Q2 2025 Global Business Travel Group Inc Earnings Call
Thank you for your patience, everyone. The AmEx Express.
American Express, Global business. Travel will begin shortly.
Good morning and welcome to the American Express Global business. Travel second quarter 2025 earnings conference call. As a reminder, please note to today's call is being recorded. I will now turn the call over to the vice president of investor relations Jennifer tarington to begin. Please go ahead. When you are ready.
Hello and good morning everyone. Thank you for joining us for our second quarter 2025 earnings conference. Call this morning, we issued an earnings press release which is available on sec.gov in our website. At investors.gov business travel.com, a slide presentation which accompanies today's prepared remarks is also available on the AmEx gbt investor relations web page.
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, 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 issue this morning and our other SEC filings.
Available in a supplemental materials of this presentation and in the earnings release.
Participating with me today are Paul Abbott, our Chief Executive Officer, and Karen Williams, our Chief Financial Officer. Joining for the Q&A session today is Eric Fox, our Chief Legal Officer and Global Head of M&A. With that, I will now turn the call over to Paul.
Thank you, Jennifer welcome to everyone and thank you for joining our second quarter 2025 earnings call.
In the second quarter we delivered Financial results ahead of expectations and reached a significant Milestone with the achievement of over 500 million in adjusted ebitda over the last 12 months.
Our focus on efficiency, gains and driving operating. Leverage is clearly evidenced in our Q2 results adjusted. Operating expenses were flat and we delivered strong adjusted. Eva Dar margin expansion.
Increased demand for our software and services resulted in continued. Share gains.
Total new winds value reached 3.2 billion over the last 12 months, including 2.2 billion from SME customers and importantly, we continue to have a high customer retention rate of 95% over the last 12 months.
Our Commercial Success margin expansion and improved demand environment. Give us confidence to raise and narrow a full year 2025 guidance.
I've also very pleased to share an important update on our pending cwt acquisition.
We reached a key Milestone last week with the US Department of Justice's dismissal of its challenge to the acquisition, and are now positioned to complete the transaction in the third quarter.
We look forward to creating even more value for customers, suppliers and shareholders.
Finally, we have a strong balance sheet with reductions in net debt, and leverage. We have nearly 1 billion in available liquidity and importantly, maintain the flexibility to pursue our Capital allocation priorities. After funding the cwt closed, including share repurchases.
Given the recent Clarity on cwt, we will put a 10 B 51, stock repurchase plan in place under our previously announced $300 million stock repurchase program upon the opening of our trading window tomorrow.
This will facilitate additional share repurchases over the next few months, signals management confidence and drive shareholder value with a strong expected return on invested Capital given the current share price.
So before we get into the quarterly details, I want to reiterate how excited we are to welcome, cwt customers and employees to Amex gbt. We now expect to close this transaction in the third quarter. Our experienced team is ready for the integration and we are confident in the growth opportunity of the combined company.
In addition to benefiting customers suppliers and colleagues, it's a compelling financial transaction with a highly attractive post, Synergy multiple. We expect to deliver approximately 155 million in identified. Net synergies and have a proven track record of integrating, large Acquisitions, and achieving our Synergy targets.
This is a stock and cash transaction, so it will help diversify our shareholder base. Shareholders, which are primarily investment funds, will own approximately 10% of the combined company upon closing.
The transaction is valued at 540 million on a cash-free debt-free basis upon closing. Approximately 50 million of shares will be issued to the cwt shareholders at a fixed price of $7.50 per share. The remaining consideration will be funded with cash on hand.
Turning back to the quarter and the financial highlights total. Transaction volume was up 1% on a work-day adjusted basis. Heightened macro uncertainty impacted April, but I am pleased to say that demand improved in May and June. So the quarter results overall was slightly above our expectations.
TTV or total transaction value which reflects both volume and price. Grew, 3% on a work-day, adjusted basis to reach 7.9 billion, this was driven by transaction growth modestly higher, average ticket prices and hotel room rates and a favorable FX impact
Revenue was up 1% to reach 600 and 31 million for the quarter, which was above our guidance midpoint
0 over year to reach 21%.
