Corporate Travel Management Limited (CTD) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the CTD Full Year 2020 Results Call. [Operator Instructions] I would now like to hand the conference over to Jamie Pherous, Managing Director. Please go ahead.

Thank you, Amanda, and good morning, everyone. Firstly, joining me today, -- yes, my name is Jamie Pherous, I'm the Managing Director. I'm also joined today by Neale O’Connell, our CFO; and Cale Bennett, our Group GM of Finance and Investor Relations. So we go straight to Slide 5, if we can, to the FY '20 highlights. As you can see, obviously, it was a very tough year for us and particularly a tough half, where we needed near-flawless execution, I think. Our wider team did a great job to get to where we've got to. So firstly, I want to make a note, as we guide to underlying EBITDA, full year underlying EBITDA of $65 million, and that included small $0.5 million underlying profit for the second half. Also, we talked to underlying NPAT. This is before the one-off costs. So profit before -- after tax of $32 million before one-off costs as well. But the key point here is we find ourselves in a really good position. We've created a very strong liquidity position because we've outperformed, which we'll touch on through this slide pack. It's -- we're really pleased to say we have 0 debt. We have over $92 million in cash, of which $60 million is our net cash. And of course, we have $180 million undrawn committed finance facility. So again, this is underpinned by very strong operating cash flow for the year of $79.2 million. And most importantly, because we move very swiftly with redundancies and other cost reductions, we don't expect any significant further one-off costs in FY '21. All that action was taken in the last quarter, including the cash payments and redundancies, which we'll talk about a little later in this presentation. And again, whilst it's very clear that our client spend is down, most importantly, our client base is building. We had very strong retention during the year. Every region was minimum 97% in client retention. And we've won business all around the regions, and that is continuing. So the other important thing that might surprise you is the client activity bottomed late April, and it's been recovering quite materially ever since. And in this slide pack, we'll show you what some of that activity looks like. And of course, as part of our cash management, the FY '20 interim dividend that we deferred to October has been canceled, and there will be no full year dividend for this year. Okay. So on to Slide 6. So why did we do better than we thought? It really comes down to this slide, and I want to start with point 2. We gave a market update May 7 of our expectations. And we said that revenue over the last quarter, we expected, hopefully, $2 million to $5 million of revenue per month in that last quarter which is roughly about 5% to 10% of our prior year revenue. But we delivered a lot more than that. We delivered $11.5 million per month of revenue, and that's been the defining difference in the business because of corporate travel, and we'll touch on/that in future slides. Then if I come to point 1, when you combine that with our ability to move very swiftly to reduce our cost base, we expected a loss range in underlying EBITDA of $5 million to $10 million a month over the last quarter. But because of that swift move, we only lost $3 million on average per month in the last quarter in underlying EBITDA. And more importantly, that loss has been trimmed further in July, with July being one of our slowest months because our overweight to Northern Hemisphere, which is in summer vacation in terms of our revenue, and that loss has now trimmed to $2.2 million in July. So the end outcome means when we come to point 3, is that we've had a materially better liquidity position and cash burn than what we thought. So if you go to the market update, again, we told you we had roughly $30 million of net cash May 7 with an additional burn of $5 million to $10 million a month. So for many -- many might have thought we might have been capping our $180 million facility by now. But the fact is, again, we delivered. At June 30, we had $60 million net cash. And in fact, nearly 7 weeks into the financial year, again, in a very quiet period, July and August, that cash is down to $55 million. So actually, as you can see, a very real chance of never tapping our facility at all. So this is why -- this is really why we never needed to raise capital for liquidity. And as a result, it's certainly not survival anymore at CTM, it's really now our focus on positioning for a recovery. And with that, if you can come to Slide 7 and then on to Slide 8. Okay. So as you can see with this slide, there's 6 unique attributes that put us in a very good position in this current environment. And I want to start with our capital-light model. We told you that we had a lower fixed cost base versus our peers because of our variable cost base. And as you've seen, as we've already demonstrated, we swiftly resized the cost base down as we needed to. And this can go both ways. We can move it swiftly upwards or downwards as the market permits. And secondly, our strong balance sheet, as we've just been through with the cash and the undrawn committed facility and so forth. What this means, we find ourselves in quite an enviable position because we're very well positioned to take advantage of acquisition in any industry consolidation that may occur due to COVID-19. We'll touch on that a little later in terms of what our peer group is seeing. Thirdly -- the next 4 points, what I do want to do is flesh these out in the following 4 slides. But the first one is that we told you we had a very high exposure to essential travel clients. And we said because our model is a tight focus of both high service with technology, we tend to attract this very demanding client base more than our peers. So what that does, it provides a solid recurring earnings through this period, and that's why we've materially outperformed in our revenues. The next point is our geographical diversity. As you can see shortly, CTM is clearly leveraged to the largest markets with your offshore. We are not Australia centric. And of course, U.S.A. is our largest revenue contributor in the 2 -- in the second half and continues to be into July, which is very positive for our business. But this brings us to the end result, and this is a unique comment that I don't think any of our peers around the world can say, is that CTM is now positioned to be a domestic-only model and be very profitable doing that whilst we wait for international to recover. And we'll touch on that in a few slides. And lastly, why and how can we do that? It's again our proprietary client-facing technology. It means we've got little or no transaction cost as activity comes back. So profit translates well to the bottom line with activity. But right now, everything has changed because of COVID-19, and we believe travel