Q2 2024 Global Business Travel Group Inc Earnings Call
Speaker Change: Good morning and welcome to the American Express Global Business Travel Second Quarter 2024 Earnings Conference Call. As a reminder, please note today's call is being recorded.
Operator: second quarter 2024 earnings 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. Please go ahead.
Speaker Change: I will now turn the call over to the Vice President of Investor Relations, Jennifer Thorington. Please go ahead.
Jennifer Thorington: Hello and good morning everyone. Thank you for joining us for our second quarter 2024 earnings 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 second quarter 2024 earnings conference call.
Speaker Change: This morning we issued an earnings press release, which is available on sec.gov and 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.
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: including industry and 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 expenses, free cash flow, and net debt.
Speaker Change: All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items. Definitions of these terms in the most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release.
Jennifer Thorington: Definitions of these terms in the Most Directly Comparable GAAP Measures and Reconciliations 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, Karen Williams, our Chief Financial Officer, and David Thompson, our Chief Information Technology Officer. Also joining 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: Participating with me today are Paul Abbott, our Chief Executive Officer, Karen Williams, our Chief Financial Officer, and David Thompson, our Chief Information Technology Officer.
Speaker Change: Also joining 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 Abbott: Thank you, Jennifer. Welcome to everyone and thank you for joining our second quarter 2024 earnings call. In the second quarter, we delivered strong adjusted EBITDA growth, significant margin expansion and accelerated free cash flow.
Speaker Change: These strong bottom line results were in line with our expectations and put us on track to deliver against our full year guidance.
Speaker Change: Our focus on controlling costs and driving operating leverage is clearly evidenced in our Q2 results. Adjusted operating expenses increased just 2% compared to 6% revenue growth.
Speaker Change: And we drove significant adjusted EBITDA margin expansion of 240 basis points year-over-year and adjusted EBITDA growth of 20%.
Speaker Change: Our progress to positive and accelerating free cash flow remains an important focus for the company, providing us with additional opportunities to invest in our growth and drive shareholder returns.
Speaker Change: And a strong second quarter gives us the confidence to raise our free cash flow guidance for the full year.
Speaker Change: Last quarter we mentioned an opportunity to refinance our debt, which we have now successfully completed in July .
Speaker Change: We've significantly lowered our interest costs, extended our debt maturities and upsized our revolver, and we continue to deleverage our balance sheet.
Speaker Change: Increased demand for our software and services resulted in continued share gains on a strong foundation. We have sustained our pace of new wins and, importantly, further increased our customer retention rate.
Speaker Change: Starting with revenue growth. Revenue was up 6% to reach $625 million for the quarter, driven by growth in transactions, TTV, and increased demand for our products and professional services.
Speaker Change: Transactions were up 4%.
Speaker Change: We saw a slowdown in the second quarter driven primarily by slower same-store sales and the impact of the Olympics in France. We expect France will bounce back in the fall, excluding France, transactions were up 5% in the quarter.
Speaker Change: TTV grew just ahead of transactions by 5% driven primarily from the transaction growth as well as higher average ticket prices and higher average hotel room rates.
Speaker Change: Again, excluding France, TGV grew by 6% in the quarter.
Speaker Change: Finally, here, our focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 20% to $127 million, with strong margin expansion of 240 basis points.
Speaker Change: In the second quarter, we continue to see stronger relative performance with our global multinational customers. As a reminder, we divide our customer base into two general categories.
Speaker Change: Global Multinational, or GMN, and Small and Medium Enterprises, or SME.
Speaker Change: We generally use annual TTV to divide customers into these categories.
Speaker Change: although this measure can vary by country and by customer need.
Speaker Change: We do not have products or services that are offered solely to one size of customer. We tend to find that customers of all sizes may prefer different solutions.
Speaker Change: Some larger customers may prefer a simpler approach, while some smaller customers may prefer a more bespoke, high-touch global solution.
Speaker Change: Back to the quarter. Global multinational transactions were up 7% with double-digit growth in the financial services and pharma industries.
Speaker Change: We saw very solid growth across our top 5 industry verticals, which account for over 60% of our total global multinational transactions.
Speaker Change: It is important to point out that we did see global multinational same-store sales growth returning to more normalised levels as we cycle over the technology ramp-up we saw in 2023.
