

Speaker Change: Our Chief Executive Officer, and Karen Williams, our Chief Financial Officer also joining for Q&A session. Today are Eric Foss, our chief legal officer, and head of global M&A with that I will now turn the call over to Paul Paul.

Paul Abbott: Thank you, Jennifer, and welcome to everyone, and thank you for joining our first quarter 2024 earnings call. In the first quarter, we delivered strong financial results with continued share gains, significant margin expansion, and 24% adjusted EBITDA growth to reach the highest first quarter adjusted EBITDA in our company's history. Total transaction value, or TTV, grew 9% in the quarter, and revenue grew 6%. However, adjusting for fewer work days in the first quarter this year versus last year, growth would be 10% and 7%, respectively.

Paul: Thank you Jennifer and welcome to everyone and thank you for joining our first quarter 2024 earnings call.

Speaker Change: In the first quarter, we delivered strong financial results with continued share gains and significant margin expansion and 24% adjusted EBITDA growth.

Speaker Change: To reach the highest first quarter adjusted EBITDA in our company's history.

Speaker Change: Total transaction value of CTV grew 9% in the quarter and revenue grew 6% adjusting for fewer workdays in the first quarter this year versus last year growth would be 10% and 7% respectively.

Paul Abbott: These strong results were in line with our expectations and put us on track to deliver against our full year guidance. Increased demand for our leading software and services resulted in continued share gains. We reported new win values of $3.3 billion over the last 12 months.

Speaker Change: These strong results were in line with our expectations and put us on track to deliver against our full year guidance.

Speaker Change: Increased demand for our leading software and services resulted in continued share gains we reported new wins value of $3 3 billion over the last 12 months. This includes $2 billion of estimated new wins demonstrating continued progress with this large profitable customer segment.

Paul Abbott: This includes $2 billion of new SME wins, demonstrating continued progress with this large, profitable customer segment. Our focus on driving operating leverage is also clearly evidenced in our Q1 financial results. Adjusted operating expenses increased just 2% compared to 6% revenue growth, and we drove a significant adjusted EBITDA margin expansion of 300 basis points year over year. Our progress to positive and accelerating free cash flow remains an important focus for the company, providing us additional opportunities to invest in our growth and drive shareholder return.

Speaker Change: I will focus on driving operating leverage is also clearly evidenced in our Q1 financial results.

Speaker Change: Adjusted operating expenses increased just 2% compared to 6% revenue growth and we drove significant adjusted EBITDA margin expansion of 300 basis points year over year.

Speaker Change: Our progress to positive and accelerating free cash flow remains an important focus for the company, providing us additional opportunities to invest in our growth and drive shareholder returns, we generated positive free cash flow of $24 million in the quarter, an improvement of $133 million year over year.

Paul Abbott: We generated positive free cash flow of $24 million in the quarter, an improvement of $133 million year-over-year, and we continue to lower our leverage ratio. Importantly, in the first quarter, we announced that we had entered into an agreement to acquire CWT.

Speaker Change: And we continue to lower our leverage ratio.

Speaker Change: Importantly in the first quarter, we announced that we've entered into an agreement to acquire CWT the transaction value of approximately $570 million represents a highly attractive post synergy multiple of two five times adjusted EBITDA, including approximately $155 million of identified annual run.

Paul Abbott: The transaction value of approximately $570 million represents a highly attractive post-synergy multiple of 2.5 times adjusted EBITDA, including approximately $155 million of identified annual run rate cost synergies. This accretive transaction, expected to close in the second half of this year, will accelerate our growth and create significant shareholder value. So our momentum continued in the quarter as we executed on our strategy and delivered strong financial results. Starting with transaction growth, transactions were up 6% driven by increased demand for business travel and our share gains. Please note there was a negative workday timing impact of approximately one percentage point in the quarter, which will have an offsetting benefit over the balance of the year, largely in the second half of 2024.

Speaker Change: Right cost synergies.

Speaker Change: This accretive transaction is expected to close in the second half of this year, we will accelerate our growth and create significant shareholder value.

Speaker Change: So our momentum continued in the quarter as we execute on our strategy and deliver strong financial results.

Speaker Change: Starting with transaction growth transactions were up 6% driven by increased demand for business travel and all share gains.

Speaker Change: Please note there was a negative workday timing impact of approximately one percentage point in the quarter.

Speaker Change: Which will have an <unk>.

Speaker Change: Offsetting benefit over the balance of the year largely in the second half of 2024.

Paul Abbott: So on a like-to-like basis, transactions were up 7% in the quarter. Please also note transaction growth, which was previously reported on a gross basis, is now reported on a net basis to exclude cancellations, refunds, and exchanges. This better aligns transaction growth with the way that we measure and recognize TTV and revenue. TTV grew by 9%, driven primarily by transaction growth as well as higher average ticket prices and higher hotel room

Speaker Change: So what I'd like to like basis transactions were up 7% in the quarter.

Speaker Change: Please also note transaction growth, which was previously reported on a gross basis is now reported on a net basis to exclude cancellations refunds and exchanges.

Speaker Change: This better aligns transaction growth with the way that we measure and recognized CTV and revenue.

Speaker Change: <unk> grew by 9% driven primarily from transaction growth as well as higher average ticket prices and higher hotel room rates on a workday adjusted basis <unk> was up 10%.

Paul Abbott: On a workday-adjusted basis, TTV was up 10%. Revenue was up 6% to reach $610 million for the quarter, driven by growth in transactions, and TTV and increased demand for our products and professional services.

Speaker Change: Revenue was up 6% to reach $610 million for the quarter driven by growth in transactions Ptv and increased demand for our products and professional services on a workday adjusted basis revenue was up 7%.

Paul Abbott: Finally, our focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 24% to $123 million. Solid transaction growth was driven by share gains and increased demand for business travel from our diverse and premium customer base. Looking at our trends in more detail, which we've workday adjusted here so you can see the true momentum, the absolute growth was in line with our expectations. However, the shape was different.

Speaker Change: Finally, I'll focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 24% to $123 million solid transaction growth was driven by share gains and increased demand for business travel from our diverse and premium customer base looking at our trends in more.

Speaker Change: <unk>.

Speaker Change: We've worked a adjusted here. So you can see the true momentum.

Speaker Change: The absolute growth was in line with our expectations. However, the shape was different we saw relatively faster growth from global multinational customers compared to SME customers.

Paul Abbott: We saw relatively faster growth from global multinational customers compared to SME customers. Our first quarter global multinational transactions were up 11% and SME transactions up 5%. In Global Multinational, we've seen very positive same-store sales growth across several sectors, particularly technology, up approximately 30% in the first quarter. We also saw double-digit growth in professional services, pharma, mining, energy, and utilities. Our most recent customer survey shows that our top 100 customers now expect travel spend to be up approximately 8% in the full year 2024.

Paul Abbott: We saw relatively faster growth from global multinational customers compared to SME customers. In our first quarter, global multinational transactions were up 11%, and SME transactions were up 5%. In Global Multinational, we've seen very positive same-store sales growth across several sectors, particularly technology, up approximately 30% in the first quarter. We also saw double-digit growth in professional services, pharma, mining, energy, and utilities. Our most recent customer survey shows that our top 100 customers now expect travel spend to be up approximately 8% in the full year 2024.

Speaker Change: Our first quarter global multinational transactions were up 11% and SME transactions up 5%.

Speaker Change: In global multinational.

Speaker Change: We've seen very positive same store sales growth across several sectors, particularly technology up approximately 30% in the first quarter. We also saw double digit growth in professional services pharma mining energy and utilities.

Paul Abbott: This is an improvement of four percentage points versus the previous survey, and it's reflected in these strong Q1 trends. The percentage of clients expected to spend more on travel over the balance of this year has also increased by three percentage points. For SME, growth has slowed by three percentage points over the last two quarters, largely driven by slower same-store sales.

Speaker Change: Our most recent customer survey shows that our top 100 customers now expect travel spend to be up approximately 8% in the full year 2024. This is an improvement of four percentage points versus the previous survey and it's reflected in the strong Q1 trends.

Speaker Change: The percentage of clients expected to spend more on travel over the balance of this year has also increased by three percentage points.

Speaker Change: So SME growth has slowed by three percentage points over the last two quarters.

Speaker Change: Largely driven by slower same store sales.

Paul Abbott: We believe this is being driven by higher interest costs and sustained higher inflation, resulting in stronger controls on SME spending. This is a broader trend with U.S. SME customers that American Express also highlighted in their Q1 results, domestic and international air transactions both up 5% air TTV was up 11% with very strong growth in US air TTV of 14%. Growth in hotel transactions was 9%, which continued to outpace the 5% growth in air transactions.

