Trainline Plc

Good morning, everyone. Thank you for joining us here today for our full year results presentation. It's good to see you all again. I'm Jody Ford, CEO of Trainline, and it's great to be joined by Pete Wood, who in December became our new CFO, having performed the role on an interim basis since September. Let's first go through the disclaimer and onto the agenda for today. I'll intro with the key highlights for the year, as well as recent political and regulatory developments in the UK. Pete will talk you through our financial performance, and then I'll update you on progress against our strategic priorities before deep diving into the international business. After that, we'll open to the floor for questions. As you know, our purpose at TrainLine is to empower greener travel choices. as Europe's leading independent rail platform, were well placed to fulfill that purpose, with over 270 carrier connections, a 4.9 star app downloaded 55 million times, and a platform processing over 6 terabytes of data per day. Likewise, we have strong tailwinds for growth. We operate across a 60 billion euro rail market, giving a significant headroom. In the UK, e-tickets will soon be available on over 90% of journeys. In Europe, markets are liberalizing at speed with six of the top 10 routes having two or more carriers. And consumers, governments, and businesses are increasingly focused on the environmental benefits of rail travel. With trains emitting at least 70% less CO2 than cars and planes, sustainability is the rail industry's superpower for generating long-term growth. This year, the group delivered a record operating performance. Net ticket sales were up 16% and revenue up 25% versus fiscal year 2020, the pre-pandemic year. Growth was led by international consumer, which became a 1 billion euro business. In the UK, we drove continued growth in digital tickets, particularly for commuters, where we doubled our segment share. In international, we further positioned ourselves as the aggregator on high-speed routes. In Italy, net ticket sales were three times higher than pre-COVID levels, while in Spain, they were four times higher. And as tourists returned to Europe, we almost doubled foreign travel sales with particularly strong demand from the US. In the UK, we're seeing encouraging political and regulatory developments. In February, the new Secretary of State for Transport, Mark Harper, spoke at the annual Bradshaw address. He gave more direction on the creation of Great British Rail, placing far greater emphasis on the role of the private sector, whilst committing to a competitive retail market to drive innovation and value for customers. And earlier this week, we announced that we had concluded our collaborative phase of engagement with RDG, confirming our commercial terms. Finally, I came by train is gaining recognition shortlisted for two sustainability awards and is becoming a galvanizing force within UK rail with new partnerships forming across government industry and train line to champion rail as a greener way to travel. And with that, I'll hand over to Pete to talk through our financial performance.

Thanks, Jodie, and good morning, everyone. I'm Pete Wood and I'm delighted to join you today as the new CFO of Trainline. Having stepped up into the role, I'm both excited by the growth opportunity ahead and pleased with the momentum we are building. Before I get into the financial performance for the year, I'd like to discuss the strengthening trading conditions in the UK. As you know, COVID had a significant impact on passenger volumes and the industry has recovered over the course of the last 12 months. from less than 70% of pre-COVID levels last year to over 90% this year. Strike action has weighed on the recovery, however, with strikes every month from June through to March. As we said in our trading statement, the gross ticket sales impact for TrainLine was around five to six million per strike day. While of course a challenge for the whole industry, I was pleased with the way we were able to help customers navigate the disruption. with features like alerts and self-serve refunds. There's been progress in the resolution of the industrial dispute, with two pay offers now settled. Two remain outstanding, and strikes have been called this month and next. However, I'm encouraged by how quickly passenger demand can return. For example, there were no strikes called since early March, and passenger volumes quickly recovered to above 90%. With cost of living pressures, customers are taking advantage of booking in advance, with our value-focused brand campaigns highlighting savings of up to 35%. And the softness in longer distance travel that we flagged in March has now receded. The group achieved a record operating performance this year, driven by strong growth in our UK and international markets. With COVID impacting prior year numbers, I'd instead talk to year-on-three-year growth rates. Net ticket sales were up 16% to 4.3 billion. Within that, UK consumer was up 37% to 2.8 billion, reflecting the market recovery and a significant increase in e-ticket penetration. International consumer was up 95% to 915 million, supported by our aggregation of new entrant carriers on key European routes. Trainline Solutions remained at half its pre-COVID size at 597 million, due to a slower recovery in business travel. However, it almost doubled versus the prior year, and we continue to see longer-term tailwinds as corporates move towards greener travel choices. Revenue was up 25% to 327 