Trainline Plc

Good morning, everyone. Thank you for joining us for our full year results presentation. I'm Jody Ford, the new CEO at TrainLine, and I'm joined by Sean McCabe, our CFO. Let's first get through the disclaimer. On the agenda for today, first I'll talk about my initial thoughts and actions as the new CEO, as well as give a recap of the business, our long-term opportunity, and our performance for the year. Good morning, everyone. Thank you for joining us for our full year results presentation. I'm Jody Ford, the new CEO at Trainline, and I'm joined by Sean McCabe, our CFO. Let's first get through the disclaimer. On the agenda for today, first I'll talk about my initial thoughts and actions as the new CEO, as well as give a recap of the business, our long-term opportunity, and our performance for the year. Sean will talk you through our financial performance, after which I'll provide further detail on progress against our strategic priorities for growth and how we're ready to lead the recovery in rail with the continued shift to online and mobile tickets. We'll then hand back to the operator for questions. Having joined Trainline last September, I stepped into the role of CEO at the beginning of March. I'm delighted to be leading such a purpose-driven business, which champions a greener way to travel and which enjoys significant long-term structural tailwinds. As someone who's spent substantial time in tech businesses in the UK and the US, I've been really impressed by the momentum of innovation at Trainline. Its pioneering culture and its laser-like focus on improving the customer experience for rail travelers. This has been put to the test through COVID, but our people responded to the challenge, supporting our customers and carriers and protecting the business while maintaining the pace of our product rollout. I'd like to thank all our colleagues for their hard work and significant contribution over the past year or so. Since joining Tray9, I've prioritized building relationships with key decision makers in government, including ministers and senior civil servants, as well as with leaders within the industry, both in the UK and across Europe. Whilst those conversations have rightly focused on recovery, it's also clear to me that COVID has catalyzed the need for change within the rail industry. And what's very encouraging is that we are viewed as part of the solution, with the opportunity to bring our tech platform, customer insights and data capabilities to support the rail industry to recover and realise its full digital potential. I've taken the opportunity to refresh Trainline's strategy, increasing our focus on new and emerging growth opportunities. These opportunities include, first, driving the recovery in rail travel at lockdown ease by launching innovative new products and leveraging our marketing playbook. Second, serving the needs of the new commuter in the UK as they return to the office. And third, harnessing the growing competition amongst carriers as domestic rail markets liberalize in Europe, adding new entrance supply and meeting the specific product needs of those local markets. Finally, I've refreshed the leadership team, adding senior hires to the strong team I inherited, a team that's committed to our purpose and focused on delivering the long-term growth aspirations of the business. To bring my initial thoughts to life, let's quickly recap on the business. As I mentioned, Trainline is a tech company with a clear purpose, to empower people to make greener travel choices. We aim to do that by making rail and coach travel easier. The value add we provide customers and carrier alike gives us an important position within the rail ecosystem. By making rail and coach travel easier, we provide significant value for customers and for industry partners. For rail users, we combine all carriers into one app to give customers the broadest choice and help them find the best value tickets. On top of that, we've built a simple, consistent, and friction-free experience. This means that customers don't have to handle paper tickets, use ticket machines, nor queue at stations, all of which people have become increasingly reluctant to do in a post-COVID world. And we're using our scaling data to create personalized experience and relevant real-time travel information. And then for carriers, we offer them access to a larger pool of potential customers, helping them generate more revenues at a lower cost to serve, than every alternative route to market. COVID-19 obviously had an unprecedented impact on the rail industry across our markets, with far lower passenger volumes given restrictions on movement. We acted quickly and decisively to mitigate the impact, significantly scaling back our cost base and increasing our liquidity. However, through COVID, we made the conscious decision to maintain our investment in our product and tech roadmap. As a result, we've continued to develop great product experiences for customers, which I'll come on to talk about later, and we're well-placed to lead the continued shift to online and mobile as the rail market recovers. And on that note, as we enter financial year 22, whilst the timing of recovery remains uncertain, we are now seeing positive signs of recovery, which Sean will talk more about. Looking at longer term, we continue to see considerable structural tailwinds for our business, The rail market in Europe is large and expanding, with significant planned investment in capacity growth, particularly high-speed rail, as it becomes an increasingly attractive alternative to short-haul flying. Awareness is growing of the environmental benefits of switching to rail, and governments and regulatory bodies are increasingly responding to this, to highlight just a few recent examples. In France, it's been announced that domestic flights under two and a half hours will be banned, where passengers can instead take the train. And in Germany, the rail and aviation industries have set up a joint action plan to encourage more than 4 million people to switch to trains. There has been an increase to shift to online and digital ticketing through COVID. However, there remains significant runway in our markets for further migration. Finally, liberalization of the European rail markets is becoming a reality, which in turn is creating more fragmentation in supply and greater competition amongst carriers. As a reminder, Trainline provides all options all fairs in a simple, easy-to-use app, so this increased competition creates a greater need for a marketplace like Trainline. These structural tailwinds continue to represent significant and long-term growth opportunities for Trainline. With that, I'll hand over to Sean to talk you through our financial performance.