Paul Abbott: We believe this is being driven by higher interest costs and sustained higher inflation, resulting in stronger controls on SME spending. This is a broader trend with U.S. SME customers that American Express also highlighted in their Q1 results; domestic and international air transactions were both up 5%; air TTV was up 11%, with very strong growth in US air TTV of 14%. Growth in hotel transactions was 9%, which continued to outpace the 5% growth in air transactions.

Speaker Change: We believe this is being driven by higher interest costs and sustained higher inflation, resulting in stronger controls on SME spending.

Speaker Change: This is a broader trend with U S. SME customers that American Express also highlighted in their Q1 results.

Speaker Change: Domestic and international Air transactions, both up 5%.

Speaker Change: <unk> was up 11% with very strong growth in U S. S TTP of 14%.

Speaker Change: Growth in hotel transactions was 9%, which continued to outpace the 5% growth in air transactions.

Paul Abbott: This reflects industry trends as well as our intentional focus on increasing our volume of hotel bookings as we continue to strengthen our hotel content and display and provide customers with more value and more choice. Finally, on a regional basis, transaction growth was 7% in both the Americas and EMEA, while Asia Pacific continues to lead the growth rates at 13%.

Speaker Change: This reflects industry trends as well as our intentional focus on increasing our volume of hotel bookings as we continue to strengthen our hotel content and display and provide customers with more value and more choice.

Speaker Change: Finally here on a regional basis transaction growth was 7% in both the Americas and EMEA Asia Pacific continues to lead the growth rates at 13%.

Paul Abbott: So turning to the commercial highlights, we continue to gain share and reported total new wins of $3.3 billion over the last 12 months. Importantly, customer attention remains high at 96%. Our biggest opportunity remains with SME customers, which represents approximately $950 billion of travel spend. We are already a leader in managed travel in this sector. But 70% of this opportunity is not currently in a managed travel program. As our progress clearly shows, more and more SME customers are recognizing the value of our leading software and services and a professionally managed travel program. As a result, SME New Winds revenue over the last 12 months totaled $2 billion.

Speaker Change: So turning to the commercial highlights we continued to gain share.

Speaker Change: <unk> reported total new wins of $3 3 billion over the last 12 months.

Speaker Change: Importantly, customer retention remains high at 96%.

Speaker Change: Our biggest opportunity remains with SME customers, which represents approximately 950 billion of travel spend.

Speaker Change: We are already a leader in managed travel in this segment.

Speaker Change: But 70% of this opportunity is not currently in our managed travel program.

Speaker Change: As our progress clearly demonstrates more and more SME customers are recognizing the value of our leading software and services on a professionally managed travel program as a result at somebody new wins over the last 12 months totaled $2 billion.

Paul Abbott: Moving on to our product and technology highlights, 79% of our transactions came through digital channels in the first quarter. Over 60% of the digital bookings now come through on our own software platforms, Neo and Agencia. In our NEO1 Spend Management Platform, we saw 10% growth in customer count in the first quarter. Our recently announced partnership with American Express to integrate virtual cards into NEO1 is also gaining traction. Customers are now issuing virtual cards within NEO1 to cover additional spend use cases, and they're using virtual cards to set budgets at an individual level.

Paul Abbott: Moving on to our product and technology highlights, 79% of our transactions came through digital channels in the first quarter. Furthermore, over 60% of the digital bookings now come through on our own software platforms, Neo and Agencia. In our NEO1 Spend Management Platform, we saw 10% growth in customer count in the first quarter. Our recently announced partnership with American Express to integrate virtual cards into NEO1 is also gaining traction. Customers are now issuing virtual cards within NEO1 to cover additional spend use cases, and they're using virtual cards to set budgets at an individual level.

Speaker Change: Moving onto our product and technology highlights 79% of all transactions came through digital channels in the first quarter over 60% of the digital bookings now come through on our own software platforms.

Speaker Change: And at Genocea.

Speaker Change: In our <unk> spend management platform, we saw 10% growth in customer count in the first quarter.

Speaker Change: Our recently announced partnership with American Express to integrate virtual cards into Neocon is also gaining traction customers are now issuing virtual cards within the loan to cover additional spend use cases, and they are using virtual calls to set budgets and individual level.

Paul Abbott: And this brings better control over employee spend with purchasing, travel, and expense data all in one place. Finally, of course, an important event in the first quarter was our announcement that we had entered into an agreement to acquire CWT. This agreement clearly shows that we are executing against a significant M&A opportunity in a large and fragmented industry and delivering on our priorities to drive growth, deliver cost synergies, and shareholder value. The acquisition of CWT will grow our revenues by one third with the potential for significant earnings contribution over time.

Speaker Change: And this brings better control over employee spend with purchasing travel and expense data all in one place.

Speaker Change: Finally of course, an important event in the first quarter was our announcement that we have entered into an agreement to acquire CWT.

Speaker Change: This agreement clearly shows that we are executing against the significant M&A opportunity in a large and fragmented industry and delivering on our priorities to drive growth deliver cost synergies and shareholder value.

Speaker Change: The acquisition of CWT will grow our revenues by one third with the potential for significant earnings contribution over time.

Paul Abbott: Our integration teams have now been established, and our proven track record gives us confidence that we can achieve the $155 million in annual run rate cost synergies that have already been identified. This results in a highly attractive post-synergy multiple of two and a half times adjusted EBITDA. We project the acquisition to be neutral to EPS in the first year and accretive thereafter, driving significant shareholder value. We continue to expect closing to occur in the second half of 2024 subject to customary closing conditions, including the receipt of certain regulatory, Now I'd like to hand it over to Karen to discuss the financial results in more detail before moving to our 2024 outlook.

Speaker Change: Our integration teams have now been established and a proven track record gives us confidence that we can achieve the $155 million in annual run rate cost synergies that have already been identified.

Speaker Change: This results in a highly attractive post synergy multiple of two five times adjusted EBITDA, We project the acquisition to be neutral to EPS in the first year and accretive thereafter, driving significant shareholder value.

Speaker Change: We continue to expect closing to occur in the second half of 2024 subject to customary closing conditions, including the receipt of certain regulatory approvals.

Speaker Change: And now I'd like to hand, it over to Karen to discuss the financial results in more detail before moving to our 2020 for outlook.

Karen Williams: Thank you, Paul, and hello everyone. I've previously talked about my three key priorities when it comes to managing our financial performance, which are focused on accelerating cash flow generation, driving operating leverage, and continued margin expansion, and importantly, creating capacity to invest and drive long-term sustainable growth, both organically and through strategic M&As. I'm really happy with the progress we have made in all three areas. Solid revenue growth, substantially higher earnings, significant margin expansion, and positive free cash flow are testament to this.

Karen Williams: Thanks, Paul and Hello, everyone.

Karen Williams: <unk> previously talked about my three key priorities when it comes to managing our financial performance, which are focused on.

Karen Williams: Accelerating cash flow generation, driving operating leverage and continued margin expansion and.

Karen Williams: Importantly, creating capacity to invest and drive long term sustained growth.

Karen Williams: Organically and through strategic M&A.

Karen Williams: I'm really happy with the progress we have made in all three areas.

Karen Williams: Our solid revenue growth.

Karen Williams: Substantially higher earnings.

Karen Williams: Significant margin expansion and positive free cash flow estimate today.

Karen Williams: So now let's turn to our financial performance in more detail. As you heard from Paul, revenue reached $610 million, up 6% year-over-year, largely driven by transaction growth. This was in line with our expectations for the first quarter and reflects known factors, including the calendar effect from workday timing. TTV grew 9% in the quarter, primarily driven by transaction volume and also reflecting increased average airline ticket prices and hotel room rates. Revenue yield, which we define as revenue divided by TTV, declined modestly in the quarter due to two factors.

Speaker Change: So now, let's turn to our financial performance in more detail.

Karen Williams: As you have seen the coal revenue reached $610 million.

Karen Williams: Percent.

Karen Williams: Year over year, largely driven by transaction growth.

Karen Williams: In line with our expectations for the first quarter and reflect known factors, including the calendar effect from what they timing.

Karen Williams: CTV grew 9% in the quarter, primarily driven by transaction volume and also reflecting increased average airline ticket prices and hotel room night.

Karen Williams: Revenue yield, which we define as revenue divided by TBE declined modestly in the quarter due to two factors.

Karen Williams: First, non-TTV-driven components of the revenue base. As a reminder, our revenue model is driven 50% by transaction volume, 30% by TTV, and 20% by product and professional services revenue, which is largely recurring. Thus, at least 30% of our revenue benefits from higher sales prices. Second, the continued shift to digital transactions is in line with our strategy and has a positive impact on the EBITDA margin, but lowers revenue yields.