managers are a lot more relevant than ever. And it's our ability then to control and swiftly develop tools for our clients and the nuances that surround COVID-19 that will allow us to capture market share as we come out of this. So on to Slide 9. We talk a lot about essential travel. And just to remind you what essential travel is, it's those clients that provide essential services that is absolutely mandatory for cities and countries to operate. That things like government, police, construction, logistics, mining, energy, utilities and health care. And what this slide shows is that we have an enormous amount of essential services in our client base, particularly in the last quarter. And these pie charts are ordered in descending order of the regions that produce the most revenue in the quarter. So if I come to Europe first, as you can see, we have a very high exposure to essential travel clients. This is very helpful because we had an enormous -- a real enormous proportion of charter flights, particularly the first 6 weeks when there was no commercial train and air operations. So a lot of our travels involve outside of commercial operations. We're doing a lot of accommodation, car hire, but an enormous amount of charter flights. Second is North America. And North America is really quite unique, isn't it? Because those Americans, they still love to travel despite COVID. And again, as you can see, we're lucky to have a significant exposure to essential travel clients. But the 2 key points here is that there was a lot -- there's a higher frequency of commercial scheduling. Hence, why there's a lot more travel outside of essential services in our client base traveling. And of course, the good old resilience of the U.S. market. The U.S. domestic travel is clearly more widely accepted than it is anywhere else in the world it seems. So that's been very helpful for us. Then we come on to ANZ. And I want to make a point here that you can see North America and Europe pretty much double the revenue contribution of our home market. And again, this is despite our home market having a very high exposure to essential travel clients. But of course, again, what we've been doing the last quarter is a large proportion of charters and accommodation and car hire, given the very low level of commercial operations and the border closures. Then lastly, Asia. Now Asia looks what a normal travel company looks like that has a normal-sized proportion of essential service clients. So you can see very typical. And what that means is we're getting a lot lower revenues in line with the lower travel by the broader market clients. So we go now to Slide 10. And we talk a lot about our revenues offshore, we are no longer Australia, New Zealand centric. And what this graphic shows is the importance of being globally diversified business. So as you can see on here, there's a couple of takeaways here. The first one is the flight activity is surprisingly strong in U.S.A. and Europe versus Australia. New Zealand is obviously strong for different reasons. And if you look closely at this particular graphic, there are actually no flights between Sydney and Melbourne, which is one of the busiest sites -- segments in the world. So that's step 1. And what this tells you, the second takeaway here is that U.S.A. and Europe really is where the action is and we're most leveraged at that market. As you can see in the pie chart to the top right there, North America and Europe are the lion's share of our revenue. So again, this reinforces what we've always said to the market is that CTM is leveraged to the largest travel markets, and it's a good place to be right now as we continue to expand our global business. So on to Slide 11. So all the previous attributes we've discussed will lead to this unique ability that I doubt, again, as I said before, that any other travel management company can make this claim. We believe we can operate a highly profitable business just as a domestic business, whilst we wait for international to recover. So how do we do this? And why can we do this? Well, firstly, I draw your attention to the pie chart to the left. As you can see, pre-COVID we're on a seasonal basis, we're roughly generating revenues of $42 million a month, of which $25 million are domestic travel. And I want to take this time just to define what domestic travel means. It does not mean Australia, it means domestic travel in all the regions we operate. So for example, domestic travels defined when you land and depart from the same country, e.g., intra-U.K., okay? And our domestic revenue is pretty much evenly split across all the regions of ANZ, Europe and U.S. and roughly totals $25 million a month. So international travel, we define as arriving and departing from a different country, but it can be intra-regional. So for example, Hong Kong, Singapore is intra-regional, international, as is U.K. to Continental Europe and as is Australia and New Zealand. So that's why if you see those planes flying out of Sydney and Melbourne, we're filling most of those because there's still big demand to get in and out of the country for business. So we're still doing some international revenues, albeit small. So when you step back for a moment, this is why we say we can have a profitable business. And I draw your attention to the revenues and the costs below in this slide. So if we take April to June average revenues of $11.5 million a month, you can see that our July cost base is $13.5 million a month. We're only $2 million a month short from breaking even. Now what that means is that either another $2 million a month from domestic travel or a little bit from international travel or just 8% of domestic -- of additional domestic activity alone will make us breakeven. And again, in that July cost base, we've got significant capacity. And when you step back and you look at, okay, if all domestic comes back, how can the business manage and what will that profitability look like? I'll let you do the math. But we expect roughly a $16 million a month cost base will support a full domestic recovery and a meaningful international recovery. So we've got those people already in the business. And that's really important. So why have we got that leverage in domestic? Again, I want to keep reinforcing, it's our technology. Because we -- the vast majority of our clients use our own Lightning booking tool and technology, it's got a very low incremental cost for each and every booking that comes back. So this is why we can make a bold claim that we just don't rely on international travel. So counterintuitively, the longer the international travel borders are closed, the better we are in a comp set. Okay. If we move now on to Slide 12 and lastly, technology. And we've already seen the benefits that our technology bring because we strongly think in this environment that travel management companies will be more relevant than ever. Because clients really need to rely upon us and be kept up-to-date on things like travel restrictions, the