Q1 2025 Global Business Travel Group Inc Earnings Call
Good morning, and welcome to the American Express Global Business Travel, first quarter, 2025 earnings conference call. As a reminder, please note today's call that's being recorded. I'll now turn the call over to Vice President of Investor Relations, Jennifer Thorington. Please go ahead.
Speaker Change: Hello, and good morning, everyone. Thank you for joining us for a first quarter 2025 Ernie's conference call.
Speaker Change: This morning we issued an earnings press release, which is available on SBC.gov and our website at investors.amxlowledbusinesstravel.com. A slide presentation, which accompanies today's prepared remarks, is also available on the MXGBT Investor Relations webpage.
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 four are looking statements in all 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 issues this morning and our other SEC filing.
Speaker Change: Throughout today's call, we will also be presenting certain non-GAAP financial measures such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted operating expenses, constant currency, Workday, Adjusted revenue, free cash flow, and net debt.
Speaker Change: All references during today's call to such non-GAAP financial measures have been adjusted to food and certain items. Definitions of these terms in the most roughly comparable gap metrics and reconciliation for non-GAAP metrics are available in supplemental materials of this presentation and in the earnings release.
Speaker Change: Participating with me today, our Paul Abbott, our Chief Executive Officer, and Karen Williams, our Chief Medical Officer. Also joining for the Q&A session today is Eric Bock, our Chief Legal Officer at Head of Global M&A. With that, I will now turn the call over to Paul. Paul?
Paul Abbott: Thank you, Jennifer. Welcome to everyone and thank you for joining our first quarter 2025 earnings call.
Speaker Change: I'd like to kick off with some key points we want you to take away from today's call.
Speaker Change: First, we continue to deliver really strong results in the first quarter with 15% growth in adjusted even though 260 basis points margin expansion and a 9% increase in pre-cash flow.
Speaker Change: We are delivering on the commitments for strong earnings growth, margin expansion and cash generation.
Speaker Change: Second, we have diverse resilience revenue streams, very high customer attention and consistent share games. Our Q1 performance demonstrates these very strong fundamentals.
Speaker Change: Third, we have a strong and flexible operating model that allows us to adapt to a range of economic conditions. We have a proven track record of cost control and margin expansion that positions us well to manage through more uncertain economic conditions.
Speaker Change: And finally, we are continuing to invest to drive sustained growth with confidence in our long-term growth prospects.
Speaker Change: Here is obviously more economic uncertainty and as a result less full-year visibility but we have delivered strong Q1 results and a solid guy for Q2. Our approach to a slower growth environment is to remain laser focused on what we can control, share gains, margin expansion, cast generation and driving shareholder returns.
Speaker Change: Turning to the first quarter highlights, we delivered strong, adjusted EBITDA and cash flow growth and impressive margin expansion in line with our commitments despite a slower demand environment.
A Valley Proposition [inaudible]
Speaker Change: To provide customers more savings and control over their travel spend becomes even more valuable in a weaker economic environment.
Speaker Change: We continue to gain share with an accelerated pace of new wins and importantly we maintained a very high level of customer attention.
We have previously talked about our capital allocation strategy.
Speaker Change: and we are executing exactly what we said we would do to drive shareholder value. We've lowered our leverage ratio, received to credit rating upgrades and amended our CWT merger agreement to reduce the original purchase price and the number of shares issued.
Speaker Change: The current environment doesn't change our longer term strategy or our earnings power. We believe our resilient and flexible business model will demonstrate that we are the preferred industry investment during this cycle and for the long run.
Speaker Change: Taking a closer look at the financial highlights of the first quarter, growth rates provided here are on a constant currency workday adjusted basis.
Speaker Change: Total transaction volume was up 4% driven by increased demand for business travel and our sharegames.
Speaker Change: TTV, or Total Transaction Value, which reflects both volume and price grew 5% to reach 8.3 billion. This was driven by transaction growth and modestly higher average ticket prices and hotel room rates.
Speaker Change: Revenue was up 4% to reach 621 million for the quarter, driven by solid growth in Transactions and TTP and increased demand for our products and professional services.
Speaker Change: Although these top line results were solid, they were roughly one percentage points softer than we expected coming into the year due to a modest slowdown in organic transaction growth.