Karen Williams: First non PCB drilling components of the revenue base.

Karen Williams: As a reminder, all revenue model has driven 50.

Karen Williams: By transaction volume gains.

Karen Williams: 2% TCE.

Karen Williams: 20% byproduct professional services revenue, which is largely recurring.

Karen Williams: So only 30% of our revenue benefits from higher sales prices.

Karen Williams: Second the continued shift to digital transactions is in line with our strategy and has a positive impact to adjusted EBITDA margin.

Karen Williams: Lower revenue yield.

Karen Williams: These factors were anticipated and incorporated into our full year 2024 guidance that we provided last quarter. Turning to expenses, which are a key area of focus for us, cost-saving initiatives and productivity improvements helped offset the investments we are making in technology and content, including our software platforms and AI. This resulted in adjusted operating expense growth of just 2% year-over-year versus revenue growth of 6%.

Karen Williams: These factors were anticipated and incorporated into our full year 2024 guidance that we provided last quarter.

Karen Williams: Turning to expenses, which are a key area of focus for us.

Karen Williams: Cost saving initiatives and productivity improvements helped offset the investments, we're making in technology and content, including our web platforms and AI.

Karen Williams: This resulted in adjusted operating expense growth of just 2% year over year that is revenue growth of 6%.

Karen Williams: This strong operating leverage translated into 300 basis points of margin expansion and adjusted EBITDA growth of 24%. Adjusted EBITDA of £123 million and Adjusted EBITDA margin of 20% are both records for the first quarter. Finally, we achieved free cash flow generation of 24 million, an increase of 133 million year-over-year, continuing the momentum. This was also a milestone to reach positive free cash flow in the first quarter, which seasonally is our lowest quarter for cash flow generation.

Karen Williams: This strong operating leverage translated into 300 basis points of margin expansion and adjusted EBITDA growth of 24%. Adjusted EBITDA of £123 million and Adjusted EBITDA margin of 20% are both records for the first quarter. Finally, we achieved free cash flow generation of 24 million, an increase of 133 million year over year, continuing the momentum. This was also a milestone to reach positive free cash flow in the first quarter, which seasonally is our lowest quarter for cash flow generation.

Karen Williams: With strong operating leverage translated into 300 basis points of margin expansion and adjusted EBITDA growth of 24%.

Karen Williams: Adjusted EBITDA of $123 million and adjusted EBITDA margin of 20% both records for the first quarter.

Karen Williams: Finally, we achieved free cash flow generation of $24 million, an increase of $133 million year over year.

Karen Williams: The momentum.

Karen Williams: This was also a milestone to reach positive free cash flow in the first quarter, which seasonally it's a low.

Karen Williams: This quarter the cash flow generation.

Karen Williams: This was driven primarily by our working capital actions, which I've discussed on previous calls, as well as timing factors that will smooth out over the balance of years. Our leverage ratio, or net debt divided by last 12 months' adjusted EBITDA, is 2.2 times as of March 31st, 2024. This represents a very significant step down for us as a company. In March 2023, this stood at 4.5 times.

Karen Williams: This was driven primarily by our working capital actions, which I discussed on the previous calls.

Karen Williams: Well its timing factors.

Karen Williams: These out over the balance of year.

Karen Williams: Our leverage ratio net debt divided by last 12 months adjusted EBITDA is two two times as of March 30 <unk>.

Karen Williams: 2024.

Karen Williams: This represents a very significant step down for us as a company.

Karen Williams: In March 2023, this stood at four five times.

Karen Williams: And as you can see from the chart on this slide, the momentum is a critical proof point that demonstrates our discipline on the balance, and we are within our leverage ratio target range of 1.5 to 2.5 times. As mentioned during our four-year earnings call, the reduction in our leverage ratio in Q1 grew 75 basis points of interest rate reduction on our outstanding term loans. In total, since Q4 2023, we have triggered a reduction of 150 basis points, resulting in approximately $25 million of annual interest expense savings.

Karen Williams: And as you can see from the chart on this slide the momentum is a critical proof point that demonstrates our discipline on the balance sheet.

Karen Williams: And we are within our leverage ratio target range of one five to two five times.

Karen Williams: As mentioned during our full year earnings call.

Karen Williams: And our leverage ratio in Q1 75 basis points of interest rate reduction.

Karen Williams: Standing term loan.

Karen Williams: In total.

Karen Williams: Q4, 2023, we have triggered a reduction of 150 basis points, resulting in approximately <unk> 5 million of annual interest expense savings.

Karen Williams: And as our non-call option rolls off in July 2024, we will have the opportunity to refinance our debt and further reduce our interest expense. Now, I'd like to turn our attention to the balance of years. On our last earnings call, we shared our powerful financial model with all of you and how it positioned us for industry leading returns. First, we expect business travel demand from our premium customer base to grow above GDP as it has done consistently for several decades prior to the pandemic. Second, we expect to continue to grow ahead of the market by driving share gains with our differentiated value proposition. Third is margin expansion.

Karen Williams: And as our non-call option rolls off in July 2024, we will have the opportunity to refinance our debt and further reduce our interest expense. Now, I'd like to turn our attention to the balance of years. On our last earnings call, we shared our powerful financial model with all of you and how it positioned us for industry-leading returns. First, we expect business travel demand from our premium customer base to grow above GDP, as it has done consistently for several decades prior to the pandemic. Second, we expect to continue to grow ahead of the market by driving share gains with our differentiated value proposition. Third, margin expansion.

Karen Williams: And as our noncore option most off in July of 2020, we will have the opportunity to refinance our debt.

Karen Williams: Our interest expense.

Karen Williams: Now I'd like to turn our attention to the balance of the year.

Karen Williams: Our last earnings call, we shared our powerful financial model with all of you and how it positions us the industry leading Mccann.

Karen Williams: First we expect business travel demand from our premium customer base to grow above GDP as it has done consistently.

Karen Williams: For decades prior to the pandemic.

Karen Williams: Second we expect to continue to grow ahead of the market by driving share gain with our differentiated value proposition.

Karen Williams: We are laser focused on a disciplined cost structure and margin expansion. Our operating leverage is forecasted to drive 18 to 32% adjusted EBITDA growth in 2024. In the Fourth Capital Deployment, we talked about the pivotal moment we've reached in our business, where our positive free cash flow can fund incremental growth opportunities. And finally, we have shared before how M&A presents an opportunity to further accelerate the strong performance you have already seen in our business.

Karen Williams: Third is margin expansion, we are laser focused on a disciplined cost structure and margin expansion. Our operating leverage is forecast at to drive 18% to 32% adjusted EBITDA growth in 2024.

Karen Williams: We've talked about the pivotal moment we've reached in our business where our positive free cash flow can fund incremental growth opportunities. And finally, we have shared before how M&A presents an opportunity to further accelerate the strong performance you have already seen in our business. The pending acquisition of CWT is a powerful example of the incremental value we can create. And so let's turn to full year 2024 guidance. Please note, our guidance does not incorporate the impact of CWT, which we expect to close in the second half of the year.

Karen Williams: For capital deployment, we've talked about the pivotal moment, we've reached in our business.

Karen Williams: Our positive free cash flow can fund incremental growth opportunity.

Karen Williams: And finally, we have shared before how M&A presents an opportunity to further accelerate the strong performance you have already seen in our business.

Karen Williams: The pending acquisition of CWT is a powerful example of the incremental value we can create. And so, let's turn to full year 2024 guidance. Please note our guidance does not incorporate the impact of CWT, which we expect to close in the second half of the year.

Karen Williams: The pending acquisition of CWC.

Karen Williams: For example of the incremental value we can create.

Karen Williams: So, let's turn to full year 2020 for guidance.

Karen Williams: Please note our guidance does not incorporate the impact of CWC, which we expect to close in the second half of the year.

Karen Williams: We are reiterating our guidance for full-year revenue of $2.43 billion to $2.5 billion, which represents growth of 6% to 9%. We expect same-store sales to contribute two to five percentage points of four-year revenue growth in 2024. On top of this, we expect net new wins to contribute approximately 4 percentage points of additional growth. We expect revenue growth to accelerate in the second half of this year due to the shape of our new winds rolling in and positive workday timing impact.

Karen Williams: We are reiterating our guidance for full year revenue of $2 four three to $2 5 billion, which represents growth of 6% to 9%.

Karen Williams: We expect same store sales contribute two five percentage points of full year revenue growth in 2024.

Karen Williams: On top of this we expect net new wins to contribute approximately four percentage points of additional growth.

Karen Williams: We expect revenue growth to accelerate in the second half of this year due to the shape of our new wins rolling on and positive what this timing impact we expect the shape of our revenue yield to be similar to last year with the lowest revenue yield in Q1, and the highest revenue yield in Q4.

