Global Business Travel Group, Inc.

Good morning and welcome to the American Express Global Business Travel First Quarter 2024 Earnings Conference Call. As a reminder, please note today's call is being recorded. I will now turn the call over to the Vice President of Investor Relations, Jennifer Thorrington. Please go ahead.

Hello and good morning, everyone. Thank you for joining us for our First Quarter 2024 Earnings Conference Call. This morning, we issued an earnings press release, which is available on sec.gov and our website at investors.amexglobalbusinesstravel.com. A slide presentation, which accompanies today's prepared remarks, is also available on the Amex GBT Investor Relations webpage. We would like to advise you that our comments contain certain forward-looking statements that represent our beliefs or expectations about future events, including industry and macroeconomic trends, cost savings and acquisition synergies, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these and other risks and uncertainties is contained in our earnings release issue this morning and our other SEC filings. Throughout today's call, we will be presenting certain non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, free cash flow, and net debt. All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items. Definitions of these terms in the most directly comparable gap measures and reconciliation for non-gap measures are available in the supplemental materials of this presentation and in the earnings release. Participating with me today are Paul Abbott, our Chief Executive Officer, and Karen Williams, our Chief Financial Officer. Also joining for the Q&A session today is Eric Bach, our Chief Legal Officer and Head of Global M&A. With that, I will now turn the call over to Paul. Paul?

Thank you, Jennifer, and welcome to everyone, and thank you for joining our first quarter 2024 earnings call. In the first quarter, we delivered strong financial results with continued share gains, significant margin expansion, and 24% adjusted EBITDA growth, to reach the highest first quarter adjusted EBITDA in our company's history. Total transaction value or TTV grew 9% in the quarter and revenue grew 6%. Adjusting for fewer work days in the first quarter this year versus last year, growth would be 10% and 7% respectively. These strong results were in line with our expectations and put us on track to deliver against our full year guidance. Increased demand for our leading software and services resulted in continued share gains. We reported new wins value of 3.3 billion over the last 12 months. This includes 2 billion of SME new wins, demonstrating continued progress with this large, profitable customer segment. Our focus on driving operating leverage is also clearly evidenced in our Q1 financial results. Adjusted operating expenses increased just 2% compared to 6% revenue growth. And we drove significant adjusted EBITDA margin expansion of 300 basis points year over year. Our progress to positive and accelerating free cash flow remains an important focus for the company, providing us additional opportunities to invest in our growth and drive shareholder returns. We generated positive free cash flow of 24 million in the quarter, an improvement of 133 million year over year. And we continue to lower our leverage ratios. Importantly, in the first quarter, we announced that we have entered into an agreement to acquire CWT. The transaction value of approximately 570 million represents a highly attractive post synergy multiple of 2.5 times adjusted EBITDA, including approximately 155 million of identified annual run rate cost synergies. This accreted transaction is expected to close in the second half of this year, will accelerate our growth and create significant shareholder value. So our momentum continued in the quarter as we execute on our strategy and deliver strong financial results. Starting with transaction growth, transactions were up 6% driven by increased demand for business travel and our share gains. Please note there was a negative workday timing impact of approximately one percentage point in the quarter, which will have an offsetting benefit over the balance of the year, largely in the second half of 2024. So on a like-to-like basis, transactions were up 7% in the quarter. Please also note transaction growth, which was previously reported on a gross basis, is now reported on a net basis to exclude cancellations, refunds, and exchanges. This better aligns transaction growth with the way that we measure and recognize TTV and revenues. TTV grew by 9%, driven primarily from transaction growth as well as higher average ticket prices and higher hotel room rates. On a workday adjusted basis, TTV was up 10%. Revenue was up 6% to reach 610 million for the quarter, driven by growth in transactions, TTV, and increased demand for our products and professional services. On a workday adjusted basis, revenue was up 7%. Finally, our focus on margin expansion and operating leverage resulted in adjusted EBITDA growth of 24% to 123 million. Solid transaction growth was driven by share gains and increased demand for business travel from our diverse and premium customer base. Looking at our trends in more detail, which we've workday adjusted here so you can see the true momentum, the absolute growth was in line with our expectations. However, the shape was different. we saw relatively faster growth from global multinational customers compared to SME customers. Our first quarter global multinational transactions were up 11% and SME transactions up 5%. In global multinational, we've seen very positive same store sales growth across several sectors, particularly technology up approximately 30% in the first quarter. We also saw double digit growth in professional services, pharma, mining, energy, and utilities. Our most recent customer survey shows that our top 100 customers now expect travel spend to be up approximately 8% in the full year 2024. This is an improvement of 4 percentage points versus the previous survey, and it's reflected in these strong Q1 trends. The percentage of clients expected to spend more on travel over the balance of this year has also increased by three percentage points. For SME, growth has slowed by three percentage points over the last two quarters, largely driven by slower same-store sales. We believe this is being driven by higher interest costs and sustained higher inflation, resulting in stronger controls on SME spending. This is a broader trend with US SME customers that American Express also highlighted in their Q1 results. Domestic and international air transactions, both up 5%. Air TTV was up 11%, with very strong growth in US air TTV of 14%. Growth in hotel transactions was 9%, which continued to outpace the 5% growth in air transactions. This reflects industry trends as well as our intentional focus on increasing our volume of hotel bookings as we continue to strengthen our hotel content and display and provide customers with more value and more choice. Finally, here on a regional basis, transaction growth was 7% in both the Americas and EMEA. Asia Pacific continues to lead the growth rates at 13%. So turning to the commercial highlights, we continue to gain share. and reported total new wins of $3.3 billion over the last 12 months. Importantly, customer retention remains high at 96%. Our biggest opportunity remains with SME customers, which represents approximately $950 billion of travel spent. We are already a leader in managed travel in this segment, but 70% of this opportunity is not currently in a managed travel program. As our progress clearly demonstrates, more and more SME customers are recognizing the value of our leading software and services and a professionally managed travel program. As a result, SME new wins over the last 12 months totaled $2 billion. Moving on to our product and technology highlights, 79% of our transactions came through digital channels in the first quarter. Over 60% of the digital bookings now come through on our own software platforms, NEO and Agencia. In our Neo1 spend management platform, we saw 10% growth in customer count in the first quarter. Our recently announced partnership with American Express to integrate virtual cards into Neo1 is also gaining traction. Customers are now issuing virtual cards within Neo1 to cover additional spend use cases, and they're using virtual cards to set budgets at an individual level. And this brings better control over employee spend with purchasing, travel, and expense data all in one place. Finally, of course, an important event in the first quarter was our announcement that we have entered into an agreement to acquire CWT. This agreement clearly shows that we are executing against the significant M&A opportunity in a large and fragmented industry and delivering on our priorities to drive growth, deliver cost synergies, and shareholder value. The acquisition of CWT will grow our revenues by one-third with the potential for significant earnings contribution over time. Our integration teams have now been established and our proven track record gives us confidence that we can achieve the 155 million in annual run rate cost synergies that have already been identified. This results in a highly attractive post synergy multiple of two and a half times adjusted EBITDA We project the acquisition to be neutral to EPS in the first year and accretive thereafter, driving significant shareholder value. We continue to expect closing to occur in the second half of 2024, subject to customary closing conditions, including the receipt of certain regulatory approvals. And now I'd like to hand it over to Karen to discuss the financial results in more detail before moving to our 2024 outlook.