Turning to the transaction growth in more detail macroeconomic. Uncertainty resulted in a modest year-over-year decline in corporate travel demand in April.
This impact was temporary and our transaction growth inflected back to positive territory up 2% in May and June combined.
We continue to see green shoots into July that give us confidence that the demand environment is improved.
And as a reminder, these growth rates are all work day adjusted, which helps neutralize the year-over-year, timing impact of Easter.
transaction growth remained stronger with global multinational customers and was up 3% in May and June SME, customers reached 2% growth, a significant Improvement versus April
Are transactions stabilized in May and June after declining modestly in April.
This trend was most pronounced in Regional and international air routes domestic air routes were more stable During the period.
Hotel transactions. Also saw an encouraging acceleration to reach 4% growth in May and June. So once again Hotel transactions outpaced are
Our strategy to increase our hotel revenues is working. Well,
finally, on a regional basis. Transaction growth in the Americas reached 2% in May and June and EMA transactions improved dramatically from April to reach 3% in May and June
importantly, our growth continued to outpace the industry.
Our Strong, net new wins impact contributed 2 percentage points of transaction growth in May and June
The trends you see here on slide 9 are Global multinational customers, same store, transaction growth rates. So the isolate. What is happening on a like for like basis and do not include the benefit of net, new wins.
All of our major industry verticals demonstrated sequential improvement from April to May and June.
It farmer.
Business, professional and financial services posted growth in May and June.
Industries with greater exposure to tariffs mining oil consumer goods and Retail continue to see slower demand.
The automotive industry saw the sharpest decline in transaction growth, but improved substantially from April to May and June
And as previously mentioned on top of same store, sales growth are strong. Net, new wins contributed to percentage points of transaction growth, in May and June
So demand has improved in line with the commentary from major US airlines. In our most recent top 100 customer survey. Macro uncertainty seems to be moderating
With customers seemingly less concerned or increasingly neutral on the impact of tariffs.
We have seen little by way of tangible, customer actions taken in terms of travel policy restrictions.
spend outlooks across industry, verticals remains mixed
technology and financial services. Look strong conversely consumer, manufacturing energy and Mining looks softer.
Finally, our meetings and events business is performing well, and this is important because it tends to be a forward-looking indicator. We currently anticipate a 5% year-over-year increase in the number of meetings in the second half of this year.
So let me close by summarizing. The key highlights of the quarter.
We again, delivered on our commitments with Q2 results ahead of expectations, we raised our full year guidance. We are excited to close the cwt acquisition in Q3, and we can now accelerate share repurchases to demonstrate our confidence in the business.
And now I'd like to hand it over to Karen to discuss the financial results and the updated 2025 outlook in more detail. Thank you, Paul. And hello, everyone.
before we get into the,
Quarter. I want to reflect on the progress. We have made in Q2.
I am incredibly pleased with our continued momentum in driving the business forward.
We delivered Financial results ahead of expectations.
Exceeding. The guidance midpoints? We previously communicated.
Adjusted ebitda margin expanded. We continue to invest at importantly, we have reached a pivotal inflection point in our financial strategy.
The announcement of cwt. Last week will accelerate our strategic Ambitions and enables us to execute on our share repurchases deploying capital in a disciplined value. Accretive manner.
Revenue reached $631 million, up 1% year-over-year.
In total revenue was driven by Modest growth in transactions and TTV increased product and Professional Services revenue and favorable foreign currency impact.
On a constant currency, basis, Revenue was largely flat year over year.
Revenue yield which we Define as Revenue, divided by TTV was 8%.
This was down 10 basis points year-over-year, but in line with expectations reflecting the non TTV driven components of the revenue base.
And a continued strategic shift to more digital transactions, which has a downward impact on yield, but a positive impact on our adjusted ebit Dar margins.
I am incredibly pleased with the momentum. We continue to see across the Enterprise when it comes to our focus on driving efficiency and increasing productivity. Our travel care costs per transaction. Our productivity metric improved by 5% year-over-year in the quarter.