Thanks, Jody, and good morning, everyone. The lockdowns and restrictions in place during the year obviously had a significant impact on our financial performance. As we reported in our trading statement in March, group net ticket sales reduced to 783 million, 21% of the prior year. Revenue declined to 67 million, 26% of the prior year. And gross profit reduced to 49 million, 24% of the prior year. However, as the graph shows, during the periods when lockdown restrictions were eased, our ticket sales recovered quickly, outperforming the wider market in the UK. This reflected an accelerated shift to online and to mobile. And encouragingly, as we look ahead to financial year 22, we're already seeing positive signs of recovery as lockdowns and restrictions gradually lift. Despite the challenges from COVID, as we exit the year, we find ourselves in a strong position. First, we took quick and decisive action to mitigate the impact of COVID and to protect the business. We significantly scaled back our marketing costs and other discretionary spend. We introduced a pay freeze and the leadership team and the board took voluntary salary reductions. We also furloughed those teams that were most directly impacted by the reduction in demand. However, as visibility has improved, we took the decision to repay the UK government fully for the furlough funding. Around this time last year, we said our monthly cash outflow would be in the range of 8 to 9 million. And a combination of better revenue than expected and the rapid and decisive actions to reduce costs meant that we were able to reduce monthly cash burn down to 5 million per month over the year. While scaling back costs, we also increased our available liquidity to 260 million, issuing 150 million of convertible bonds in January 21. This strong liquidity position gives protection for the business, but it also gives us greater flexibility to invest in future growth as well. Finally, and as Jodie mentioned earlier, we maintained our product investments throughout COVID, despite the impact on trading, and doing so will help drive long-term growth. We'll create value for customers and shareholders and position the business for recovery as the market improves. As a result of our strong operational cost management, we reduced our cost base by more than a third, from £116 million to £74 million, and this helped mitigate the impact of COVID on profitability. We reported an adjusted EBITDA loss of £25 million in the period, compared to a profit of £85 billion last year. Net debt increased from £71 million to £241 million, And this is mainly driven by a 95 million working capital outflow as lockdowns resulted in a sharp drop off in sales and an unprecedented number of refunds. Of course, this will fully reverse when ticket sales recover. And as I mentioned earlier, we invested in our tech and product roadmap with 26 million in capitalized engineering development time. And with that, I'll hand back to Jody.

Thanks, Sean. Let's now talk about our progress against our strategic priorities before we take your questions. As a reminder, our four stated strategic priorities are to enhance the customer experience, continually improving and optimizing app and web, build customer demand, scaling up customer acquisition, and increasing their engagement with us, optimize the revenues we generate from net ticket sales, and grow Trainline Partner Solutions, our new name for Trainline for Business, which serves the B2B and carrier markets. Through the last year, we've continued to make good progress against these long-term priorities, and this positions us well to drive growth as conditions improve. Let's step through some of these priorities. To enhance the customer experience, we continue to champion e-tickets, a core part of our 4.9-star mobile app proposition. Industry penetration of e-tickets has stepped up materially this year, from 21% to 30% of all tickets, supported by greater reluctance to use ticket machines and queue at stations post-COVID. And of those e-ticket sales, Trainline accounted for around 70%. We continue to see significant runway for further penetration, particularly as more routes become e-ticket enabled. Last year, availability of e-tickets increased from 71% to 75% of journeys, and we expect it to increase further in the months ahead. We continue to invest in our product roadmap, launching innovative new features that make rail travel easier and better value for customers. This includes the launch of rail cards in the app, making it far easier for customers to apply a discount when booking and far harder to forget their rail card when traveling. Rail cards are used on more than 40% of all train line transactions in the UK, and the digital version is already proving popular, with more than 70,000 sold since we launched in September. We've taken steps to remove friction points for the customer, too. We've increased speed with app startup times reduced 34%, improved the web booking flow, and delivered a host of self-service capabilities, improving the customer experience and reducing our customer service costs. And we're making our smart travel companion increasingly personalized, including the recent launch of Find My Train. This uses geolocation to identify the train on which a customer is traveling and provide them real-time travel information while on board. This brought consensus that COVID has changed the way we work and travel, accelerating existing trends with more working from home. and with greater variation in our commuting patterns. Of course, this has led to much speculation about how this will affect the commuter travel space. It's worth pointing out here that in the past, mobile ticket penetration has historically been low amongst commuters, as digital options have been largely unavailable. For example, there's not yet an accredited network-wide digital season ticket product, and this is something we're working on with the industry. Looking ahead, as commuters return to the offices, In whatever shape or form, there's an emerging opportunity to better serve their needs, and we're priming our mobile app to do just that. We're