process flows of traveling to an airport and through taxis and so forth, the product safety that they want to be aware of, and particularly for clients, the risk of identification to travel hotspots, if there's any COVID breakouts and so forth. So what's very, very important is given we control our own technology development, we're able to move very swiftly to incorporate much of the airline process requirements into our Lightning booking tool and other tools globally already. And we're well underway in updating all parts of the process to assist with the knowledge, safety and streamline process that our clients demand. So I want to share with you that it will be infinitely more difficult and a lot more error prone and costly to do this manually, given the amount of changes that happen daily in every single city and country we operate out of. This, again, is a huge advantage for CTM that we think will play out by enhancing our client proposition versus our peers. So again, it gives a couple of takeaways for us. We get first-mover advantage. We can build trust, which should help us build market share. And lastly, we are very engaged with our key suppliers at the moment in terms of how we can work together to best produce this data and information so our customers feel safe using CTM. Okay. On to Slide 13, our activity update. Now before I get into the following 5 slides, what we want to do is give you a bit of color on what's going on because I think the activity is quite surprising in corporate. It's materially more than we all think. And the 2 takeaways from the next 5 slides are very clear. Firstly, our booking activity is materially higher than we all thought and the industry. And second, you'll see that all regions are trending up since the bottom in late April and some are materially higher despite second and third and even fourth waves in COVID. So if we go straight to Slide 14, and I want to use a case study of New Zealand. It really is a perfect case study for what can happen to corporate travel when the environment is safe and restrictions are lifted. Now before I go into all the next graphs, you'll find that these graphs, to make it very clear, we are showing the current bookings this year versus the total bookings last year as a comparison of percentage. So last year's bookings include all international and total bookings. So when you keep that in mind, it's quite extraordinary that New Zealand has really gone from nothing to 105% of last year without any international bookings in 12 weeks which, again, is nothing surprising to us but tends to be surprising to the market when we hear some of the theories floated around by analysts. And there's 3 key takeaways here that I want to bring to your attention. Firstly, there is clear pent-up demand for corporate travel. It's pretty obvious looking at this graph. It just took 12 weeks for activity go from 3% to 105%. Secondly, what this also shows is that there's no evidence of any structural changes to corporate travel. And I want to again bring to your attention the history. We've been through a number of these in historic pandemics. Once things clear out and people feel safe, we get full recoveries, full recoveries in 3 to 4 months. And thirdly, how we tend to do. And for those that have followed the stock since we listed 10, 11 years ago, and we've been through a few of these cycles, know that we tend to materially outperform our peers in market share coming out of these. And New Zealand is a great example. Clearly, to be over 100% shows you the organic growth we've had in the last 6 or 12 months. But more importantly, it's the things that we have, the advantages that's coming out of this. And I ask you to think about this because New Zealand is a great example. What took us 6 years to build fell over in a month and that 6 years came back in 3 months, which is extremely challenging for a service business to manage. What helps us manage that infinitely better than our peers is our technology. Again, the vast majority of our clients are using our technology, which gives us a scalability. And secondly, it's our capital-light model, which means because we have variable cost, we can afford to hold more staff and still have a lower cost base which means we've got the people to come out of this. And the example I've given you on that last bullet point is a real example that we see in all these cycles. We have won 3 key accounts in just July alone due to poor competitive service. We had a customer saying our peer just couldn't answer the phone. They just couldn't cope with the speed of the recovery because they cut their costs so hard. So that's a good sign for us. If we go to Slide 15 now, I'll go through the 4 regions, starting with North America, which is our biggest region. Again, good old North America and the resilience of travel. As we've shown you in Slide 10, there's a lot of travel and flight still going despite a clear deteriorating COVID-19 backdrop. And again, what this shows again is that there's steady client activity since the bottom in late April, and you can see that in this graph. But most importantly, for us, are the encouraging signs. As we said before, with 80% of our global revenues coming from the Northern Hemisphere, July, August is their summer vacation. So it's typically quieter, and we normally see a 20% to 25% decline in activity from June. But we've got some encouraging signs in America. In fact, revenues are higher month-on-month from May to June and to July despite the seasonality. And in fact, the U.S. performance in July just continued. Again, it was our largest revenue contributor. And that's for a number of reasons we'll touch on later. But also, as we just a number of days ago, U.S.A. relaxed restrictions on international travel with increased flight capacity added. So we don't know what that's going to do yet, but if America is traveling domestically, I'm sure they're going to keep traveling internationally. So if we go to Slide 16, the Europe outlook. Again, post-July, we experienced increased activity with the opening of international travel between Continental Europe and U.K. But the key point for us in U.K., as you guys know, we've got a really big exposure to government. And government has been closed since May. So we know that, that's a lot of domestic travel, and we've got a high leverage to that recovery. And that's why we always say we're well positioned for domestic profitability in that region. But the interesting thing to share with you is that July activity, we actually broke even in Europe on that activity, which we think is a stunning result, which again reinforces all the things we said to you in the past. We've got the right technology. We've got that variable cost base to better do these things. So we're really pleased with that happened in July. And of course, I just want to reinforce July and August is the summer vacation. If we move to Slide 17, ANZ. Again, another interesting example of what's going on here is that despite what you're