Trainline Plc

Good morning, everyone. Thank you for joining us here today for our full year results presentation. I'm Jody Ford, CEO of Trainline, and I'm joined by Pete Wood, our CFO. Let's first go through the disclaimer. Onto the agenda for today. First, I'll give a quick introduction, briefly discussing the progress we've made during the year. Pete will talk you through our financial performance. I'll update you on how we're progressing against our strategic priorities. And then we'll take a closer look at Spain, which is now the most dynamic rail market in Europe and precursor for how carrier competition can shape other markets. And after that, we'll open the floor to questions. As a reminder, at Trainline, we have a clear purpose to empower greener travel choices. To achieve that purpose, our vision is to build the world's leading rail platform, making it easy for customers to find the right ticket at the right price and delivering that experience 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. At Trendline, we have a huge headroom opportunity. Our addressable market is 55 billion euros and growing, in part supported by industry investment plans and increasing awareness of the environmental benefits of rail travel. Within that 30 billion euros are in markets where new entrant carriers are due to launch over the next two years. We believe we are the best position player to win in these markets and become the aggregator of choice. We have a clear remit to aggregate carriers in multiple geographies, unlike incumbent rail carriers. We have the expertise and scale to invest across markets, unlike other independent rail retailers. And we have a scalable tech platform that's optimised for the complexities of rail travel, unlike big tech platforms operating in other verticals. As a result, I see significant runway for sustainable growth over the long term. Our performance this year reflects the progress we're making against our headroom opportunity. We grew net ticket sales by 22% and revenue by 21%. Together with the benefits of operating leverage and cost discipline, this drove a 42% increase in adjusted EBITDA and strong cash flow generation. In the UK, we continued to digitise rail travel, with industry e-ticket penetration rising to 47%, while our share of the commuter travel segment grew to 23%. In international, we surpassed one billion of sales driven by liberalising European markets, with Spain and Italy growing 43%. And in train line solutions, we have continued to see a strong recovery, further leveraging our investment in Platform One. Returning to the upcoming general election in the UK, recognising this as a significant topic, we continue to engage closely with both leading political parties. In the last few months, we have gained greater clarity of their plans for the rail industry should they win the election. The Conservative government published its draft rail reform bill in February. The bill includes the creation of GBR as an arm's length governing body that will unify track and train. And it gives strong support for open access carriers as a way to bring choice and value for passengers. The government has also shown clear support for third-party retailers and in December withdrew its plans for a central retailing app and website. Labour launched its rail policy at Trainline HQ last week. They commended Trainline's efforts to innovate for passengers, which is aligned with their own passenger-focused vision for rail. Like the Conservatives, Labour announced that they would create GBR as the directing mind for the industry. However, in contrast, they plan to bring private operators under public ownership as their contracts expire. This would likely take a full parliamentary term to complete and would exclude the Scottish and Welsh carriers, as well as open access operators. Labour would also seek a reset of industrial relations to address the long running dispute with the rail industry. Looking specifically at retailing, Labour have recommitted to an innovative and competitive third-party market. Though yet to iron out their plans, Labour may look to simplify some of the 27 different carrier apps and websites in due course. However, they've made it clear that they have no plans for a centralised app and website. Labour also plan to review the complex fare structure to maximise passenger growth. At the same time, they intend to accelerate the rollout of innovation across the industry and plan to task GBR to work with Trainline to make that happen. This includes digital season tickets, automated delay repay and digital pay-as-you-go, which we've been encouraging the industry to roll out for some time. So there are real positives in the plans both parties have put forward. What's important beyond the election is clarity, direction and full momentum for the industry. And under either scenario, we may remain fully confident we can execute against our long-term priorities in the UK. And with that, I'll hand over Pete to talk through our financial performance.

