Trainline Plc

And good morning, everyone. Thank you for joining us for our half-year results presentation. I'm Claire Gilmartin, our CEO. I'm joined this morning by Sean McCabe, our CFO, and Jodie Ford, our COO and future CEO. Let's first get through the disclaimer. And now on to the agenda for today. As an introduction, I'll give a quick summary of performance in the first half. the progress we've made against our strategic priorities and our long-term opportunity. Sean will then run you through our financial performance in more detail, after which Jody will provide further detail on our strategic priorities for growth and how we've delivered against each of them in the half. We'll then hand back to the operator for questions. So to kick us off, let's recap on our aim at Trainline to make rail and coach travel easier. For our travelers and our travel company partners, we do that by combining all carriers into one app. On top of which, we have created a simple, consistent and friction-free experience. No paper, no ticket machines, no queuing at stations, which is especially relevant in the COVID era. Beyond that, we use our scale in data to create smart, real-time and AI-driven information. And then for our carrier partners, We help them drive revenue by offering access to a much bigger pool of customers at a lower cost to serve than their alternatives. Taking all of this together, we champion a much greener way to travel. So as everybody knows, it has been a challenging environment across our market so far this year, and we've seen significant impact from COVID restrictions. In response, we acted quickly and decisively, significantly reducing our costs and ensuring we have sufficient liquidity for the long term, whilst also protecting our investment in our strategic priorities. As lockdowns were gradually lifted, we saw encouraging signs of recovery in Q2 and over the summer months, reflecting a greater shift to online and mobile as anticipated. We made good progress in the half against our strategic growth priorities, And although COVID disruption is ongoing, we continue to have strong confidence in the long-term tailwinds and our growth opportunity ahead. So let's look in a bit more detail at Q2. As you can see from the chart, the impact from lockdowns across our markets was felt most acutely in Q1, and I should state that's our Q1 from March. Lockdowns were then gradually lifted throughout Q2, against which we saw encouraging signs of recovery across all of our markets. This recovery was most pronounced in our largest international markets, where restrictions lifted earlier than in the UK, and in our top three international markets, we saw a return to growth over the summer months. This was against a backdrop of some continued supply restrictions, such as seat capacity restrictions and lower than normal booking horizons, which of course we believe will unwind in the long run. As you can see, continued regional and national restrictions are impacting Q3, albeit not as severe as Q1 to date. In the UK, where restrictions lifted later than Europe, Our UK consumer business also saw some recovery in Q2, albeit more gradual than elsewhere in Europe. Within that, our relative position in the market strengthened, meaning our recovery considerably outpaced the market. As anticipated, this reflected an accelerated shift to online and to mobile, as travellers sought out contactless ticketing and wanted to avoid queuing at stations. Over the half, we continued to make progress against our strategic priorities. As I said, we maintained our investment in those throughout the period. We enhanced our customer experience, launching new innovations like digital rail cards and delay repay, while helping to drive up industry e-ticket penetration further to 29%. We drove a strong rebound in new customers across our markets, taking advantage of considerably lower customer acquisition costs over the half. and in train line for business we took further steps to scale our global api platform with 15 b2b clients now signed up including three of the top five largest global travel management companies looking longer term and past covid the long-term structural tailwinds for our business will endure We operate in a large and expanding market, set to benefit from significant investment in capacity expansion across Europe, particularly in high-speed rail. Awareness of the environmental benefits of switching to rail and coach continues to grow, while governments face stretching targets to bring transport emissions down. To give some recent examples, the German government recently announced plans to increase its investment in rail by almost 60% per annum and pledged to double rail passenger numbers by 2030. And the UK government has committed to 48 billion to maximize the shift to rail for more polluted forms of transport. There remains significant digital migration opportunity in our market also. Having stepped through COVID, the shift to online and digital ticketing still has more room to run. Finally, the liberalisation trends of the European rail industry continue, leading in turn to a more fragmented supply landscape. From December this year, the EU's fourth railway package will open up domestic passenger services to commercial competition. In response, several major European rail carriers are preparing to enter new markets. For example, SNCF are due to enter Spain next year. And as we've seen elsewhere, greater competition like this brings an increased customer need for an aggregator like Trainline. We firmly believe that these structural tailwinds represent significant and long-term growth opportunities for Trainline. I'll now hand over to Sean to talk through our financial performance in more detail.

