Trainline Plc

Thank you for joining us here today for our full year results presentation. It's great to see you all again. I'm Jody Ford, CEO of Trainline, and I'm joined by Sean McCabe, our CFO. Let's first go through the disclaimer. Onto the agenda for today. I'll intro with the key highlights for the year, including our recent MOU agreement with Rail Delivery Group. Sean will talk you through our financial performance, and then I'll update you on progress against our strategic priorities. After that, we'll open the floor for questions. As a reminder, at Trainline, we are centered around our core purpose to empower greener travel choices. Our vision is to build the world's leading rail platform, making it seamless for customers to find the right ticket at the right price online and delivering that experience either through our branded channels or through our travel partners. In doing so, we're making rail travel more attractive, encouraging millions of people to take the train rather than driving or flying. We believe this will make a huge difference. For every 1% of air and car journeys we switch to rail in the UK alone, we'll save 5 million tonnes of CO2 each year. This year, we've made significant progress against the priorities I laid out 12 months ago, encouraging people back to rail as COVID restrictions eased. As a result, we supported the rail industry recovery while delivering a strong performance in net ticket sales and a return to positive EBITDA. In addition, I'm really encouraged by our underlying customer metrics. In the UK, we've helped drive industry e-ticket penetration to 42%, double where it was two years ago. Our customer acquisition has reached record levels, and we have significantly increased the amount of customers who transact with us. Likewise, in international, with domestic rail liberalization becoming a reality, Trainline is in a unique position as the only retailer to aggregate all high-speed rail routes in our target markets. By aggregating this inventory and scaling our brand marketing, we are positioning ourselves for the very significant opportunity ahead. And in Train9 Partner Solutions, we've expanded our white label business into Europe with a new white label contract with NTV Italo, providing regional Italian travel inventory. You'll have seen our announcement at the end of March that we signed a Memorandum of Understanding, or MOU, with Rail Delivery Group. This agreement means we'll now enter a new phase of discussions around a future retailing framework, which should conclude before the end of the calendar year. The MOU also includes a legally binding backstop should mutually acceptable terms not be reached. The backstop sets a floor of 25 basis point reduction in our net commission rate, effective in three years' time. This would be made up of a 50 basis point reduction in the headline commission rate, offset by a 25 basis point benefit to Trainline from the removal of shared industry costs. The MOU gives Trainline considerably more certainty around our future economics while we continue to work with RDG on a shared agenda to reform rail retailing. And with that, I'll hand over to Sean to talk through our financial performance.

Thanks, Jody. Good morning, everyone. As Jodie discussed, last year was one of strong recovery for Trainline, particularly for our UK consumer and international businesses. Of course, it was not without some bumps along the way, given the periods of COVID disruption. However, as you can see from the graph, with each wave of COVID, the subsequent recovery in combined net ticket sales was much faster. This is particularly evident with the Omicron wave, and the U-shaped recovery thereafter. Omicron impacted sales from around mid-December. However, by February, both UK consumer and international had already returned to year-on-two-year growth. The strong recovery in UK consumer and international has driven a significant recovery in net ticket sales, revenue, and gross profit. The group generated 2.5 billion of net ticket sales, up 222% on last year. And this was 68% of the same period two years ago. Revenue increased to 189 million, up 181% year on year, and 72% of the same period two years ago. And gross profit increased to 153 million. up 214% on the year and 76% of the same period two years ago. As a result, the business returned to positive EBITDA. Direct and central costs increased to 114 million, up from 74 million last year, but broadly in line with where it was two years ago. and as trading conditions normalized, we scaled our costs back up, particularly in performance marketing as we seek to generate new rail bookings and to attract new customers. We also made strong progress against our investment plans in international. We've opened a new tech hub in Barcelona to recruit tech talent at a lower cost than London. We've opened a local office and launched a team in Milan to focus on that key Italian market. In addition, we stepped up our investment in brand marketing to grow customer awareness in our focus markets in Europe. We reported an adjusted EBITDA of 39 million versus a 25 million loss last year. Net debt. has reduced significantly from 241 million a year ago to 90 million at the end of February. As you can see from the waterfall chart, the biggest driver was, of course, the strong working capital inflow of 156 million as net ticket sales recovered, together with the EBITDA generated in the year. As the net debt reduction, and that net debt reduction was despite the 29 million capex, reflecting continued investment in our tech and product roadmap. The significant reduction in net debt combined with the improvements in EBITDA means that we are now operating comfortably within our banking covenants for the first time since the onset of COVID. With that greater visibility, we can once again provide full year guidance for the group. Assuming no further significant disruptions to rail travel, we expect to generate strong growth this coming year, with net ticket sales in the range of 3.8 to 4.2 billion, above the pre-COVID year. Revenue of 280 to 310 million, and adjusted EBITDA of 70 to 75 million, split broadly evenly between H1 and H2. And with that, I'll hand back to Jodie.