Thanks, Jodie, and good morning. Before I step into the financial performance for the group, I will briefly unpack the performance of our business units. Starting first with UK consumer, net ticket sales grew 23% to 3.5 billion as people in the UK continue to shift to digital tickets. E-tickets rose to 47% of all industry sales this year, from 43% in the prior year. Growth was led by commuters and people booking on the day of travel, who increasingly benefit from Trainline's innovative set of products and features, while long distance and leisure travel remain strong. Net ticket sales also benefited from the broader rail market recovery, alongside a 6% fare increase. And while industrial action continued, the industry experienced fewer strike days this year, and on average their impact was less severe. International net ticket sales grew 14% to 1 billion, as we positioned ourselves as the aggregator in Europe's liberalising rail markets. The strongest performance came from the markets with the greatest levels of carrier competition, Spain and Italy, where further innovation in our customer proposition and marketing investment delivered net ticket sales growth of 43% year on year. Net ticket sales in France and Germany grew 3%, with France representing the vast majority of the volume here. This reflected our decision to pause brand marketing in France until we see more widespread carrier competition. Growth in app sales remained strong, with the share of our transactions through app increasing to more than 62% from 53% a year ago. Growth in web sales was slower, primarily due to Google launching trains within its travel module and suppressing organic search results, as we discussed in November. We have somewhat mitigated this impact by scaling our presence in the travel module to more than 3,000 routes across our core markets in Europe. Net ticket sales within our train line solutions division grew 31% to 785 million. As a reminder, this business unit provides B2B retailing capabilities to rail carriers and other travel platforms. For rail carriers, our IT carrier solutions business delivered a strong performance, supported by feature releases and market recovery. For business travel, the industry continued to recover from a lower base. Bringing that together, the group achieved a very strong set of results, with net ticket sales up 22% to 5.3 billion, underlining the progress that Trainline is making against its strategic objectives. This was at the top of our previously stated guidance range of 17% to 22%. Our revenue increased 21% to 397 million, ahead of previous guidance of 15 to 20%. This outperformance reflected the mixed effects of faster than expected growth in UK consumer, as well as growth in non-commissioned revenues across the UK and international consumer businesses. And gross profit was up 21% to 305 million. Growth in profitability outpaced that of net ticket sales and revenue. This reflected the benefits of operating leverage and disciplined cost management. Marketing costs grew 4% to 67 million, reflecting our continued investment to drive efficiencies in new customer acquisition, as well as our decision to pause brand spend in France. Other admin costs increased 14% to 116 million. Within that, people costs were 69 million, which reflected the four-year impact of increasing headcount in the prior year. Other costs were 47 million, which was also higher, principally driven by growth in transactions, which grew faster than net ticket sales. However, we continue to engineer efficiencies to mitigate cost inflation and drive leverage, resulting in a 16% increase, far lower than the transaction growth. Net of these costs, adjusted EBITDA was $122 million, up 42% year-on-year. At 2.3% of net ticket sales, this exceeded our previously stated guidance range of 2.15% to 2.25%. It also reflected the underlying international consumer business approaching breakeven this year, in line with our previously stated guidance. The business continued to deliver strong cash generation, with operating free cash flow of 91 million. This was driven by increased EBITDA plus working capital inflows. It was partly offset by 41 million of capex, reflecting our ongoing investment in product and tech innovation. As we generated more cash, our leverage further reduced to 0.5 times EBITDA, down from 1.2 in the prior year. And this was despite Trainline buying back 28 million of shares as part of our 50 million share buyback programme. By the end of April 2024, we had repurchased 38 million, and today we've announced a new share buyback programme of up to 75 million to commence upon completion of the existing programme. This is in line with our stated capital allocation framework of returning excess capital to shareholders after investing behind the business and managing debt. Finally, as I look ahead, we are well positioned to further grow we continue to enjoy significant growth opportunities, including more people shifting to e-tickets in the UK, and new entrant competition increasing the need for market aggregation in Europe. Group expectations for this coming year are as follows. Net ticket sales growth of between eight and 12%, revenue growth of between seven and 11%, and adjusted EBITDA as a percent of net ticket sales of between 2.4 and 2.5%. Thank you, and I'll now hand back to Jodie.