Speaker Change: We have built the most valuable B2B marketplace in travel, with the most comprehensive and the most competitive content in the industry. Our strong combination of technology and people, delivering the best experiences, proven at scale, continues to resonate with customers.
Speaker Change: Our very high customer retention rate with Global Multinational, which reached 98% over the last 12 months, demonstrates the value that we bring to this important customer segment.
Speaker Change: GMN TTV growth in the quarter was also strong up 9% driven by the transaction growth and a two percentage point benefit from higher average ticket prices
Speaker Change: Our most recent customer survey is encouraging as we look out over the balance of the year.
Speaker Change: It shows that our top 100 GMN customers now expect travel spend to be up approximately 10% year-over-year for the full year 2024. And this is an increase of two percentage points versus the previous survey in Q1.
Speaker Change: driven by improvements in expectations within professional services, mining and the oil and gas industries.
Speaker Change: The stronger performance within GMN customers highlights the strength of our diversified model, as SME growth was relatively muted in the quarter. On a transaction basis, GMN growth was 7% versus SME at 1%.
Speaker Change: As we described last quarter, SME customers have tightened spending controls in the face of sustained higher interest costs and higher inflation.
Speaker Change: As we also discussed on the call in Q1, this is a broader trend for SME businesses beyond travel spend.
Speaker Change: given the more challenging macro environment.
Speaker Change: We are confident that as the macroeconomic conditions improve, so will SME growth.
Speaker Change: And this outlook is supported by our most recent customer survey, which showed 82% of our top 120 SME customers expect travel spend to grow or remain flat in the second half of this year.
Speaker Change: Meanwhile, our new winds performance in SME continues to be strong.
Speaker Change: As you've heard from our peers in the travel industry, we are seeing a negative impact on business travel in France related to the Olympics. Transactions in France were very strong in the first quarter, but rapidly decelerated and ended the second quarter down 4%.
Paul Abbott: Transactions in France were very strong in the first quarter, but they rapidly decelerated and ended the second quarter down 4%. However, 70% of this opportunity is not currently in a managed travel program. We continue to successfully work with non-governmental organizations to provide safe travel for vulnerable refugees and get rapid response emergency relief workers to disaster zones.
Speaker Change: France is actually our second largest country by transaction volume, so it resulted in a negative impact of one percentage point to year-over-year total transaction and TTV growth in Q2. The impact to our revenue growth is smaller.
Speaker Change: Clearly we believe this is a temporary impact and we expect to see a return to growth in France from September onwards.
Speaker Change: Finally here, growth in our air transactions versus hotel and domestic versus international.
Speaker Change: was consistent in the second quarter.
Speaker Change: So, turning to the commercial highlights.
Speaker Change: We continue to gain share with total new wins value of $3.3 billion over the last 12 months. Importantly, these share gains are on an even stronger foundation of increasingly impressive customer retention, which is up to 97% at the enterprise level over the last 12 months.
Speaker Change: Our biggest growth opportunity remains with SME customers, which represents approximately $950 billion of travel spend. We are already a leader in managed travel in this segment.
Speaker Change: But 70% of this opportunity is not currently in a managed travel program.
Speaker Change: As our New Winds progress demonstrates, more and more SME customers are recognizing the value of our software and our services and a professionally managed travel program. As a result, SME New Winds over the last 12 months totaled $2 billion.
Speaker Change: In the second quarter, 79% of our transactions came through digital channels. Over 60% of those digital bookings came through on our own software platforms, NEO and Agencia, which we continue to believe is an area of significant competitive differentiation for us.
Speaker Change: The collaboration between American Express and our Amex GBT NEO1 spend management platform is progressing well, with pleasing results from Amex GBT's most recent digital marketing lead campaign, targeting the very large opportunity in the SME segment.
Speaker Change: Amex GBT's NEO1 customers acquired digitally is on track to grow 2x year-over-year in 2024.
Speaker Change: We continue to invest in NDC and our marketplace to make sure we offer the most comprehensive, the most competitive content in the industry.
Speaker Change: and to help our partners retail to our premium customers in the most effective way.
Speaker Change: We're now working with 20 airlines on NDC.
Speaker Change: And because we own our software solutions in Neo and Agencia, we are very well positioned to lead the changes that are required.
Speaker Change: We also continue to make business travel more sustainable. Our new agreement with Shell Aviation reinforces our commitment to sustainable aviation fuel.
