Trainline Plc

Thank you. And good morning, everyone. Thank you very much for joining us for our full year results presentation. I'm Clare Gilmartin, CEO, and I'm joined this morning by Sean McCabe, our CFO. Good morning. First, let's get through the disclaimer. And now, unimportantly, to the agenda for today. As an introduction, I'll discuss the key highlights from what has been a very good year for Trainline. and importantly, address upfront the impact from COVID-19 and how we've responded to the situation. Sean will then take you through our financial performance for the year. And after that, I'll discuss our longer term strategic priorities and how we're delivering against each of those. We'll then hand back to the operator for questions. So turning first to the exact summary. As I said, we've delivered a strong financial performance in the year exceeding the expectations that we set out at IPO, whilst making also significant progress against our strategic priorities. We have, of course, since experienced the impact of COVID-19, to which we at Trainline responded quickly and decisively and have sufficient liquidity for the foreseeable future. Longer term, we continue to see the same structural tailwinds for the business. And in fact, in the shorter term, there's potential for further opportunities for digitization. As a result, we are continuing to advance our growth strategy and we feel very well positioned for the future. So turning first to the financial highlights for the year, where we've delivered strong growth, we grew group net ticket sales by 17% year on year, We increased revenue by 24% and EBITDA by 62% to 85 million, both ahead of the expectations we set at the time of IPO. While operating cash flow increased 39% to 59 million, contributing to a large reduction in net debt following our IPO last June. On strategic highlights, we made good progress against our strategic priorities. We continue to enhance and improve the user experience, increasing conversion rate across our consumer business by more than 20%. And our app now has a 4.9 star rating in international as well as in the UK. We continue to build demand, growing acquisition and customer engagement with average monthly visits up 19%. And we made particularly strong progress growing mobile app usage with app share of transactions for UK consumer up 10 percentage points to 76%. We have further optimized revenues, expanding the revenue we generate from net ticket sales in both the UK and Europe through the addition of new streams like advertising and insurance. And we positioned Trainline for Business, or T4B, for future growth. Our global API platform is up and running with its first B2B clients integrated, and we sustained our high retention rate for white label clients. Moving on then to the impact of COVID-19 in FY21. In the first quarter of this year, travel restrictions and the resulting declines in transport use across our markets have had an unprecedented impact on trading. Passenger numbers have been down more than 95% in the UK with similar declines across Europe. In response, we've taken quick and decisive action to ensure the wellbeing firstly of our people, swiftly transitioning all of our teams to working from home with very minimal disruption to our business. And we supported our customers and carriers through a period of uncertainty, managing over 1.7 million inbound customer requests for journey changes and refunds, over four times the normal level. We also worked to mitigate the impact on our business, significantly reducing our cash burn down to 8 to 9 million pounds a month, And together with our liquidity headroom of 150 million, this means we're well placed to weather an extended downturn if required. And as I mentioned earlier, well positioned to return to growth as travel restrictions lift. Likewise, governments in our markets have indeed been quick to step in and assist the travel industry. Across Europe, governments have introduced a range of measures to support the wider economy, as well as sectoral support for travel companies and rail carriers. In addition, the UK government has introduced emergency measures that have allowed rail franchises to temporarily shift to a management contract model in place of traditional franchising. So whilst operators continue to run the trains, the revenue risk and reward sits with the government. We have welcomed these measures given the reassurance they give to the industry and to customers. So looking to outlook on COVID-19, post-COVID-19 for the industry, with government starting to lift lockdowns and ease travel restrictions, the industry is now setting out plans to resume full train services. For example, the UK government is planning gradually to ramp up services in May and aiming to get to 100% timetable by the end of June. SNCF in France have announced plans to have 20% of high-speed trains running in May, increasing to 100% by the summer, and full service running on regional trains by June. And in Germany, Spain, and Italy, carriers have already begun a phased ramp-up. Now, of course, it's still early days, but the resumption of services will be a key milestone towards the industry getting back on its feet. There's less visibility on how quickly volume returns, and there's likely to be implications for consumers and industry in a post-COVID world. However, we see Trainline as very well positioned to cater for what will likely be enhanced customer and industry needs in this recovery phase. To give you some examples, a greater need for social distancing likely increases the need for e-tickets as people will be less willing to queue in a station or touch a ticket machine and more advanced purchasing. Likewise, the need for clear and accurate on-the-go travel information is likely to increase too. And if customers become more price conscious, through the Trainline app, they can find the best prices for their journey, a function of features that we've introduced like split save and price prediction. Given our technology, industry expertise, and strong relationships, we'll be well-placed to meet these evolving needs. I'm now going to hand over to Sean to talk you through our financial performance in detail.