adding a feature called Select My Commute, allowing commuters to personalize their journey. This allows much faster and easier repeat bookings, as well as personalized travel information on the go, like platform prediction, live tracking of their train, and delay and disruption notifications. We're also continuing to invest in our secure barcode technologies, This lays a foundation to support the rollout of industry-wide flexi-tickets, reported to be launching in the summer. In Europe, there's a growing opportunity to become the marketplace of choice as rail market liberalization becomes a reality. We've already integrated new entrants, Avlo and Wego, Renfe and SNCF's respective low-cost carrier brands into our supply ahead of their service launch in Spain. and we would expect to add several other major European rail carriers preparing to enter new markets over the next year or so. While adding supply, we continue to leverage our core platform, improving the app and web experience across our international markets. However, we understand there are differences between different domestic markets in Europe, so where necessary, we are adapting our product roadmap to meet specific local market needs. For example, last year, we launched V1 of Recoup Retard, or Delay Repay in France, This notifies customers when they're entitled to compensation as a result of a delayed train, solving for one of the top customer pain points there. We'll launch V2 soon. Likewise, in Italy, we'll soon launch our Seat Maps feature. This allows customers to select their preferred seat when booking, an important feature for our Italian customers. Of course, once we develop a product or feature for one market, we can then leverage our single platform to roll it out elsewhere. As Sean said, we paused marketing for much of the year given the impact on demand from lockdowns and travel restrictions. However, when COVID restrictions were temporarily lifted in the second quarter, we ramped it back up as passenger numbers began to recover. In doing so, we drove a strong rebound in new customers, a leading indicator of recovery momentum. At one point, new app customers in international actually surpassed pre-COVID levels, while in the UK, they reached more than 80%. While lockdowns continue across our European markets, they have been gradually easing in the UK, and demand is returning. As we did in Q2, we are leaning into this customer acquisition opportunity. Once again, a subsequent rebound in new app customers, as you can see from the graph. This investment will also support the wider industry recovery, in part reflecting the efficiency of our marketing engine. In fact, every £1 train line invest in advertising yields approximately £11 of incremental sales for the wider industry, from modal shift to rail. Finally, we continue to make strong progress in shifting customers to our mobile app, our optimal customer experience, with its share of transactions increasing further to 83%. While investing in customer acquisition, we are also using our marketing playbook to drive greater engagement with customers. We recently launched a tickets alert campaign, prompting customers to set alerts for real-time notifications as and when tickets for their selected train becomes available. This campaign was timely given the current level of ambiguity surrounding timetables and booking horizons in the UK. We've also launched new promo code capability and are trialing targeted discounts for key customer cohorts to re-engage with Trainline and with rail more broadly, in turn helping drive recovery. And our brand-led leisure campaigns will soon go live, designed to tap into the expected bump in staycations and other domestic leisure travel this summer. Finally, we're continuing to make good progress in positioning train line partner solutions for future growth. First, our global distribution and business solutions division. This sells B2B travel to corporates, small and medium-sized enterprises directly, as well as distributing rail content to travel management companies and other travel platforms. While business travel remained muted, we continue to build and develop our global API distribution platform. The global API offers B2B clients one-stop shop access to our European rail supply. We've continued to achieve good momentum here with 19 businesses customers now signed up, 16 since the end of last year. And we're in discussions with a strong pipeline of travel platforms and other European carriers. Second, our carrier IT solutions division. Here, we're continuing to build and deliver innovative solutions for our white-label carrier partners, including digital flexi tickets, helping them prepare for industry recovery. And we have a strong ambition to scale the number of carrier partners to whom we offer white-label services, both in the UK and internationally. Before we take questions, let's briefly recap on our key takeaways. Trainline is a purpose-driven business which champions the greener way to travel and which enjoys significant long-term structural tailwinds. In my first few months as CEO, I've met with many key government and industry stakeholders and taken the opportunity to refresh the top team and the strategy, increasing our focus on new and emerging growth opportunities. These opportunities include driving the recovery in rail travel by continuing to launch innovative new products and leveraging our marketing playbook, serving the needs of the new commuter in the UK as they return to the office, and harnessing the growing competition amongst carriers as domestic rail markets liberalize in Europe. Finally, through COVID, we've maintained our investment in our product and tech roadmap. As volumes return, we are well positioned to invest further to capitalize on these opportunities. So in summary, whilst there remains a significant degree of uncertainty of the timing of market recovery, we are uniquely placed to lead the continued shift in ticketing to online and mobile, and our belief in the future opportunity remains undiminished. Thank you very much for listening. We'll now hand over to the operator for questions.