Speaker Change: Avelia is one of the world's first blockchain powered book and claim platforms for SAF and we already have more than 30 corporations and airlines participating in the Avelia program including customers like Bank of America and Google.
Speaker Change: Also during the second quarter we published our annual ESG report that highlighted our commitment and our progress in sustainability, governance and developing the workforce of the future.
Speaker Change: We continue to successfully work with non-governmental organisations to provide safe travel for vulnerable refugees and get rapid response emergency relief workers to disaster zones.
Speaker Change: Our inclusion groups continue to thrive. We are growing the number of minority-owned businesses in our supplier portfolio, and we are working with customers to make business travel more accessible for all.
Speaker Change: I also want to take a moment to thank my colleagues for the clear thinking and swift action that helped mitigate the impact of the recent CrowdStrike incident.
Speaker Change: We have received countless notes from customers thanking our service team for their outstanding support, helping travelers through the disruption to get where they needed to be.
Speaker Change: And finally, as you saw last week, we provided an update on the CWT acquisition, which is now expected to close in the first quarter of 2025.
Speaker Change: We continue to work collaboratively with the CMA, which intends to continue its review of the transaction in a Phase 2 investigation, as well as with the Department of Justice in the U.S.
Speaker Change: We believe that a comprehensive analysis will clearly show that the transaction will create more choice for customers, more efficient distribution for suppliers, while maintaining a highly competitive environment for business travel services. We continue to expect...
Speaker Change: to receive full approval of the transaction.
David Thompson: Before turning the call over to Karen to discuss our results and Outlook in more detail, I'm very pleased to introduce David Thompson, our CIO.
Karen Williams: We have previously discussed the potential of the investments that we're making in automation and AI to drive further productivity gains and margin expansion, and I'm pleased to say we are making good progress as initiatives now move from the pilot phase to implementation.
David Thompson: And as I promised on a previous earnings call, David is here to speak more about our progress with RPA, machine learning, and AI to create better experiences for our customers and to improve productivity. David, over to you.
David Thompson: Thanks, Paul, and hello, everyone.
David Thompson: As previously shared on our Q4 earnings call, Amex GBT launched our AI program focused on driving innovation through new and existing artificial intelligence technologies.
David Thompson: We are already delivering operational efficiencies through safe, secure, and scaled AI capabilities.
David Thompson: Through our AI initiatives, we are adopting next-generation AI technologies focused across four key objectives.
David Thompson: First, increase service efficiencies. Second, increase engineering velocity. Third, streamline our financial processes. And fourth, enabling our workforce.
David Thompson: These four areas account for approximately 70% of our total adjusted operating expenses, representing a huge opportunity to continue driving productivity improvements.
David Thompson: And as Karen will elaborate on, automation and AI initiatives are a component of the 100 million in total saving opportunities we expect to deliver this year.
Karen Williams: Our strategy is broader than generative AI. We are taking advantage of multiple capabilities, including natural language processing, large language models, third-party SAS solutions, and our own proprietary machine learning capabilities to accomplish these objectives.
Karen Williams: And so let me share some of these thoughts and progress to date.
Karen Williams: Dealing with a massive amount of data is a common challenge for organizations. The effort required to exploit that data is very complex and labor-intensive.
Speaker Change: Amex GBT is looking to harness the power of AI to gain insights from our two largest communication channels to understand why clients are contacting us which in turn allows us to direct them to the most efficient channel to meet their needs.
Speaker Change: To garner these insights, we are utilizing our own internally-deployed large-language models, which sits behind Amex GBT firewalls and is not available to the public Internet.
David Thompson: By supplementing our own LLM with Amex GBT proprietary data and third-party SaaS technologies, we identify customer intent and analyze demand to provide optimized routing and develop future self-service opportunities. Our conversational co-pilot will be enabled to provide quick access to customer and client information without the need for material investment and structured data storage.
Speaker Change: By supplementing our own LLM with Amex GBT proprietary data and third-party SaaS technologies, we identify customer intent and analyze demand to provide optimized routing and develop future self-service opportunities.
Speaker Change: We have also focused on increasing our engineering velocity through partnering with third-party SaaS provider, GitHub.
Speaker Change: With their development co-pilot, we have measured a 20% productivity increase in test case creation, code documentation, and new user story development.