Thanks, Claire. And good morning, everyone. So before we run through our financial performance for the year, let me just give you a quick reminder of each of our business units. First of all, our UK consumer business, which sells tickets on behalf of all UK rail and coach carriers to customers worldwide. Our international business does the same, principally for carriers in Europe. And train line for business, T4B. It's currently a UK focused business, providing rail and coach booking solutions for travel management companies, large corporates and small and medium sized enterprises. Trainline for Business also provides the white label online retail platform that many of the UK's largest rail carriers use.

As Claire mentioned, we delivered strong growth in FY20.

Group net ticket sales grew 17% to 3.7 billion pounds. Revenue increased 24% to 261 million. And gross profit grew 29% to 201 million. To explain the drivers of growth, let's look at the performance of each of those business units. First of all, our UK consumer business performed strongly. Net ticket sales, on the left, increased 24% to over 2 billion pounds. supported by higher e-ticket availability, improved app mix, and increased conversion rates. We also saw upside in the fourth quarter from the launch of Split Save, as Claire mentioned, our new feature that gives customers access to the lowest fares available. And we also benefited from some customers switching from UK consumer to UK consumer from T4B as the West Coast mainline franchise moved from Virgin to Avanti. And together, these factors helped accelerate our growth in the market share in Q4. UK consumer revenue grew 30% to £178 million, driven by sales growth and a 40 basis point increase in revenue take rate. Our take rate increase was driven by the launch of new ancillary revenue streams together with ongoing optimisation of booking and service fees. You can see on the right gross profit for our UK consumer business grew 34% with gross margin expanding three percentage points given lower fulfilment costs from an increased mix of e-ticket sales. And on to Trainline for Business. Trainline for Business reported net ticket sales of £1.2 billion and revenue of £57 million, a decline of 1% and 3% respectively. As I mentioned, the white label business was impacted by changes to the West Coast mainline franchise, which switched from Virgin to Avanti in the fourth quarter. And the B2B business saw some slowdown in discretionary travel spend from large corporates in the second half. As a result, gross profit for T4B reduced 1% to £40 million, though gross margin increased 1% given lower fulfilment costs per transaction. And finally, international, our fastest growing business unit, net ticket sales grew 41% to £490 million. And that was underpinned by new customer acquisition and a strong increase in conversion. We estimate sales growth in international would have been 8 percentage points higher had France not experienced its longest ever strike, rail strike, in the fourth quarter. Outside of France, international net ticket sales continue to perform strongly in Q4. International revenue grew 79% to £26 million, driven by sales growth and 110 basis point expansion intake rate, given the launch of new revenue streams. Gross profit for the international business grew 120% to £17 million, with gross margin increasing 13 percentage points, given the benefit of these new revenue streams. The group's strong volume growth and operating leverage drove strong margin expansion and profitability. As you'd expect, we continued to tightly manage direct and central operating costs, helping achieve considerable operating leverage right across the cost base. And this was true even in international, our newest business unit. Here, we increased marketing spend to push into the significant headroom for growth. This resulted in a 20% increase in international direct costs, Yet that increase in cost was far outpaced by the net ticket sales growth and the revenue growth of 41% and 79% respectively. So it's profitability. Group EBITDA grew 62% to £85 million. And this is primarily due to strong volume growth and the operating leverage that we realize as we realize the benefits of scale and the investments we've made in our platform and our people over the past few years. The group generated 59 million pounds of operating free cash flow, up 16 million or 39% year on year. It was driven by increased profitability, lower capex given that we've completed the build of our single global platform. At £27 million, CAPEX was equivalent to about 10% of group revenue. Consistent to what we explained at the half year, cash flow growth was partly offset by a lower working capital benefit, and it was due simply to timing differences in the settlement payments to the rail industry. Primary proceeds from the IPO and our strong cash generation meant we had significantly delevered by the end of February, and net debt reduced to £71 million on 0.8 times EBITDA. Since March, we've seen the COVID-19 pandemic take hold, considerably impacting the net ticket sales growth across all of our markets, as Claire explained. The uncertainty remains around when government lockdowns and travel restrictions will lift, and after that, how long it will take for things to get back to normal. So until visibility improves, we'll not give specific guidance for the year ahead. However, as Claire said at the outset, we've taken mitigating actions and we've got a strong liquidity position, so we're confident we can operate through an extended downturn period if required. Some of the actions that we've taken, we have paused marketing and other discretionary spend. We've furloughed certain teams under the UK government's coronavirus job retention scheme. We've introduced a group-wide pay freeze and the board and the management team have taken voluntary pay cuts. In taking these actions, we've reduced our cash burn from operating expenditure and capex down to £8 to £9 million per month. And of course, we'll continue to monitor developments closely and adapt our response accordingly. And if required, we'll take further cost mitigating action. The slowdown in sales and increase in refunds has resulted in cash outflows for the group in March and April. We'll have worked through all of those working capital changes and outflows by the end of May. At that point, we expect to have significant liquidity headroom of about £150 million. And our lenders have waived the covenant on our revolving credit facility until August 2021. So we're very confident we have enough liquidity to operate for the foreseeable future. Finally, as Claire mentioned, we'll continue to invest in our strategic priorities to drive long-term growth. and create value for our customers and shareholders. And we'll position the business for recovery when we see conditions improve. And with that, I'll hand back to Claire.

