Q3 2024 Global Business Travel Group Inc Earnings Call
Good morning, I welcome to the American Express Global Business Travel 3rd quarter 2020-24 earnings conference school. As a reminder, please note today's school was being recorded. I'm an out-turned-to-coverte device president of investor relations, Jennifer Thurington, please go ahead.
Jennifer Thurington: Hello, I'm good morning everyone. Thank you for joining us for a third quarter 2020 for earnings conference call
This morning we issued an earnings press release which is available on at cc.gov in our website at investors.mxgulablebusinesstravel.com A slide presentation which accompanies today's prepared remarks is also available on the MSGVT Investual Relations webpage
Jennifer Thurington: We would like to advise you that our comments continue to look at the statements that are about to increase or expectations about future events, including industry and macro economic trends, cost savings and acquisitions and energies among others.
Jennifer Thurington: All four working statements involve risks and uncertainties that may cause actual results to differ materially from statements made on today's conference call.
More information on these and other risks and uncertainty is just contained in our earnings where we issue this morning and our other SEC Fire Ennis.
Throughout today's call, we will also be presenting certain non-gapsed financial measures, such as EBITDA, adjusted EBITDA, adjusted EBITDA, margin, adjusted operating expenses, free cash flow and net debt.
Jennifer Thurington: All references during today's call to such non-gap financial measures has been adjusted to exclude certain items.
Jennifer Thurington: Death missions of these terms and the most directly comparable gap measures and reconciliation and on-gat measures are available in the subtle menel materials of this presentation and in the earnings really.
for participating with me today, Paul Abbott, or Chief Executive Officer, and Karen Williams, our Chief Financial Officer. Also joining for the Human A session today's airfock, our Chief Legal Officer in Highland Global, M.N.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 third quarter 2024 earnings call.
Paul Abbott: In the third quarter, we continued to drive strong momentum and deliver strong financial results. Our focus on controlling costs and driving operating leverage drove impressive adjusted EBITDA growth with significant margin expansion.
Paul Abbott: giving us confidence to narrow the range and reiterate the midpoint of our full year adjusted EBITDA guidance.
Jennifer Thurington: Increased demand for our software and services resulted in continued share gains. We have sustained our pace of new wins and importantly maintained our very high customer retention rate.
Paul Abbott: Continued free cash flow acceleration remains a very important focus for the company. Our strong third quarter results give us the confidence to raise our full year free cash flow guidance once again.
Jennifer Thurington: We've previously talked about our capital allocation strategy, and I'm incredibly pleased with our progress on executing exactly what we said we would do.
Jennifer Thurington: We have significantly reduced the interest we pay on our debt, continued to deleverage and strengthen the balance sheet, and we are in a strong position to continue investing in growth and productivity gains and finance the closing and integration of the CWT acquisition.
Jennifer Thurington: This significant progress in our financial performance has brought us to an important milestone, returning cash to shareholders.
Jennifer Thurington: During the quarter, as we previously announced, we executed our first share buyback, and today I'm pleased to report our Board of Directors has approved a new, larger share buyback authorization.
Jennifer Thurington: Turning to some of the highlights of the third quarter, we continued to execute on our strategy and deliver strong financial results with significant adjusted EBITDA growth. Starting with transaction growth, transactions were up 5% driven by increased demand for business travel and our share gains.
Jennifer Thurington: TTV grew by 9% to reach nearly $8 billion, driven by transaction growth and higher average ticket prices and hotel room rates.
Jennifer Thurington: This included a mixed benefit from higher international TTV and strong TTV growth in certain industry verticals like financial services and pharma.
Jennifer Thurington: Revenue was up 5% to reach $597 million for the quarter, driven by solid growth in transactions, TTV, and increased demand for our products and our professional services.
Jennifer Thurington: Finally here, our focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 23% to $118 million with strong margin expansion of 300 basis points.
Jennifer Thurington: Growth was strong with global multinational customers up 8% in the quarter and I'm going to provide more detail on this in the next slide. SME transaction growth remained muted at 2% growth.