Thanks, Sean. Let's now talk about our progress against our strategy. As a reminder, here are four stated strategic priorities. I'm really encouraged by the progress we're making against each of them. Let's first discuss our progress in our UK consumer business before discussing international and finally TPS. Our UK consumer business remains resolutely focused on providing an excellent customer experience. By removing friction for customers while offering them unrivaled value, we've supported rail industry recovery, getting people onto trains and into towns and cities. We've also shifted more people to online and digital ticketing, with e-tickets a core part of our mobile app proposition. In the UK, e-ticket penetration has doubled in two years, as more people opt to buy their tickets through their mobile phone rather than queue at the station. But at 42%, there's plenty of runway for future growth. The continued growth in the availability of rail journeys where e-tickets can be used is removing a key constraint for e-ticket adoption. ScotRail's rollout of the barcode tickets last year took availability to over 80%. And last month, Southeastern, an important rail operator for commuters, began their rollout. Once complete, it will take e-ticket availability above 90%. So that broadly solves the supply issue. And on the demand side, there's a clear tailwind for growth, including a step-changing customer preference for digital tickets and a long-term industry ambition to shift people away from paper tickets. Likewise, the commuter segment represents a significant growth opportunity for digital ticketing. It's a segment underserved with digital ticket options historically. Pre-COVID, we estimate commuters made up about 40% of the UK rail market. about half of which were season tickets. Season tickets were almost entirely fulfilled by paper tickets, with no digital season ticket available to the mass market. COVID has changed the way we work and travel, with more hybrid travel driving a mix shift away from seasons to singles, returns, and more recently, digital flexi tickets. And as commuter journeys become more ad hoc, there's a greater need for flexibility on the days people do travel, as well as more on-the-go information. We flagged this opportunity a year ago, and since then, we've primed our mobile app to meet the needs of the new commuter with features such as Save Your Commute, allowing commuters to personalize their commuter journeys and rebook tickets in a couple of clicks, as well as the launch of Flexi tickets within our app. We're already seeing positive changes in customer behavior. Prior to COVID, many computers used our app, but due to a lack of digital ticket options, only a minority bought their tickets through Trainline. As you can see on the left, we have a large cohort of app users we specifically call time checkers who serve as a good proxy for commuters. In the last two years, we've converted 27% more of them into ticket purchase. This is a great start. There's clearly still a lot more head ring to go after. We will convert more time checkers into ticket purchase when we have a full suite of commuter ticket types in digital format. And this coming year, we're rolling out the Digital Seasons product following a successful pilot. Moving on to our second priority in the UK, building demand. As COVID restrictions ease this year, we lent in, scaling our marketing investment to attract new customers. As you can see on the left, new app customers acquisition has surpassed pre-COVID levels, with October our best month ever. As we add new customers, we are increasingly targeting under 30s. Not only are they more tech savvy, they tend to use RHEL far more frequently. Adults in the UK below 30 are four times more likely than the rest of the population to take the train at least once a week. In the last several months, we've run successful brand-led campaigns, including for Flexi tickets and digital rail cards. Let's move on to our third priority, increasing customer lifetime value in the UK and step into digital rail cards. Rail cards are a key loyalty proposition for the rail industry, as they give customers access to discounted tickets, particularly relevant now as people become more cost-conscious. When we launched our digital version 18 months ago, we estimated there were around 6 million in circulation. Since then, we've made significant progress, selling over a million digital rail cards in the last year alone. Think about that for a moment. More than 1 million rail cards are now stored in our customer mobile apps, making it far easier to book cheaper tickets and removing the need to carry a physical card. This is helping Trainline attract and lock in younger audiences to rail travel, with over half of the rail cards sold to under 30-year-olds. It's also improving transaction frequency, with digital rail card customers 58% more likely to transact three or more times a year. Digital railcars are a good example of how our enhanced product offering and broader marketing efforts are helping people make better everyday travel choices. All of this is helping increase our relevance for more of our customer travel needs. In the