Thank you, Sean. I'll now discuss our longer term growth opportunities and update you on progress against our strategic priorities. But first, let me just recap on our aim to make rail and coach travel easier. We do that, of course, by combining all carriers into one app so customers get access to the best routes and, importantly, the best prices. On top of which, we've created a simple, consistent, friction-free experience. No paper, no ticket machines, no queues. We think this is especially relevant in a post-COVID world. And beyond which, we leverage our scale in data to create smart, real-time, often personalised and AI-driven travel information for customers. And we offer access to a much bigger customer pool for our carriers at a lower cost to serve in their alternatives and taking all of this together, we are, of course, championing a much greener way to travel. Looking at the longer term structural tailwinds, it is undoubtedly a challenging time for the industry right now, but longer term, we are confident the structural tailwinds for our business will endure. We operate in a large global market of over 225 billion, which is expanding, given in particular a long-term shift from car to rail. For example, rail demand has almost doubled in the UK over the past 20 years, as well as continued government investments in capacity expansion, and in particular, high-speed rail expansion across Europe. There is a growing consumer awareness of the environmental benefits of switching to rail and coach from road and air in particular, and relatedly stretching government targets to bring transport emissions down. Furthermore, emerging consensus is that there is likely to be a potential longer term contraction in the air travel as a result of COVID, from which rail may benefit. There remains, of course, a significant digital migration opportunity in our markets, with online rail penetration in Europe still below 40%, less than half the penetration for air travel. And e-ticket adoption in the UK is at 21%. Although growing, it still has a huge runway to go. And finally, the liberalization trends of the European rail sector continue, leading to a continued more fragmented supply landscape. The EU's fourth railway package mandates competition on domestic rail routes and becomes law from December this year. And in response, major European rail carriers have announced plans to enter new markets, most notably new carriers in the French and Spanish markets. And with this increased competition comes an increased consumer need for an aggregator like train line. As I said earlier, these long-term structural tailwinds continue to represent significant growth opportunities for Trainline. To drive long-term growth and create value for our customers and shareholders, our strategy for growth remains the same. And as a reminder, our four stated strategic priorities are to enhance the customer experience by continually improving and optimizing app and web and, where relevant, adding new supply, to build customer demand, driving customer acquisition at scale and increasing their engagement with us, to optimize revenues, the revenues we generate from net ticket sales, developing and rolling out ancillary revenue streams, and to grow train line for business, targeting the B2B and white label markets. We've made significant progress this year against these priorities, creating value for customers and shareholders. And importantly, we'll continue to invest behind them positioning the business well for recovery. Let's step through each in turn. So firstly, enhancing the customer experience. We've continued to improve the customer experience over this past year. Our app now is 4.9 star rated in international as well as the UK, and our conversion rate has grown by more than 20% across our consumer business. In the UK, as you've heard us say, we recently launched SplitSave, a mobile app feature which allows customers to split tickets and make savings on 64% of routes nationwide. This new feature has been very popular with customers, helping improve NPS scores. And it's had minimal impact on average transaction values, as customers are using the savings to trade up to more optimal, higher-priced journeys or more convenient times. We continue to optimize the e-ticket experience in the UK, driving the adoption of e-tickets. Industry adoption has increased 50% since the IPO in June of last year to 21% overall, and Trainline makes up more than 70% of all industry e-ticket sales. In our international business, our primary focus has continued to be on fine-tuning the platform to enhance the experience for customers in Europe. For example, optimizing and reducing speed and improving core flows, whilst continuing to add new functionality, including post-sale. Looking ahead, we'll keep up the pace on our strong innovation pipeline. A couple of examples of innovation to come over the next few months include digital rail cards and reliability ratings for trains. Moving on to building demand, we continue to build demand, growing acquisition and engagement by increasing Some examples, launching new content pages in 10 further languages for search engine optimization, leveraging our data, specifically rolling out our own proprietary bidding engine to optimize pay-per-click advertising, and using our cross-platform data to target higher lifetime value app users. As a result, average monthly visits were up 19% year-on-year. And we made particularly strong progress growing mobile app usage, migrating web customers to app. through scaled A-B testing across our web flows. And in turn, app downloads grew 49%, with over 50% coming from international. An app share of transactions in UK consumer was up 10 percentage points to 76%. Now, we have put our marketing activity on pause for the time being due to COVID, but we are ready to start dialing it back up once the recovery gets underway, and we'll be thoughtful on how we do so. Moving on to optimizing revenues, as Sean has mentioned, the launch of new ancillary revenue streams has driven a strong growth in our take rate this year. Notable examples include multi-currency payment options, international service fees, tiered refund fees, and insurance across app and web. This in turn has driven strong growth in take rate in both the UK and international. Looking ahead and mindful of the ongoing impact of COVID-19, We'll continue to optimize existing revenue streams where feasible to do so. And we have a strong pipeline of new ancillary partnerships that could generate future revenue. On to train line for business. We made good progress positioning T4B for future growth with a successful launch this year of our global API. This has provided us with a platform to enter new markets and scale the B2B business internationally. We've achieved good momentum so far with our first B2B clients already live on the platform. And this is just the start. We have a strong pipeline of new clients that we expect will integrate moving forward. We also sustained the high retention rate for our white label business. We retained both franchises up for tender since our IPO, East Midlands Railway and West Coast Mainline. And we'll continue to support our white label clients through the turbulence of COVID-19 as they adapt to the government's temporary emergency measures. So before we take questions, let me briefly recap on the takeaways from this morning. We have had a good year, delivering a very strong financial performance and importantly outperforming the expectations we set at the IPO, whilst also making significant progress against our strategic priorities. We've responded quickly and decisively to COVID-19, and have sufficient liquidity for the foreseeable future. Long term, we continue to see strong structural tailwinds for this business. And in fact, shorter term, there's the potential for new opportunities for digitization. And we feel very well positioned to capitalize on those. And therefore, we continue to remain focused on advancing our growth strategy. Thank you very much for listening. I will now hand over to the operator for questions.