Jennifer Thurington: but improved modestly versus the 1% growth we reported last quarter. As we described last quarter, SME customers have tightened spending controls in the face of sustained higher prices and higher interest rates.
Jennifer Thurington: This remains a broader trend for SME businesses beyond travel.
Jennifer Thurington: Growth in domestic air transactions was 4%. Regional and international growth combined was up three, with international specifically up 6%.
Jennifer Thurington: Growth in hotel transactions was 6%, which outpaced the 4% growth in air transactions.
Jennifer Thurington: 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 hotel value and more choice.
Jennifer Thurington: Finally, on a regional basis, transaction growth was 6% in the Americas, 11% in Asia Pacific. EMEA growth was softer at 2% impacted by the Olympics in France.
Jennifer Thurington: As a reminder here, for organizational purposes, we divide our customer base into two general categories, global multinational and small and medium enterprises.
Jennifer Thurington: We generally use expected annual TTV to divide customers into these categories.
Jennifer Thurington: Although, this measure can vary by country and by customer need.
Jennifer Thurington: We do not have products or services that are offered solely to one size of customer.
Jennifer Thurington: We tend to find that customers of all sizes may prefer different solutions. Some larger customers may prefer a simpler approach, while some smaller customers may prefer a more bespoke, high-touch, global solution.
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!
Speaker Change: Looking specifically at global multinational customers, we maintained very high customer retention rate of 98% over the last 12 months, demonstrating the value that we bring to this important customer set.
Jennifer Thurington: We continue to see stronger relative performance with our global multinational customers. Total GMN transactions were up 8%, with double-digit growth in pharma, automotive, and financial services industries.
Jennifer Thurington: Thank you very much.
Jennifer Thurington: We saw very solid growth across almost all of our top industry verticals. Technology growth returned to more normalized levels as the same store sales cycled over the technology ramp up we saw in the third quarter of 2023.
Jennifer Thurington: TTV growth in the quarter was 9% and outpaced transaction growth by 4 percentage points.
Jennifer Thurington: GMN TTV growth was particularly strong, up 13%.
Jennifer Thurington: and within the regional and international category, international air TTV was up 11%.
Speaker Change: Looking ahead, our most recent customer survey indicates that demand remains solid as we look over the balance of the year. It shows that our top 100 customers expect travel spend to be up approximately 5% in the fourth quarter.
Speaker Change: So, turning here to the commercial highlights, we continue to gain share.
Speaker Change: with total new wins value of $3 billion over the last 12 months.
Speaker Change: Importantly, these share gains are on a very strong foundation of impressive customer retention, which we've maintained at 97% over the last 12 months.
Speaker Change: Our biggest growth 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, but 70% of this opportunity is not currently in a managed travel program.
Speaker Change: Our new wins clearly demonstrate that more and more SME customers are recognizing the benefit of a managed travel program, including significant savings to our preferred extras rates, more control over their travel spend, and of course, 24-7 customer service and duty of care.
Speaker Change: This value proposition is clearly resonating. Our SME new wins value totaled 2.1 billion over the last 12 months with 14% year-over-year growth in the number of unmanaged customer wins.
Speaker Change: In the third quarter, 80% now of our transactions came through digital channels, up three percentage points year over year. And 60% of our digital bookings came through on our own software platforms, Neo and Agencia.
Speaker Change: We believe owning our own software platforms is a significant competitive advantage because we can control and improve the user experience. Growth on our Neo platform was particularly strong, up 18% year over year.
Speaker Change: We continue to provide customers with more value and more choice in our marketplace through enhanced content.
Speaker Change: We are working with over 20 airlines on NDC to help our airline partners retail to our premium customers in the most effective way.
Speaker Change: The collaboration with American Express Card and our NEO1 spend management platforms also progressing well. We have more than doubled our NEO1 customer base year over year.
Speaker Change: We also continue to make business travel more sustainable.