UK, customers are increasingly booking their regional travel through train line, and more recently, their commuter travel too. This has driven a notable increase in repeat usage In Q3, the number of customers transacting twice or more each month was up 39% versus two years ago. As you'll note, this is a particularly tough metric to shift. While helping drive faster growth, the increased customer lifetime value allows us to invest more in customer acquisition as well. Now let's turn to the progress against our strategic priorities for our international business. I'll start first with enhancing the customer experience as we become the retailer of choice in our priority of markets, France and Italy. The European rail market is liberalizing at pace. This is a map of rail carrier competition in Europe at the end of 2020, prior to the EU's fourth railway package. At the time, Italy was the only country with major competition across its high-speed roads, following NTV Italy's market entry several years earlier. Roll forward to today, and competition has now arrived in France and Spain. Wego, SNCF's low-cost carrier brand, entered the Spanish market last summer, launching on the Madrid to Barcelona route, and soon onwards to Valencia. They'll be joined by Irio, a Trenitalia JV, who will add a number of Spanish routes this year. And in response, incumbent carrier Renfe has launched its own low-cost brand, Avlo. Whilst in France, Trenitalia entered the market in December, launching a service between Paris to Lyon, France's busiest high-speed route. Fast forward to 2024, and four brands will compete across both the French and Spanish markets. Fast forward further into the future, and we see a world where European customers benefit from far greater choice. They will also use rail far more often, with EU targets to double high-speed passenger traffic by 2030 and triple it by 2050. The future of rail liberalization is exciting, but even today, we already have a lot to go after. In fact, carrier competition now exists on six of the top ten routes in Europe, on which all carriers are fully integrated into our platform. This competition pushes down prices and drives up service levels, stimulating incremental rail demand. As competition grows, customers will increasingly need help to find the right ticket at the best value. We will fulfill this role by positioning ourselves as the rail app of choice for European rail travel. We're aggregating all the carriers, fares, and journey options in one place so customers can compare and select the right option for them. They can also book multi-carrier journeys. For example, on the Paris to Lyon route, around 22% of ticket sales involve a connecting journey. Recently, I traveled on a train service, Trenitalia service in France, and chatting with another passenger, he explained to me for his ticket from Rennes to Lyon that he'd booked through Trainline, we were the only place that he could go to get the combination of regional, WeGo, and Trenitalia trains. For the rail customer, that means Trainline has a uniquely differentiated customer proposition. On the other side of the equation, Trainline is rapidly becoming the partner of choice for new entrants, attracted by our ability to rapidly add their infantry into the new domestic market, bring incremental demand in the form of new customers, and offer multi-carrier connections to the broader rail market. the net of which means we're beginning to see the early signs of the virtuous cycle of the marketplace. As we add more inventory, we become more attractive for passengers, and as we attract more passengers, we become increasingly relevant for rail operators. Let's take a closer look at two recently liberalized routes, starting first with Madrid to Barcelona, the busiest domestic air route in Europe prior to liberalization. With a journey time by train of two and a half hours, it's a route ripe for modal shift. Three different rail carriers now run service on this route, and the competition between them is hotting up. As the aggregator, we are benefiting. The number of tickets sold are up more than fivefold since before COVID, and a quarter of the new customers we're acquiring in Spain are from this route. And second, Paris to Lyon. This is another route ripe for modal shift, particularly given the recent flight ban in France for domestic journeys that can be done by train in under two and a half hours. Having entered the market in December, Trenitalia are already competing fiercely with incumbent SNCF and by June will operate five services a day. As the aggregator, the total number of tickets we've sold on this route has doubled since the launch of the competitor service. And we account for more than one in five of Trenitalia's tickets sold, a contrived step up versus our prevailing market share in France. There's still more work on our part to become the marketplace for rail travel in Europe. In November, we outlined our plans to step up investment in international. This investment will increase the pace at which we optimize and differentiate our product. In France, we recently launched the second iteration of recoup retard or delay repay. This makes it far easier