hearing in the news, you think the world is falling apart, but travel activity has more than doubled since the second wave. And this is again, like the New Zealand example, there is a clear pent-up demand for essential travel clients in corporate. So as you can see, even through end of July, activity is steady despite half the economy being shut down. And that's because similar to New Zealand, in Queensland and WA where people feel safe and confident to travel, we are getting -- when you back out that they can't travel to Sydney, Melbourne and international, we're getting the sort of recoveries, not too dissimilar to New Zealand, which again shows structurally that there are people -- there's no structural issue to corporate travel coming back. But what I also want to share with you about Australia, as we said before, it's only a small part of our revenue. We actually have minimal downside. The fact is that Sydney, Melbourne, Brisbane triangle last year was 45% of our entire bookings in the region. And the fact we're knocking out this sort of activity without it tells you that we're in a good position because since mid-July, there's -- we're just doing nothing between those cities, yet we're knocking out this sort of activity. And again, I want to share with you, again, on this sort of activity in July, we broke even in ANZ on that current activity, which, again, is because, as we've said before, Europe and ANZ are well leveraged to high volume of online domestic using CTM technology. It gives us this competitive advantage. So the takeaway is Sydney, Melbourne and Brisbane isn't even running, which will be material to profitability in ANZ in the next half. And on to Slide 18 in Asia. And as we said before, this is what travel looks like for many of our peers. And when you don't have essential clients and you rely on international travel, these are the sort of outcomes you can experience right now in COVID. But again, I want to reinforce that we're a diversified global business in Asia and only represents 8% of our fourth quarter revenue. So it's not a big play to the business. But there are some green shoots we're seeing. So since late July, we are experiencing a recovery in corporate and wholesale business, and that's because the public announcement of increased airline schedules and, of course, China opening up long-haul transit via Hong Kong to get students around the world back home. And of course, we're still waiting eagerly for that Greater China travel bubble, which will be a big catalyst. But also a few days ago, there's some other positive signs. Singapore has announced, Malaysia and Japan travel bubbles that start August and September, respectively. So we think, as you can see by that graph, it certainly bottomed, recovered in July and continues to recover. And again, summer vacation in Asia. So now if we go into the regional performance on Slide 19, I'll touch very briefly because, obviously, some of the P&Ls are a little meaningless. But if we go straight to Slide 21 in North America, I just want to highlight a couple of points here. As you can see, it's our largest contributor revenue, reinforcing success of the client wins we've made. And I want to also point out that's the only region without government support. So we have to work a little bit harder in America to make sure that we stem losses. And of course, as we said before, they're heavily weighted to domestic travel. But I'm really proud to say we executed really well, as we said in the first half -- after the first half results. The new leadership has done a really good job. We told you we're going to get our integration completed, and we have. But more importantly, that cost base now is down to USD 3 million a month. If you go back a year or 2, we're $7 million or $8 million a month. So they've done a really great job. But more importantly, it's the overlay of what we're doing with the client base in wins and retentions. So if you remember, we earmarked, we were about to implement $100 million with the clients. Well, roughly 90% of those did implement despite COVID. And post that, we continue to win businesses previously flagged, and our retention is above 97%. So what that means is we've got a much lower cost base, but an integrated business and we've got -- whilst the clients aren't trading anything alike, we hope, the key point is that client base will be bigger when things come back. So we're very bullish on what America can do when things come back, and we're well set for a recovery. Slide 22, Europe. Again, as we all know, this region just continues to materially outperform the market due to the essential travel clients and winning business. Same thing, heavily weighted to domestic travel. And we've become a really respected operator with essential travel providers, particularly some large projects and client wins. We did enormous amount of wide-body jet charters to help out when all borders were closed so that governments and other industries could function. And again, I just want to reinforce, we highly leverage the domestic and government return to work. Governments have been closed down, but they're all coming back after summer vacation. So we look forward to that. And of course, again, very high retention. Slide 23 in the ANZ region. Same story, continuing to win market share and outperforming. Most importantly, it's really the growth in Europe and North America that's shown. So it's the third largest contributor, but still doing very well. And we all know the same story, heavily weighted domestic travel with Brisbane, Sydney, Melbourne being a material catalyst, and again, very strong client retention. And if you come to Slide 24, Asia. As we stated previously, Asia is predominantly relying on international travel because we don't do much China domestic, and we've got lower volume of essential travel clients. So transactions are running more like market, roughly between over the period, 2% to 5% in the last quarter. But we're not sitting still. I think that's a really important part. We're using this time to do a number of things. We've reduced the cost base as low as possible without compromising our culture and ability to recover. But we're using idle capacity really well. We're moving clients to CTM technology. And because of every client wants to save money, it's become quite a catalyst for people to take on the cultural barrier of using technology. And as we've said, we've seen that well because of this one -- one of the biggest clients is the one in Asia because of the technology, and we're really proud of that. And again, we're trying to think about other ways we can tap the Chinese market while we're idle. We know the wholesalers, we've got a very strong play there. But we've got very strong accommodation in terms of our accommodation rates up in Asia and how we can sell that on the Chinese customers is what we're working on at the moment. So with that in mind, I now want to hand over to our CFO, Neale O’Connell, to go through the group financial summary.