Adjusted operating expenses were flat year-over-year and actually down 2% on a constant currency basis.
And so, putting these together, adjusted EBITDA grew 4% to $133 million, and our adjusted EBITDA margin increased by 70 basis points year-over-year to reach 21%.
We continued to see momentum when it comes to cash.
Generating, 27 million, a free cash flow in the quarter.
Free cash flow declined year-over-year, due to 1-time elements of the agencia working, capital benefits in the prior year, as well as increased Investments.
Finally, moving to the balance sheet. I am incredibly proud of the strength of our balance sheet.
Our net debt declined by $70 million year-over-year.
and our leverage ratio or net debt divided by last 12 months, adjusted e bit dark continue to decline to 1.6 times as of June, the 30th 2025
Down from 2 times, 1 year ago, and 3.5 times 2 years ago.
And so, with our balance sheet in a strong position, we are confident to execute on our m&a agenda while also initiating our share repurchase program.
This dual track approach, reflects our confidence in the underlying strengths of the business and our commitment to driving long-term shareholder value.
For taking a closer look at our expense line items. We can clearly see how we are hitting the mark on the factors in our control.
cost of Revenue went down 2% in the quarter and general and administrative costs went down 14%
This enabled us to grow our sales of marketing costs by 13% and technology and content by 8% while keeping costs strongly in control.
So our efficiency gains are enabling us to make continued Investments for driving future growth and productivity.
Now, moving to guidance.
the improved demand environment, our Q2 performance
share gains and strong margin expansion. Give us confidence to raise and narrow our full year 2025 guidance.
As a reminder.
our updated guidance does not include the impact of the cwt acquisition which we now expect to close in Q3
We will provide updated guidance including the impact of cwt, on, our next earnings, call in November.
We are now guiding to 4 year Revenue growth of 2 to 4% year-over-year.
With the midpoint up 3 percentage points to $2.488 billion.
This is a significant Improvement versus our previous Revenue guidance, which had a wide range of minus 2% to up 2% and reflects our confidence.
Now, it's important to note our updated guidance midpoint incorporates expectations for 4%, Revenue growth in H2.
Which is 4 percentage points higher than our previous expectations.
Brought you to our natural Hedge.
We continue to expect a modest decline in Revenue yield as we intentionally increase our mix of higher margin, digital transactions.
We are now guiding to full year adjusted evitar growth of 6 to 13% or 505 million to 540 million with a full year. Midpoint of 523 million
We now expect strong adjusted medal margin expansion of 80 to 180 basis points year-over-year or 130 basis points at the midpoint to 21%.
This reflects our strong efficiency gains.
We're continuing to execute on our 110 million cost Savings Program. While making incremental Investments.
We expect to see higher volumes on an absolute basis in the third quarter versus the fourth quarter, given our seasonality with September being a strong month for business travel.
However, we expect revenue and adjusted ebit data to be equally split across the 3rd and fourth quarter. Given that Q4 is seasonally our highest revenue yield quarter.
and so, finally, back to full year
We expect to generate a strong level of free cash flow. We are now guiding to a range of 140 million to 160 million or 150 million at the midpoint.
Of capital, on occasion, strategy remains the same. But as I said earlier, we have reached a pivotal inflection point in our financial strategy with CWT.
As a reminder, the acquisition will be funded with stocks and cash on hand.
We are ready to integrate cwt. While maintaining a strong and flexible balance sheet and remain within our Target, leverage range.
We are also now able to execute against our $300 million share repurchase authorization.
In summary, we delivered Q2 results ahead of expectations. We raised and narrowed our four-year guidance.
it's a critical moment to accelerate our strategic Ambitions and deploy capital in a disciplined manner. With the cwt, acquisition and accelerate share repurchases.
We remain focused on what we can control and driving shareholder value.
So we can move into Q&A Paul and I are joined by Eric Bach, who is our chief legal officer and Global head of m&a.
Operator. Please go ahead and open the line.