million, which I'll step into on the next slide, and gross profit was up 29% to 252 million. Group revenue has grown ahead of net ticket sales when compared with pre-COVID results, driving an increase in the group's take rate from 7% to 7.6%. This was driven by a mixed effect in the group portfolio with the UK and international consumer businesses, both with relatively higher take rates, growing faster than train line solutions, as well as by an accelerated growth in foreign travel, which also generates a higher take rate, in part because carriers pay more in commissions for non-domestic sales. The business delivered a material increase in EBITDA, even while we increased investment to drive international growth, and despite a headwind from industrial action. We reported an adjusted EBITDA of 86 million, up 47 million year on year, and up 1 million versus fiscal year 2020. In international, we ramped up marketing investment to 43 million, We are already seeing the benefits of this investment as it drives growth in new customer acquisition and net ticket sales. Alongside this, we scaled the platform to manage the significant step up in transactions as reflected in the other admin cost bar. We hired additional people and I'm pleased with the acceleration in feature development and localization of our platform for European markets and the critical contribution this makes in driving growth. Jody will expand more on this later. Staying with international consumer, we expect EBITDA to approach breakeven on a pre-internal transaction fee basis in fiscal year 2024. As we have said before, our number one priority in international is to drive growth in net ticket sales and revenue. But as the business grows, it benefits from operating leverage on marketing and people costs. The chart on the right hand side shows the international's financial profile prior to the payment of the internal transaction fee to Trainline Solutions. As you can see, the business is achieving operating leverage as it scales with revenue up 131% versus the cost base increase of 87%. This reflects our disciplined approach as we prove our way into new markets, closely managing lifetime value and the cost of acquisition for new customer cohorts. It also reflects the benefits of our existing customer base growing in size, particularly app customers who are stickier and transact more frequently. Finally, as I look ahead, we are well positioned for further growth and have made a strong start to the year. Demand is healthy across our key markets. And as you will shortly hear from Jody, our team is delivering against the clear strategy. Group expectations for fiscal year 2024 are net ticket sales growth of between 13 and 22%, revenue growth of between 13 and 22%, and adjusted EBITDA as a percentage of net ticket sales of between 2.15 and 2.25%. Thank you. And I'll now hand back to Jodie.

Thank you, Pete. Let's now talk about the progress we're making against our strategy, starting with our UK consumer business. Our first key priority in the UK is to provide customers with an excellent user experience, removing friction when searching for trains and booking tickets while offering them unrivaled value. This is helping shift more people to digital ticketing, with e-tickets a core part of our mobile app proposition. We're achieving an accelerated delivery of new products and features, and I'd like to touch on some highlights. Historically, commuters have been underserved with digital ticket options. We've therefore primed our mobile app to better serve such journeys. And we've already had good traction with Trainline doubling its commuter segment chair in three years. An example includes our favorites feature, which allows commuters to personalize their journeys in the app, giving them live departure boards and notifications of delays and disruptions. It's proven popular with 4 million customer setups to date. And last month, we launched our new Quick Buy feature, which leverages our data to let customers purchase the same ticket again in just three clicks. We continue to reduce friction from the travel experience, recently launching Next Best Actions to help customers manage delays and disruptions. We've always done a good job notifying customers. Next Best Actions goes a step further, helping customers understand what they can do. We're starting by allowing customers to check what other trains their ticket is valid on, with plans to go way beyond this. At the same time, we're unlocking further savings for customers with innovative tools like SplitSafe. We ran a data-led optimization process to make the product even better, expanding the number of journeys in which split tickets are offered. This helped grow availability of SplitSafe tickets to 80% of all UK journeys, up from 64% at launch. Moving on to our second priority in the UK, building demand. We are running a brand campaign telling customers how they can save 35% on average when booking a journey through Trainline, highly relevant as the cost of living pressures bite. These campaigns point to the environmental benefits of rail travel too, reflecting our core purpose to encourage career travel choices. This is helping more people to make better travel choices every day, showing them that great journeys really do start with Trainline. It forms part of a broader marketing strategy in the UK that has delivered significant customer acquisition. In fact, over the past three years, we've increased active customers by 58%. At the same time, we have deepened our customer relationships, significantly