Thanks Claire and good morning everyone. So as expected Covid has had a significant impact on our financial performance in the first half. Group net ticket sales reduced to 358 million, 19% of the prior year. Revenue declined to 31 million, 24% of the prior year and gross profit reduced to 22 million, 22% of the prior year. However, As Claire highlighted, when the lockdown restrictions began to ease and trading conditions improved into Q2, our net ticket sales also began to recover quickly. UK consumer net ticket sales increased from 13% of prior year in Q1 to 30% in Q2, exiting the quarter at 46%. International set up even more substantially, from 10% of prior year sales in Q1 to 74% in Q2. And although T4B's recovery was slower, reflecting a more subdued business travel market. It improved from 1% of prior year sales in Q1 to 7% in Q2 and exit in the quarter at 15%. As COVID impacted all of our markets, we took quick and decisive steps to mitigate its impact. We paused marketing spend, held discretionary spend, we furloughed certain teams, particularly teams most impacted by the drop in demand. We introduced a recruitment freeze, we paused annual pay reviews, and we implemented executive and voluntary salary reductions to protect the business. Back in April, we said that our monthly cash outflow would be in the range of eight to nine million a month. A combination of better revenue than expected and the rapid and decisive actions to reduce costs meant that we were able to reduce monthly cash burn to an average of five million a month during Q2. Looking ahead, We'll obviously continue to monitor lockdown developments closely and we'll adapt our response accordingly, whether that's investment in marketing to support the recovery or further cost mitigation actions as required. While scaling back costs, we also ensured that we had sufficient liquidity to withstand even the most extended downturn. At the end of August, we had 162 million of available liquidity through a combination of cash and undrawn RCF. Again, better than our previous expectations given the lower than expected operating costs and the improved trading in Q2. Given the strength of our liquidity position, we remain very confident we have sufficient liquidity to operate for the long term. As a result of our operational cost management, we reduced our cost base by a third from 57 million last year to 38 million this year, helping mitigate the impact of COVID on profitability. And we reported an adjusted EBITDA loss of 16 million in the period compared to a profit of 42 million last year. Net debt increased from 71 million to 166 million and a half. This was mainly driven by the 90 million working capital outflow in the first quarter as lockdown resulted in a sharp drop off in sales and an unprecedented number of refunds. However, as expected, we saw a partial reversal of the working capital as trading improved into Q2, resulting in a 41 million cash inflow. And this, of course, will fully reverse when ticket sales recover further. The increase in net debt also reflects our cash burn over the period, including our EBITDA loss and our capex investment. As we said we do, we maintained our capex investment in the period as we continue to invest in our strategic priorities to drive long-term growth to create value for our customers and our shareholders and position the business for recovery when the market improves. And with that, I'll hand over to Jody.