Thanks, Jamie, and good morning, everyone. Turning to Slide 26 and the key financial highlights. As Jamie has already discussed, we were able to achieve better than forecast results for the last quarter by quickly rationalizing our cost base and generating higher-than-expected global revenues through this low activity period. I just want to point out, we received $7.7 million in global government grants, which has been received from 3 regions which have been shown in other income, we've called it out separately. We have appreciated the government support. The grants have averaged $2.5 million a month and have been largely offset by the cost of retaining those additional staff. This, in particular, the Asian, Europe regions, access to these grants have been possible by retaining those staff. With our better than forecast results and through our strong treasury management, we're able to remain in a strong cash position with no debt, which is an outstanding outcome considering the circumstances. We've been able to execute our changes quickly. And as a result, all material one-off costs have largely been dealt with by year-end. In summary, strong cash flow of $79.2 million for the year. Net cash is now at $55 million, still 0 debt and an undrawn facility of $180 million. Bank guarantees have reduced from $91.8 million to $54.3 million, in line with activity and through consolidation. Turning to Slide 27 and the P&L. On the P&L, you see the impact of COVID-19, which we'll run through. You can see on the slide, we have shown the impact of D&A this year and what we can expect what FY '21 would look like. It's important because in this particular year, there's been additional charges that have occurred and also the adoption of AASB 16. Turning to Slide 28 and the nonrecurring items. As you'd expect, there was a number of impacts of COVID-19 on the business. As you see from our cash, we've been very successful in collecting our debtors. Bad and doubtful debts amounted to $13 million as a result of market impacts and supplier failures such as Virgin. As I've already said, we've moved quickly to manage our cost base. Unfortunately, this resulted in an over 1,000 staff being now redundant globally. The cost of these redundancies were $15 million, and we've paid most of this out by year-end with a small tail in July. We took a very prudent approach to a review of our intangibles and the carrying value of software. And particularly those items that are related to dealing with clients. This totaled $10.5 million in impairments and accelerated amortization. We also wrote off the borrowing costs incurred as part of the original finance facility negotiated in August '19, given the facility was renegotiated in May this year when we achieved the covenant waivers. And for the CTP acquisition we made in January, there was an earnout liability, which was unpaid and noncash that formed part of the consideration and consequently increased the carrying value of the goodwill. Unsurprisingly, because of COVID, this contingent and noncash earnout liability was reversed and resulted in a gain reported. Also, we review the cash flows for CTP in light of the impact of COVID on the cash flow and impaired the goodwill associated with that acquisition, resulting in impairment figure you see there. Turning to Slide 29 and the balance sheet. We thought it would be useful to show you the December balance sheet as well to show the second half impacts and how we have held up. The cash balance of $92.8 million included client monies and with $30 million of client creditors, which form part of payable and provisions in current liabilities. So how we look at is net cash currently sits at 30 June at $60 million and now sits at $55 million, nearly 7 weeks into the financial year. You can see the reduction, as you would expect, in receivables and payables, our working capital in line with activity. And the increase in intangibles is due to the CTP acquisition. Turning to Slide 30 and the cash flow summary. You can see the operating cash flow was a strong $79 million. Investing cash flows include the CTP acquisition. All debt has been repaid, and we expect CapEx to be around the $12 million to $15 million in FY '21. But this may change a little if activity returns a bit quicker. And as previously, as we've noted, there is no interim or final dividend. I'll now hand you back to Jamie.