increasing customer transaction frequency. Customers that transact two or more times a month have grown from 49% of monthly customers to 49% of monthly customers, up from 42% three years ago. With the simultaneous increase in active customers, it means a substantial jump in sales transactions. Turning to our fourth priority, growing train line solutions, leveraging Platform One, our single global tech platform, to power online retailing for our travel partners. We further strengthened Platform One this year. We added to the significant breadth and depth of our carrier connections, integrating new entrants at speed as they came to market. We developed and released an extensive list of customer-focused products and features, and we increasingly use machine learning to surface relevant products and features to each specific customer. While in the background, we continue to optimize the platform's reliability and enhance its scalability. In fact, platform one is now regularly processing over a thousand transactions a minute at peak times. While enhancing the platform, we leveraged its strength to better serve our travel partners and position the business for future growth. For our carrier partners, we made big strides in improving their core functionality and customer features. This includes enabling digital seasons and digital payment methods like Apple Pay and Google Pay. And we extended our contracts with Cross Country and ScotRail and signed a new contract with TrainHugger, a sustainability-focused third-party retailer. At the same time, more travel businesses went live on our global API platform. As a reminder, our global API gives B2B partners the ability to offer European rail options to their customers through one simple seamless connection, rather than tackle the complexity of connecting to 13 different carrier APIs. And in recent months, CWT and Havas Voyage both went live on the platform. Now, let's turn to the international consumer business. 18 months ago, I stood here outlining our plans to accelerate the growth of our international business. Since then, we've increased the pace at which we launch innovation into our core European markets, while filling any product gaps that existed, rapidly integrated four new entrants onto our platform, and expanded our marketing activity to grow brand awareness and increase customer acquisition. As a result, International consumer net ticket sales has doubled versus fiscal 2020, reaching the milestone of 1 billion euros of net ticket sales. We're increasingly prioritizing the rail markets where we have the strongest proposition. These are domestic markets which enjoy widespread carrier competition, primarily Spain and Italy. And foreign travel representing global inbound and intra-EU cross-border travel. These markets contribute about two thirds of international consumer revenues, and we expect strong growth ahead. Beyond these markets, significant further headroom remains, most notably in France, which I'll come on to shortly. Let's first look at domestic market liberalization. As you know, Italy, Spain, and France have opened to competition. Six out of the top 10 high-speed routes in Europe now have carrier competition. And as you can see on the map, there's an increasing number of key routes that have more than two different carriers. By giving customers more choice, carrier competition is creating the opportunity for Trainline to position itself as the market aggregator. But not all markets are at the same level of maturity when it comes to liberalization. So we are tailoring our approach based on the respective level of maturity. For phase one countries like France, which has yet to see carrier competition beyond Paris-Lyon, we continue to focus on providing a great user experience with all key journeys and prices. As widespread carrier competition arrives on a market's high-speed rail network, as is happening in Spain, we'll move to phase two, making aggregation a key differentiator for Trayline. This includes ramping up marketing spend to grow brand awareness and acquire new customers. As we establish ourselves as the number one aggregator, it gives us an opportunity to move to phase three, deepening customer relationships, as we're now doing in Italy. As customers engage more habitually with Trainline, particularly through the app, it increases our relevance for more of their travel needs. This sees them transact more often, including for shorter distance regional trips. Let's first look at France, a large market, but one where market liberalization remains nascent. Without a widespread aggregation opportunity, France offers a slower growth of profile than the other more liberalized markets. And the effect of strikes this year is likely to slow growth further. We will continue to invest in the user experience and performance marketing in order to serve and grow our French customer base. How we'll manage our brand investment to coincide with the future arrival of widespread carrier competition. Moving on to Spain, a rail market worth 2 billion euros, The Spanish government have embraced liberalization, seeing the benefits it brings in reducing fares, improving service quality and driving greater ridership. Four carrier brands now compete in Spain, and as they expand services, we estimate these liberalized routes will represent a 1.3 billion euro aggregation opportunity. It's amazing to think this time two years ago, there was just one rail brand in Spain, the incumbent Renfe. Since then, SNCF has launched their low-cost