Speaker Change: Finally, two proof of concepts have been approved for expansion, our Intelligent Virtual Assistant, or IVA, and our Servicing Conversational Co-Pilot.
Speaker Change: Data collected at the start of a process is exponentially more valuable than data collected throughout a business process.
Speaker Change: The IBA is intended to provide customer identification, intent, and authentication to start automating processes prior to connecting to a travel counselor.
Speaker Change: Our conversational co-pilot will be enabled to provide quick access to customer and client information without the need for material investment in structured data stores.
Speaker Change: The expected outcome of both initiatives is the reduction of manual effort for our servicing team.
Speaker Change: They will spend less time copying and pasting and more time servicing the customer.
Speaker Change: That means a better customer experience and lower operating costs.
Karen Williams: I look forward to continuing to update you on our progress and future calls. And now I'd like to hand it over to Karen to discuss the financial results in 2024 Outlook in more detail.
Speaker Change: Karen
Karen Williams: Thank you, David, and hello, everyone.
Karen Williams: I've previously talked about my three key priorities when it comes to managing our financial performance.
Karen Williams: accelerating cash flow generation, driving operating leverage and continued margin expansion, and importantly creating capacity to invest and drive long-term sustained growth both organically and through strategic M&A.
Speaker Change: And again, in the second quarter, I am really happy with the progress we have made in all three areas.
Karen Williams: The significant margin expansion and accelerating free cash flow we reported in the second quarter are testament to this, in addition to the momentum we are seeing in our investment spend.
Karen Williams: So now, let's turn to our financial performance in more detail. We delivered strong results that were in line with our expectations from an adjusted EBITDA perspective.
Karen Williams: Revenue reached $625 million, up 6% year-over-year.
Karen Williams: Revenue yield, which we define as revenue divided by TTV, was 8% flat year-over-year in the quarter.
Karen Williams: As we turn to total operating expenses, which are a key area of focus for us, I am incredibly pleased with the momentum we are seeing across the enterprise when it comes to increasing productivity.
Paul Abbott: Importantly, we are delivering cost savings that not only drive our margin expansion but also drive growth by investing in technology and content, including our software platforms and AI. We are reiterating our guidance for four-year revenue of $2.43 to $2.5 billion and our four-year adjusted EBITDA guidance range of 450 to 500 million, representing a growth of 18 to 32 percent, despite a softer macro environment. And finally, I am delighted to raise our guidance for free cash flow and now expect to generate more than 130 million in 2024, a 30 million increase. Third, as we continue to see cash flow acceleration and naturally de-leverage, it gives us the option to invest in technology and organic growth.
Karen Williams: Importantly, we are delivering cost savings that not only drive our margin expansion, but also drive growth by investing in technology and content, including our software platforms and AI.
Karen Williams: In the quarter, we achieved free cash flow generation of $49 million, up 148% year-over-year. This was driven by our working capital actions, which I have discussed previously on our calls.
Karen Williams: And as a reminder, there is no expected incremental financing required to fund the pending CWT acquisition.
Speaker Change: The participating lender group includes 94 debt investors and broadens our investor base while bringing in high-quality blue-chip anchor investors. I am incredibly happy with this outcome.
Karen Williams: Second, we expect to continue to grow ahead of the market by driving share gains with our differentiated value proposition.
Karen Williams: Fourth, we are incredibly focused on optimising our capital deployment. A positive and accelerating free cash flow can fund important incremental growth opportunities.
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, including significant value creation from the pending CWT acquisition.
Karen Williams: And so, let's turn to the full year 2024 guidance.
Karen Williams: Please note, our guidance does not incorporate the impact of CWT, which we now expect to close in the first quarter of 2025.
Karen Williams: Our H1 results were strong and keep us on track to achieve our 2024 targets.
Karen Williams: We are hitting the mark on what we can control and delivering solid revenue growth, significant cost savings, strong adjusted EBITDA growth and margin expansion.
Karen Williams: We are reiterating our guidance for four-year revenue of $2.43 to $2.5 billion.
Karen Williams: And our full year adjusted EBITDA guidance range of 450 to 500 million, representing a growth of 18 to 32 percent.
Karen Williams: We remain focused on driving continued operating leverage.
Karen Williams: This includes $100 million of cost savings from the carryover actions taken in 2023 plus new cost initiatives and productivity improvements this year, including the progress David described on automation and AI.
