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spk03: moving to positive free cash flow in the back half of the year. In summary, we delivered strong first quarter revenue and adjusted EBITDA. The business travel recovery continues, and we are delivering on share gains and SME momentum. We continue to execute on agency synergies and cost savings to drive operating leverage. We are well positioned to deliver strong second quarter and significant revenue growth and margin expansion in 2023. So we are delivering on what we said we would do and are confident in continued momentum ahead. I look forward to stepping into the CFO role on July the 1st and getting to know all of you in the months and years ahead. So we can now move into Q&A. Martine and I are joined by Eric Bock, who is our Chief Legal Officer, Global Head of M&A and Compliance and Corporate Secretary. Operator, please go ahead and open the line.
spk04: Thank you. If you would like to ask a question, please press star then one on your telephone keypad. If you change your mind at any time, please press star two. And as a reminder, that is staff followed by one to ask any questions. The first question we have comes from Steven G of Credit Suisse.
spk08: Okay, thank you so much. So Paul, the transaction recovery overall stands at 76% for you guys. I don't know if you have the regional data handy, but can you talk about where the Asia Pacific recovery may be as that region is still seems to be, you know, growing the highest year over year amongst your, I guess, the regional comparisons. Thank you.
spk02: Steven, hi. Look, yeah, thanks for the question. We, I don't have the regional recovery rates in front of me. Maybe, Martin, have you got those handy there?
spk06: So Asia was transaction recovery for APAC was 87%. That's a, you know, reported, so you'd have to adjust that by a couple of points to get .
spk05: Thank you.
spk02: Stephen, you probably saw as we were going through the presentation, we're trying to focus more on the year-over-year performance going forward and start to move away from recovery rates versus 2019. It was obviously 2019 is four years ago now, and, you know, we run into sometimes some reporting challenges with quarter-over-quarter analysis. So, you will see us focus more on the, you know, year-over-year growth rates and quarter-over-quarter growth rates going forward.
spk08: Understood. Thank you. Yeah, because the higher APEC protection recovery is a little bit odds versus what I was thinking, given that that region is growing at the highest rate for you right now. But I guess the good news here is that some of the other potentially larger regions are still lagging in the recovery, so there's still a lot more light space in front of the recovery. Is that a correct characterization?
spk02: Yeah, worth remembering, though, that the Asia-Pacific region for us, we don't consolidate domestic China volumes because it's a joint venture market. And so when you look at our Asia Pacific results, they are primarily driven by the recovery in Australia and India that's been actually pretty very strong and actually has been ahead of the curve in terms of the other markets in Asia. What we're seeing more recently is the recovery of international volumes to and from China, but those recovery rates actually will register in the point of origin. So if that trip is booked from the U.S. or it's booked from Europe, then that trip from the U.S. to China or Europe to China, you know, is registered, you know, where it is ticketed. So it'd be registered in, you know, in Europe or in the U.S.
spk08: Thank you.
spk04: We now have Lee Horowitz of Deutsche Bank.
spk07: Great. Great. Thanks so much. Can you really help us understand your application for your revenue guide? You know, I guess given the 1QD, the 2QL, the wide revenue growth in the second half of the year in the low-dimension of the range versus 130 in the front half of the year, Maybe can you help us better understand sort of the macro assumption underpinning the second half growth and why we should be expecting sort of revenue growth to slow down so materially in the second half? And then one follow-up, if I could.
spk02: Yeah, sure. I think as Karen mentioned in her comments there, We acknowledge that if the current trends continue, we're likely to reach the upper end of the revenue guidance. I think we've guided in previous calls that we're expecting to see a couple of points recovery per quarter sequentially. I think we made that statement in Q3 and we saw a couple of points recovery in Q4. We also made that statement in Q4 and we've seen essentially a couple of points recovery. When you work, they adjust it in Q1. We've gone from 72 to 74. So we are continuing to model out two points of recovery per quarter in the balance of the year. And if that recovery level plays out, then yes, we're likely to be at the upper end of the revenue guidance. I think what Karen also said, though, is that we do have potentially some delays in the restructuring in Europe, and which won't affect our exit rate from an operating expense standpoint. And we also have attractive investments that we may or may not choose to trigger in the balance of the year. So that's why we feel that actually the current range for revenues and adjusted EBITDA, you know, are still appropriate, whilst acknowledging that the current trend would take us to the higher end on the revenue side.
spk07: Great, helpful. Thank you. And then maybe, you know, I don't think we're allowed to go through the conference call this year without touching our chairman of AI. So, Paul, can you maybe talk a bit about how you see these cutting-edge technologies impacting your business operations and how you think about putting investment to work in, say, the medium term in order to harness the power of these technologies?
spk02: Yeah, that's a great question. We see it as a tremendous opportunity. I mean, if you look at what we actually do in agency and in Neo, we are consistently data to automate. transactions that were previously through the voice channel, through our travel counselors. And that sort of percentage of online adoption, as we call it, has been steadily increasing year over year and it's now 76%. But we still have a big opportunity to take more demand out of the voice channel. And when we do that, it increases our margins and in many cases creates a better self-serve experience for customers. So it's a muscle that we've got well developed in the company. And what AI and the developments and the advancements that AI are doing is frankly just making the speed and scale of those changes look even more exciting. And so we do have a team that are focused on using generative AI models and big data to see what can we do to automate our processes more effectively. And yeah, definitely see that as a significant opportunity for us, not just in the months, but years ahead.