Speaker Change: However, our focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 15% to 141 million in line with what we said we would deliver with strong margin expansion of 260 basis points.
Speaker Change: Turning to the work they adjusted transaction growth in more detail, just as a reminder here for organizational purposes, we divide our customer base into two general categories, global multinational and small and medium enterprises.
Speaker Change: We don't have products or services that are offered solely to one-size-of-customer. 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, five-touch global solution.
Speaker Change: Transaction Growth was relatively stronger with global multinational customers, up 6% in the quarter. We saw stronger growth in financial services, farmer and industrial sectors.
Speaker Change: and the broad range of industries that we serve brings us diversification to our revenue streams.
Speaker Change: SME growth remains slower at 2%, as we previously described, SME customers have tightened spending controls in a broader trend for SME businesses beyond just travel spend.
Speaker Change: Growth in domestic air and regional and international air transactions were both up 2%. Our US air TV growth was 3% in the quarter in line with the commentary provided by the major US airlines on corporate spend growth.
Speaker Change: We are also well diversified from a supplier perspective with hotel becoming an increasing share of our revenue.
Speaker Change: Growth in hotel transactions continues to outpace air at 5% versus 2%.
Speaker Change: This reflects industry trends and also our 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.
Speaker Change: Finally, on a regional basis, Transaction Growth was 3% in the Americas, 4% in EMEA and Asia-Pacific continues to outpace the rest of the world at 7%.
Speaker Change: So, turning here to the commercial highlights, our solutions provide complete visibility and control over travel spend.
Speaker Change: and our marketplace provides access to the most comprehensive and competitive content to deliver
Speaker Change: Plus, we've also maintained our ability to invest through different economic cycles.
Speaker Change: Because of all of this, we have historically seen strong sales performance and a flight to quality during more challenging macro environments.
Speaker Change: In the first quarter, we continued to gain share. We said our total new wins value would accelerate in Q1 and it did, to a total of 3.2 billion over the last 12 months.
Speaker Change: And importantly, these sharegames are on a very strong foundation of impressive customer attention of 96% over the last 12 months.
Speaker Change: Our value proposition is clearly resonating with SME customers which represents our biggest growth opportunity.
Speaker Change: SME Newwinds value total $2.3 billion over the last 12 months, more and more SME customers recognize the benefit of a managed travel programme, with our number of unmanaged SME winds up 8% year over year.
Speaker Change: We continue to invest in technology transformation, including automation and AI, to improve the customer experience and increase productivity.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Let me provide clarity on the actions that we're taking with our operating costs and productivity gains and what makes our earnings less sensitive to softening economic conditions.
Speaker Change: In the first quarter, 81% of our transactions came to digital channels. Growth in digital channels was 5% year-over-year on a work they adjusted basis and outperformed overall transaction growth as we intentionally drive a higher mix of these more profitable, higher margin digital
Speaker Change: Over 60% of our digital bookings came through on our own software platforms, Neo and Egencia.
Speaker Change: Owning our software platforms is a significant competitive advantage. We've proven that we can improve the user experience and accelerate the share of digital transactions using AI and machine learning to improve productivity and reduce costs.
Speaker Change: Adjusted operating expenses declined 1% year over year, even with incremental investments in future growth, and traveler care productivity went up an impressive 7% year over year
Speaker Change: The end result, 260 basis points of adjusted EBITDA margin expansion, a powerful demonstration of our cost control and productivity gains.
Speaker Change: Finally, regarding the CWT transaction, we announced an amended merger agreement.
Speaker Change: The highlights are an extended deadline to provide the parties with additional time to defend the lawsuit filed by the DOJ as necessary and a revised transaction value with a reduction in the number of shares expected to be issued from approximately 72 million to approximately 50 million.
Speaker Change: And now I'd like to hand it over to Karen to discuss the financial results and the 2025 outlook in more detail.
Karen Williams: Thank you Paul and hello everyone. In the first quarter we continue to execute against my three key priorities in terms of managing our financial performance.
Karen Williams: We Accelerated Casually Generation, Drows Operating Leverage and Continued Margin Expansion, and, importantly, continued to invest.