Speaker Change: We are among the first in the business travel industry to achieve SBTI validation of our carbon emission reduction targets.
Speaker Change: We continue to invest in our products and services to provide customers with more value and more choice.
Speaker Change: New features this quarter include benchmarking dashboards in our Peer Travel Insights tool. This uses key performance indicators for customers to compare their company's travel program against other peers in their industry.
Speaker Change: We also launched a new group travel solution on the Agencia platform.
Speaker Change: I'm pleased to say our product leadership has been recognized by G2, the largest and most trusted peer-to-peer review site that more than 60 million people and many Fortune 500 companies use to make software decisions.
Speaker Change: Amex GBT Agencia has proudly received 19 awards from G2 this fall which are based on verified user reviews from travelers and travel managers.
Speaker Change: We're also focused on providing the very best traveler experience. In the third quarter, we updated the Agencia mobile app to deliver a more intuitive user experience.
Speaker Change: And we made improvements to the NEO checkout process and the Agencia trip management experience.
Speaker Change: As we mentioned last quarter, we are investing in automation and AI to deliver operational efficiencies across four areas.
Speaker Change: And these four areas represent 70% of our adjusted operating expenses.
Speaker Change: The four areas include increasing service efficiencies, increasing engineering velocity, streamlining our financial processes, and enabling our workforce.
Speaker Change: Let me provide a quick update on our progress on each of these four areas.
Speaker Change: First, we are piloting our proprietary email AI solution that saves travel counsellors time by generating offers based on incoming customer email requests.
Speaker Change: Second, we have now expanded our use of the GitHub Copilot and used it to accelerate the software development required to launch our new corporate website.
Speaker Change: Third, we have deployed automation for our credit card reconciliation process, reducing the average handling time by approximately 50%.
Speaker Change: And fourth, we've deployed AI to respond to our customers' program change requests faster, reducing these timelines by approximately 80%.
Speaker Change: So as you can see, we're making measurable progress and continue to see AI as a huge opportunity to drive productivity improvements.
Speaker Change: Finally, regarding the CWT acquisition, we continue to work through the relevant regulatory approval processes and we continue to expect the transaction to close in the first quarter of 2025.
Speaker Change: and now I'd like to hand it over to Karen to discuss the financial results and 2024 outlook in more detail.
Karen Williams: Thank you, Paul, and hello, everyone.
Karen Williams: I've previously talked about my three key priorities when it comes to managing our financial performance.
Speaker Change: And as a reminder, they are Accelerating Cash Flow Generation.
Speaker Change: 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 third quarter I am really happy with the progress we have made in all three of these areas.
Speaker Change: So now let's turn to our financial performance in more detail.
Speaker Change: Revenue reached $597 million, up 5% year-over-year.
Speaker Change: Although revenue growth was more consistent with the first half of the year and transaction growth did not accelerate as much as we expected, we still delivered a just a little bit dar in line with our expectations, thanks to our rigorous cost control.
Speaker Change: And importantly, free cash flow exceeded our expectations.
Speaker Change: Revenue yield, which we define as revenue divided by TTV, was 7.7 percent.
Speaker Change: As a reminder, our revenue model is driven by 50% transaction volume, 30% TTV, and 20% product and professional services revenue.
Speaker Change: So only 30% of our revenue benefits from higher air and hotel pricing.
Speaker Change: And so it's important to highlight as TTV grows faster than transactions, as we saw in the quarter, it has a negative impact on the yield metrics.
Speaker Change: The 30 basis points year-over-year decline was very much in line with our expectations.
Speaker Change: And I encourage you to look at our overall yield performance on an annualized basis, which we expect to be down 15 to 20 basis points for the full year.
Speaker Change: This reflects the non-TPV driven components of the revenue base and continued shift to digital transactions, which has a positive impact on our adjusted EBITDA margin.
Speaker Change: And as previously discussed, there is seasonality in our yield, with Q4 being our highest revenue yield quarter.