Yes. Thank you, Neale. If we go now to Slide 31, we'll talk about FY '21 and our strategy. We might move straight to Slide 32. So firstly, with guidance, as you know, we normally give guidance, but given the government decisions on border restrictions are unknown, we're really not in a position to offer our FY '21 guidance at this point. But I do want to recap as a summary on the full quarter '20. Firstly, as we've demonstrated very clearly, activity has materially bounced off the late April lows. You can see activity is a lot higher than what you would have thought. And again, the key point to our business is the solid recurring earnings that are much higher than we thought, combined with our ability to swiftly adjust the cost base has meant that our fourth quarter '20 underlying EBITDA loss was only $9 million or averaged $3 million per month with no further significant one-off costs, as Neale said before, we did all our hard work and heavy lifting early. So -- and I just also want to remind you that we can operate a highly profitable domestic business in the interim if the international recommences in any material way. We've also talked about post year-end. And as Neale touched on, we still got that very strong liquidity position. Net cash, which is net of client creditors, remains really steady at $55 million just 7 weeks in. And again, I want to remind you, July and August are pretty quiet months because of our exposure to Northern Hemisphere and the resulting summer vacation. Very proud to still have 0 debt, and we haven't tapped that line, still sitting there at $180 million. Again, I want to remind you that surprisingly, July activity continued higher month-on-month suggesting there is a broad-based recovery in corporate activity in the Northern Hemisphere, and we look forward to corporates getting back to work late August in the Northern Hemisphere. As we said before, July is typically our slowest month, recorded a surprisingly lower underlying EBITDA loss of $2.2 million versus June. And of course, very proud to say, for the first time since COVID started, we actually broke even in 2 of our 4 regions in Europe and ANZ in July, and that's a positive sign. And lastly, as we said before, we find ourselves in a really enviable position through our strong balance sheet because we know our peers rely in international travel, have higher cost base and have a really difficult time in this market. And it's only going to get more difficult the longer international boarders stay closed. So we feel right now, we're in this unique generational opportunity for industry consolidation. And we want to be on the right side of history, and we think we're well positioned to do so because of our strong balance sheet. And going to our last slide, Slide 33. Again, it's interesting that we've had a really tough year. It's been a really good acid test for our wider management team. But the key point, we're still on track for a long-term strategy and execution. We talk about our track record of performance and execution. I think it's fair to say despite COVID, we executed near flawlessly to get the results we've got. Secondly, I want to remind you, it's a huge growth opportunity. The market pre-COVID was USD 1.5 trillion, and we're under 1 -- or roughly 1% of that market. And we still think there's a great opportunity to grow into this and potentially is going to be historical consolidation opportunity as well which may accelerate in the next 6 to 12 months. And I want to remind you of our value proposition. We say it all the time that you must have good technology with good service to be successful in corporate travel. That has really come to the floor through COVID because some of the very highly technical and complex jobs we had to do and charters and other things was well suited to our model, that would never work for an online company or a call center company. So you can see that our material outperformance in revenue is because of our value proposition. And again, our tech competitive advantage. We talk about the unique advantage we have of building in region for our clients. And COVID just made that more relevant. We know there's going to be new things that suppliers want. There's new tools that clients demand, and we can be a first mover, and we want to take that advantage. And lastly, as we've always said, our aspiration is to be a company that's the best in every market we operate in. We talk about high compound growth generating free cash flow and not requiring debt. We might not have got the high compound growth this year with COVID. But really proud to say, again, we've shown that the investment community, we can generate free cash flow, and we don't require debt. And that's something we're really proud of in terms of our full year results. So thank you again for listening, and I'll pass over back to Amanda for questions.