Karen Williams: This formula has driven amazing progress and strong financial results. It gives us confidence as we navigate through a more uncertain macroeconomic environment.
Karen Williams: So now, let's turn to our financial performance in more detail.
Karen Williams: We continue to control what we can control and deliver our commitment.
Karen Williams: Whilst transaction and revenue growth was about one percentage point below our expectations coming into the quarter, we still delivered Adjusted EBITDA, Adjusted EBITDA margin and free cash flow in line with the expectations we previously communicated for Q1.
Karen Williams: Revenue reached $621 million, up 4% year over year, on a constant currency, works
Karen Williams: On a reported basis, revenue was up 2%, reflecting a negative impact of one percentage point from effects of one percentage point from fewer work days.
Karen Williams: Revenue Yield, which we define as Revenue divided by TTV, with 7.4%
Karen Williams: As expected, this was down 8 basis points year-on-year, reflecting the non-TTV-driven components of the revenue base, and a continued shift to digital transactions.
Karen Williams: which has a positive impact on our adjusted EBITDA margin. And as a reminder, Q1 is seasonly a lower revenue yield quarter.
Now let's turn to total operating expenses.
Karen Williams: I am incredibly pleased with the momentum we're seeing across the enterprise when it comes to our focus on costs and increasing productivity. We are clearly doing more with less.
Karen Williams: A jufted operating expenses were down 1% year-over-year driven by a cost-saving initiatives and productivity
Karen Williams: This enabled us to make continued investments in technology content sales and marketing to drive future growth and productivity.
Karen Williams: It is also worth noting that we have a favourable assets impact, but is previously discussed given the natural hedge between revenue and expense, the impact to a judge's EBITDA is neutral.
Karen Williams: Putting links together, adjusted EBITDA grew 15% to $141 million and our adjusted EBITDA margin grew an impressive 260 basis points year over year to reach 23%.
Karen Williams: We saw continued momentum when it comes to cash and generated 26 million dollars of free cash flow in the quarter, up 9% year over year.
Karen Williams: Moving to the balance sheet on leverage ratio on net debt divided by last 12 months of Justice EBITDA continued to de-meverage to 1.7 times as of March 30th, 2025.
Karen Williams: And as discussed on our last earning call, we refinance the entirety by death at the start of the quarter. Lowering our interest rate by 50 basis points with the new term loan facility price that so far, plus 2.5%.
Karen Williams: And finally, but importantly, I am very pleased that we receive two credit rating upgrades in the quarter from Moody's and S&P. These upgrades are recognition of strong momentum.
Karen Williams: Our powerful financial model is more important than ever in an uncertain macroeconomic environment, and that is why we believe GBTG should be a preferred industry investment.
Karen Williams: With confidence that with our strong financial model, a Justin Ibidar will continue to outpace revenue growth.
Karen Williams: We expect business travel demand from our premium customer base to grow above GDP. Additionally, we expect to continue to grow ahead of the market by driving share gains with our differentiated value proposition.
Karen Williams: On laser focus on operating efficiency, disciplined cost management and quite frankly a track record here creates a significant runway for margin expansion, particularly as we leverage AI and automation.
Karen Williams: From a capital deployment perspective, we are incredibly focused on value creation. Our strong free cash flow generation can fund important incremental growth opportunities and M&A. And finally, but importantly, we are in a very strong position to return cash to shareholders.
and so building on this in a little more detail.
Karen Williams: There are three key business attributes that make us confident and give us stability to navigate through a period of uncertainty. First, our resilient and diversified revenue model. As a reminder, when airlines need to use price to stimulate demand of your seats.
Karen Williams: 70% of our revenues protect it because it is volume based or recurring product and professional services revenues and only 30% moves in line with ad bears and hotel prices.
Karen Williams: Furthermore, our revenue is roughly balanced between customers versus suppliers and the US versus the rest of the world. Because of this, we are less exposed to downturn versus suppliers during the economic cycle.
Karen Williams: The second attribute is a strong, operating efficiency. And as I just mentioned, we have a clear track record in cost reduction.
Karen Williams: We came into this year with grants for $95 million in cost savings but in light of current conditions we have a further increase the cost savings to a 4-year target of approximately $110 million in 2025.