Thank you. We will now begin the question and answer session. If you'd like to ask a question please press star. Followed by 1 on your telephone keypad,
If you change your mind, please press star followed by 2.
Branch ask your question, please. Ensure your device is unmuted. Locally, we will make a quick pause here for the questions to be registered.
And our first question comes from Lee orowitz with Deutsche Bank.
Great. Thanks for taking the question. See if I could so nice. Improvement is the back. Half of the Year. You guys are not pacing at low, single digit, FX neutral, Revenue growth, I guess. Is that still under, right? Uh, I'm going share, gains is the back half of the year, um and you know, with that sort of growth still below your long-term growth algorithm are we simply waiting for some of these more depressed, customer segments, that are a better macro environment before you guys return to that longer term growth. I'll go and then 1 on sales and marketing, um, I guess, you know, sales and marketing expense, um, up decently as a percentage of Revenue and volume in the front, half of the Year, you guys are investing.
Against growth plans. Just any more clarity on, you know, the types of Investments that are being made within that line, the payback periods, you expect on that and if anything is perhaps structurally changing within your business that is perhaps necessitating, a more intense sort of sales and marketing investment plan. Thanks so much.
Yeah. Well look, thanks Lee. Um
We are operating in a lower growth environment, you know, we need to accelerate the impact of net new wins and share games. And so we we we are hoping to see an acceleration um as we get into the second half of of the year uh and also in particular see a a larger impact of net new wins.
uh, on the growth rate in SME, in particular,
Uh, so that's why you are seeing that increase in the sales and marketing investments.
So that, you know, we can increase the the contribution from net new wins in what is, you know, a lower growth uh, environment. So um hopefully that answers both parts of the questions.
Very clearly. It's helpful. Thank you.
Thank you. So just as a reminder, is *#1 on your telephone keypad to ask any question. The next question comes from Dwayne February with Evercorrect.
Isi.
Hey, good morning. This is Jake on Anon for Dwayne. Um, I understand it's still preliminary but do you have any visibility into cwt's 2025 performance? And then, are there any updated views on the timing of synergy capture? You could provide
Um, Jake, on the first question, we're not able to provide um detailed information about CWT's financial performance until post-close, so we will be able to give you an update on that, um, you know, post post-close when we announce Q3 results in November.
um,
So, uh, yeah, just need to be a little bit patient. Uh,
Uh, on that 1.
Oh, sorry. The timing of the synergies, apologies Jake. Uh, no, we we have obviously a little more time to pressure test the synergies. We're still very confident, you know, in the uh, previous, uh, data that we shared. So, um, 155 million of net synergies. So that's
Bottom line impacts in the transaction, you know, we expect to deliver those. Um
You know, over a 3 year period.
Uh, and we expect to see. I think it's approximately 30% of those synergies in the first 12 months.
Okay. Thank you. And and then, um, really interesting acceleration for for May and June versus April. So thanks for breaking that out. Um, how much of April do you think was weighed down by the Easter shift? And then how much of that acceleration was driven by US Travel versus other geographies, and then just 1 more Point, uh, the deceleration in APAC. What, what drove that
Yeah, maybe just the the first part we the numbers we're sharing our work day adjusted. So we tried to neutralize for the timing of Easter.
Now, that's not necessarily a 100% precise science. Um, but we are adjusting for the workday difference.
Created by Easter year-over-year. So, um, you you should sort of see the majority of the acceleration, uh, you know, as being, you know, I think, uh, a sequential Improvement in, in May, uh, and June versus, um, versus April.
Um, and then maybe past to to Karen for the second part of the question there.
so Jake in terms of the question, was it about the US were you, the US performance then also APAC,
Yes. Yeah. The um
Chart breaks out Us by region of sale. But just asking for, for us travel and then the deceleration in APAC, from up 6, to up 1,
Yeah. So, um, from a U.S. perspective, we, you know, as the chart shows, we saw, um, you know, a strengthening as we saw across the board. I think, yeah, APAC, that deceleration is primarily driven by Australia, and really what we're seeing there is it really is about the timing of tariffs.
um, in that region and and also um, particularly around kind of the mining
Vertical.