[Operator Instructions] Your first question comes from Quinn Pierson from Crédit Suisse.

Jamie, I guess just firstly, could you just maybe bridge a bit of a gap for us in terms of the May net cash update to where it kind of closed in August? We're losing a couple of million of bucks a month that went up. Great results. But could you just maybe bridge that for us, please?

Yes. I mean it's twofold really. I think, firstly, when we were giving that market update in May, it was right at the height of uncertainty. And we were -- I guess we were trying to under-promise and being just really concerned about what would happen with some of our debt, collecting debt, preserving cash. And I think we were just giving ourselves a bit of fat, watching working capital unwinds and so forth. But at the end of the day, we had a very strong focus from the team on collecting debt to preserving cash. And everything, we're hopeful we executed beyond our expectations actually despite the environment. So I guess you could say in hindsight that we're being conservative and prudent, but the facts are we're through it all, and we are where we are today.

Okay. So it's mostly debt or collection kind of above what you would have probably anticipated in, I guess, in a normal environment, just...

Yes. I mean, look, you move on. You go back to May, I mean, we thought the whole world was falling in. So there's a lot of moving parts at the time, and we just wanted to be prudent to give the market update of where we stood. But clearly, we did a lot better. And again, it comes back the same 2 reasons. We've materially outperformed in revenue and we moved very swiftly with our cost base reductions because of our capital-light model. And those 2 attributes have served us very well.

And then secondly, can you just talk us through what you're seeing from the competitor environment, particularly in terms of trying to kind of win market share off them? You mentioned it's a generational opportunity. Are you thinking more trying to buy distressed competitors? Or is there -- or are you seeing competitors folding and closing doors and you can win that share organically? Kind of what's the path here to try to exit COVID with higher market share?

Well, I think it's all of the above. As we've said before, we tend to outperform growth on the way out because, as I said, I mean, if I look at some of our peers that were forced by covenants to make them really savage cost cuts, and they've got high fixed cost bases, clearly, they're running a much leaner staff to get those outcomes. So because of our technology, it gives us scalability. We think we can always organically grow our way out of this, and we tend to outperform. And secondly, look, there are -- there clearly will be some acquisition opportunities. We're always looking at acquisitions. We'll see where it goes. But also, I think there is some issues with distressed business will probably close down. Particularly as international drags on, the borders closed, it has to be. Therefore, I think it was a combination of all of those things.

And just lastly for me. Cognizant your cash balance is going in the right direction, but should you need to dip into your debt facility, there is a covenant for the last 6 months of '21. How much debt could that facility support with the -- given its covenants?

Yes. Yes. I think we've got to have an $80 million liquidity value at 30 June. And after 30 June, it reverts back to -- there's no liquidity covenant like that, it goes back to normal, interest in EBITDA are standard covenants. So what that means, today, we've got -- even what we're towards the end of April, we've got $55 million, we've got $180 million, that's $235 million, take off $80 million, that's $155 million, right? You see our July loss. Well, you can see our cost base. I mean it's just not an issue for us. As I said before, we're over survival. We're now moving into how we can really dominate organic growth coming out of this. And I think it's pretty obvious then why we didn't raise, right? I mean -- and it's a good thing for shareholders because we didn't dilute our shareholders. But hopefully that makes it really clear.

So it's mostly clear, except for those just a bit. So just on that 6 months, once it goes onto the covenants, so kind of what -- I think it's some sort of kind of earnings metric. So presumably, you kind of have a view on what it could support just in the view you needed it?

Well, yes, so it goes back to normal EBITDA interest coverage covenant. So that's it from June. So it's just to June. Like I said, we've got to have a minimum $80 million liquidity. That's the key covenant. And if we've got $235 million a day, well, we'd have to just -- I mean if you think about it, it's not really possible when you look at our July and April, May, June results. We're just not focused. I know you guys want to get cash burn in month of survive and these sort of metrics we move forward. We're about now, as you can see, the energy we're throwing the recovery. We just don't think that's an issue for us. And it's obvious, I think, really obvious.

Your next question comes from Tim Plumbe from UBS.

Just a couple of questions form me, and apologies if you've touched on it. I'm just been -- going between a couple of different calls. But 97% customer retention rate, obviously, impressive given the current environment. Have you guys done a review of your customer books? And how do you think about that potential customer retention going forward over the next 6 months?