Karen Williams: Paul discussed the progress we are making in our technology transformation strategy. We are intentionally growing our mix of digital transactions because it is more profitable. The efficient series achieving on the bottom line results in really strong incremental margins as new volumes flow through our platform.
Karen Williams: The third attribute is value creation opportunities. We have a strong cash balance of $552 million as of March 31st, 2025, and over $900 million in available liquidity.
Karen Williams: This enables us to continue our investments in shared gains, our software platforms, automation and AI.
Karen Williams: The macro environment doesn't have us reconsidering these investments. We have strong investment capacity in plan to invest and incrementing $50 million this year in these initiatives.
Karen Williams: This incorporates CapEx productivity sales, where we are doing more with less and updated topics than phasing versus our previous expectations.
Karen Williams: We have a strong balance sheet and incremental M&A drives value. Tickly given our record in delivering synergies with an experienced integration team. And finally, we have a $300 million share to buy a back authorization in place.
Karen Williams: Turning to the current transaction growth trends and customer outlook, we have no direct impact from tariffs. The headwind we are experiencing is from slower macroeconomic growth and its impact on our organic transaction volume.
Karen Williams: The trends have stabilized and this is in line with the commentary you are likely to have heard from the major US Airlines.
Karen Williams: Transaction growth is currently trending flat year over year. This is down roughly five percentage points versus our expectations coming into the year, but we are not seeing any further signs of deterioration.
Karen Williams: The trend is based on looking at March and April together to normalise the Easter timing impact consistent with our approach in prior years.
Karen Williams: Across the top five verticals which account for approximately 70% of GMN transactions we are seeing positive or broadly flat year over year growth.
Karen Williams: 6th of our 15 US GMN industry verticals that quenchially improved from February to March
including IT.
Karen Williams: Business and Professional Services and Farmer. However, two were largely flat and seven industries declined with a sequential slowdown in the sectors more exposed to tariffs, including consumer and automotive.
Karen Williams: A bright spot is our meetings and events business which tends to be a forward indicator. We are currently seeing a 2% year-ever year increase in the number of meetings and 8% increase in spend for four year 2025.
Consolation levels are in line, previous years.
Karen Williams: And so in our most recent survey of our top 100 global multinational customers, customer sentiment has moderately declined.
Karen Williams: Overall, 6% of the top 100 global multinational customers have put new budget controls in place since the 8.2nd tariff announced them.
Karen Williams: And so in light of this backdrop, let's move to our guidance.
We are hitting them up on what we can control.
Karen Williams: Our expectation for new wins remain unchanged, and in fact we've actually increased our cost saving.
Karen Williams: However, the macro-environment is softer than we expected coming into the year.
Karen Williams: and it is important to reflect the resulting slower organic travel growth.
Karen Williams: So let me be clear about the assumptions we are taking and I will focus on the midpoint of our guidance.
Karen Williams: Because of our new term Disability Intake 2, we thought it helpful to provide Q2 guidance today.
Karen Williams: Our approach to guidance is based on a weaker economy and built on the assumption that the flat transaction growth we have seen over March and April continues.
Karen Williams: The flap work they adjusted transaction growth assumption is driven by a modest decline in organic transactions offset by new wins.
Karen Williams: This results in Q2 midpoint expectations for $625 million in revenue or roughly flat year over year.
Karen Williams: with adjusted operating expenses down moderately year over year. This includes our incremental and to investments demonstrating rigorous cost control.
Karen Williams: So, importantly, strong, adjusted EBITDA margin expansion continues and, therefore, we expected to adjust EBITDA to grow faster than revenue.
Karen Williams: We're guiding to $130 million in adjusted EBITDA at the midpoint, up 2% year-over-year and reflecting 50 basis points of margin expansion.
Karen Williams: So now let's turn to what that means for our 4-year 2025 guidance. Our updated guidance is changed to reflect the softening in current conditions and its impact on our organic transaction growth.
Karen Williams: The key message is our strong-adjusted EBITDA margin expansion continues.
Karen Williams: We are bringing four-year 2025 revenue down by just 4% and adjusted EBITDA guidance down by just 6% at the midpoint. With the upper end largely in line with the previous adjusted EBITDA guidance at this point.