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad and wait for your name to be announced. That's star and 1 if you have any questions. Your first question today comes from Marcus Debray of JPMorgan. Please go ahead.

Yeah, hi, everyone. Three questions from my side, maybe two for Claire and one to Sean. Claire, could you talk a little bit about, yeah, I mean, you're best review or best guess when travel might increase a little bit. I mean, clearly no one has the right answer to this. You gave us the details on timetables. But what is your view when we get back to like at least utilization of like 70, 80%, whereas the current 90%, 95% down, that would be quite helpful, just an indication. Secondly, clearly you elaborated on this already that probably now the shift towards online might be even come faster than we initially thought. Is there anything more you could say in terms of current discussions with train operators that they think this is also the way to go forward? Is there anything that they have commented that they want to push this out even faster than initially? And then thirdly, for Sean, you were saying in case the lockdown takes longer than we today think, you would undergo further cost mitigation actions. Could you elaborate a little bit what that means? So what are the cost items that you haven't touched yet, which you might touch if things get a bit worse, just to get a bit of feeling what might come as well? Thank you.

Thanks, Marcus. Let me touch on the first two of those questions. I think the first one was how travel might recover and what the outlook looks like. You know, you heard me talk about the resumption of rail services. In fact, it's key to government policy in all the markets we operate to get rail back up and running because it obviously underpins the economy overall. So there's strong motivation there. right the way across Europe, which I think is encouraging. It is, of course, hard to predict then how demand will recover and its early days. I think we have already seen very early green shoots in Italy, for example, one of the markets that has relaxed restrictions earliest, but it's very early days. I mean, we're talking week-on-week growth. And what I would say, stepping back and looking at our business, say compared to AIR, I think the majority of our business in the UK and across Europe is domestic travel. And domestic travel, we believe, recovers faster than cross-border and international travel. And so it's an everyday use case product and travel use case. So we expect domestic travel to come back earlier than cross-border travel. And then you pointed to the likelihood of greater e-ticket adoption. And yes, we have been in deep discussions with industry, not just the carriers, but also at government level. And so those discussions are, of course, informing what we're sharing with you today. There's strong consensus that the industry is likely to lean more towards advanced purchase, certainly on the medium to longer distance routes. And advanced purchase, as you'll know, is more likely to be online. And secondly, there's broad consensus that e-ticketing offer additional advantages over and above to consumers, not just the ability to buy online and in advance, but also They help customers avoid having to touch ticket machines or queue up in stations. And so I think it's fair to say that there's broad consensus across the industry that we will want to push for greater e-ticket adoption and more advanced ticketing. And then beyond that, as you can imagine, I'm sure we're all consumers and travelers ourselves, as timetables are somewhat uncertain, a travel app that gives you real-time and up-to-date information on the go is going to be Very helpful. But, you know, I'll go back to what Sean said. As regards forward-looking guidance and outlook, it's very early days. We're not in a position to share any more than that.