Karen Williams: Executing these savings enables us to deliver strong margin expansion of 150 to 350 basis points, while making significant investments in future growth.
David Thompson: particularly in driving our sales and marketing engine, our software platforms and AI.
David Thompson: We expect revenue yield to decline by approximately 10 basis points due to the non-TTV driven components of revenue and continued shift to digital transactions in line with our strategy.
Karen Williams: We expect this trend to also carry over into 2025.
Karen Williams: In the second half of this year we expect adjusted operating expense growth of just 2-3% versus revenue growth of 6-7%.
Karen Williams: From a seasonality perspective, we expect Q3 and Q4 revenue growth to be similar. Revenue yield is expected to be higher in Q4, given phasing consistent with prior years.
Karen Williams: Expenses are expected to step down sequentially in Q3 and Q4 on an absolute basis.
Karen Williams: And so I want to end with a reminder of our capital allocation policy, which is focused on cash generation, deleveraging, growth investments, and shareholder returns. The priority order for our capital allocation policy is
Karen Williams: First, accelerating cash generation with a longer term free cash flow target of 45-50% of adjusted EBITDA.
Karen Williams: Second, although we are already right in the middle of our 1.5 to 2.5 times net debt to adjust a little bit to our target, continuing to deleverage.
Karen Williams: Third, as we continue to see cash flow acceleration and naturally de-leverage, it gives us optionality to invest in technology and organic growth.
Karen Williams: Fourth, we intend to continue to pursue accretive, highly synergistic M&A opportunities.
Karen Williams: And finally, we will focus on returning cash to shareholders.
Karen Williams: So to wrap things up, our second quarter performance was solid, with strong bottom line performance.
Karen Williams: With our continued focus on share gains, productivity, margin expansion, investing for long-term growth and cash flow acceleration, we are clearly delivering on these priorities and remain confident in our four-year 2024 guidance.
Speaker Change: We can now move into Q&A. Paul, David 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: Absolutely.
Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove your question, please press star followed by 2. Again, to ask a question, press star 1.
Karen Williams: As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.
Karen Williams: Our first question goes to the line of Lee Horowitz with Deutsche Bank. Your line is now open.
Leigh Horowitz: Great, thanks for the question. Can you just maybe expand on the state of the macro environment and your expectations for the rest of the year? We've obviously seen some things slow down.
Speaker Change: pointing towards acceleration. But can you just give a little bit more detail on some of the maybe spin pressures you're seeing in SME or any more color that you're seeing in this, you know, hypervolatile macro environment at the moment?
Speaker Change: Thanks for the question. I would say it's a continuation of the themes we discussed in Q1. We have seen a slowdown in same-store sales, particularly in the SME segment.
Karen Williams: On Global Multinational, I would say it's more...
Karen Williams: A stabilization, you know, we're starting to grow over...
Speaker Change: The ramp-up that we saw last year, particularly from the tech sector, that was a pretty steep ramp-up in the second quarter of last year.
Speaker Change: So I would say the outlook for global multinationals is actually pretty stable. SME, same-store sales have softened again a couple of points in that second quarter.
Speaker Change: But that's a trend, you know, we discussed in the last quarter, it's also a trend that's been discussed, you know, on quite a lot of earnings calls across various industries.
Speaker Change: You know, I think we are seeing a tightening of...
Karen Williams: of spending from, you know, small to mid-sized companies that are generally more exposed to interest expense and lending costs.
Karen Williams: But as it relates to the sort of balance of the year...
Karen Williams: You know, we're sort of expecting to see, you know, a moderate acceleration.
Karen Williams: In SME, because of the net new wins that we've already signed, as those start to get implemented in the second half of the year,
Karen Williams: You know, there is also a point of benefit in the sort of workdays in the second half of the year. So, you know, those two things combined are going to give us a, you know, very moderate acceleration in the second half of the year.
Karen Williams: And I think as Karen said in her comments there, we're sort of guiding to around 6-7% growth in the second half of the year, you know, and we're seeing, you know, one to two points of acceleration, but really based on, frankly, things that we can control, which is the implementation of the new business that we have in the pipeline.
Speaker Change: We're not assuming any improvement in the macro environment. We're assuming that the kind of underlying trends continue for the second half.