Okay, thank you.
The Kaplan with Morgan Stanley.
Hi. This is Yehuda Silverman on for Tony Kaplan. Just curious about
The, the declines in April. Again are those bookings? That are
Are those decisions that are being pushed out recoverable? Now that there's a little bit more clarity on restrictions and budget decisions, do we expect them to be recoverable? Or is it more cancellations?
Um well what what you see their transaction volume is in the month. And you know I think April was you know I would say at the height of some of the macro uncertainty in terms of both significant GDP revisions and the introduction of tariffs if you cast your mind back to April. So um, you know, I think what happened is, we saw frankly a stabilization in um, in in May and June, in terms of the macro environment and companies just getting more confident to to plan. So I wouldn't I wouldn't necessarily think of those transactions being recoverable. I would just think about it as being, you know, a week a week a month that was driven primarily by, you know, macro or economic uncertainty.
Great, got it. And just a quick follow-up on the operating expenses. So, G&A should be lower, and cost of revenue also a bit lower. Can you touch on the specifics a bit more on some areas within those that you're able to lower during times that are a bit more challenging, like you saw in April?
Sure. So um,
you know, we have talked about previously the the focus in terms of
Productivity efficiency and, and the 110 million in terms of the cost saves. And so, you know, particularly with, we're very proud in terms of the progress that we've made in that space. The in terms of cost of sales, and we've talked on the call terms of the, the games that we're seeing, from a, uh, travel of care, our servicing side of things, the operations of continuing to focus, um, in that area. But then also more broadly across the Enterprise as we continue to focus in terms of the, you know, delivering against that, 110 million that we've previously spoken about.
Great, thanks.
Thank you. So just as a reminder, is star 1 on your telephone keypad to ask a question.
The next question comes from James Goodall with orc, child and Co
All right. Well, thanks for taking my questions. Um, I get to sort of follow up from this in terms of the transactions charts that you gave. Obviously, there is stabilization in the back office in Q2. How are things trending into July? Um, you know, we had a number of us, a lot.
About some very strong trends in corporate travel within the first three weeks of July when they reported, is that something that you're seeing too? And then, second question is on what's implied in terms of the guidance for transaction growth in H2, I think in...
q1's that was based on flat transaction growth for the rest of the year because that's what you were seeing. Um, so what I guess is implied in H2. Thank you.
yeah, maybe I take the first part um,
on July Trends, and Karen can chat about the
Numbers that are implied in the H2 guide. Um, I mean look, the short answer is, yes. We've been pleased with the trends that we've seen in July. Um, you know, and it's it's consistent with what obviously we are guiding to uh, the second half of the year. I do think though it's worth just as a reminder.
You know, September is 40% of our Q3.
Volumes. So whilst it's it's encouraging to see um, you know, a a stronger volumes in July um that sort of post Labor Day, Demand, on September really, you know is very important part of delivering the third quarter. So and you know, we're just a little bit um too early to call that right now.
Uh, but yes, we've certainly seen some improvement and we're encouraged by that.
Certainly, in terms of your question around transaction and H2 assumptions, obviously, we talked on the call about Revenue, but transaction. The the midpoint is 2%, uh, with a range of 0 to 4%.
Brilliant, thanks so much.
Follow-up question, please. Press star, followed by 1 on your telephone key.
Telephone keypad.
A final reminder. That is star 1 on your telephone keypad to ask you a question.
And as we have no further questions in the queue, I will hand back over to you Paul for any final comments.
Well, before closing just, uh, a big thank you to everyone across MX. TBT for, you know, your dedication to our customers and delivering another strong quarter. We're very excited about the second half of the year and very much looking forward to welcoming the cwt colleagues and customers into AMX gbt. So, thank you very much for joining us today and your continued interest in American Express Global business travel. Thank you, everyone.
Thank you everyone. This concludes today's call. You may now disconnect have a great rest of your day.