Thanks, Pete. Let's now talk about the progress we're making against our strategic priorities, starting with our UK consumer business, where our priorities are to provide customers with an excellent user experience, build demand, and increased customer lifetime value. Taking a step back, the UK is a large rail market worth over £10bn. We aim to expand that market, shifting more people onto trains. We also aim to shift more people to online and digital tickets. As you can see, online sales were almost £6bn, the majority of which were e-tickets. However, over £3bn of sales were offline. These were mostly tickets bought at the train station on the day of travel and primarily for commute and short distance journeys. So we are priming our mobile app to better serve those types of journeys. We continue to make good progress, unlocking value and removing friction for customers. We launched an improved price prediction tool, leveraging the scale of our data to more accurately predict when fares are likely to increase and how many tickets are left at the current price. We improved ticket alerts, which flags to customers when tickets are available on their chosen route at their cheapest price. And SplitSafe is now available on more than 80% of routes. As in Europe, the UK is seeing new entrant competition in the form of open access operators. Brands like Lumo and soon Grand Union are increasingly competing with incumbent carriers on selected long distance routes. These carriers tend to be less well known, so for them we are a significant source of new customers. By taking learnings from Italy and Spain, we're enhancing our fare presentation so customers can easily compare prices and times between carriers. We are priming our mobile app to better serve commute and short distance journeys. We've now launched Best Price Guarantee, where we promise to refund the difference if a customer finds the same on-the-day ticket cheaper elsewhere. And we continue to scale digital seasons, with our digital season customers exhibiting more than double the retention levels of our customer base in the UK. All of this is helping us take more share of the commuter segment, now at 23%, and grow into the 3 billion of offline sales headroom. Our second priority in the UK is to build customer demand with marketing campaigns that focus upon value, commuting and sustainability. This has helped grow active customers by 13% this year. Under our flagship brand campaign, Great Journeys Start with Trainline, we told customers how they can save 35% on average when booking through Trainline. And our viral Trainline Wrapped campaign gave every customer a personalised view of their sustainability journey, helping encourage greener travel choices. On to priority number three in the UK, increasing customer lifetime value. As we grow our customer base, we are increasing the frequency in which they transact with us, with active customers now transacting almost three times a month on average. This reflects our focus on commute and short-distance travel, with on-the-day bookings now representing two-thirds of all transactions in the UK. and it's driving growth in net ticket sales, as Pete has outlined. At the same time, we are nurturing ancillary revenue streams with add-on products like hotels and parking, as well as enhancing ad placements within our channels. Turning to Trainline Solutions. This business unit leverages the strength of our single global tech platform, Platform One, to support our travel partners. For business customers, we have brought together our business and consumer app. Customers can now flick between their business and personal travel while keeping their booking separate. For white label carrier partners, we have added more customer experience features, including push notifications and bike reservations. We are actively engaging in several new tender processes from carriers for their online retailing solutions. This follows the cancellation of government plans to create its own centralised retail app and website. Within Platform One, we harness advanced machine learning to deliver data-driven features, including split save and price prediction, as well as greater personalization. As I said six months ago, we see generative AI as additive to what we're already doing in this space. We've set up AI labs to develop our own proprietary AI models within our own domain. By combining these models with industry data and our own unique customer data sets, we are widening the opportunity to create smaller and more personalised experience, smarter and more personalised experiences across the whole user journey. Let's now talk about the progress we're making against our growth strategy in international. Taking a step back, the rail market in Europe represents significant headroom for Trainline's future growth. By positioning Trainline as the aggregator of choice, we are well-placed to significantly scale our international business. While we operate across most of Europe, we focus on markets worth €10 billion, where we have the strongest customer proposition today. They include the domestic markets with widespread carrier competition, primarily Spain and Italy, which together are worth €6 billion. They also include foreign travel, which is worth around €4 billion. This represents global customers from the US, UK and the rest of the world, as well as some intra-EU cross-border travel. Markets beyond that, like France, represent significant future opportunities for train line. We plan to increasingly position ourselves as the aggregator here to once carrier competition becomes widespread. We're making strong progress in our priority markets, which now make up three of our top 10 routes globally. This includes a new entry, Barcelona to Madrid, at number three, growth growing from 11th biggest last year. We are creating a unique customer experience, removing friction and unlocking value when booking rail travel. We recently overhauled our fare presentation within the app, providing clear and simple information about each carrier and carriage class. This helps customers compare choices, particularly on routes with more than one carrier. We also launched best price guarantee in Italy, Spain, and France. Similar to the UK, we promise to refund the difference if a customer finds the same ticket cheaper elsewhere. And in Italy, we now find and automatically apply carrier promo codes for customers. We're investing to grow brand awareness of Trainline as the market aggregator. Prompted brand awareness has doubled since we launched brand campaigns in Spain and Italy. In Spain, it's gone from 8% to 21%, while in Italy, it has increased from 19% to 40%. At the same time, we are deepening our relationship with our customers. This includes encouraging more customers to download and use our mobile app, given its