Karen Williams: So our baseline assumption is now the flat total transaction growth for the four year.
Karen Williams: The breakdown is a two percent decline in organic transactions offset by a two percentage point positive impact from new wins. With confidence in our new wins and this assumption is unchanged.
So overall, the midpoint of our guidance reflects flat revenue.
Karen Williams: This updated guidance assumes a neutral foreign exchange impact, but as we have said previously because of the natural hedge between revenue and operating expenses, changes in currency assumptions do not impact the majority better.
Karen Williams: Accordingly, we are also updating our four-year adjusted EBITDA guidance to reflect slower organics and action growth, at a full-through of about 65 percent.
Karen Williams: So clearly, we will exercise firm cost control with a total of $110 million in cost actions to protect our earnings and cash generation.
Karen Williams: But importantly, we are continuing to invest and expect to continue benefiting from the impressive productivity gains we have discussed.
Karen Williams: We are now guiding to a four-year midpoint, a justy bit dark of $510 million, representing growth of 7%.
Karen Williams: From margin of 21% a margin of expansion of 130 basis points, the takeaway is we still expect healthy, adjusted EBITDA growth even with a softer economic environment.
Karen Williams: And finally, but very importantly, given our focus on cash, we still expect to generate a strong level of free cash.
Karen Williams: We are now guiding to four year free cash flow of $140 million at the midpoint, which is $190 million on an underlying basis excluding the non-recurring M&A related costs we spoke about previously.
Karen Williams: So I want to end by reiterating of capital amication priorities.
A First Priority is Continued Cash Generation.
Karen Williams: We are now guiding to the 4-year free cash flow of $140 million at the midpoint.
Karen Williams: As just highlighted, this is $190 million on an underlying basis, representing a free cash rate conversion rate, 37% of adjusted EBITDA.
Karen Williams: Second, continuing to de-leverage. We expect on leverage ratios to remain at the bottom end of our target leverage ratio of 1.5 to 2.5 times.
Karen Williams: We have a strong and flexible balance sheet with a cash balance of $552 million and over $900 million in available liquidity at the end of March.
Karen Williams: Third, our strong balance sheet gives us capacity to invest. While we are currently managing our expenses, we are still increasing investments in areas that deliver more value to customers and make us a leading B2B software and services company.
Karen Williams: This includes investing in our market base and products to continue enhancing the customer experience.
Karen Williams: Sales and marketing to drive growth, an AI and automation to drive further margin expansion and efficiency. As mentioned, we expect to invest in incremental $50 million this year.
Karen Williams: 4. With respect to M&A, we amended our merger agreement for the CWT acquisition, including a reduction in the number of shares expected to be issued. We remain confident in the merits of our position in the lawsuit initiated by the DOJ, and remain prepared to prove this
Karen Williams: Because the fight I'm seeing is primarily stock, we expect remain within our target leverage range following the transaction close.
Karen Williams: And finally, given our current stock price, which we believe is significantly undervalued, as well as our leverage in cash position, we are in a position of strength to execute against off $300 million share by back authorization and return cash to shareholders.
Karen Williams: So our capital allocation strategy remains the same, and in a weaker environment, M&A and share by back become even more accreted.
Satrap things off.
Our first court performance was strong. [inaudible]
Karen Williams: Oversillion Revenue Model and Strong Operating Leverage Positions is to continue to try and shareholder value.
Karen Williams: with confidence in our long-term growth prospects and our approach to a slow growth environment is to remain focused on what we can control.
Karen Williams: We can now move into Q&A. Paul and I are joined by Eric Bock, who is our cheaply officer and global head of M&A. Operator, please go ahead and open the line.
Speaker Change: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two.
Karen Williams: When preparing to ask your question, please enjoy the voice is unmuted locally.
Speaker Change: That's question comes from Peter Christiansen with City Group. Your line is open, please go ahead.
Peter Christensen: Thank you, and good morning. A couple questions. Paul, I was just curious, have you witnessed any trade-down in accommodations by your underlying clients or people switching to cheaper alternatives? Lights would have been losing in that?
and David Thompson. Thank you. Thank you.