Thanks, Sean. And good morning, everyone. It's great to be here. And while clearly these are unusual times, as COO over the last couple of months, it's been very encouraging to see the opportunities in front of TrainLiner to get to know the strong team that Claire has assembled. And I'm very much looking forward to meeting you as I transition over the coming months to CEO. Today I'll be discussing our progress against our strategic priorities before we take your questions. We have a clear strategy to drive long-term growth and create value for our customers and shareholders. As a reminder, our four stated strategic priorities are to enhance the customer experience, continually improving and optimizing app and web, build customer demand, scaling up customer acquisition and increasing their engagement with us, optimize the revenues we generate from net ticket sales, and grow train lines of business, serving the B2B and white label markets. As Claire and Sean have mentioned, we are continuing to invest in these long-term priorities, which we believe will position us well to drive growth as conditions recover. Let's step through some of these. We focused heavily on enhancing the customer experience in the first half. We drove the further adoption of e-tickets in the UK leveraging the strength of our 4.9-star rated mobile app. Industry penetration is up more than a third since last year at 29%, with Trainline making up around 70% of all e-ticket sales in the first half. We continue to see significant runway for further e-ticket adoption, with customers having a greater preference for contactless solutions given the COVID backdrop. We are lowering the cost of travel for customers and recently launched digital rail cards, This provides customers a seamless in-app solution that gives them up to a third of rail ticket fares. For context, rail cards are used in more than 40% of all train line transactions in the UK. Customers can now store their rail card in the app, making it far easier for them to apply a discount when booking and far harder to forget their rail card when travelling. Digital Rail Cards follows our launch of Split Save earlier in the year, a feature that allows customers to make significant savings by splitting their tickets. and which can be used on two-thirds of UK journeys. We've made the Smart Travel Companion features on app even smarter, launching crowd alerts in the first half to help customers identify busy trains. This adds to the broad suite of features our customer app customers use every day, like lifetimes, journey planning, and disruption alerts, using our scaling data to give them real-time insight and reassurance on the go. We improved our self-serve functionality with the recent launch of delay repay notifications in France. This feature notifies customers when they're entitled to compensation as a result of a delayed train, solving for what is one of the top two customer pain points there. And this is something we can roll out to other markets beyond France. As COVID lockdowns hit in the first quarter, we quickly enhanced our automated change in refund functionality allowing us to process the significant number of inbound requests. As a result, 99% of all free funds are now self-served, improving the customer experience and reducing our customer service costs. Looking ahead, we'll keep up the pace with our innovation. We have a number of products due to launch over the next year, designed to meet the needs of our customers and enhance their travel experience. Having paused marketing in Q1, we resumed investment in the second quarter as COVID restrictions lifted and passenger demand began to recover. At this point, we leaned into the customer acquisition opportunity, predicting and optimizing for post-lockdown demand, while benefiting from reduced bidding competition for paid marketing channels. With customer acquisition costs down by more than 50% in international and 30% in the UK, we drove a strong rebound in new customers. New app customer acquisition in international surpassed pre-COVID levels, while the UK rebounded to more than 80%. We drove a recovery in customer engagement in the second quarter, increasing monthly active users to around three quarters of pre-COVID levels. And we continue to make strong progress in shifting customers to our mobile app, with its share of transactions increasing further to 81%. Finally, we are making good progress in positioning Trainline for Business for future growth. As a reminder, we developed and built a global API platform to scale B2B distribution internationally, increasing our addressable B2B market from 1 billion to 6 billion. The global API offers B2B clients one-stop shop access to our European rail supply, meeting the growing demand from travel management companies and other travel platforms. Our good momentum has continued in the first half. We now have 15 European B2B clients, signing 12 since the end of last year, including three of the top five global travel management companies. And this is just the start. We're in contract discussion with a strong pipeline of travel platforms and other European carriers. At the same time, we're continuing to build and deliver innovative solutions for our white label carrier partners, helping them solve for COVID-related ticketing and refund issues, and prepare for industry recovery. Before we take questions, let me briefly recap on our key takeaways. COVID have had a significant impact. We have responded quickly and decisively and have sufficient liquidity for the long term. When conditions improved in Q2, we saw the business recover strongly. Our international business led the recovery with net ticket sales across the top three European domestic markets returning to growth. Our UK consumer business followed, where we made a faster recovery than the wider industry. And we delivered a strong rebound in new customers while acquisition costs remained low. By continuing to invest in our growth priorities, we are building our customer base and positioning ourselves to benefit when consumer demand returns. And finally, as the future CEO of the business, I can say I'm very excited about the huge headroom for growth, as well as the structural tailwinds this business enjoys. And we remain confident that these will play out over the medium term. Thank you very much for listening. We'll now hand over to the operator for questions.

Thank you, sir. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel that request, please press the hash key. That is star and 1 if you wish to ask a question. And your first question comes from the line of Marcus Stevo of J.P. Morgan. Please ask your question.

Yeah, hi. I have two questions. The first one may be for Sean. If you can tell us a bit more about working capital developments, how shall we think about it now for the rest of the calendar year, given the increase in lockdown measures? Where do you think the kind of like monthly cash goals are going to go from here? And then the second question, maybe more broader for Jodi or Claire, if you could talk a bit more about the online or the shift towards online. You gave us the metrics on e-tickets, but more broadly, where would you say the shift has or how much has the shift accelerated over the last few months? I think pre-COVID, the online share was about 40%. So where do you think, where do you see this right now tracking?