And Marcus, you asked about further cost mitigations. I mean, I think the first thing to say is we took decisive action and swift action. So, you know, we paused our marketing spend, we put a recruitment freeze in place and we looked at all discretionary spend. And we also, for the teams that were impacted by the drop in demand, we used the government's coronavirus job retention scheme. and furloughed those teams. And it's about 20% of our team. We've reduced our cash burn to eight to nine million pounds. And with our liquidity, we've got a long runway. So we can sustain ourselves for the foreseeable future. If we had to take further cost mitigations, we could. We could take further furlough action. I think that's the most obvious place. If you think about our cost base, we are fortunate in that our cost base is a variable cost base. It's different to the train companies whose cost base is much more fixed. So we could take further cost action. Our costs tend to be marketing costs and people costs fundamentally. That isn't our plan right now, but of course, you know, we are monitoring the situation and we will respond accordingly.

Okay, perfect, thank you.

Thank you. And next question comes from Lina Sato of Panmure Gordon. Please go ahead.

Hi, morning everyone. If I could ask maybe a couple of questions as well. So firstly, just in terms of the cost base, obviously you've talked about how you can cut that, but as we see the ramp up again, how does that number move upwards? Should we assume you can keep this lower cost base or some sort of a proportionate increase in costs again as services resume? And then the second question, in terms of the Williams review, obviously you know the many more important things going on now for the government should we assume that this is more or less you know not going to happen now or do you expect it to be published at some point in the future and then actually if I could ask one more just on sort of social distancing measures I understand it's still very early days but can you tell us anything about what you may have heard in terms of you know sort of various policies that may be put in place like managing peak travel times, keeping empty seats or things like that, things that may impact the sort of utilization rates going forward. That'd be very helpful. Thanks.

So if I take the first of those on the cost base, and then I'll let Claire take the second and third. So look, on the cost base, The actions that we've taken are, because we have such a variable cost base, yes, the actions that we've taken have dropped the costs quickly. And as we see the recovery come through, we do expect, of course, for example, to start spending on marketing dollars again. Absolutely, because we want to lean into that opportunity when we see it coming. That said, there are things that we've done which will reduce our cost base permanently. So we've re-engineered some of our AWS costs, for example, so that we've achieved a lower, a more efficient AWS cost going forward. And there's some choices that we'll make that we will continue with as we go forward. They were just smart cost decisions to make, and there's no reason for us to revert on those.

I'll pick up the second two questions. So the Williams Review, I would be speculating if I were to tell you a precise date on when the Williams Review will be published, but I think it could be published after the summer, but again, it's hard to be precise. I think the themes of it, however, remain important. If you'll remember the three themes that Williams was focused on, firstly, innovation. I think that continues to be important. And in particular, digital innovation and e-ticket innovation, like I mentioned in the post-COVID recovery phase. Secondly, addressing fare anomalies. Well, the launch of our split-save product earlier this year was directed specifically at that to remove the anomalies from split ticketing and make sure customers got access to the best possible fares. And the third theme I think that Williams was focused on was the industry structure. And you have seen, of course, the government under emergency measures take back the revenue and risk from the train companies on a short-term basis. It remains to be seen what happens for the longer term. I'm not sure there's that much more I can share on Williams aside, as I said, to say that the themes are alive and continue to be progressed, even if the report hasn't been published. The third question, I think, was on social distancing. And there again, it also is very early days. As I said, we are in live discussions with the industry, with carriers and with governments. And you heard me mention earlier a greater focus on advanced purchase, and that may well be one of the measures in particular for medium to long distance travel that helps control volume in the short term. And there are other things being discussed. It remains to be seen what will be implemented. I guess it's also important to note that whatever does get implemented, it will be for a finite time period. The government and we overall need a full strength rail network and public transport network as that is precisely what underpins a healthy economy. And so, yes, there may be some short term measures, but the overarching aim here is to get the public transport network and the rail network back to full strength as that, as I said, will be what underpins a functioning economy.