Karen Williams: We expect the shape of our revenue yield to be similar to last year, with the lowest revenue yield in Q1 and the highest revenue yield in Q4. And as discussed, we are very focused on driving operating leverage and margin expansion, which scales 6% to 9% revenue growth, with 4% to 5% expense growth and drives significant adjusted EBITDA growth of 18% to 32% in our 2024 guidance to a range of $450 million to $500 million.

Karen Williams: We expect the shape of our revenue yield to be similar to last year, with the lowest revenue yield in Q1 and the highest revenue yield in Q4. And, as discussed, we are very focused on driving operating leverage and margin expansion, which scales 6 to 9% revenue growth with 4% to 5% expense growth and drives significant adjusted EBITDA growth of 18% to 32% in our 2024 guidance to a range of 450 to 500 million.

Karen Williams: And as discussed we are very focused on driving operating leverage and margin expansion, which scans, 6% to 9% revenue growth.

Karen Williams: With 4% to 5% expense growth and drive significant adjusted EBITDA growth of 18, 2% and off 2024 guidance to a range of $450 million to $500 million.

Karen Williams: This reflects an expected margin expansion of 150 to 350 basis points to reach a full year 2024 adjusted EBITDA margin of 18 to 20 percent. And so it's important to note that this strong marginal expansion is net of significant investment in future growth, particularly in driving our sales and marketing engine of software platforms and AI. In 2024, we will benefit from the carryover of some of our cost transformation initiatives and will additionally realize incremental benefits from our continued focus on productivity across the enterprise.

Karen Williams: This reflects expected margin expansion of 150.

Karen Williams: 350 basis points to reach a full year 'twenty towards people adjusted EBIDTA margin of 18% to 20%.

Karen Williams: And so it's important to note that this strong margin expansion is net of significant investments in future growth.

Karen Williams: Particularly in driving our sales and marketing engine, our software platform and AI.

Karen Williams: In 2024, we will benefit from the carry over of some of our cost transformation initiative I'm going to do.

Karen Williams: <unk> realized incremental benefits from our continued focus on productivity across the enterprise.

Karen Williams: We expect adjusted EBITDA in Q2 to be largely in line with Q1.

Karen Williams: And over the second half of this year, we expect similar levels of adjusted EBITDA in Q3 compared to Q4. This seasonality is different than last year due to the timing of cost savings and continued momentum we are driving with regards to productivity and margin expense. Finally, we are targeting free cash flow conversion of approximately 25% of adjusted EBITDA. This means we expect to generate in excess of 100 million of free cash flow in 2024, or more than double our 2023 free cash flow.

Karen Williams: And for the second half of this year, we expect similar levels of adjusted EBITDA in Q3 compared to Q4. This seasonality is different than last year due to the timing of cost savings and continued momentum we are driving with regard to productivity and margin expense. Finally, we are targeting a free cash flow conversion of approximately 25% of adjusted EBITDA. This means we expect to generate in excess of 100 million of free cash flow in 2024, or more than double our 2023 free cash flow.

Karen Williams: And over the second half of this year, we expect similar levels of adjusted EBITDA in Q3 compared to Q4.

Karen Williams: This seasonality is different than last year due to the timing of cost saving and continued momentum we are driving with regards to productivity and margin expansion.

Karen Williams: Finally, we are targeting free cash flow conversion of approximately 25% of adjusted EBITDA. This means we expect to generate in excess of $100 million of free cash flow in 2024 or more than double our 2023 free cash flow this significant step.

Karen Williams: FOP is driven by strong adjusted EBITDA growth the reduction of integration and restructuring costs lower interest expense as we deleverage and the continued benefit from the agenda here working capital initiatives.

Karen Williams: This significant step-up is driven by strong adjusted EBITDA growth, the reduction of integration and restructuring costs, lower interest expense as we de-leverage, and the continued benefit from the Agencia Working Capital Initiative. Note, we have seasonal movements in working capital in Q1 pre-cash flows that were different than last year. These timing factors will reverse and smooth out over the rest of the year with the offset largely in Q3. As a reminder, our guidance does not include the impact of cash that will be used to fund the CWT acquisition and integration.

Karen Williams: We have seasonal movements in working capital in Q1 free cash flow with different than last year.

Karen Williams: These timing factors will reverse and smoothed out over the rest of the year with the offset largely in Q3.

Karen Williams: As a reminder, our guidance does not include the impact of cash will be used to fund the CWC acquisition and integration.

Karen Williams: I want to end with a reminder of our capital allocation policy, which is focused on growth, cash generation, and reinvestment to drive shareholder returns. In addition to the CWT integration, our priorities are: Accelerating cash generation with a longer-term free cash flow target of 45% to 50% of adjusted EBITDA; and continuing to de-leverage, targeting a range of 1.5 to 2.5 times net depth to adjusted EBITDA. And as we continue to see cash flow acceleration and naturally deleverage, it gives us the optionality to invest in growth, both organic and inorganic, and return cash to shareholders.

Karen Williams: I wanted to end with a reminder of our capital allocation policy, which is focused on growth.

Karen Williams: Cash generation reinvestment to drive shareholder returns.

Karen Williams: In addition to the CWC integration our priorities.

Karen Williams: Accelerating cash generation with a longer term free cash flow target of 45% to 50% of adjusted EBITDA.

Karen Williams: Continuing to de leverage targeting a range of one five to two five times net debt to adjusted EBITDA.

Karen Williams: And as we continue to see cash flow acceleration and naturally deleverage it gives us optionality to invest growth both organic and inorganic.

Karen Williams: Return cash to shareholders.

Karen Williams: So to wrap things up, our strong first quarter performance was in line with our expectations. With our continued focus on share gains, productivity, margin expansion, investing for long-term growth, and cash flow acceleration, we remain confident in our full year 2024 guidance. So we can now move into Q&A. Paul and I are joined by Eric Bock, who is our Chief Legal Officer and Global Head of M&A. Operator, please go ahead and open the line.

Karen Williams: So to wrap things up our strong first quarter performance was in line with our expectation with our continued focus on share gain productivity margin expansion investing for long term growth and cash flow acceleration.

Karen Williams: We remain confident in our full year 2020 for garden.

Speaker Change: So we can now move into Q&A, Paul and I are joined by Eric Buck.

Eric J. Bock: Our chief legal officer, and global head of M&A.

Speaker Change: Operator, Please go ahead and open the line.

Operator: Hello everyone, this is your operator Shanshan. Thank you, Jennifer.

Eric J. Bock: Hello, everyone. This is to appraise restoration.

Speaker Change: Jennifer if you would like to ask a question. Please press star followed by one when you'd have some key patent now.

Operator: If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by 2. We now have Peter Christiansen from City. Peter, your line is open now. Please go ahead.

Speaker Change: If you change your mind, Please press star followed by two.

Eric J. Bock: Okay.

Eric J. Bock: We now have Peter Christiansen from Citi.

Peter Corwin Christiansen: Your line is open now.

Peter Corwin Christiansen: Please go ahead. Thank you.

Peter Corwin Christiansen: Thank you. Good morning.

Peter Corwin Christiansen: Thank you good morning. Thanks for the question good job on some of the EBITDA margin efficiencies showing through there.

Citi: C R.

Peter Corwin Christiansen: I'm curious I want to dig a little bit back into travel yield a little bit and Karen that was helpful. Your explanation there I'm just curious if.

Peter Corwin Christiansen: Thanks for the question. Good job on some of the EBITDA margin efficiency showing through there. It's good to see. I'm curious, I want to dig a little bit back into travel yield a little bit. And Karen, that was helpful, your explanation there. I'm just curious if there was any incremental impact from GMN being a bit more higher share relatively versus SME. I'm wondering if there was any impact on travel yield with that, and then I have a follow up.

Peter Corwin Christiansen: Thanks for the question. Good job on some of the EBITDA margin efficiency showing through there. It's good to see. I'm curious; I want to dig a little bit back into travel yield a little bit. And Karen, that was helpful, your explanation there. I'm just curious if there was any incremental impact from GMN being a bit higher in share relatively versus SME. I'm wondering if there was any impact on travel yield with that, and then I have a follow-up.

C R: There was any incremental impact from G. M M b a bit more higher share relatively versus I send me I'm wondering if there was any impact on travel yield with that and then I have a follow up.

C R: Okay.

Karen Williams: Thanks for the question. From a yield perspective, there's no real impact. I mean, as you think about Q1, Q1 is always our lowest yield quarter, with Q4 being the highest. And as you think about the Q1 performance, there is an element in terms of just timing. As you look at our four-year guidance, really, you see a very small deterioration in yield, and that's really being driven by the shift to online and the fixed components that we talked about in terms of our revenue.