Hello, Marcus. Let me just pick up the working capital question first. So as you saw in Q1, we would expect a working capital outflow as we go into the second lockdown. Because in the sense Q1, you know, we have, we pay down our rail partners, And those ticket sales are not replaced in the short term. So we expect a working capital outflow, but of course, as we saw in Q2, that will recover and we'll get an inflow once ticket sales start to recover. What we don't expect is it will be as severe as we saw in Q1, simply because the business has been lower through the COVID period. So there isn't as much working capital outflow to go out. I would also say on the cash burn question, we've done a lot of work, as you know, to manage our cost base and manage our operating costs. And our monthly cash burn during Q2 reduced to $5 million a month. Now, during lockdown, we would expect that to go up a little because we'd expect there to be less revenue for the next few weeks. But it's going to be in the range of from $5 million in Q2 to maybe $7 million. And after that, as ticket sales start to recover, again, cash burn will start to reduce. So if you look at our total liquidity position, we feel very comfortable. We have 162 million liquidity at the end of the first half, and our cash burn is reduced to somewhere in the range of, let's call it, 5 to 7 million. So we feel very comfortable. We've got sufficient liquidity for the long term, even in a very extended lockdown, which we don't expect to be the case.

And just to pick up on the online question, over Q2, I mean, as anticipated, we expected that online would grow in share. Whilst there isn't necessarily market-wide online data, I'll just point you to a few of the numbers we can share. So e-ticket share of total sales went from 21% to 29%, which is, I think as Jodie mentioned, a significant jump over the half. Our sales, our net ticket sales grew at 46% year over year in August, and that compares to the market growth of 35% in the UK. So I guess, Marcus, that also underlines the shift to online. And then in international, our net ticket sales were 74% of prior year, and this rate of recovery clearly implies a significant market share gain. And all of which is to say, obviously, buying online and buying e-tickets afford customers a contactless ticketing option and allows them to avoid either touching ticket machines or queuing in stations. And I think that effect persists over time.

Okay. Thanks a lot. And, yeah, all the best in the future for you. Thanks a lot.

Thanks, Marcus. Thank you. And your next question comes from the line of Shahid Atiyah of Morgan Stanley. Please ask your question.

Good morning. Thank you for taking my question. Please, for me, So one related to the online question, but more specifically on the e-ticket rollout. So you mentioned there are further rollouts of e-ticket availability, which supported adoption. So on an industry level, can you share where we are now versus the 70% e-ticket availability we saw pre-COVID? Second, on the base case scenario that you outlined in the release, You mentioned that in that base case scenario, revenues will recover to 2019 levels by June 2021. Does that assume the underlying industry returns to those levels, or are you also taking into account online share increasing or remaining stable from where we are today? And lastly, wondering if you can speak a bit maybe on broader industry changes. How should we think about the impact on train lines from the shift to the concession model and the increased government involvement overall. Anything you can share about how maybe decision-making in the industry will change maybe at the RDG level and any change in your view to the commission risk. Thank you.

Okay. I think the first one was around e-ticket availability. Is that right? e-ticket availability sits at around 71%, I think, across the country, 72%. It has grown by a few percentage points over the half. And interestingly, in October, one of the large rail operating groups, GTR, have announced further e-ticket infrastructure rollout on their southern network. So we expect that availability to grow. And look, over time, we believe that e-ticket availability will trend towards 100%. And as we said, meaning today, there is both headroom in further availability but also headroom in uptake, because uptake, of course, always lags availability. And so today, 29% of tickets are sold as an e-ticket. We see no reason why that doesn't get to four and five over time.