Great, thank you.

Thank you. And our next question today comes from the line of Andrew Ross of Barclays. Please go ahead.

Good morning, everyone. Thanks for taking the questions. I've got a few as well. So first one, you mentioned that most of your business in the UK is domestic. Is there any way you could split it out between what is leisure and what is business? And I guess in business... split between both commute and then longer distance. And I appreciate that may not be that easy, but any kind of high level splits you've got would be very helpful in terms of thinking about the rebound. The second question is on the new Virgin app, the price guarantee, a kind of headline offer they're making. Just interested in your thinking on that type of functionality, whether it's something you think you need to replicate and the impact on net ticket sales potentially, if you did. And then third question is on continental Europe, and I guess two aspects. Are you worried about any customers you've acquired who you would have seen as sticky customers may now not be because they've forgotten about you having not taken the train for a few months, and therefore the path to break even gets pushed sideways because you've got to reacquire them? And are you worried that operating companies might use this as an excuse to delay international expansion and the whole kind of liberalization argument in Europe? Thanks.

There's a lot in there. Let me try and pick up each of them. So firstly, I think the question was, do you split out your customer base, leisure versus business versus commuter? And in short, we don't disclose that level of detail. But what I can say is that many of our customers cross between all those different journey types and our heaviest customers buy across all. And as you said at the beginning, overarching, we do believe that domestic travel recovers earlier than international cross-border travel. And I'd say beyond that, on leisure in particular, I think there's evidence that cross-border flying and international travel in general may well be impacted longer, and there may well therefore be some upside on leisure travel and staycations. It's too early to point to any data, but I think you know, together with the points I made earlier about a greater focus on e-ticket, more advanced purchasing, more domestic travel. I think we believe that these things more than offset what might be short to medium term behavior change. The second point was on the, I think, reported Virgin app. Look, We stay focused on innovating. We make over 300 improvements a week to our consumer experience, and it's not by accident, therefore, that we have a very high-rated app. And you've seen us innovate in terms of... Splitsave is a good example as a means of getting customers access to cheaper tickets on 64% of routes in the UK. You should expect us to continue to innovate around the price point. Bringing rail cards into our app, as I mentioned earlier, later in the year, is another way of us getting customers to cheaper prices. And there will be more beyond that. We have over 300 engineers in our engineering team, by far the biggest scale team in the sector. And we'll continue to innovate. And then, you know, if you marry that with the fact that we're leveraging our scale and our scale in data in particular to get customers access to proprietary real-time travel information. The combination of all of those things, we believe, allows us to continue to advance market share. The third question, I think, was do you – are you worried – about customers you may have acquired in Europe forgetting about you. And there again, I would say, you know, the same underlying short-term trends, I think, impact across Europe as do the UK. You know, don't forget in Europe, 60% of purchasing is done offline as well. And we see the same strong desire to shift more to online. And we think we're well-placed to benefit from that. We think a top-rated app with real-time data is hugely beneficial, in particular as timetables are somewhat uncertain for the short to medium term. And with likely pressure on air travel and air leisure travel, we see potential, in fact, for domestic rail even in a leisure sense across Europe as well, much as we do in the UK. And, you know, and I think all of those things are opportunities for us.

That's great. Just to follow up on the second question, Claire, on the Virgin Point. I mean, obviously the split save sounds like it hasn't been that dilutive to your net ticket sales or to your average ticket value. But I guess, you know, what version of proposing it at a headline level might be if it meant that people were kind of reimbursed for a more optimized ticket value at the end of the week or end of the month or whatever it was. So, I mean, yeah, I would be interested in just a bit more color to how you'd think about that if that becomes a change that happens in the industry.

So as I said, from first principles, we continue to innovate with our industry partners on different ticket types and different features. And we'll always be somewhat cautious in what we disclose and what's coming down the pipe, obviously, but you should assume that we're continuing to innovate around price, around real-time data, around flexibility. It's really not for me to comment on... competitor apps. As I said, our focus is to leverage our scale engineering team to continue to innovate at pace and continue to delight customers.

Perfect. Very helpful. Thank you.

Thank you. And our next question comes from Morgan Stanley. Please go ahead.

Okay. Thank you for taking, taking my question. Two quick ones for me. So kind of following up on the product question in the international business more specifically. So does this current period of disruption change the way you're thinking about ancillary launches in the international business? I know that the UK is well ahead in terms of what you're offering. So I'm just wondering if you're still planning to launch those in international and what the timeline would be like there. And then second of all, on marketing, so Sean, you said that you are going to lean into opportunities as soon as you see demand pick up. So it sounds like it will be more reactive. But to what extent do you think you can help drive up demand by maybe bringing forward marketing spend and just highlighting train lines advantage in this kind of environment? Thank you.