Speaker Change: As we turn to total operating expense, 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 our focus on cost and increasing productivity.
Speaker Change: Importantly, we are delivering over $100 million in cost savings this year that not only drive our margin expansion, but enable us to reinvest for future growth.
Speaker Change: In 2024, we are investing an incremental $35 million, which represents a slightly lower CapEx expectation now, with a $75-$25 split between OPEX and CapEx.
Speaker Change: Together, the net impact of these resulted in adjusted operating expense growth of 1% year-over-year versus revenue growth of 5%.
Speaker Change: Adjusted EBITDA grew 23% to 118 million with an Adjusted EBITDA margin of 20% growing an impressive 300 basis points year over year.
Speaker Change: I'm incredibly happy with the continued momentum and acceleration when it comes to cash flow generation.
Speaker Change: In the quarter, we achieved free cash flow generation of $59 million. This has been driven by a working capital optimization initiative, lower capex spend in addition to significantly lower interest expense.
Speaker Change: As a reminder, we executed a debt refinancing in July that significantly lowered our interest costs. Importantly though, through our derivative strategy, we have further reduced our costs.
Speaker Change: When we consider this recent refinancing and our interest rate hedges and swaps,
Speaker Change: In addition to the previously achieved savings tied to our lowered leverage, the expected run rate cash interest savings achieved were approximately $50 million and represent a 35% reduction versus 2023.
Speaker Change: And finally, our leverage ratio on net debt divided by last 12 months adjusted EBITDA is 1.9 times as of September 30th, 2024.
Speaker Change: This represents a very significant step down from the 2.7 times in September 2023 and is just below the midpoint of our target leverage ratio of 1.5 to 2.5 times.
Speaker Change: We've previously shared our powerful financial model with you all and how it positions us for industry-leading returns.
Speaker Change: First, we expect business travel demand for our premium customer base to grow above GDP.
Speaker Change: Second, we expect to continue to grow ahead of the market by driving share gains with our differentiated value proposition.
Speaker Change: Third is our focus on margin expansion. We are laser focused on a disciplined cost structure and continued margin growth.
Speaker Change: Our operating leverage is forecasted to drive 24-26% adjusted EBITDA growth in 2024, reflecting our narrowed guidance range that I will discuss in more detail shortly.
Speaker Change: Fourth, we're incredibly focused on optimizing our cash flow deployment. A positive and accelerating free cash flow can fund important incremental growth opportunities in M&A, including significant value creation from the pending CWT acquisition.
Speaker Change: And finally, we are in a very strong position to return cash to shareholders.
Speaker Change: And so let's turn to the full year 2024 guidance.
Speaker Change: We are hitting the mark of what we can control.
Speaker Change: Although revenues are at the lower end of our guidance, adjusted EBITDA, free cash flow and margin are all ahead of expectations.
Speaker Change: Given the softer macro environment and uncertainty related to interest rates as we've talked about previously, revenue growth continues to track towards the lower end of the guidance range provided at the start of the year.
Speaker Change: We are now narrowing our guidance for the full year revenue to $2.415 million.
Speaker Change: to 2.435 billion, which represents a year-over-year growth of approximately 5.5% to 6.5%, and a midpoint of 6%, consistent with the low end of the prior range.
Speaker Change: and reflective of what we are currently seeing in terms of performance.
Speaker Change: For the fourth quarter, our guidance implies a modest revenue growth acceleration, largely driven by higher yield related to timing a certain performance threshold and in line with the seasonality of our revenue model.
Speaker Change: We remain focused on driving continued operating leverage.
Speaker Change: This includes in excess of $100 million of cost savings from the carryover actions taken in 2023.
Speaker Change: plus new cost initiatives and productivity improvements this year. Executing these savings enables us to deliver strong margin expansion of 290 to 310 basis points while still making significant investments in future growth.
Speaker Change: We have narrowed our full-year Adjusted EBITDA guidance range to $470 to $480 million, representing growth of 24 to 26 percent. And again, we are reiterating the midpoint of our Adjusted EBITDA guidance.
