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Global Business Travel Group Inc (GBTG) (Q1 2024) Earnings Call Transcript Highlights: Record ...

GuruFocus Research
·4-min read

  • Revenue: $610 million, up 6% year-over-year.

  • Total Transaction Value (TTV): Grew 9%, driven by transaction growth and higher average ticket prices.

  • Adjusted EBITDA: $123 million, up 24% year-over-year, highest first quarter adjusted EBITDA in company history.

  • Free Cash Flow: Positive $24 million, improvement of $133 million year-over-year.

  • Net Debt to Adjusted EBITDA Ratio: 2.2x as of March 31, 2024, down from 4.5x in March 2023.

  • New Wins: Total value of $3.3 billion over the last 12 months, including $2 billion from SMEs.

  • Customer Retention Rate: High at 96%.

  • Adjusted Operating Expenses: Increased just 2% compared to 6% revenue growth.

  • Adjusted EBITDA Margin Expansion: 300 basis points year-over-year.

  • 2024 Full Year Revenue Guidance: $2.43 billion to $2.5 billion, growth of 6% to 9%.

  • 2024 Adjusted EBITDA Guidance: $450 million to $500 million, reflecting margin expansion of 150 to 350 basis points.

  • 2024 Free Cash Flow Target: Approximately 25% of adjusted EBITDA, expecting to generate in excess of $100 million.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Global Business Travel Group Inc (NYSE:GBTG) reported the highest first quarter adjusted EBITDA in company history, with a 24% growth.

  • Total transaction value (TTV) increased by 9% and revenue grew by 6%, indicating strong financial performance.

  • GBTG achieved significant margin expansion, with adjusted EBITDA margin expanding by 300 basis points year-over-year.

  • The company generated positive free cash flow of $24 million, an improvement of $133 million year-over-year.

  • GBTG announced the acquisition of CWT, expected to close in the second half of the year, which is projected to accelerate growth and create significant shareholder value.

Negative Points

  • Despite overall growth, the SME segment showed a slowdown, attributed to higher interest costs and sustained higher inflation impacting spending.

  • Revenue yield declined modestly in the quarter due to a shift to digital transactions, which have a lower revenue yield but positively impact adjusted EBITDA margin.

  • The company faces macroeconomic uncertainties that could impact the travel industry and customer spending patterns.

  • The integration of CWT poses potential challenges and risks, including achieving the projected $155 million in annual run rate cost synergies.

  • While GBTG is focusing on de-leveraging, the company still carries a significant amount of debt, with a net debt to adjusted EBITDA ratio of 2.2x as of March 31, 2024.

Q & A Highlights

Q: Can you discuss the impact of the higher share of global multinational (GM) on travel yield compared to SME? A: Paul Abbott, CEO & Director, explained that there was no significant impact on travel yield from the higher share of GM relative to SME. He noted that Q1 typically has the lowest yield, with Q4 being the highest, and the full-year guidance already accounts for a slight deterioration in yield due to a shift towards online components.

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Q: With the pending CWT acquisition, do you expect new wins to be under pressure temporarily? A: Paul Abbott, CEO & Director, stated that the pipeline for new wins remains strong and the company expects to continue gaining share. He highlighted a win-loss ratio of 2.4%, indicating robust share gains, and does not foresee new wins being under pressure due to the CWT acquisition.

Q: Can you provide more details on the strength seen in global multinational transactions, particularly how it's outpacing SME? A: Paul Abbott, CEO & Director, mentioned strong growth across multiple sectors within global multinational transactions, especially in technology, which saw a 30% increase. He shared that a recent survey indicated an 8% increase in travel spend projections for the year among top customers, reflecting strong ongoing growth.

Q: What defines SME at your company, and are there specific industries within SME that are more significant? A: Paul Abbott, CEO & Director, defined SMEs typically as companies spending $30 million or less on travel, with the majority being much smaller. He noted that performance trends in SME mirror those in global multinational, with larger companies within SME showing stronger results.

Q: How are you addressing the slowdown in SME due to macroeconomic factors? A: Paul Abbott, CEO & Director, discussed several strategies to mitigate the impact of macroeconomic slowdown on SME, including focusing on strong customer retention, investing in SME sales and marketing, expanding existing customer relationships, and improving profitability through better working capital management.

Q: Has there been any change in trends in April compared to Q1? A: Paul Abbott, CEO & Director, indicated that it's too early to comment on April trends due to seasonal variations and the timing of Easter. He reassured that the company's performance is on track with full-year guidance, expecting to update more details in the next quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.