Speaker Change: So thanks and thanks for the question on.

Peter Corwin Christiansen: From a yield perspective.

Peter Corwin Christiansen: Hum.

Peter Corwin Christiansen: No real impact I mean, as you think about Q1, you wanted to wait until the last few quarters with Q4 being a high and.

Peter Corwin Christiansen: And as you as you think about the Q1.

Peter Corwin Christiansen: And then there is an element.

Peter Corwin Christiansen: Oh, just timing as you go forward.

Peter Corwin Christiansen: Year guidance are really very well.

Peter Corwin Christiansen: And the yield and that's really being driven by the shift to online.

Peter Corwin Christiansen: Components that we talked about in terms of a rabbit.

Paul Abbott: That's helpful. And then, Paul, I guess, new wins, still $3.3 billion, still a very robust kind of number there. I guess, as we think about anticipation for the CWT acquisition to close, do you foresee new wins being a little bit under pressure temporarily ahead of that deal closing and subsequent integration? And just curious if you've also had any early feedback from potential clients on the acquisition. Thank you.

Speaker Change: That's helpful. And then Paul I guess, you know new wins still $3 3 billion still very robust kind of number there I guess as we think about anticipation for the CWT acquisition to close.

Speaker Change: Do you foresee new wins.

Speaker Change: <unk> being a little bit under pressure temporarily ahead of ahead of that deal closing and subsequent integration and just curious if you also had any early feedback from from potential clients on on the acquisition. Thank.

Speaker Change: Thank you.

Paul Abbott: Yeah, no, I think the pipeline for new wins is still really strong. You know, if you look at the overall market, you know, we talked about the scale of the opportunity. You know, we're in a $1.4 trillion industry, and even after the TWT acquisition, we'll have $45 billion of that $1.4 trillion, and of course, SME is the biggest opportunity within that. $900 billion of TTV fits with, if you like, professionally managed travel programs, and $600 billion is income managed.

Paul Abbott: Yeah, no, I think the pipeline for new wins is still really strong. You know, if you look at the overall market, you know, we talked about scale of the opportunity. You know, we're in a $1.4 trillion industry, and even after the TWT acquisition, you know, we'll have $45 billion of that $1.4 trillion, and of course, SME is the biggest, opportunity within that is 900 billion of TTV of which you know 300 billion sits with if you like professionally managed travel programs and 600 billion is in unmanaged so You know, we certainly see significant runway for growth and, you know, we expect to continue to gain share.

Paul: Yeah, No I think the pipeline for new wins is still really strong.

Speaker Change: If you look at the local market, we talked about the opportunity.

Speaker Change: We're in a one four trillion industry.

Speaker Change: Even after the TWC acquisition.

Speaker Change: 45 billion of that $1 four trillion.

Speaker Change: And of course SME is the biggest.

Speaker Change: Opportunity within that.

Speaker Change: 100 billion.

Speaker Change: T D of which 300 billion sits with professionals.

Speaker Change: Professionally managed travel programs and 600 billion.

Speaker Change: So.

Paul Abbott: You know, we certainly see significant runway for growth and, you know, we expect to continue to gain share. If you look at the new wins for the last 12 months, ending the first quarter, you know, our win loss ratio is at 2.4. So for every dollar of business we lose, we win 2.4 dollars of new business. So, you know, we've consistently gained share and we expect that to continue. Thank you. I appreciate that perspective.

Speaker Change: We certainly see significant runway for growth than we.

Speaker Change: We expect to continue to gain share if you look at the new wins.

Paul Abbott: If you look at the new wins for the last 12 months, ending the first quarter, you know, our win-loss ratio is at 2.4. So for every dollar of business we lose, we win 2.4 dollars of new business. So, you know, we've consistently gained share, and we expect that to continue. Thank you.

Speaker Change: The last 12 months ending the first quarter.

Speaker Change: Our win loss ratio is at two point pool. So for every dollar of business. We lose we win two pool dollars of new business. So yeah, we're consistently gaining share and we expect that to continue.

Peter Corwin Christiansen: Thank you. I appreciate that perspective. Thank you.

Paul Abbott: Thank you. I appreciate that perspective. Thank you.

Speaker Change: Thank you I appreciate the perspective, thank you.

Speaker Change: Yeah.

Lee Horowitz: Thank you, Peter. Our next question is from Lee Horowitz from Dutch Bank. Lee, your line is open now. You may continue.

Operator: Thank you, Peter. Our next question is from Lee Horowitz from Dutch Bank. Lee, your line is open now. You may continue.

Speaker Change: Thank you P. J. Our next question from Lee Horowitz from Deutsche Bank.

Lee Horowitz: Your line is open now.

Speaker Change: Continued.

Paul Abbott: Thanks for the question. Can you talk a bit more about the strength you're seeing in global multinationals, now outpacing SME for the first time since the recovery? Maybe just a bit more on the sort of the underlying drivers of this evolving shape of your volume growth and how you think about the sustainability of these factors moving forward? And then from a regional perspective, obviously, APAC remains a big source of strength. Can you maybe just give us an update on how you're thinking about the overall recovery in that region? How much more do you think is left to go relative to, say, other regions? And how do you think about APAC sort of carrying sort of the overall volume growth moving forward? Thanks so much.

Lee Horowitz: Thanks for the question. Can you talk a bit more about the strength you're seeing in global multinationals, now outpacing SME for the first time since the recovery? Maybe just a bit more on the sort of the underlying drivers of this evolving shape of your volume growth and how you think about the sustainability of these factors moving forward? And then from a regional perspective, obviously, APAC remains a big source of strength. Can you maybe just give us an update on how you're thinking about the overall recovery in that region? How much more do you think is left to go relative to, say, other regions? And how do you think about APAC sort of carrying sort of the overall volume growth moving forward? Thanks so much.

Lee Horowitz: Alright, thanks for your questions.

Lee Horowitz: You talk a bit more about the strength you're seeing in global multinational now outpacing SMB for the first time since the recovery, maybe just a bit more on the sort of the underlying drivers of this evolving shape of your volume growth and how you think about the sustainability of these factors going forward and then from a regional perspective, obviously APAC remains a big source of strength.

Lee Horowitz: Can you maybe just give us an update on how you're thinking about the overall recovery in that region. How much more do you think is left to go relative to say other regions and how you think about APAC sort of carrying sort of the overall volume growth moving forward. Thanks, so much.

Paul Abbott: Yeah, sure. So we're really pleased to see the strength in global multinational. I think one of the advantages of our business is we have this diversified Revenue Model and Diversified Growth Profile. We have just over 50% of revenues from F&E, but just under from Global Multinational. Also, there's a really good balance between customer and supplier revenues. And so I think that balance really, really helped.

Paul Abbott: Yeah, sure. So we're really pleased to see the strength in global multinational. I think one of the advantages of our businesses is that we have this diversified Revenue Model and Diversified Growth Profile. We have just over 50% of revenues from F&E, but just under from Global Multinational. Also, there's a really good balance between customer and supplier revenues. And so I think that balance really, really helped.

Speaker Change: Yeah sure so.

Speaker Change: We're really pleased to see the strength in <unk>.

Speaker Change: Multinational I think one of the.

Speaker Change: Vantage is about businesses, we have this diversified.

Speaker Change: Rapidly model.

Speaker Change: The five growth profile, we have just over 50% of the revenues from that's a knee, but just under for global multinational.

Speaker Change: Also there's a really good balance between customer and supplier revenues. So.

Speaker Change: Hum balanced really really helps.

Paul Abbott: If you dig a little deeper into global multinationals, what's encouraging there is that we're seeing strong growth across multiple sectors. Technology was certainly the standout in the quarter, and we heard that, I think, from some of the airlines that reported in the US. That was up 30% in the quarter, but we saw double-digit growth in professional services, pharma, and also energy and utilities. So pretty broad-based growth in terms of how that's trending. The survey that I shared on the call just now; we go out every quarter to our top 100 customers.

Speaker Change: If you dig a little deeper into global multinationals.

Speaker Change: Priority that.

Speaker Change: Is that we're seeing strong growth across multiple sectors of.

Speaker Change: Technology was suddenly the standout in the quarter it would be both that I think from some of the airlines that are reported in U S.

Speaker Change: That was up 30%.

Speaker Change: In the quarter, but we saw double digit growth in professional services.

Speaker Change: Also energy and.

Speaker Change: Utilities, so pretty broad based growth in terms of how that's trending.

Speaker Change: The stuff like that.

Speaker Change: Sure Nicole just now we went we go out every quarter to our top 100 customers.