Speaker Change: demonstrating the strong margin performance we've already seen year to date and our confidence into Q4.
Speaker Change: And finally, but very importantly, given our focus on cash, I am delighted to raise our guidance for free cash flow for the second time this year.
Speaker Change: We now expect to generate approximately $160 million in 2024 compared to the previous guidance of at least $130 million. This more than triples our free cash flow from last year and represents a conversion rate of just under 35% of adjusted EBITDA.
Speaker Change: I want to end by highlighting our accomplishments with respect to the capital allocation priorities we laid out earlier this year.
Speaker Change: Our first priority is accelerating cash generation, which our results clearly demonstrate we have accomplished.
Speaker Change: Second, continuing to deleverage.
Speaker Change: Our Q3-24 leverage ratio of 1.9 times is now in the lower half of our target.
Speaker Change: And as previously discussed, we have achieved just under $50 million of expected run rate interest savings.
Speaker Change: Third, as we continue to see cash flow acceleration and naturally de-leverage, it gives us optionality to invest in our business, including our people, software platforms, SME sales and marketing engine and AI to drive organic growth, productivity and margin expansion.
Speaker Change: Fourth, with respect to M&A, we continue to work cooperatively with the regulators and expect the CWT acquisition to close in the first quarter of 2025.
Speaker Change: Because the financing is primarily stock, we expect to remain within our target leverage range following the transaction close.
Speaker Change: And as you heard from Paul, our confidence in our business model and strategy puts us in a very strong position of now being able to return cash to shareholders.
Speaker Change: In the third quarter, we repurchased 8 million shares in a private share buyback from an unaffiliated third party, representing approximately $55 million.
Speaker Change: This transaction was our first share buyback and an efficient way to repurchase shares at a discount while managing potential overhang risks that could have resulted from them selling in the open market.
Speaker Change: I'm thrilled that today we announced our Board of Directors has authorized an additional share buyback of up to $300 million and with this new authorization in place we expect to return cash to shareholders.
Speaker Change: So to wrap things up, our third quarter performance was strong. We are clearly delivering on our priorities and are confident in our full year 2024 guidance. We will provide our 2025 outlook next quarter.
Speaker Change: So we can now move into Q&A. Paul and I are joined by Eric Box who is our Chief League Officer and Global Head of M&A. Operator, please go ahead and open the line.
Speaker Change: If you'd like to ask a question on today's call, please press star followed by 1 on your telephone keypad now to enter the queue.
Speaker Change: And our first question comes from Peter Christensen from City. Peter, please go ahead, your line is open.
Peter Christensen: Thank you. Good morning. Thanks for the chance to answer questions. Karen, really impressive on the pre-cash flow generation here. If we think about
Speaker Change: current run rate, and I guess on a stand-alone basis.
Speaker Change: Do you think that, you know, we should rank cost savings?
Speaker Change: further, or is it more a function of finding working cap efficiencies or...
Speaker Change: or even the CapEx efficiencies, considering that, you know, you still are investing. Granted, I recognize this is on a standalone basis, but it would be good to get a sense of the runway you see for free cash flow expansion going forward. Thank you.
Speaker Change: So Pete, thanks for the question.
Speaker Change: Certainly, we're very happy, I would say, first off, in terms of the momentum that we're continuing to see.
Speaker Change: and our profit growth in terms of that continued margin expansion given our focus around cost will continue to be a big component.
Speaker Change: But to your second point, as you think about the CAPEX side, as we focus in terms of really that productivity and making our CAPEX spend go further in terms of the investments that we're making from AI and just that productivity, that will also contribute in addition to
Speaker Change: just continuing to chip away in terms of the interest expense and you heard us on this call in terms of obviously we have the refinancing but there's you know there's further reductions in terms of that interest expense given some of the swaps that we've done from a derivative perspective and so again feel good about that.
Speaker Change: That's fair. Thank you. That's helpful. And Paul, I wanted to ask about S&B.