And, Gleb, perhaps I'll take the base case scenario question. So, Shaked, as we think about it, we think about June 21, and the recovery in the market into the middle of next year, we look at 2019 and think that 21 looks more like 19 at that point. But we think the overall market at that point will still be smaller. And there's a couple of things going on there. So I think if you break the market into component parts, I think the consumer market recovers fastest. That's what we saw coming out of the first lockdown. And we saw that in every market, France, Italy, and Germany, where we're in growth year on year in the summer months, and even in the UK as well. But if you look at the T4B market, the white label business has been slower to recover than our consumer business, which is the point Claire made about we have seen share gain. And the B2B market has been slow to recover because business travel has just been slow to recover, as you would expect. And then finally, I'll just point at the inbound market, which I think has been slowest to recover. And there's no surprise there, right? This is US customers coming to Europe, Chinese customers coming to Europe. And that market just doesn't exist right now. Of course, we expect it to recover in time, but I think it will be the slowest market to recover. So overall, the market will be smaller, even by the middle of next year, the overall market will be smaller, but we will see share gain. We are seeing share gain right now, where our recovery is faster than the market, and we expect that to persist. This shift online that we've talked about, and shift to mobile and e-tickets, It's happening, it's happened throughout the COVID period and we expect it to continue.

And just picking up on the, I think the third question was about the industry structure. Let me pick up that. So broadly speaking, as we've shared before, we work very closely with the DFT, with our rail operating companies and government overall. I think we have a very shared goal across all. to continue to grow rail and reduce more polluting forms of travel. Over the half, of course, you saw the rail operating companies move to emergency recovery measure agreements, a form of concession, but of course the concession theme really is a theme that's been around in the rail industry for a long time and was one of the expected recommendations from the Williams Review. So I think we see this somewhat as a continuation. And with the concession model, there's always intended to be a number of train operation companies running the UK's rail services with distinctive brands. And we don't envisage our role within that stakeholder group changing. Our job is to continue to innovate, to push some of the innovations like we've talked about today. Customers vote with their feet. We have a 4.9 star app. And ultimately, through this innovation, the driving of e-ticket innovation and other such things, we're encouraging more people to take the train. And I don't see that role changing over time. On commissions very particularly, you'll know that commission is set by the industry overall, and the commission we earn is the same commission as the train companies pay each other, and it's the same for all retailers in the market. And it has been consistent for some time, and we don't envisage that changing. And in fact, put against other sales channels, it points to the fact that selling online is in fact a very cost-efficient means of selling tickets.

very helpful thank you very much thank you your next question comes from the line of Andrew Ross of Barclays please ask your question thank you very much and morning everyone I have got three questions the first one is

In the statement, you mentioned that there are three scenarios you've looked at in terms of liquidity and covenants, and that the third most bearish scenario might test your covenants in August of next year. So could you give us a bit more color about exactly how bearish?

Andrew, sorry. We cut out for the last 15 seconds. Can you just rewind 15 seconds and replay? Sorry. We heard three scenarios, and that's all we heard.

Can you hear me okay now?

Yes. Yes.

Great. So just on the third scenario where you say you might test for covenants in August, it would be helpful just to get a bit more granularity as to exactly what is in that scenario and how bad things would need to be in the end markets for you to get to that point. That's the first question. Second question is on the global API on the B2B side, which sounds like it's going very well. Is there anything more you can give us in terms of how the pricing there is working? I mean, any numbers around ARPU would be great and kind of the pace at which you might sign up more customers. And then the third question is back to follow up on Marcus's question on working capital. And just thinking of how your negative working capital position might look in a world where net ticket sales are back at kind of pre-COVID levels. From your standpoint, is anything going to change then? And I guess I'm thinking particularly in terms of payment terms with the industry. Is there anything we need to be aware of in terms of where that negative net working capital position should rebuild to in a steady state? Thanks.

Okay, so let me take the first and the third of those, Andrew. The first one was about the three scenarios. So, look, as you're aware, the accounting standards require us to look forward 12 months and comment on any material uncertainties. And, of course, the whole world is materially uncertain right now. So what we do is we look forward, we take our forecast, and then we stress test that forecast with a number of different scenarios. And in each of those scenarios, we did three different scenarios. In two of those scenarios, we're fine, and our forecast says that we won't breach our covenant. And remember, our covenant test, we've deferred that covenant test until August 21, the next half year, so a year from now. And in the third scenario, the most severe downside case would have us breach the covenant. Now, remember how the covenant works. It's a function of trailing 12 months EBITDA and our net debt position. It has to be within a ratio of 3.75 to 1. We don't think that's a very likely outcome. And the scenario, that most severe but plausible scenario is... The base case is our current lockdown, the one we've started today, and we extend that lockdown to go through the whole of December, and then we segue into next year, and then we see another lockdown for another two months, and then we see a slower recovery throughout the rest of what is our first half, up running through to August. So that is a plausible... but pretty unlikely scenario, I would suggest. But it is that most severe scenario three that we've reflected here. And I feel okay about that. I feel okay about the fact that our liquidity is strong. We have a lot of headroom. Our cash burn is well managed, and we feel good about our position. So I think if we thought that was a likely scenario, we would approach our lenders, and our lenders have been super supportive, we'd approach our lenders and we'd have that conversation. And the reason we haven't done that is simply because we don't think it's a very likely scenario.