Paul Abbott: So I think it's a really good data point for the global multinational outlook. And that most recent survey, you know, showed a strengthening of the overall spend projections for this year up to 8%, and also the number of customers expecting an increase in travel volume in the balance of the year is also up another three points. So that would certainly indicate that I think that we'll see pretty strong growth from that segment for the full year.

Speaker Change: Really good data point for global multinational.

Speaker Change: Outlook.

Speaker Change: And that most recent survey showed.

Speaker Change: A strengthening.

Speaker Change: The overall spend.

Speaker Change: <unk> for this year up to 8%.

Speaker Change: And also the number of customers as expected.

Speaker Change: An increase in travel volume and the balance of the arrows. There was off another three points so that would indicate that.

Speaker Change: You will see pretty strong growth from that segment.

Speaker Change: For full year.

Paul Abbott: And, you know, if you'd asked me back in Q4, I would have actually thought our growth rates for global multinational and SME would have been closer together. And so global multinational is a little higher than I expected, SME a little lower than I expected. And, you know, I think I mentioned some of the reasons for that on the call.

Paul Abbott: And, you know, if you'd asked me back in Q4, I would have actually thought our growth rates for global multinationals and SME would have been closer together. And so global multinational is a little higher than I expected, and SME a little lower than I expected. And, you know, I think I mentioned some of the reasons for that on the call.

Speaker Change: Uh huh.

Speaker Change: If you'd asked me back in Q4, I would have actually thought our growth rates for global multinational method. He would have been would it be closer together.

Speaker Change: And so global multinationals, who I have not.

Speaker Change: But it hasn't even lower than I expected and I think I mentioned some of the reasons for that on the call.

Paul Abbott: You know, I referenced the American Express data, because Amex is really the best data point we have for SME growth rates. Amex has, 400 billion of payment volumes from US SME businesses and relationships with nearly 4 million, you know, small businesses and in the U.S. So it's a really robust data point to look at the external market. And if you look at Amex results for Q1, US S&E payment volume was up 1%. If you look at the same store sales for Q1, they're actually down 3%. And that's a spend number.

Paul Abbott: You know, I referenced the American Express data because Amex is really the best data point we have for SME growth rates. Amex has 400 billion payment volumes from US SME businesses and relationships with nearly 4 million small businesses in the U.S. So it's a really robust data point to look at the external market, and if you look at Amix results for Q1, the USF&E payment volume was up 1%. If you look at the same store sales for Q1, they're actually down 3%. And that's a sales number, so that includes price inflation. So transactions would have been lower than that.

Speaker Change: I referenced the American Express stated because IMAX is really the best data point, we have four actually.

Speaker Change: And the growth rates I haven't said.

Speaker Change: 400 billion of payment volumes from U S SME businesses.

Speaker Change: And relationships with nearly 4 million small businesses in.

Speaker Change: In the U S.

Speaker Change: So it's a it's a really robust data point to look at the external market and.

Speaker Change: If you look at Opex reviews. The results for Q1 or is it U S. SME payment volume was up 1%.

Speaker Change: Same store sales for Q1, they were actually down 3% and that's about it.

Paul Abbott: So that includes price inflation. So transactions would have been lower than that. And I think what Amex is seeing on the payment side of what we're seeing as well is that, you know, there is more impact from. Sustain higher inflation, sustain higher prices, and I do think that is leading to, and the other question is how do we expect that to evolve? I think that will be macro-driven. I think as confidence improves, as macroeconomic conditions improve, that's when the inflation outlook becomes a little clearer.

Speaker Change: Spend number so that includes price inflation.

Speaker Change: Transactions would have been lower than that.

Paul Abbott: And I think what Amix is seeing on the payment side of what we're seeing as well is that, you know, there is more of a sort of impact from, sustain higher inflation, sustain higher prices, and I do think that is leading to, and the second part of your question about how do we expect that to evolve? I think that will be macro-driven. I think as confidence improves, as macroeconomic conditions improve.

Speaker Change: And I think honestly, we're seeing on the payment side of what we're seeing as well is that.

Speaker Change: There is more.

Speaker Change: Impact from.

Speaker Change: Sustained higher inflation sustained pod.

Speaker Change: Prices.

Speaker Change: And I do think that is leading to that.

Speaker Change: Hi, suspend controls with with SME businesses.

Speaker Change: In terms of the second part of your question around how do we expect that to.

Speaker Change: Oh, no I think that will be macro driven I think ed.

Speaker Change: This improves as macroeconomic conditions improve.

Paul Abbott: That's what the inflation outlook becomes a little clearer. You know, we do expect that to change. And we certainly still see SME in the medium to long term being the growth engine for the company. So the second part of your question on AIPAC, I think that it's really not a recovery issue that you mentioned in your question; just structurally, I think AIPAC is a region that will continue to grow fast. You know, we're seeing really strong growth, you know, out of our key markets in Asia and India, in particular, and I think we certainly see that as a longer-term trend and not really driven by, you know, any recovery factors.

Speaker Change: The inflation outlook becomes a little clearer.

Paul Abbott: You know, we do expect that to change. And we certainly still see SME medium to long term being the growth engine for the company. So the second part of your question on AIPAC, I think that it's really not a recovery issue that you mentioned in your question, just structurally, I think AIPAC is a region that will continue to grow fast. You know, we're seeing really strong growth, you know, out of our key markets in Asia and India in particular, and I think we certainly see that, you know, as a longer term trend and not really driven by, you know, any recovery factors.

Speaker Change: We do expect that to change and we certainly still see SMA medium to long term growth engine for the company.

Speaker Change: Sorry, what was the second part of your question on APAC.

Speaker Change: I think it's really not a recovery.

Speaker Change: Issue that you mentioned in your question structurally I think APAC is the region that will continue to grow at Boston.

Speaker Change: Now, we're seeing really strong growth out of all our key markets in Asia and India in particular.

Speaker Change: And I think you recently to see that you know the other.

Speaker Change: A longer term trend.

Speaker Change: Not really driven by recovery practice at this stage.

Duane Pfennigwerth: Thank you. Thank you, Lee, as well. Just a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask any question, please ensure your device is unmuted locally. Our next question is from Duane Pfennigwerth from Avocor. Duane, your queue is open now, please go ahead.

Operator: Thank you. Thank you, Lee, as well. Just a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask any question, please ensure your device is unmuted locally. Our next question is from Duane Pfennigwerth from Avocor. Duane, your queue is open now.

Speaker Change: Thank you thank you Liam well.

Speaker Change: Just a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: If you change your mind. Please press star followed by two when preparing to ask any question. Please ensure your device is.

Speaker Change: Locally our next question is from doing things <unk> from Evercore.

Doing Things: Can you. Please open now please go ahead.

Duane Pfennigwerth: Hey, thank you. Can you just remind us how you define SME, what is the cutoff? to be classified as SME, and certainly appreciate it's highly fragmented, but any particular industries you're keeping an eye on, just wondering about kind of drivers there, and really do appreciate that the vast majority of this is unmanaged, and it's a very large opportunity for you, but we are interested in kind of this incremental SME commentary.

Duane Pfennigwerth: Hey, thank you. Can you just remind us how you define SME? What is the cutoff? to be classified as SME, and certainly appreciate it's highly fragmented, but any particular industries you're keeping an eye on, just wondering about the kind of drivers there, and really do appreciate that the vast majority of this is unmanaged, and it's a very large opportunity for you, but we are interested in kind of this incremental SME commentary

Doing Things: Hey, Thank you.

Doing Things: Can you just remind us.

Evercore: How you define SMB, what what is the cutoff too.

Evercore: To be classified as SME.

Speaker Change: And I certainly appreciate it's highly fragmented, but any particular industries, you're you're keeping an eye on.

Speaker Change: Wondering about kind of drivers there.

Speaker Change: Really do appreciate that the vast majority of this is on managed in it.

Speaker Change: It's a very large opportunity for you, but we are interested in kind of this incremental.

Speaker Change: Sami commentary.

Paul Abbott: Yeah, sure. Four.

Speaker Change: Yeah sure.

Paul Abbott: For our kind of SME definition, we actually have the way we're structured is we have a division that is dedicated to SME customers. And so we essentially report, you know, looking at the customers that are in that part of our business. But broadly speaking, it's customers that are spending kind of, let's say, $30 million or less, you know, in travel. But the vast majority of those are much smaller. But there are some exceptions that we try to be need driven rather than purely volume driven. But directionally, that's a that's a good a good guide. And it represents about $14 billion of our TTV. So. That's the definition question.

Paul Abbott: For our kind of SME definition, we actually have a, the way with structures, a division that is dedicated to SME customers. And so we essentially report, you know, looking at the customers that are in that part of our business. But broadly speaking, it's customers that are spending kind of, let's say, 30 million less, you know, in travel, but the box majority of 30, those are much smaller. But there are some exceptions that we try to be need need driven rather than purely volume driven. But directionally, that's a good guide.