Speaker Change: on some of the activity. We obviously slowed down the last two quarters. Just curious if you're seeing that broadly across, I guess, all industry verticals, or are there certain soft areas that we should be mindful of? Thank you.
Speaker Change: Thank you.
Paul Abbott: Thanks for the question, Pete.
Speaker Change: I think if you look at the SME growth rate in a quarter, it did actually move up a point versus last quarter. It's still below the level of multinational, but hopefully that is a kind of stabilization of the decline that we've seen over the last decline in the growth rates over the last few quarters.
Speaker Change: And I think, as I said last quarter, you know, if you look across different industries, it's very well reported that small, mid-sized businesses have certainly been feeling
Speaker Change: the pressure of higher prices and obviously much higher interest rates. And so now that we're seeing interest rates gradually move down in the Eurozone, in the UK, in the US.
Speaker Change: Hopefully, we can keep inflation under control and those interest rates continue to decline. We think that will improve confidence with small to mid-sized businesses as we go into 2025. I think I shared this data point before, we look at the annexed card spending.
Speaker Change: with small businesses across a very large base in the U.S. That car spending also stabilized in the third quarter.
Speaker Change: So I think, hopefully, we're seeing that stabilization and as the macro conditions improve and interest rates continue to move down, we'll start to see a gradual improvement.
Speaker Change: Super helpful. Thank you, Paul. Thank you, Karen.
Speaker Change: The next question comes from Dwayne Fennigworth from Evercore ISI. Dwayne, your line is open, please go ahead.
Dwayne Fennigworth: Thank you.
Dwayne Fennigworth: Thank you.
Dwayne Fennigworth: Hey, thanks. Nice operating leverage this quarter, but just curious about the spread between TTV growth and revenue growth. Is that at all a function of your customer mix? Is this about large multinationals growing faster than SMEs? Is that part of the driver?
Speaker Change: Dwayne, thanks.
Speaker Change: for the question. And see, it is...
Speaker Change: higher than what we have traditionally seen in terms of that spread. Although when you look back to Q1, it's very much in line with what we've seen. And really what we're seeing drive this is essentially a component is being driven by the international mix.
Speaker Change: but then also Price if you think about more at the front of the plate.
Speaker Change: that is really helping in terms of that. What I would say as well, Duane, is just remember in terms of the TTV growth, it's from a revenue perspective, it makes up 30%. And so you have that denominator.
Speaker Change: component, that numerator component that can skew it.
Speaker Change: Thanks and then just maybe you could expand a little bit on the the drivers of improved free cash flow and appreciate the detail you gave us in the presentation but specifically what is driving a lower investment this year is it you know should we think about it more as timing or you know projects that you're no longer pursuing but
Speaker Change: Just any more detail on the drivers of the improved free cash flow outlook. Thank you.
Speaker Change: Yes, sure, Duane. So it's primarily driven in terms of the interest expense. So part of it is just as a result of the refinancing, and you'll see that the interest expense in the quarter
Speaker Change: was significantly lower because she had the accrued interest in the second quarter. So that is the biggest driver in terms of the CAPEX spend.
Speaker Change: We are still investing. We haven't changed in terms of, or shifted our priorities in terms of those investments.
Speaker Change: It is a mix of us just being, continuing, as I just talked about earlier on the call,
Speaker Change: continuing to be very focused in making those dollars go further in terms of productivity saves, low-cost locations, and such, in terms of where we're hiring some of those roles.
Speaker Change: In addition to there is a small component of just phasing, but it's much more about the interest expense story.
Speaker Change: Got it. And then maybe just one last one.
Speaker Change: And this is a question we got from a client this morning. Just thinking about the timing lag.
Speaker Change: between your transactions
Speaker Change: and you know when that
Speaker Change: sort of business travel is actually consumed. You know, we tend to think about business travel as fairly close in, within a week or two.
Speaker Change: So would you say that your 3Q transactions are representative of activity in the third quarter and consumption in the third quarter, or do you view it as leading in nature at all?