And then the second question I think was around the global API opportunity and pricing in particular. So pricing clearly is commercially sensitive. It's not something that we can disclose. But the global API is really leveraging the scale of connections and supply and feature breadth that we have to offer a product to the B2B market. And as Jody mentioned, I think it allows us to expand the addressable B2B opportunity from circa one billion market size to circa six billion. And for those travel management or travel company partners, it affords them a one-stop shop for European rail. It allows them access a broad set of inventory and a broad set of features. As we said, we have now signed 15 clients, three of the top five global travel management companies, and the pipeline is strong. I'm not sure there's that much more we can share today on that.

Andrew, your third question is working capital related. Much as I said earlier, we saw a big outflow in Q1, as you'd expect. And we saw the recovery into Q2 as ticket sales began to recover. We do expect some outflow from the second lockdown. And equally, we'll expect to see that recovery once we get through lockdown and out the other side. And then as ticket sales recover, once ticket sales recover to pre-COVID levels, our working capital position is going to go back to the strength that it was pre-COVID. It is an advantage for us, of course, because we are taking money from customers before we pay our carriers, so we have that negative working capital cycle. In terms of, you asked specifically about payment terms, so we agreed revised payment terms with our UK, with RDG, with our UK rail carriers for the period of COVID and that will revert to the normal payment terms once we are beyond COVID. So again, I think the working capital position, it's bumpy in line with lockdowns and travel restrictions, as you'd expect, but we feel very confident that it's going to bounce back to where it was once we start to see ticket sales recover again.

Thanks, Sean. Just to follow up on that, is there a specific date that's been outlined by the RDG when those payment terms get revised back to normal or not?

No, we simply said that we would review that once we were into recovery. It's obviously helpful for us, but it's also helpful for the industry. So it was an easy conversation, and we'll review it once we get back. Once we see the recovery happening, And we need to be sort of, my estimate, Andrew, is once we've passed about 70% of prior year, and you remember how the payment structure works, and we can go into that offline if we need to, once we get past 70% of the prior year, then we'll revert back to the normal payment terms.

Got it. Thank you very much.

Thank you. Your next question comes from the line of Simon Davis of Deutsche Bank. Please ask your question.

Good morning. Three from me, please. Firstly, just on mobile, you said that it was now up to 81% of transactions. Can you say what percentage of revenues mobile now accounts for? Secondly, on digital rail cards, can you give us a sense of the scale of that opportunity? And lastly, on e-tickets, roughly what is your market share of the e-ticket market now, do you think? And what do you think happens to e-ticket sales post-COVID recovery? Do you think we've seen a permanent shift to digital, or do you expect to see a return to the ticket office in relative terms?

So maybe the first one, Sean.

Yes, so morning Simon. 81% of transactions, it is more than 60% of sales. So clearly sales lag transactions because typically mobile transactions are related to shorter distance and therefore lower ATV. But it's more than 60% of sales. But what's super interesting is the growth there, the change there. And we continue to grow our app mix And if you looked at our business, our app share of new customers, our recovery in app new customers has been very strong, significantly faster than the recovery we've seen in both sales and transactions. So feeling good about that.

Great.

And then I think the second one was rail cards besides the opportunity. Well, rail cards are used prolifically throughout the industry, and incidentally not just in the UK, but in other markets as well. Over 40% of our transactions are made using a rail card, so obviously it improves convenience and utility for consumers considerably by being able to both buy the rail cards from us, but also being able to store them in the app. And, of course, the other secondary benefit, the significant benefit, is it drives stickiness. When someone has a rail card, they're obviously more likely to, you know, the frequency improves over time.