Speaker Change: For all kind of SME definition.

Speaker Change: We actually have a the way it was structured we have a division that is.

Speaker Change: Dedicated to SME customers and so we essentially report you know looking at the.

Speaker Change: Customers that are not part of our business.

Speaker Change: Broadly speaking.

Speaker Change:

Speaker Change: Customers that are spending kind of let's.

Speaker Change: Let's say 30 million Nevertheless.

Speaker Change: In travel, but the vast majority of those are much smaller, but there are some exceptions to that would be trying to beat or meet.

Speaker Change: Neat driven rather than purely volume driven but directionally. That's the that's a good a good guy.

Paul Abbott: And it represents about 14 billion of our TTV. That's the definition question. In terms of industries, you know, I think it's, I mean, it's so broad-based that it's really difficult to pick out, you know, a specific industry. I think when you look at the SME performance, actually, it mirrors kind of what we're seeing in global multinationals. The results are stronger in the larger companies within SME, and they're kind of a little softer, you know, as you go down into the smaller companies.

Speaker Change: And it represents about $14 billion.

Speaker Change:

Speaker Change: TB.

Speaker Change: So.

Paul Abbott: In terms of industries, you know, I think it's, I mean, it's so broad based, that it's really difficult to pick out, you know, a specific industry. I think When you look at the SME performance, actually, it mirrors kind of what we're seeing in global multinational. The results are stronger in the larger companies within SME, and they're kind of a little softer, you know, as you go down into the smaller companies. So I would say that's the general trend that we're seeing.

Speaker Change: That's the definition question.

Speaker Change:

Speaker Change: In terms of industry I think.

Speaker Change: And somebody is so broad based.

Speaker Change: It's really difficult to pick out a specific industry.

Speaker Change: Industry.

Speaker Change: Yes.

Speaker Change: When you when you look at the SME performance actually.

Speaker Change: <unk>.

Speaker Change: Is there a mirror there is kind of what we're seeing in global multinational D. The results are stronger than the larger companies within SME and there kind of a little softer.

Speaker Change: You go down into the smaller companies so I'm site.

Paul Abbott: The smaller the business, Perhaps the type of controls that we're all spending, and I think that does connect back to the comments I made earlier about lending costs and higher inflation, you know, and price inflation. And, you know, we have to keep in mind that, If you look at domestic airline prices.., in the US, for example, you know, our average ticket price, for the first quarter was up 8% year-over-year, but it's up 24% versus 2022, so there has been some pretty significant price inflation that I do think is contributing to some of those spending controls that you see.

Paul Abbott: So I would say that's the general trend that we're seeing. The smaller the business, perhaps the type of control that we're all spending, and I think that does connect back to the comments I made earlier about lending costs and higher inflation, you know, and price inflation. And, you know, we have to keep in mind that, in the US, for example, our average ticket price for the first quarter was up 8% year-over-year, but it's up 24% versus 2022, so there has been some pretty significant price inflation that I do think is contributing to some of those spending controls that you see.

Speaker Change: That's the general trend that we're seeing the smaller of the business.

Speaker Change: That's the type of controls that room spending and I think that does connect back to the comments on de Villiers about.

Speaker Change: Lending calls.

Speaker Change: Higher inflation and price inflation.

Speaker Change: We have to keep in mind that.

Speaker Change: If you look at domestic.

Speaker Change: Airline <unk>.

Speaker Change: <unk> in the U S. For example.

Speaker Change: Our average ticket price.

Speaker Change: For the first quarter was up 8% year over year.

Speaker Change: It's up 24% versus 22, so there has been some pretty significant price inflation.

Speaker Change: I do think that's contributing to some of those spending controls that you see in the afternoon segment.

Paul Abbott: That's great. And then, just to follow up there, I think you said that your US air transaction volume was up 14%. I don't know if you have it handy, but how does that compare to hotel transaction growth for the same geography? And sorry to put you on the spot. But again, it's just something we're interested in. Do you have any insight into how trip length or trip duration may be changing? as the close in corporate starts to perk back up.

Speaker Change: That's great and then just just a follow up there I think you said that your U S Air transaction volume was up 14%.

Speaker Change: I don't know if you have it handy, but how does that compare to hotel transaction growth for the same geography.

Speaker Change: And I'm, sorry to put you on the spot, but again, it's just something we're interested in do you have any insight into how trip length or trip duration may be changing.

Speaker Change: As the close incorporate starts to perk back up.

Paul Abbott: Yeah, I think you're on air we were 10% up on a work day and justice based globally air was 11% up globally and the US from this region from an air perspective actually at 40% grade. So, very strong overall sales growth on air. I think it's worth noting that About two-thirds of that growth was price and yield related. So you've got about eight points of pricing and yield growth and about six points of transaction growth. So hopefully that sort of additional color helps a little bit on the air side.

Paul Abbott: Yeah, I think you're on air. We were 10% up on a work day, and justice based globally air was 11% up globally, and the US from this region, from an air perspective, actually at a 40% grade. So, very strong overall sales growth on air. I think it's worth noting that about two-thirds of that growth was price and yield related. So you've got about eight points of pricing and yield growth and about six points of transaction growth. So hopefully, that sort of additional color helps a little bit on the air side.

Speaker Change: Yes. Thank you.

Speaker Change: And we were.

Speaker Change: Yes, 10% up on a workday adjusted basis globally and was 11% globally in the U S.

Speaker Change: Thomas region from an App perspective, I see a 14% growth.

Speaker Change: Very strong overall sales growth.

Speaker Change: And I think it's.

Speaker Change: Worth noticing that.

Speaker Change: About two thirds of that grant with price and yield related.

Speaker Change: So.

Speaker Change: You've got.

Speaker Change: About two eight points.

Speaker Change: Pricing and yield.

Speaker Change: Growth in about six points of transaction growth, so hopefully that sort of additional color helps a little bit on the SaaS side.

Speaker Change: U S.

Paul Abbott: UF, hotel transactions. I think, I know hotel sales were up 10%. So I think that's probably in the U.S.

Speaker Change: Hotel transactions.

Speaker Change: I think I know hotel signings were up 10%.

Speaker Change: So I think that's a problem in the U S. So that's probably the comparable number two.

Paul Abbott: So that's probably the comparable number to. 14% because both of those include, if you like pricing and yield impact. So US air up 14, US hotel sales up 10. But you've seen a little less price inflation on hotel. If you look at U.S. average daily rates for hotel, year over year, they're up 4%, whereas I mentioned before, air is up 8% on domestic. And if you go back to 2022, as I mentioned before, domestic air is up 24% but hotels up 14%.

Paul Abbott: So that's probably the comparable number to 14% because both of those include, if you like, pricing and yield impact. So US air up 14, US hotel sales up 10, but you've seen a little less price inflation on hotels. If you look at U.S. average daily rates for hotels, year over year, they're up 4%, whereas, as I mentioned before, air is up 8% on domestic. And if you go back to 2022, as I mentioned before, domestic air is up 24%, but hotels are up 14%.

Speaker Change: 14% because both of those include.

Speaker Change: If you like pricing and yield impact so U S era.

Speaker Change: U S hotel sale about 10.

Speaker Change: But you've seen a little price inflation.

Speaker Change: On hotel, if you look at U S average daily rates for hotel.

Speaker Change: Year over year, they are up 4%, whereas I mentioned before Arizona.

Speaker Change: On domestic.

Speaker Change: And if you go back to 2022, as I mentioned before domestic and about 24% of hotels up 14.

Speaker Change: Okay.

Speaker Change: Yeah.

Paul Abbott: Thank you. Thank you, Paul, for that detail. I appreciate it.

Speaker Change: Thank you. Thank you Paul for that detail I appreciate it.

Speaker Change: Okay.

Speaker Change: Youre welcome.

Toni Kaplan: Thank you. Our next question is from Tony Kaplan from Morgan Stanley. Tony, your line is open now. You may continue.

Speaker Change: Thank you.

Speaker Change:

Operator: Thank you. Our next question is from Tony Kaplan from Morgan Stanley. Tony, your line is open now. You may continue.

Speaker Change: Our next question from Toni Kaplan from Morgan Stanley Tony Your line is open now you may continue.

Toni Kaplan: Thank you. I wanted to ask another follow-up on SME. I know you mentioned the slowdowns really driven by macro factors. Just wondering what are some of maybe the sales initiatives or strategies that you could deploy to maybe mitigate some of the macro factors? I'm sure that this has happened, you know, a number of times in the past, and so just wanting to understand, you know, if there's anything that can help mitigate some of the macro slowdowns.