Speaker Change: You're right, it's a pretty tight window between actual transactions and travel, so you should certainly think about our transaction performance relating to activity in July, August, and September.
Speaker Change: Thank you.
Speaker Change: As a reminder, that's star followed by one. The next question comes from Lee Horowitz from Deutsche Bank. Lee, your line is open. Please go ahead.
Lee Horowitz: Alright, thanks. We may be sticking with the SME growth for the year. It's obviously a bit constrained by the macro environment. I guess as we look at the next year and beyond...
Lee Horowitz: Since the reason that may be a healthier backdrop would drive SME demand to be stronger than it is this year. And perhaps you grow more quickly. Is SME returning sort of the base lever that gets you from the low end of your long-term range that you're gonna deliver this year versus, you know, touching up near the high end?
Speaker Change: Thank you very much.
Speaker Change: Yeah, well, I think that's fair. You know, I think my background.
Speaker Change: economic conditions would obviously help across the base but
Speaker Change: Certainly, I do think that the SME segment is more sensitive to those conditions, so you will see an improvement in, I think, the SME growth rates in the fourth quarter.
Speaker Change: and Karen referenced some of the investments that we've made in the second half of this year in order to accelerate our SME growth rates. We've made further investments in our
Speaker Change: SME Sales and Marketing Channels.
Speaker Change: that we think will also help in terms of share gains and growth rates as we move into 25. So it's not all about
Speaker Change: the macro conditions. We obviously have to focus on the things that we can control and that's making sure that we're driving, you know, greater productivity and greater results from all of our SME sales and marketing channels as well. But I think your question is a good one. It's definitely a lever for us as we look into 2025.
Speaker Change: Great, thanks. And then, you know, we've been talking a lot about your ability to leverage the end of the AI across your cost base, you know, highlighted what 70% I think of cost.
Speaker Change: I guess at this point, can you, you know, you have some nice metrics on time savings and, and, you know, the things that you've been able to achieve there, but any quantification of how much
Speaker Change: or cost you've actually taken out of the business by leveraging these technologies to date and what you think the opportunity is going forward, like how much of that 70% of your cost base can you actually affect the real cost change going forward?
Speaker Change: Yeah, look, I think if you look at our
Speaker Change: margin expansion opportunity. We see it as a significant continued runway for margin expansion. And I think Karen's mentioned before, 100 basis points per annum, minimum moving up to the mid 20s. And we do see automation broadly playing a critical role in that. It's not just about AI.
Speaker Change: that we're using in certain parts of our business. We have moving transactions to our software platforms, which is taking demand out of the voice channel into our digital channels, where we have a higher margin and a higher ROR.
Speaker Change: and it's also then using AI and using generative AI in different use cases across the business. So I think it's tough to put a dollar number specifically on generative AI use cases.
Speaker Change: But I think the best way to look at it is it's a very important lever to help us deliver that continued margin expansion that we've committed to. And look, you see it in the third quarter, you see 300 basis points of margin expansion year over year.
Speaker Change: You see 1% growth in OPEX versus 5% growth in revenues.
Speaker Change: But we're also in parallel with that, investing more in the business, investing more in our AI capabilities, investing more in our SME growth channels, investing more in our software platforms. So that operating expense is coming through productivity gains.
Speaker Change: not through investment reductions, coming through productivity gains that are being driven significantly by a series of different automation levers, including AI.
Speaker Change: Thank you.
Speaker Change: Just a reminder, that's star followed by one.
Speaker Change: Well, thank you to everyone for joining us. I want to finally kind of thank our team for their dedication to our customers and the very strong results that they've delivered again this quarter. We remain very confident that 2024 is gonna be another year of growth, share gains, continued margin expansion, accelerating cashflow, which of course is enabling us to return more cash to shareholders. So thank you very much for joining us today and your continued interest in American Express Global Business Travel. Thank you.
Speaker Change: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Speaker Change: [music]