Peter Christensen: Not really at this stage, Peter, thank you for the question. If you dig into the trends, you will see there are premium and international.
Peter Christensen: Volume actually held up better than domestic, so you are seeing stronger growth in premium international routes and also stronger growth in premium hotel occupancy.
Peter Christensen: So we are seeing the premium nature of our customer base grow, grow faster and as you saw more in the presentation, we did still see in Q1, a very...
Peter Christensen: Slight increase in overall average ticket price and average daily hotel rate, so one percentage point, moderate price increase but still a 1% increase over the quarter.
Speaker Change: That's a good take away. And then, I'm curious to me, it's just juxtaposed. It looks like SME wins, Rose in the quarter, which is nice to see. At the same time, I think you called out, you're seeing lower transaction value, transactions coming out of that segment, just wondering if there's.
Speaker Change: Two stories there to tell and then finally if you could just comment on what's the next milestone or date for the CWT.
Where's your process? Thank you.
Speaker Change: Yeah, sure. I'll take the first one and I'll give the second one to Eric who's with me here.
Eric: With SME, I think it's important to remember that really over the last four or five quarters we've seen a lower level of organic growth within the SME segment. So the new wins are definitely making a difference.
Eric: But it's off a lower base because SME customers have tightened their belts after frankly long periods of inflation and higher interest costs. We know that that has impacted SME spending more than larger customers.
Eric: So we are seeing the impact of new wins, but it is off a lower level of organic growth in that segment.
Thank you.
Speaker Change: Pete on the CWT Transaction, we're working through the fact discovery process that will be complete in early June and then we're into trial September 8th.
Speaker Change: and I hope to complete that by the end of September , October timeframe and enclosed by the end of 2025.
Christopher, thank you both for your helpful.
Thanks Pete.
Speaker Change: Our next question comes from Lee Horowitz with Deutsche Bank. Your line is open, please go ahead.
Thank you.
Speaker Change: Great, thanks for the question. I'm sorry this nearly was mentioned earlier, we're joking on a couple of things, but can you comment at all on how the macro environment evolved in
Speaker Change: in the second half of the year, is sort of a recession-of-base case scenario at this point, or are people even entertaining the idea that there could be some growth positive outcomes as we move through the year, and the help across that would be great. Thanks so much.
Yeah, look, thanks, Lee, um...
Speaker Change: I think if you step back and look at what we are seeing in our business through Q1, you know, we saw a different pattern, you know, by sector, we saw financial services and tech, actually, with double digit growth rates.
Speaker Change: We saw as a business services, professional services around the mean and then you know some sectors, energy mining, marine, automotive, work softer and those industries you know are obviously more exposed to tariffs. So there is a view by sector.
Speaker Change: but I think when you look at the overall picture, you step back and look at the survey results from the top 100 customers, I would say the main takeaway is most customers are in a sort of wait and see mode, you know, they're not over reacting to the situation.
Speaker Change: We had a very moderate increase in the number of customers.
Speaker Change: that made changes to their travel policy, or changing their approval processes, or changing their travel budget. There was just a 6% change in the number of customers that had a change to their policy, and I think what we're focused on, Lee, is
Speaker Change: Not really measuring sentiment because frankly what how people feel is actually not that reliable, you know we're trying to be much more focused on what people are actually doing. So are you changing your budget? Are you changing your policy?
Speaker Change: I think another thing I would draw out is our meetings and events business. We have a...
Speaker Change: A longer-term view in meetings and events because obviously the nature of that business is people are often booking six, nine, twelve months.
Speaker Change: in advance. And so we do use that part of our business as a sort of leading indicator. And when you look at the M&E business, we're still seeing a 2% increase in the number of meetings for full year 2025, it's an 8% increase in spend year over year in meetings.
Speaker Change: and events. And if you look at the cancellation rate, it's flat. It hasn't changed.
Speaker Change: So, I think all those data points, when you put them all together, they sort of support that underlying, you know, thesis that I shared with you earlier, which is the vast majority of customers are, you know, in a weaker but stable environment.
Speaker Change: As a reminder, if you'd like to ask a question, please press star one on the telephone
Speaker Change: We now turn to Stephen Joo with UBS. Your line is open, please go ahead.