Speaker Change: Great, thanks. And then maybe one on NDC. We often feel questions from investors regarding your economics in an NDC world. Can you maybe elaborate a bit more on how you expect to keep your economics within the business travel ecosystem sort of stable as NDC content proliferates?
Speaker Change: Yeah, sure. I mean, there is no change to our economics.
Speaker Change: whether a transaction comes to Edifact or NDC.
Speaker Change: You know, they are simply different technical standards. You know, NDC provides our business partners, airlines.
Speaker Change: In particular, the opportunity to retail their products and services in a more flexible and a more personalized way.
Karen Williams: And so you should really just think of EDIFACT versus NDC as being two different technical standards. One being more modern that gives suppliers more flexibility, but it has no impact to our underlying economics or our contractual relationships with those business partners.
Karen Williams: You know, we actually think over time, now that we're starting to build NDC volumes, and I think we'll start to see more...
Karen Williams: Introduction of ancillary services and personalized offers you know we think over time that could actually create additional revenue opportunity for us because we don't participate really in the revenue stream from ancillary services today and that's something that you know could build over time so
Karen Williams: The real takeaway is no difference to our economics today, but some opportunity potentially in the future.
Speaker Change: Hopeful, thank you.
Speaker Change: Thank you, Lee. Our next question goes to the line of Duane Pfennigwerth with Evercore ISI. Your line is now open.
Joanne Senigworth: Hey, thank you. I thought the France stats were interesting and pretty aligned with what the airlines have been saying.
Joanne Senigworth: Apologies if you've already said this, but how much was business travel down in France in 2Q?
Joanne Senigworth: And, you know, how do you see that kind of comparing with the rest of Europe ? And then, you know, I guess what we're a week or so away from the other side of that, you know, how do you see kind of forward bookings for France in particular recovering?
Karen Williams: Yeah, thanks, Tony. We did see an impact. And that impact was a little earlier, frankly, than we anticipated. Companies actually did start to pull back on travel into and out of Paris earlier than we anticipated. We actually had a really strong Q1 in France, I think we were up 13% in the first quarter. But in the second quarter, we actually ended the second quarter minus four.
Speaker Change: Yeah, thanks Duane. We did see an impact, and that impact was a little earlier, frankly, than we anticipated. Companies actually did start to pull back on travel into and out of Paris earlier than we anticipated.
Speaker Change: We actually had a really strong Q1 in France. I think we were up 13% in the first quarter. We actually ended the second quarter minus 4.
Speaker Change: So it was actually a pretty significant swing, but that strong performance in Q1 is what actually gives us confidence that we're going to see that rebound.
Karen Williams: I think once we get into September . And frankly, it's really all about September . I mean, you know, July and August are slower months for business travel, particularly in Europe and particularly in France. And so if you look at our second quarter, 40% of our...
Speaker Change: 40% of our third quarter sales come in September , so really the question is more about what are we going to see post-Labor Day in terms of September demand.
Karen Williams: And do we see that recovery in France? And we believe we will. We believe we'll be back, you know, to solid levels of growth, you know, in France from September onwards.
Speaker Change: Thanks for that, that makes sense. And I wonder if you'd be willing, can you just touch on what transpired with American this quarter on the travel supplier side. They called out a new agreement with you, obviously they had a big push around NDC but
Unidentified Speaker: with American this quarter on the travel supplier side, they called out a new agreement with you. Obviously, they had a big push around NDC. So I guess, if you're willing, like what role did you play historically at American? You know, how did that role change in their aggressive push to NDC, which they are now unwinding, and does this new agreement kind of get you back to where you were, or are you doing kind of new and different things with them?
Speaker Change: claimed that the execution of that was unhelpful to a lot of travel management partners and travel management companies.
Speaker Change: So I guess if you're willing, what role did you play historically?
Karen Williams: at American, you know, how did that role change in their aggressive push to NDC?
Karen Williams: which they are now unwinding, and does this new agreement kind of get you back to where you were or are you doing kind of new and different things with them?
Karen Williams: Yeah, look, I think we certainly welcome the changes that American have announced. They've already put their content back into all of the available channels. And I think, importantly, they've said publicly, and Robert said this,
Speaker Change: on several occasions that they kind of recognized the importance of the travel management channel and they recognized the importance of the relationship with Amex GBT and
Speaker Change: Also, they have been clear, they recognize the importance of working collaboratively with customers and with distributors to drive the changes.