And then the third question was the e-ticket share. So, again, Simon, we've seen a step up in e-ticket penetration. It was 21%, so one in five tickets was an e-ticket pre-COVID. That's now stepped up to 29%. That's a change that we have driven. I mean, if you looked at our share of e-tickets, we are 75% of the e-ticket penetration. We have a disproportionate share of that. And that's because we, you know, It was our innovation that helped drive that and we continue to drive that. We think it's a better customer experience and we think it's here to stay. I really don't see customers reverting to using paper tickets once they've used e-tickets. And remember, as Claire mentioned earlier, availability across the network today is about 72%. So we have headroom in availability. And exciting for us and exciting for customers as well, GTR, Thameslink and Southern are They will be rolling out e-ticket availability across their network across the next few months, which I think is a really exciting step forward.

Great. Thank you very much.

Thank you. Your next question comes from the line of Owen Shirley of Berenberg. Please ask your question.

Morning. Thanks for taking my questions. Three for me, if that's OK. The first was on T4B, you're obviously doing really well signing up new clients and it was helpful mentioning the addressable market increasing from one to six billion. But I wondered whether you could contextualize of that sort of extra five billion, roughly what the 12 clients you've won would make up and whether you're also the exclusive provider. The second question was just whether you've ever shared any data on reason for travel of your customers, and specifically would be interested in what the share of traveling for work or commuting might be. And then the third question, given customer acquisition costs seems to be so much lower at the moment, what's your thinking around potentially spending more while it's so much more efficient, particularly in Europe? Thank you.

Thanks very much. So the first question was around T4B and the market expansion.

Yeah, so it's the shift from our addressable market. And the big shift there, Owen, is because we've made Europe accessible with the global API. So we have provided this one-stop shop for all of travel management companies, corporates, and actually any partner to be able to access all of our European inventory with one connection. Now we won't, as you'd expect, we won't break out what incremental sales opportunity the clients who signed today gives us. But what I would say is think about it in terms of who else can provide this capability. Because right now, we're the only people who can provide this capability. Nobody else can give you a one-stop shop. One connection gives you access to more than 80% of European rail. And that's what's exciting, right? So this is, and this is not just what we say, but this is what our travel management company partners and B2B partners are telling us. For them, it's a significant effort to have to connect many different rail carriers together. Whereas if they can connect and access all that rail inventory in one step, that is obviously super efficient for them and gives us a competitive advantage. And the second question, I think, Jody?

So I'll take the second question, which was around the reasons for travel. Whilst we don't break those out, I think what's helpful is just to guide you through how we saw this play out with the ending of the first lockdown. We saw in August strong leisure recovery, and that's a place that plays very well with our barcodes and ticketing solution, and that came through very strongly with domestic travel there. And then over time, we saw with September and a kind of return to work, we saw the commute segment very encouraging there, and we think there's broader opportunities for train liners as people don't want to use our ticketless, if you like, solution and use a digital to buy rather than be queuing in the station. And then I think when we look at the domestic markets that we talked about earlier internationally, we saw strong growth there and actually a return to growth as those markets recovered first. We'll have to then watch the business market and the inbound market and observe the profiles, if you like, the return that we see over time there. But we remain very well positioned for those. And then I think it was the third question was around spend on marketing. And I think, as I said within my section earlier, We saw opportunity and we lent into that opportunity as the return happened. The way we think about our marketing is really looking at the kind of marginal value, every marketing dollar we spend there and we saw opportunity and we took that. And that's how we continue to operate. And I guess we're able to lean into those opportunities in a way potentially some of the other providers aren't able to. So we'll have to track that over time to see what that means with the final result, but we're encouraged with what we've been able to do so far, and it means that we've actually been able to get a lot of people to our app through this period.

Yeah, I think that new customer growth and new customer app growth in particular is important, obviously, for future sales. So we've taken advantage of this opportunity, as Jodie said, to lean in.

Brilliant. Thank you.

Thank you. Once again, ladies and gentlemen, if you do wish to ask a question, please press star and one on your telephone keypad. Your next question comes from the line of James Lockyer of Peel Hunt. Please ask your question.