Yes. I think it's to be fair that around the world, I mean, most of our customers were very empathetic and very supportive of what we are going through. But like everything, I think customers give you a bit of goodwill, but you must be able to service if things come back. And I think the example we gave in New Zealand is how quickly things can come back and the pressure that can put on your service. Clearly, we've been very active with our essential travel clients, and it's been very technical. If you go to the annual report, in my report, you'll see we had some pretty big projects like U.K. government repatriations and where we were doing 3 or 4 wide-body jets a day, long haul. I mean these are really technical things to do. So we've been working very closely with our clients. And again, we're communicating with our clients as well in terms of what we need to do because we've done surveys. As you know, we're very close. And what we've done is listen to what they want. And the key thing right now is that people just want -- they want information that makes them feel comfortable and safe to travel. And it could be like the little things like if I'm going from airport X, do I have to go 10 minutes earlier what does the screening process look like? Do I get a mask on plane? Do I get a spare seat? Can I get a cab? Can I get a private car? Which hotel has the best cleaning facilities? Who has quarantine? Guess who doesn't. There's a lot of information that our customers want. And we're -- rather than sitting back trying to survive, really for the last 2 or 3 months, we've been really focused on that. And I think we're doing a good job. All our tech globally has that stuff on it. And I know it's a world first in our industry, and we expect other world first to come.

And you spoke a little bit about the tech platform. Could you maybe talk a little bit more in terms of the technology rollout over in the U.S. and the appetite from the customer base in terms of moving across from the old school Concur onto your platform? Has that been an easier process during what's been going on throughout the last quarter? Or has that been a bit more challenging?

Yes. I'll take it in 2 points. Firstly, we're holistic. So we're going to have customers that will want to use products, and we're very happy to support those customers. However, you are right, we are getting a move to people that want something that's simple, that's -- I mean, again, the advantage of our technology, we control it. We can adapt really quickly for a market. So we're using that leverage to say to customers, hey, look, if you want up-to-date information, we've got it. So clearly, as a sales pitch, we're using the current environment, the backdrop to move customers. And as you've seen and we talked to very briefly in all regions, we're using this time to move as many customers as we can from either nothing or others onto our tools, in particular Lightning -- particularly Lightning because we've got the idle time to do it. So I guess, internally, the motto is what are we doing with our time. And when you go back to cash flow and other things too is we've done a really great job which we didn't touched in this presentation, but we did in the market update. We've moved a lot of clients around 30-day terms to credit card and other things, which you're going to see us very, very well in terms of cash flow and future cash flows and just keep that high conversion. So we haven't, again, just sat on our knees or our hands during the last few months. We've had a lot of energy on these key objectives.

Great. And just last one if I may, further from Quinn's question around acquisitions. We're hearing that there's some pretty large potential acquisition opportunities over in the U.S. Just wondering how you guys are thinking about how you would potentially structure any of those sort of deals in terms of upfronts versus 3-year earnouts, et cetera?

Look, I don't even know what's going on there other than -- I think what we always said, we're always talking to people all over the world. And we'll take every, I'd guess, deal on its merits. And like I said, we talk to 20 or 30 people consistently and we'll just see where it goes. I think I've got nothing much more to say than that other than it's interesting times, and we seem to be in a good position.

Your next question comes from James Bales from Morgan Stanley.

Jamie, firstly, I just wanted to ask about the working capital movements that you're expecting, especially in the first half of '21 but throughout the year. This is going to be a different year with different sort of quantum of TTV dollars, how should we expect the cash balance to move throughout the next 12 months?

I'll hand it over to Neale to answer this. Of course, the only one factor is we don't know what activity is going to look like, but I'll let Neale answer this.

James, yes, the way we're looking at it and the way you should look at from a cash perspective, as the working capital sort of unwinds, that demonstrates an increase in activity. And so we'll see a slow ramp. If activity starts to return, which we're very hopeful of, and we've already seen some aspects of that already, the cash position won't move greatly in terms of being a -- from a negative point of view because that capital unwind will be a slow process, and we'll be able to manage that through.

I think, James, there will be a slight lag, just as growth, right? As growth comes back. But I think the key point I want to say is we've really used this downtime to work. You think what -- in a growth time in our business -- as you can see, cash flow and EBITDA are pretty close to correlate. I think that old test that's done. It's more about as we grow. It's -- what's going to give you a bit of a cash lag is, as Neale said, as clients on 30-day terms grow. But we've done a really good job of changing that around 7 days of credit card, and we've been -- and our clients have been very supportive of that. So I think as we grow, if we grow quickly, the lag won't be as great as it normally would have been.