Speaker Change: Great, just to kind of follow up on the earlier macro backdrop question.
I would imagine sales cycles can potentially elongate.
Speaker Change: in the environment as CFOs probably hit the pause button on various things.
Speaker Change: So it's probably more important for GBT to share the value add, especially versus competitors as you go in RFPs and or, you know, to a new deal. So what are some of the steps that you can take to potentially increase the value proposition?
to your clients and customers. Thanks.
Speaker Change: Yeah, thank you, Stephen. Actually, we don't generally see that, you know, through previous economic cycles and actually, you know, even through the pandemic, we actually saw decisions and the pipeline stayed pretty robust, and what we have seen in previous...
I would say, more difficult macroeconomic conditions.
Speaker Change: As we do see, a flight to quality, you know, and we do see our new sales accelerate.
Speaker Change: And, you know, if you step back and think about what we actually do...
Speaker Change: We help customers save money. We give them access to the most comprehensive, the most competitive content in the entire travel industry. We give them access to savings. We give them complete visibility and control over their travel spend.
Speaker Change: And in an environment where customers are more focused on operating expenses, that strengthens our value proposition. And so, you know, I would expect
Speaker Change: No change, in fact, I would expect an improvement in our new sales performance through the cycles. And that's frankly what you saw in Q1. I mean we said that our new sales performance would accelerate coming into the year and it did.
Thank you.
Speaker Change: greenhouse turn to Duane Pfennigwerth with Evercore ISI. Your line is open, please go ahead.
Hey, thanks. Good morning. Good afternoon. See you probably.
Speaker Change: I wanted to see if you could play back, and sorry, we're juggling multiple calls also so apologies if you're repeating this, but
Can you contrast a little bit… [inaudible]
Speaker Change: You know, U.S. volumes versus rest of world volumes and then maybe just play back, you know, the cadence of the first quarter and if you've seen any signs of, you know, stabilization or pickup here in April May.
Okay, thanks [inaudible]
Speaker Change: Well, you'll have seen in the presentation, or if you look at the growth rates by region, the US was at 3%.
Speaker Change: All the Americas is a 3% EMEA at 4, APAC at 7. And in previous quarters, we've always seen the Americas ahead of EMEA. So you have seen a relative slower performance in the Americas but you do have to point out that
Speaker Change: The positive impact from Easter in March is actually greater in Europe than it is in the US.
Speaker Change: Having said that, there's another point that I made earlier which is that domestic travel definitely was slower through Q1 than international travel and obviously domestic is a much larger part of our US sales volume.
Speaker Change: So, for those two reasons, we have seen more of a slowdown in the US than other regions.
Speaker Change: But there's not much in it, Duane. If you actually look at it on a relative basis, it's pretty similar across Europe and the US and really the issue is more domestic versus international for us. That's the bigger theme.
Speaker Change: Look, as things evolved through March and April , obviously with the calendarization of Easter
If you look at individual weeks, [inaudible]
Speaker Change: or even March and April in isolation. You know, it can be quite misleading. So what we do is we put March and April together to really assess the trend. And then we also look at the individual weeks here over here. So Easter Week, prior week.
Speaker Change: Easter Plus One, Easter Plus Two. And if you apply both those lenses, you end up with the same answer which is that actually on a work of the adjusted basis, normalizing for Easter.
Speaker Change: That growth rates have been stable, you know, through the last seven or eight weeks.
[inaudible]
Speaker Change: That's helpful. And then just on government, I know you have very, very limited exposure, but I do wonder if you have a window into government adjacent, things like consulting or aerospace and it's actually a very similar question.
Are you seeing any signs of stabilization?
Speaker Change: or pickup in government adjacent. Thank you for taking the questions.
Speaker Change: Directly Associated to Government Travel. We don't really have a clear and accurate read on that, I think probably some of the numbers that have been shared by the US airlines that have direct contracts with
Speaker Change: Government agencies are probably a better read than what we would be able to give you.
Okay, how about just very large multinational consulting?
Speaker Change: Yeah, business services and professional services are kind of out there at the mean.
Speaker Change: So if you look at the performance by sector financial services tech with the strongest growing sectors, there's in the double digit range.