Maybe I'll pick up the first one, Sean, and you can pick up the second one. So on ancillary revenue streams, I think as we shared and have been sharing over the last year, we purposely built a platform that gave us optionality on revenue streams. We've built a platform that allows us to generate revenue in multiple different ways off ticket sales. And what you've seen us do over this course of FY20 is launch new revenue streams, and start to optimize those revenue streams. You should expect us that this is the stage one of that journey. You should expect us to continue to optimize revenue streams on and into the future, really. And I don't think that the COVID changes any of that necessarily.

And your questioning on marketing spend, Shaket. So the way we think about the marketing spend, When passenger volumes are down more than 95%, it clearly isn't the time to be leaning into opportunities. And we have to be thoughtful about when is the right moment. I don't think it's yet. I think we'll look for the green shoots and then we will play our way back in. Also, I think we've got to think about the wider context. I don't think the government, for example, would welcome us spending marketing dollars to drive additional demand into the rail network at a time when they're trying to manage passenger numbers and social distancing. So we do have to be thoughtful about what the right moment is there. But one of the advantages we have is that we're pretty good at deploying marketing and using the marketing lever and scaling that up and down in response to the signals that we see in the market. And our marketing playbook allows us to do that. So we will do those things. And of course, as you allude to, we will showcase the great product features that I think differentiate us from the other players in the market. Things like split save and price prediction. And just having a great app that gives real-time travel data, I think helps differentiate us, a 4.9 star app. So at the right moment, we will lean into marketing spend, but it isn't yet.

Understood. Thank you.

Thank you. And our next question comes from Mark Irving, Fortescue, Stifel. Please go ahead.

Oh, hello. Morning, everyone. Two questions, please. One on refunds and one more medium-term question around working from home. On the refunds point, I just wondered if you could give any data points how much, what proportion of the refunds have come back to customers, how quickly you've been able to do that. And perhaps if you're aware of any difference in the expedience and the customer experience as you're doing that compared to customers going direct through the train operating companies, maybe just the working capital impact, if you could quantify as well, that would be helpful. The medium-term question was just around some of the surveys and press coverage would have us believe that working from home has been a bit easier than people expected and that this will catalyze some more structural changes with people commuting less and using the trains less for work. Do you think that's too simple a narrative? Is it something you monitor or is it just more that the other positive structural trends comfortably offset that. Any thoughts? Welcome.

Thank you. Maybe I'll pick up the first part of the refunds question. And Sean, please chime in with any additions. So I think the question was, remind me again, the question was the scale of the refunds and the time period it took to reimburse customers.

Exactly, just compared to the train operators.

Yeah, again, it's not for me to comment really on others in the sector. I prefer to focus on train line. What I can say is we processed over 1.7 million refunds, which is over four times what our normal level was. And there were a number of steps in doing that. We worked with the government and with carriers in the early days in most of our major markets to, in places, relax terms and conditions. And we felt very strongly on those topics. We wanted to relax conditions in places so that customers could, in fact, make changes, even on advance tickets. And that was an important early step. We then, whilst we have... A high level of automation around refund and post-sale in any event. The benefit of using our app is that you can make changes on the go. Because of changes in terms and conditions, we moved very quickly to create new levels of automation around new terms and conditions. And there I think we did move faster than most others in the sector so that customers could self-serve, which has always been the fastest way to get refunds. And beyond that, you know, we've just worked hard to get money back to customers. And whilst we may have gone beyond our usual less than 24 hours, we didn't go much beyond that. And service levels are now resumed to normal. Again, it's hard for me to comment on others, but I certainly think in the air industry, that hasn't been the customer experience at all. And I feel proud of what our customer service folks in particular were able to do.

Thanks for the help.

Was there a second part to the refunds question, Sean?

It's the working capital part.

The quantum.