operator, Wego, followed by Renfe's low-cost brand, Avlo. This competition has brought value-focused pricing to the market. The way it's stimulating demand and disrupting rail is akin to how Ryanair and EasyJet disrupted the airline industry 20 or so years ago. Last year, train Italia-backed Irio entered the market. In contrast, they are offering a differentiated premium proposition, directly competing with Renfe's traditional brand. Three or more of the brands will compete on five key high-speed rail routes by the end of next month. Their new service is expanding capacity by 84%. Let's look specifically at Madrid-Barcelona, where there are clear signs carrier competition is driving modal shift. Prior to COVID, this was Europe's busiest domestic air route. However, last year, air traffic fell 28%. During the same period, railfares fell 55% and passenger volumes grew 35%. By positioning TrainLine as the aggregator on this route, we've significantly increased our market share. Tickets sold on this route doubled year on year and were nine times higher than three years ago prior to COVID and the arrival of competition. At the same time, we're proving vital for new entrants as they seek to attract new customers as quickly as possible. In Eereo's first quarter of trading, we sold 20% of their tickets. As carrier competition grows in Spain, we are embedding our position as the leading aggregator. We're improving the way we surface the most relevant travel options, including intuitive search filters, plus search results that allow customers to identify where it's better to combine different carriers for their journey. Finally, we're going the extra mile to delight customers, including an a la carte food selection within the booking flow for IRIO trains. Let's now discuss Italy, a rail market worth 4 billion euros, where two carriers, Trenitalia and Italo, have competed for the last decade. Here we have a strong aggregator proposition with all the carriers, routes, and journey options, as well as a seamless app experience. We continue to build brand awareness and drive new customer acquisition. We launched our first major nationwide brand campaign last year. This focused on train stations in key cities with aggregated routes, as well as a national TV campaign. I'm delighted to say that we are the number one rail app in Italy, with 13% more downloads than incumbent Trenitalia. And this is translating into net ticket sales, which were three times higher than pre-COVID. At the same time, we are deepening our relationship with Italian customers. We grew our relevance with more of their travel needs, with a fourfold increase in ticket sales on regional railways, driving total tickets sold to 10 million. This was despite there being no carrier competition on those regional routes. Moving on to foreign travel. As a reminder, this represents global inbound customers from the US, UK and rest of world, as well as some intra-EU cross-border travel. It's an addressable market worth €4 billion, with journeys weighted more to the summer months. It generates double-digit take rates, partly due to higher commissions payable by carriers for non-domestic customers. This year, foreign travel almost doubled versus pre-COVID, with sales to US inbound customers particularly strong. As we position ourselves as the one stop shop for rail travel in Europe, we see opportunity for growth to continue, particularly as we begin to leverage our marketing leadership. To bring that to life, let's look at U.S. inbound customers as an example. The typical U.S. inbound customer visits Europe in a group, often as part of an expensive family holiday or to celebrate their graduation. They book most journeys in advance and increasingly want to explore multiple countries in Europe, with 42% of sales coming from customers that book journeys on two or more carriers. However, they're not used to traveling by train, particularly in a foreign country, so feeling reassured is a top priority. In that light, Trainline already meets many of their needs, offering easy booking in advance or on the day. all the key routes, carriers, and fares, and a standardized travel experience in their native language, helping them get from A to B successfully. We plan to build on our early success to attract more U.S. inbound customers. We are currently running a campaign to find Trainline's chief conductor, hosted by the one and only David Hasselhoff, with the contest winner experiencing rail adventures across Europe. And we have launched journey guides to help customers feel reassured when traveling by train across Europe. Before we open the floor to questions, let me recap on some key takeaways. We've delivered record operating performance this year, and we expect the momentum to continue, guiding to strong growth in the year ahead. In the UK, our consumer business is growing strongly as we shift more customers towards digital ticketing, particularly commuters. In international, we are prioritizing the markets where we have the strongest proposition today. This means harnessing the aggregation opportunity to accelerate sales growth in Spain and Italy and driving growth in foreign travel, which provide higher margins for train line. Looking forward, I remain hugely excited by the opportunity ahead, our long-term growth tailwinds, and the progress we continue to make in delivering to our customers in the UK and across Europe. So thank you very much for listening. We'll now open to the floor for questions. If asking, please can you give your name and institution?