Speaker Change: Business Services and Professional Services were at the average through Q1 and then we had sort of energy mining marine automotive that was softer and as you farm I was a little softer for us as well but that's been a frankly a structural issue pre tariffs.
Speaker Change: So, business services are essentially at the average in terms of growth rates through Q1.
Thank you.
David Thompson, Peter Christiansen, Duane Pfennigwerth
Operator: We now turn to Toni Kaplan, We're at Morgan Stanley . Your line is open, please go ahead.
Speaker Change: Hi, this is Yehuda Silverman for Toni Kaplan, so you've mentioned that 6% of customers have put new budget restrictions in place.
Speaker Change: As many are in wait and see mode, is this a number that's expected to increase or do you have any insight into how you're viewing this paper for the next quarter?
Speaker Change: All right, I think that's going to depend on how the macro economic conditions evolve. I think if the macro conditions continue.
Speaker Change: You know, to be weaker but stable, then I think we will see limited change to that picture. You know, what we've seen historically.
Speaker Change: for decades is the business travel, you know, frankly grows at or slightly above GDP. So that that is going to directly...
Speaker Change: and relate to how the macroeconomic conditions evolve. And as I think we mentioned in our prepared remarks.
Speaker Change: Power-based assumption for the guidance that we're giving is that the current environment continues that it is a weaker but stable environment.
Speaker Change: Great. So, sort of just a follow up to that about the midpoint of the guide. So, what are some scenarios? What are you seeing that would have impact the low end of the high end of the guide? What would need to happen to get to either part of it? So, what are you seeing? What are you seeing that would have impact the low end of the guide?
Well, I think- [inaudible]
Speaker Change: We mentioned the sort of base case to the midpoint is that the current conditions
You can continue.
Speaker Change: and that is that we have seen over the last 60 days.
Speaker Change: You know, a week of its stable demand environment. So that's also the base case for the midpoint. But look, there is certainly a scenario that some of the uncertainty around tariffs starts to dissipate that there is, you know, a more...
Speaker Change: Stable and clearer economic picture. And that growth rates actually begin to improve through the second and third quarter. And if you look at...
The fundamentals, particularly in the U.S. economy, unemployment is...
Speaker Change: Low, the overall economy coming into the year was strong, so the underlying fundamentals, I think are still very solid, and I think corporate profits have remained strong as well
Speaker Change: So I do think there is a scenario where the macroeconomic environment becomes more stable. Companies have greater visibility through the second half of the year, confidence returns and growth rates go back to a similar level.
Speaker Change: to the level that we saw in Q1. And that effectively takes us to the upper end of the guidance range that we shared with you, which was essentially the midpoint of our previous guidance.
Speaker Change: Great. And just one quick clarification question on your incremental spend. Believe me, I mentioned 15 million in incremental spend into investment. Was that 65 million last quarter? I was just wondering if you could expand on, there's a difference there, but have it in currently.
Yeah Karen, do you want to pick that one up? [inaudible]
Karen Williams: Yeah, sure, I can take that. So, essentially, we talked about two things. So, one, with a 50 million increase in terms of our cost actions.
Karen Williams: So last quarter we talked about 95 million of cost takeout in 2025. This is now increased by 15 million based upon just our continuing focus around productivity efficiency.
Karen Williams: and then saves AI and how that's helping low cost locations. So we've increased that by 15 million.
Karen Williams: On the investment side, we previously talked about 65 million. We have reduced that down to 50 million. You need to think about that as that 50 million reduction.
Karen Williams: pretty much equally split between Capix and Opex as you think about that, and that is essentially
Karen Williams: It's not about a reduction per se, it's about the productivity on CapEx productivity, so we're doing more with less, and so we can find those efficiencies, and from an OPEX perspective, it is really just the updated phasing in terms of that spin.
All right. Thank you.
Karen Williams: We have no further questions, so I'll now hand back to Paul Abbott for any final remarks.
Karen Williams: Great. We'll look. Thank you to all of you for joining our first quarter conference call. I'd like to close by thanking all of our teams around the world for their hard work and their dedication to our customers. And we appreciate your interest in the company. Thank you very much.
Speaker Change: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now just connect your lines.
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