superior user experience and transaction frequency benefits. In Italy, we became the second most downloaded travel app behind Booking, while app share of transactions increased to 73%. This has helped grow overall transaction frequency as app customers in Italy transact almost three times as often as web customers. We're also placing greater focus on monetisation. We are growing foreign travel sales, which is typically higher margin business for TrainLine. And we have introduced ancillary products into the booking flow, including hotels in partnership with Booking.com. This has helped grow the underlying revenue take rate from 6.4% to 6.6%. Now, let's take a closer look at the Spanish rail market. Given its transformation in recent years, Spain serves as a useful template for what increased carrier competition might look like in other European markets. Spain has quickly become the most competitive high-speed carrier market in Europe. Since 2021, it has gone from having one long-distance carrier, the national incumbent Renfe, to four different carrier brands. With two premium and two low-cost brands, customers now have real choice. Carrier competition is transforming the high-speed rail market. The new brands have taken well over half of the market already. Average fares have fallen 50%. And that's helping to drive modal shift to rail, with industry passenger volumes jumping 70%. However, with increased choice comes increased complexity for the customer. Let's look at an example to bring that to life. This is Maria. She lives in Madrid and wants to book a return journey to Valencia, a route where all four carriers operate. To compare the carriers, she could look at each of their respective apps, perhaps using a pen and some paper to cross-reference the different times and prices. Alternatively, Maria could save herself the trouble and use Trainline. She can compare services across all four carrier brands and book the right journey for her all in one highly rated mobile app. And now we've made that even easier. Top Combo allows customers to seamlessly stitch together different carriers for multi-leg and return journeys. In doing so, customers can optimise their booking for price and convenience. As you can see, by using Top Combo and combining different carriers, Maria has saved herself over €38. So clearly it's great for customers, but Top Combo also allows new entrant carriers to sell more rail tickets, in turn helping them to grow share. By focusing on aggregating for competitive high-speed routes, we are growing quickly and taking meaningful share. Our share on the top five routes now ranges from 8% to 13%. This compares to sub 1% across Spain only a few years ago. As a result, our Spanish domestic sales have doubled for two years running. At the same time, we are driving an increasingly engaged customer base. As you can see, the proportion of sales coming from repeat customers has gone from 31% to 44% in just two years. Today, Spain is the only market in Europe where four carrier brands are competing on the same long-distance routes. But new entrant carrier competition is also set to ramp up in Italy, France and in the UK in coming years. With 20 routes set to see new entrant carrier competition in the next two years, I believe this could support a golden age of rail travel. Let's look at how this might play out in Italy and France over the next few years. In Italy, two carriers already compete on its high-speed rail network, Trenitalia and Italo. This is due to increase to four over the next couple of years. In late 2025, new entrant carrier Longitude Arena Race is set to arrive, having submitted plans to run one international and six domestic routes. SNCF's low-cost brand Wego is set to follow from 2026, and it's likely they will pursue their signature aggressive pricing approach. In France, carrier competition is relatively limited. Paris to Lyon is the most notable exception, where SNCF and Trinitalia have competed since late 2021. Trainline ticket sales on that route grew 42% this year, similar to growth across Spain and Italy, demonstrating how carrier competition can be a key unlock for our growth in France too. This trend should accelerate with Renfe due to launch a Paris-Lyon service in H2. And thereafter, new entrant carriers Le Train and Kevin Speed are planning to launch services on routes across France. Carrier competition is also set to arrive between London and Paris. It's a €1bn route that could liberalise as early as 2025, with various new entrants planning to launch competitor services to Eurostar. More carrier brands should increase the competitive dynamic of the Italian and French rail markets, in turn catalysing the need for a market aggregator like train line. Spain has proven to be the template for carrier competition, with a considerable reduction in fares, a significant increase in passenger volumes and customers enjoying real choice for the first time. We've positioned ourselves as the market aggregator, and this is driving exceptionally strong sales growth. It's also allowing us to hone our aggregation playbook, building a headstart for when other rail markets liberalise. As I said earlier, we increasingly believe we occupy a unique position that we can leverage to win in Europe, with a clear remit to aggregate carriers across multiple geographies, the expertise and scale to invest in new markets, and a scalable tech platform that's purely optimised for the complexities of rail travel. Given the headroom opportunity, our unique position and our experience to date in Spain, we see significant runway for future growth. So before we open the floor for questions, let me recap on some key takeaways from today's presentation. In the UK, we are unlocking value and removing friction to expand the market while focusing on digitising the 3 billion station walk-up market. And as the general election draws closer, we are engaging closely with both leading political parties and getting increasing clarity on their plans for rail. In Europe, we are driving particularly fast growth in Spain, the most liberalised market in terms of carrier competition. This liberalisation has a positive read across for how carrier competition should benefit other European markets. And we've built a strong head start. overall we've delivered an excellent performance this year with strong top line growth increasing profitability and growing cash flow generation and today we've guided for strong growth in the coming year and announced the new share buyback program ultimately this reflects the significant progress we are making in delivering for our customers in the uk and across europe So thank you very much for listening. I'll now open the floor for questions. Raise your hand if you would like to ask a question. When asking, please state your name and your organisation.