Thanks, guys. Just two questions for me, if you don't mind, please. Firstly, the £5 million per month cost saving that you've met, sorry, the Reduction to 5 million that you've made. Can you talk about how much of that reduction is, you know, year on year is our efficiency gains that you may not have had, had you not gone through this exercise and therefore potentially been able to reinvest? So, for example, was the gross reduction, say, was the gross savings, say, you know, a million more than that, but you were able to reinvest that million elsewhere. And hence, therefore, could you be in a better position after COVID from a cost efficiency perspective? And then secondly, just on e-ticket versus paper, could you just remind us of the gross margin benefits of moving towards e-tickets and how should we think about operational leverage there?

Thanks. Morning, James. First question was on the 5 million cash burn. So the 5 million cash burn, think of that as our EBITDA investments because our EBITDA loss in the month and our capex. That's how to think about the 5 million. So the reason the 5 million was better than we expected is because revenue recovery was better than we expected and also our operating cost management was better than we planned. So we were able to reduce our operating costs and that's specifically around marketing costs and you've heard Claire and Jodie talk about the efficiency that we've seen in marketing costs. We've been acquiring customers at a lower cost in every market Obviously, that's good news. But it's also other costs related as well. It's headcount costs. So we had a recruitment freeze in place and we paused our pay review, for example. And it's other discretionary costs as well. So feeling good about those cost savings. Of course, when we see recovery, expect us to lean into the marketing spend again. And that's what we all want to do, right? We all want to support the recovery. What is also true is is some of those cost efficiencies that we've put in place will endure. We will have an ongoing lower cost base as a result of the efforts that we've put in place. So for example, we have done a whole bunch of work around our AWS costs to make sure that we've managed those and fine-tuned those and optimized those to be at the right level. So feeling good about our cost position. as we go forward. And I think the second question was on the GM benefits of e-ticketing. Well, there is a very clear GM benefit of e-ticketing, and it's to do with the fulfilment cost. So as you'll remember, James, every ticket that we sell in the UK is subject to a fulfilment cost that we pay to the UK rail industry. But the fulfilment cost of a paper ticket is significantly higher than that of an e-ticket, and it's about 3x. And in pound terms, it's the difference between an average of 30 pence a ticket for a paper ticket and about 9 pence a ticket for any ticket. And that obviously flows through to gross margin. So we do get that benefit into gross margin.

That's great. Thank you.

Thanks. Thank you. And your final question comes from the line of Mark Fortescue of Stiefel. Please ask your question.

Oh, thanks. Morning, everyone. I just wanted to pick up one question on what you said about accelerated uptake of contactless more widely in this strange COVID environment. I wondered if you could talk a little bit strategically about contactless credit and debit cards as opposed to in-app and the likes of Apple Pay where there isn't a £45 spend limit. Are those real alternatives, a threat to be mindful of outside of London, and is there a way for Trainline to be a part of the solution?

Yeah, great question. Sorry, did someone speak? Let me start on that one. So the current terminology, I guess, is important. Pay-as-you-go is a means of buying tickets, principally in and around central London, which is a tap-and-go or an Apple Pay. And for the most part, we've excluded that market in our definition of market size. When we talk about the UK rail market as being 11 billion, that part of the market we have excluded. And we've said in the past, I think, that we... it's not hard to imagine that that market will expand a little in concentric circles, but it'll be in the order of most likely hundreds of millions. However, that's not a market we play in today, but it is a market we may be interested in over time. So you could imagine a customer experience with transparent fairs, with real-time personalized journey information and other features as well actually blend quite well with that market opportunity. But for today, it's outside of our definition of the market. Is there anything you would add, Sean or Gillian?

Yeah, I think you could imagine a world where we use the app to provide a contactless, pay-as-you-go type experience. where we've got integrated rail cards, where you can access delay repay, where you've got all the features that comes with the Trainline app, the lifetimes and so forth, that gives you all the custom benefits of our app, combined with the convenience of pay-as-you-go. I mean, we are not going to stand by and watch that market move away from us. We'll absolutely be part of that as we go forward.

Lovely. That's helpful. Thanks.

Thank you. There are no further questions at this time. Speakers, please continue.

Great. Well, with that, I think it just remains to say thank you all very much for joining us this morning. And thanks to Sean and Jody. And we hope you all have a good day. Thank you.