Toni Kaplan: Thank you. I wanted to ask another question on SME. I know you mentioned the slowdowns really driven by macro factors. Just wondering what are some of the maybe sales initiatives or strategies that you could deploy to maybe mitigate some of the macro factors? I'm sure that this has happened, you know, a number of times in the past, and so just wanting to understand if there's anything that can help mitigate some of the macro slowdowns.

Toni Kaplan: Thank you.

Toni Kaplan: Wanted to ask another follow up on SME.

Toni Kaplan: I know you mentioned the slowdown is really driven by macro factors. Just wondering what are some of maybe the sales initiatives or strategies that you could deploy to maybe mitigate some of the macro factors I'm sure that that this is happening in a number of times in the past.

Toni Kaplan: And so I'm just wanting to understand if there is anything that that can help mitigate some of the macro slowdown.

Paul Abbott: Yeah, good question, Tony. Absolutely. I mean, certainly, there are a number of levers that we can pull in an environment where, you know, organic is slower. The first is you make sure that your retention remains really, really strong. And unfortunately, that's certainly been the case.

Paul Abbott: Yeah, good question, Tony. Absolutely. I mean, certainly, there are a number of levers that we can pull in an environment where, you know, organic is slower. The first is to make sure that your retention remains really, really strong. And unfortunately, that's certainly been the case.

Speaker Change: Yeah. Good question, Tommy absolutely I mean, certainly there are a number.

Toni Kaplan: Is that we are pulling them in an environment with organic is slower first as you make sure that your retention remains really really strong. Unfortunately.

Toni Kaplan: So have you been the case.

Paul Abbott: Then, you know, we have been making investments in, you know, our SME sales organization, both in the sales and the marketing channels. And, you know, increasing those investments in our sales and marketing channels obviously is an important lever for us to pull. And then there is the, what we call, you know, share of wallet from existing customers, making sure that we're doubling down on growing those existing relationships and taking advantage of the expansion opportunities.

Paul Abbott: Then, you know, we have been making investments in our SME sales organization, both in the sales and marketing channels. And, you know, increasing those investments in our sales and marketing channels is obviously an important lever for us to pull. And then there is what we call, you know, share of wallet from existing customers, making sure that we're doubling down on growing those existing relationships and taking advantage of the expansion opportunities. And then the final lever, of course, always being very focused on profitability and making sure that we're taking actions that improve the profitability of the segment.

Speaker Change: Then you know we're all we all have been making investments in our SMB sales organization.

Toni Kaplan: Sales and marketing channels.

Toni Kaplan: Increasing those investments in our sales and marketing channels, obviously is.

Toni Kaplan: Important lever for us to call.

Toni Kaplan: And then there is the what we call share of wallet from existing customers, making sure that we're doubling down on growing those existing relationships and taking advantage of the expansion opportunities.

Paul Abbott: And then the final lever, of course, always being very focused on profitability and making sure that we're taking actions that improve the profitability of the segment. And I think Karen referenced before, the work that we've been doing to improve, you know, work in capital management across the business. A lot of that work has been focused in the S&E segment, moving customers onto, our preferred payment, processes and payment options that improve working capital. And so there's obviously an important profitability lever that, you know, needs to be a focus in addition to the growth levers that I just mentioned.

Toni Kaplan: You know that we have.

Toni Kaplan: The existing base.

Toni Kaplan: And then the final levered.

Toni Kaplan: We've been very focused on profitability and making sure that we're taking actions to improve the profitability of the segment.

Paul Abbott: And I think Karen mentioned before the work that we've been doing to improve capital management across the business. A lot of that work has been focused in the SME segment, moving customers onto our preferred payment processes and payment options that improve working capital. And so there's obviously an important profitability lever that, you know, needs to be a focus in addition to the growth levers that I just mentioned.

Toni Kaplan: I think Karen referenced before.

Toni Kaplan: The work that we've been doing to improve.

Toni Kaplan: Working capital management across the business.

Toni Kaplan: A lot of that work has been focused in the SME segment moving customers onto <unk>.

Toni Kaplan: The preferred payment.

Toni Kaplan: Susan and payment options to improve working capital.

Toni Kaplan: There's obviously an important profitability lever.

Speaker Change: Uh huh.

Toni Kaplan: It needs to be a focus in addition to the growth levers that I just mentioned.

Toni Kaplan: Terrific. And I just wanted to ask about April, you know, was there any sort of divergence in trends that you saw in April versus the first quarter? You know, maybe not, but I just want to see it. I thought you did a really good job and talked about seasonality for the year. So, you know, maybe this is duplicative of that, but I just wanted to see if there's any improvement or, or the reverse in April versus one.

Speaker Change: Terrific and I just wanted to ask about April you know any any sort of divergence in trends that you saw in April versus the first quarter.

Speaker Change: Yeah.

Speaker Change: Maybe not but just trying to see I thought you did a really good job and talking about seasonality for the year. So.

Speaker Change: You know maybe this is duplicative of that but just wanted to see if there is any improvement or or the reverse.

Speaker Change: April versus <unk>. Thanks.

Paul Abbott: Yeah, it's difficult to say at this point, because March, as you know, East to Southern for March this year, as opposed to April last year. So that creates, you know, a little bit of noise.

Paul Abbott: Yeah, it's difficult to say at this point because March, as you know, went from East to Southern for March this year, as opposed to April last year. So that creates, you know, a little bit of noise.

Speaker Change: Yeah, I'd say difficult to say at this point because March east the seventh of March this year.

Speaker Change: As opposed to April last year, so that creates a little bit of.

Speaker Change: That's noise.

Paul Abbott: And we also have some additional work days in April this year versus, you know, the adjustment we talked about for Q1. And so I think it's going to take a few more weeks to kind of work through that and see what the trends are. But, you know, as Karen said, our full-year guidance is what, 6% to 9% on revenues. On a workday adjusted basis, we came in at 7% in the first quarter.

Operator: And we also have some additional work days in April this year versus, you know, the adjustment we talked about for Q1. And so I think it's going to take a few more weeks to kind of work through that and see what the trends are. But, you know, as Karen said, our full-year guidance is what, 6% to 9% on revenues. On a workday adjusted basis, we came in at 7% in the first quarter.

Speaker Change: And we also have some additional work that's in April this year versus the adjustment we talked about for Q1.

Speaker Change: So I think all of those can take a few more weeks to kind of.

Speaker Change: Work through that and see what the trends are right.

Paul Abbott: You know, our guide to TTV was saying 8% to 12%. We came in at 10% workday adjusted. So from our point of view, we're sort of, you know, Stay on track for where we want it to be in terms of our four-year guidance and we'll obviously be able to update you on Q2 in more detail at a later date.

Operator: You know, our guide to TTV was saying 8% to 12%, and we came in at 10% workday adjusted. So from our point of view, we're sort of, you know, on track for where we want it to be in terms of our four-year guidance, and we'll obviously be able to update you on Q2 in more detail at a later date.

Speaker Change: But as Karen said Alpha.

Speaker Change: Our full year guidance is six to nine central revenues.

Speaker Change: Workday adjusted basis, we came in at seven in the first quarter.

Speaker Change: Our guide for PCB was saying eight to 10, 8% to 12% we came in at 10% would be adjusted so from my point of view with them.

Speaker Change: Bang on track, where we wanted to be in terms of our full year guidance.

Speaker Change: And.

Speaker Change: We'll obviously be able to update you on on Q2 more detail at a later date.

Speaker Change: Terrific. Thanks.

Speaker Change: Thank you Tony.

Operator: This concludes today's call. Thank you everyone for joining. You may now disconnect your lines.

Operator: This concludes today's call. Thank you everyone for joining us. You may now disconnect your lines.

Speaker Change: This concludes today's call. Thank you for everyone for joining you may now disconnect your lines.

Speaker Change: Yeah.

Paul Abbott: Wallet in closing. Thank you to everyone across our team for their dedication to our customers and the strong results they've delivered. We are very confident that 2024 will be another year of share gains, strong growth and profit, improve cash flow and continue to succeed for their dedication to our customers and the strong results they've delivered. We are very...

Paul Abbott: Wallet in closing. Thank you to everyone across our team for their dedication to our customers and the strong results they've delivered. We are very confident that 2024 will be another year of share gains, strong growth and profit, improved cash flow, and continued success because of their dedication to our customers and the strong results they've delivered.

Speaker Change: Well in closing thank you to everyone across our team for their dedication to our customers and our strong results. They delivered we are very confident that 'twenty 'twenty four will be another year of share gains and strong growth in profit.

Speaker Change: Improved cash flow.

Speaker Change: Team for their dedication to our customers and our strong results. They delivered we are very clear.

Q1 2024 Global Business Travel Group Inc Earnings Call

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