spk07: Helpful. Thank you.
spk04: Thank you. We now have Dwayne Penningsworth of Evercore ISI.
spk01: Hey, thank you. Could you just talk a little bit about the drivers of upside in the March quarter relative to your initial guidance? You know, which regions or segments kind of surprised you? And then I wonder if you could speak broadly to performance by month. You know, what did a March exit rate on recovery look like relative to a January?
spk02: Yeah, sure. Maybe, Martin, you'd like to just come in and give your perspective on the drivers of of Q1 performance?
spk06: Sure. So we actually came at, you know, we had $10 million of favorable care over on supply revenue, as I shared with you in the earnings presentation. If you adjust for that, we're actually seeing at the high end of the guidance. And this is really driven by, you know, better volume growth. across all regions and there's not really one particular region that stands out versus where the high end of the guidance was. And we saw progressive recovery through the quarters on kind of month-by-month basis. We do see a similar pattern as what we saw in, you know, around the summer holiday and And the year-end Christmas holiday, which we tend to have a bit of a dip around the holiday period and then followed by a strong recovery following the holiday period. And we're seeing that around Easter as well.
spk01: Thanks. You led into my – that was a good segue for my follow-up, was just going to be around seasonality and – You mentioned remote work and maybe some structural changes in the underlying seasonality, but maybe you could just expand on that. As you look back on the second half of last year and the early part of this year, where do you see periods of maybe exaggerated strength and maybe periods of exaggerated weakness relative to, say, a 2019 baseline based on differing behavior?
spk02: Yeah, maybe I'll just come in and expand on the comment Martine made. You know, we have now seen really across three holiday periods, so the run-up to December holidays, also in August in the summer holidays, and then over the Easter period. We have sort of seen an extended impact over the holiday period, and we've seen more of a trough and more of a peak. And we do think that that is probably the new normal now, having seen it across three holiday periods. You know, we do think that people are perhaps taking extended holidays and maybe working from that holiday destination for a period of time. But then what we see is we see a much stronger bounce back, which we saw, you know, in January. You know, we saw that in September post-Labor Day. And as Martine mentioned, in the run-up to Easter, we saw a little bit more of a dip than we were expecting, but we saw a really strong recovery post-Easter. So I think that's the one key trend that I think is something that we are looking at as the new normal now.
spk01: Okay. Thank you.
spk04: Thank you. We now have Tony Captain of Morgan Stanley.
spk00: Hi, this is Hilary Leaf on for Tony. Just wanted to ask about the adjusted EBITDA flow through. Obviously, you guys talked about quarter to quarter. It was well over 100%. Year over year, it looks like it was down to around 56%. Just wondering how we should kind of think about it going forward. Any cadence you guys could provide would be helpful.
spk02: Martin, would you like to take that one?
spk06: Sure. So I think going forward, right, I think what we've always shared with you and guided you on is we expected our, you know, fall through kind of a longer-term basis to be, you know, 60, 65% territory. That being said, you know, fall through was a real useful driver, if you wish, and we were going very quickly through the recovery of business travel. As that recovery starts normalizing and the growth starts normalizing, looking at the overall margin of the business will be a more useful driver going forward because you will see a lot more stability in the margin and margin extension quarter over quarter than you would in fall through as you just saw in the first quarter, quarter over quarter. That being said, to answer your question more specifically on the first quarter, versus the first quarter of last year. You may recall that in the first quarter of 2022, our volume base was obviously very depressed with Omicron, and we had not, and the volume returned very quickly at the end of the first quarter, and we had not obviously ramped up our costs as quickly as the volume came back. So in some sense, you had understaffing in the first quarter, which is why you have a lower fall through as compared to the first quarter. And you have exactly the reverse when you compare to the fourth quarter because you ramped up the cost in the fourth quarter last year.
spk05: So you have an excellent flow through Q1 over Q4.
spk00: Great. Thank you. And just wondering if we could touch on SMEs a little bit. Would you be able to give kind of the split in terms of number of transactions, TTV, and revenue between the GMNs and the SMEs? for the quarter?
spk02: We don't provide that level of detail by quarter. You know, I think we have previously guided that our SME business is over 50% of our revenues and a higher share of our profits. But we don't provide the details by segment, by quarter. All right. Thanks. Other than the new WINS information, of course, which we do.
spk04: Thank you. As a reminder, if you'd like to ask any further questions, please press star then 1 on your telephone keypad. I can confirm we have had no further questions, so I'd like to hand it back to Paul Abbott, CEO, for any final remarks.
spk02: Great. Well, once again, thank you very much for joining. I would like to extend a sincere thank you to all of our team across Amex GBT for their dedication to our customers and the strong results that they've delivered in the quarter. We are very confident in our position and our outlook for continued success in 2023. Thank you for joining and your continued interest in the company.
spk04: Thank you all for joining. I can confirm that does conclude today's call. You may now disconnect your lines and please enjoy the rest of your day.
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