for customers to submit a claim for a delayed train, and it's not available through the incumbent carrier's website or app. We've built new search capability, a virtual departure board, and a global live tracker, keeping customers up to speed while on the go. And we've also launched airline-style seat maps in France and Italy, by increasingly positioning Trainline as the marketplace of choice, and we're well-placed to succeed in Europe and significantly grow our share. We're also investing more in marketing to drive up customer demand. This includes expanding our performance marketing capability to acquire more new app customers, Acquisition has since grown to its highest ever levels. However, as you can see on the right, there remains a large opportunity to drive wider app adoption, which remains significantly behind UK levels. Likewise, there's an opportunity to drive up customer awareness, and we're now starting that journey with meaningful investment in brand marketing. We launched our first major brand campaign in Italy in the second half. This includes full station takeovers in Milan and Rome, a nationwide TV campaign, and leveraging influencers on social media to target younger audiences. As we acquire more customers as the aggregator, we are driving up customer lifetime value by making ourselves increasingly relevant for more of their travel needs. This dynamic was reflected in our regional sales growth in Italy, up 125% versus two years ago, and in France, up 106%, despite there being no carrier competition on those routes. Finally, our fourth priority, growing train line partner solutions, or TPS. Before we step into our progress here, I'd like to briefly talk about Platform One, our single global tech platform. Platform One's functionality includes broad yet deep inventory connections, end-to-end e-commerce solutions, powerful data assets, and core reliability, scalability, and security. Platform One has many tenants. Alongside our own trainline branded business, we offer B2B customers and carrier partners access to our cutting-edge technology and digital innovation as well. In doing so, we reduce their cost and complexity, making TPS an obvious choice of partner for their online retailing capabilities. This is being increasingly recognized outside of the UK. Recently, we have taken steps to broaden our white label business into Europe with a multi-year deal with Italian carrier NTV Italo. This will enable them to sell regional train and bus connections alongside their high-speed rail tickets. And we continue to position for growth our global distribution business. We're signing up more B2B partners to our global API, including recently Travelport, our first GDS customer. Published a year ago, the William Shatwhite paper included proposals for GBR to launch its own retailing app and website. There are still no confirmed plans on how GBR will develop retailing capabilities. However, RTG has taken preliminary steps to begin a formal tender process to procure platform services for its consolidated online retailing solution or course. This potentially may be novated to GBR at some stage in the future. The contract length would be four years with the opportunity to extend for a further four years. We've engaged with the preliminary stages of the course tender process and are ready to engage more fully once the official process begins. So before we open the floor to questions, let me recap on some of the key takeaways. Over the last year, we've continued to support the rail industry recovery as reflected in our strong performance in net ticket sales and in our outlook for next year with sales to be above pre-COVID levels. Our UK consumer business is growing strongly as we shift more customers towards digital ticketing, including in the commuter segment and in digital rail cards. and the MOU with RDG gives much more certainty around our future economics, whilst we continue to engage on ways to reform the retailing framework in the UK. In Europe, as competition between operators emerges, we have stepped up our investment to become the aggregator for rail. We are already seeing accelerated growth on routes that we have liberalized. In return, these new entrants act as propellants for new customers to trainline, attracted by the low fares, the aggregator proposition, and the unique inventory. And in TPS, we have broadened our white label business into Europe and further expanded our global API partnerships. Over the last six months, I finished building out my executive leadership team, hiring two highly experienced senior leaders, Mike Hyde, our new chief data officer, previously at Facebook, and Martin Sheehan, our chief corporate affairs officer, who has years' experience at Number 10. And as Sean referenced, we have opened offices in Barcelona and Milan as we aggressively expand into Europe. Looking forward, I'm as positive as ever about the opportunity and long-term tailwinds for growth and hugely excited about the journey ahead. So thank you for listening. We'll now open the floor for questions. Please raise your hand if you have a question. And before you ask your question, please state your name and your organization. Thanks.