So Claire talked about the £1.7 million in refunds that we've processed. When you think about the working capital, of course, the timing is important. So as we came out of our year end, we had a strong cash position. And then we moved into this period of COVID-19. We had to pay down our rail liabilities, pay down the money we owed to the rail carriers at a time when, of course, volume had dropped significantly. And at the same time, we were starting to see the refunds coming through from travel that was booked in February and earlier, but for travel in March and beyond. And so we had this lag effect on refunds. But we were able to manage that. And the reason that you see us talk about the end of May, we will have this 150 million liquidity position. The reason we do that is to remove all of the complexity around the working capital inflows and outflows. the pay down of the rail liabilities to carriers, and the processing of the refunds. You know, one thing I can tell you, Mark, is that we worked with the rail industry to change our settlement period to move to a weekly settlement during this period of very high refunds, simply because we wanted to make sure that we got that money back from the rail industry very quickly. And now we can, once we're through that period of refunds, and now we're back to... normal processing of refunds are, we quote, three to five days. And that's simply the time it takes to get the money, the customer's money back into their account through the banking system. So we're processing refunds, you know, within the same day. So I think we've managed that situation particularly well, I think. And it was a big avalanche of refunds. But we're out the other side of that now and we are back to normal service. Very clear. Yeah.

And I think then your second question was around long-term behavioral change, working from home. And I guess, you know, I don't have any better information on that than anyone else. I think it's reasonable to believe there may be some working from home changes in the medium to long term, but we see it as being around the edges, really. And importantly, I think the more important point was the third point you made. We think it's more than offsets. by some of the other likely behavioral changes. The ones I've mentioned, the shift to a greater shift to online purchasing and advanced purchasing and a greater shift to e-ticketing. And if you step back, we are by far the largest online platform in this space with over 90 million visits to our platform monthly in a pre-COVID basis. And the vast majority of those, of course, are repeat customers. And so we feel very well positioned as government carriers and customers put greater emphasis on online and buying in advance and on e-ticketing. And that, I think, more than offsets what might be behavioral changes around working from home.

Thank you.

Thank you. And our final question today comes from James Lockyer of Peel Hunt. Please go ahead.

Good morning. Thank you for taking my questions this morning. I've got three, if you don't mind. Firstly, can you just remind me of the gross margin impact for each one percentage point increase in e-ticket usage? And then who is in the other 30%? Is it the carriers themselves? Does it include your white label services, for example, or is there a specialist e-ticket provider? Another second question, you obviously mentioned the volumes are down, obviously quite dramatically, but I was wondering of the remaining ticket sales that are happening, are you able to give us an idea of whether this is demonstrating a higher online penetration and e-ticket usage than before? And then the third question, just on your global API, your focus so far seems to be on TMCs and traditional travel-focused partners. However, just wondering about whether the API has been built to take advantage of companies that might have a more general focus, let's say a larger audience. I'm just thinking of how WeChat in China, for example, sells train tickets. If consumer digitization continues with the rise of super apps, do you foresee a time in the future where your API is taken advantage of by some of these platforms as well? Thank you.

Should I take the first one on gross margin, Claire? So the way to think about the impact of e-tickets on gross margin is around the fulfillment cost. So the fulfillment cost of a paper ticket is significantly higher. Remember, we pay a fulfillment cost to the UK rail industry for every ticket we sell. the fulfillment cost for a paper ticket is significantly higher than that of an e-ticket, and it's about 3x. On an average ticket value, it's the difference between about 30 pence per ticket and about nine pence per ticket. It's a significant cost of sales savings. As we see the migration to e-ticketing, we do get this tailwind effect in our gross margin. So between Andrew and I, we can help you work through the maths of that offline if required.

Thank you. And I think the second question was ticket sales in April, whether there's higher share from train line or online. Again, too early to say really. We don't get market data that quickly. But I draw you back to the discussions that we've been having and are having with government and carriers. And as I said, the strong drive is going to be towards customers buying in advance before they get to the station. And we feel very well placed to cater to that. The last question, I think, was our global API, what our target audience is. And I think you make very good points. And in fact, we have aggregated now over 270 different carriers covering most of rail in Europe and the majority of coach carriers as well. And that's ultimately what our global API then consumes. And as you quite rightly say, travel companies globally are interested in that. It's a laborious task to connect carrier by carrier And not only just do the original connection, but then maintain these connections over time. And so we see quite a broad potential target audience for our API over time.

That's great. Thank you so much.

There are no further questions. Please continue.

Great. Well, thank you all very much for joining us this morning. As I said, we're proud. It has been a strong year, FY20 for Trainline, and we're very proud of having exceeded the expectations that we set out at the time of IPO. There's no doubt that COVID has had unprecedented impact on the industry overall, but we feel we've taken quick and decisive actions, and it was a point of principle to do so. And as a result, we feel well-positioned well-positioned for the recovery phase. The long-term, multi-decade structural tailwinds, I think, endure in this vertical, but there may well be short-term upsides around a greater focus on digitization, which we're excited about. And we remain heads down and focused on our growth strategy. Thank you, Sean, and thanks to all of you for joining us this morning.