Karen Williams: that they would like to see in terms of the introduction of modern retailing and NDC and frankly, we very much welcome that that position from American. I think, you know, certainly I've said on many times, you know, in public forums that
Speaker Change: The best way to drive change in our industry is to make sure that we work collectively to drive that change and that, critically, that the customer is at the center of that change and that whatever we're trying to do, we have to make sure we bring customers with us and that we're delivering more value to customers.
Karen Williams: And I think, you know, that's certainly what you've heard from me on many occasions, and I think that's what you're hearing from Robert as well. So, yeah, certainly we welcome that change in position from Americans.
Unidentified Speaker: Okay, thanks for the thoughts.
Speaker Change: Okay, thanks for the thoughts.
Operator: Our next question goes to Tony Kaplan with Morgan Stanley. Your line is now open.
Joanne Senigworth: Thank you, Duane.
Hilary Lee: Hi guys, this is Hilary Lee on for Tony. I was just wondering if we could possibly go into the CWT acquisition, like, you know, any details I could provide of why it was pushed into Q1 of 2025.
Paul Abbott: Yeah, sure. Maybe I'll ask Eric to come in here. As you know, Eric is our Chief Legal Officer and also runs M&A. So, Eric, maybe you'd like to share your thoughts here?
Speaker Change: Sure, hi Hilary, how are you? Yeah, primarily the reason we switched into Q1 is because of the CMA Phase 2 which we announced and Paul commented on.
Speaker Change: So that would, you know, push our original H2 this year into Q1 next year. So that's primarily...
Speaker Change: why we pushed it into Q1.
Eric Bock: The bar is relatively low when you go from phase one to phase two.
Speaker Change: The bar is relatively low when you go from a Phase I to a Phase II.
Karen Williams: And they were, you know, focused on the competitive environment, which we believe we will be able to show continues to be intense with lots of competitors post-transaction.
Speaker Change: Customer service calls or a lot more cancellations on your end. Just wondering if you could provide any detail there. Thanks.
Speaker Change: In terms of the impact of CrowdStrike, I have to say that our teams responded to the situation
Karen Williams: Very quickly and very well, we picked up on some issues as our business opened up in APAC.
Karen Williams: It was clear that some issues were coming from the CrowdStrike software upgrade, and we work extensively with CrowdStrike.
Karen Williams: And so we were able to go into the...
Karen Williams: You know, firewall and stop that upgrade update, you know, in in other parts of the world, including critically the US.
Speaker Change: When there's disruption, that's when our customers, frankly, you know, need us the most. So, we certainly saw increased call volume. We obviously saw increased changes, cancellations. We utilized our proactive traveler care solution extensively, which reaches out to customers.
Karen Williams: to advise them of cancellations and changes and proactively support them to make sure they get where they need to go. And so it was an incredibly busy period. We have a lot of people working overtime through the weekend to ensure that we're there for our customers. But the bottom line is we've managed the process very, very well. Both our technology teams and our servicing teams were absolutely outstanding, and we have had... You know, we have managed through it very successfully.
Karen Williams: to advise them of cancellations and changes and proactively support them to make sure they get where they need to go. And so it was an incredibly busy period. We have a lot of people working
Karen Williams: So many notes from customers thanking us for our support through that period so you know I think
Karen Williams: In terms of the impact of the business, I don't expect that to have a material impact. You know, yes, there was some disruption over a two or three day period, but I don't think when we come to the end of the quarter, we're going to see that as a significant impact. Got it.
Karen Williams: You know, we managed through it very successfully. In terms of the impact of the business, look, I don't expect that to have a material impact.
Karen Williams: Yes, there was some disruption over a two or three day period, but I don't think when we come to the end of the quarter that we're going to see that as a significant impact.
Karen Williams: Thank you.
Speaker Change: Thank you.
Speaker Change: There are currently no other questions registered at this time, so as a reminder, it is star 1 on your telephone keypad to ask a question.
Speaker Change: Okay, in closing, just thank you very much to our team across the world for their dedication to our customers, the strong results they've delivered in the first half of this year.
Speaker Change: We are very confident that 2024 is going to be another year of share gains, strong growth and profitability, and free cash flow and continued margin expansion. Thank you to all of you for joining us today and your continued interest in the company. Thank you.