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

Thank you for standing by, and welcome to the Corporate Travel Management Limited Half-year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Jamie Pherous, Managing Director. Please go ahead.

Thank you, and good morning, everyone. I'm pleased to be coming to you from the U.S.A., where I've been living since Christmas, which I'm sure we'll touch on later in this presentation. But I'm also pleased to present our first half results and update of current activity. I think if we can move straight to Slide 4, please. Yes. Firstly, the CTM highlights. I think it's clear to everyone that this half was dominated by, firstly, the Delta strain and then the Omicron strain, which impacted through November and December and held back our recovery momentum. But despite this, we think we've delivered a strong first half result. As we go through the first half highlights, firstly, you'll see that underlying EBITDA of $18.2 million was delivered versus $15.2 million loss in the prior corresponding period. Again, pleased to say that all regions except Asia recorded positive underlying EBITDA. But I do want to pay special attention to 2 regional standouts. Firstly, North America, where I'm currently stationed. The region recorded revenue higher than CTM stand-alone pre-COVID, in fact, 32% higher revenue. This is a testament to CTM's acquisition execution through COVID, and as you will see later, supports our expectation for an early return to pre-COVID profits in this region. And of course, Europe. Europe delivered a record EBITDA result of $20.9 million for the half, which really is an incredible achievement in this environment. It's actually worth repeating, a record profit in a COVID environment for a corporate agency. So secondly, CTM continues to win market share. Why? It's our value proposition, a proprietary technology with expert service is just so relevant in this environment. We are building a global reputation for being able to do things that are outside the box. And the proof of this is evidenced in our revenue recovery rates, which we will talk to shortly. Thirdly, it's our strong balance sheet all the way through COVID. Our financial position is one of the best, if not the very best, in corporate travel across the entire globe. We have no debt, over $100 million in cash, allowing us to invest in customer solutions and internal automation without any financial constraint, and this is a big competitive advantage for the business. And lastly, it's a timely reminder that we use this financial advantage to make transformational strategic acquisitions, which takes CTM to be the fourth largest TMC in the world. Upon a full recovery, we are now targeting revenue of $810 million, and importantly, underlying EBITDA of $265 million, which represents 77% higher than our record pre-COVID number of $150 million in EBITDA. So as you will see in the upcoming slides, some regions are already above CTM pre-COVID levels in revenue and profits, and we think it's early evidence that we're on track for this trajectory. So now if we go to Slide 5. Revenue and EBITDA overview. This is a very challenging half due to the Delta and Omicron strains, as we've said before. Firstly, to revenue on the left-hand side. You can see revenue continues to build, and we recorded $163 million in the first half versus $74 million in the prior corresponding period despite the COVID strains. This is up 120% on the PCP. Now to profit. Profit also continues to build despite these strains and we recorded an $18.2 million half versus a $15.2 million loss in the prior corresponding period. It's really important to note how this is derived because looking back, we experienced strong momentum at the end of 4Q '21 before the Delta strain. And what we did in that period, we employed quite heavily in 3 regions to manage this expected continued momentum. But Delta and then later Omicron halted this recovery. And as a result, we have to keep our people for the future growth, but we've been overstaffed throughout the half. It's important to note because it has 2 big impacts. One, we're carrying an excess cost of $2 million a month ahead of time. Port is now looking like an imminent recovery, which I'll talk to shortly. And two, when short-term revenue does recover, we'll see this revenue drop directly to profits. And lastly, we remind you that the second half is traditionally a seasonally stronger half in client activity, typically have a 67% skew to the second half in profits. And on to Slide 6, CTM transformation through acquisition. So our financial position has afforded us the opportunity to make 3 acquisitions through the COVID cycle that have been transformational to CTM. And as you can see, with the first one, of course, is Travel & Transport. The purpose of that was to significantly increase the exposure to the large and fragmented North American market, which we'll talk to specifically shortly. Secondly, with Tramada Software also around the same time period early in COVID, and that gave us an opportunity to leverage the ANZ industry-standard software across the world, not only for ourselves, but also in a SaaS model, which we're using now. And lastly and most recently, the Helloworld Corporate acquisition for $175 million. We expect this to close in the third quarter of '22, subject to regulatory approvals and contractual requirements. So on Helloworld, as we said before, FY '19 pro forma EBITDA of $22 million, and we expect a further $8 million of synergies upon a full recovery. And again, like all our acquisitions, Helloworld has a very strong strategic rationale. It builds on our CTM's core capability. It adds attractive new verticals, particularly entertainment comps and events where at CTM, these parts of our business are running well above 100% of pre-COVID. So we think the timing of entering this thematic is very sound. Of course, it's got a very complementary client base coming in Australia and New Zealand, and we've talked about the material synergies identified. So if we take our eye to the right-hand side now to the chart there, you will see that it gives you a guide to how revenue looks by region upon a full recovery. The left-hand side shows you what CTM looked like pre-COVID in the mix between the 4 regions. And as you can move forward with the 76% growth in revenue, you can see the big area now is North America. It's now by far the largest region. And with Hello closing sometime in this quarter, ANZ also grow significantly. The key point, the end result is revenue is expected to grow 76% from $459 million pre-COVID to $810 million on a full recovery. Now no other travel company can make this claim because no other travel company has been making transformational acquisitions to get themselves in this position. So now if we go on to Slide 7, our regional performance. Now before we get into the next 5 slides, we have added a pre-COVID comparative period to the far right-hand side column on the next slide as well as comparing our 1H '22 results to 1H '21. So why have we done this for? Well, firstly, pre-COVID, if we can go to the next slide, too, if we can, on to Slide 8. Pre-COVID is the period July to December 2019. This period is before COVID began and also before the T&T acquisition and is the most relevant period, the most relevant comparison to assess our recovery trajectory. So this comparison will demonstrate a number of key points as we go through the next few slides. Firstly, it highlights the impact that acquisitions are already making to the business, reinforcing our recovery trajectory to $265 million underlying EBITDA. And secondly, it demonstrates just how quickly we expect to return to pre-pandemic revenue and following that profitability. So now that we're on Slide 8, the group overview, with comparators in mind, you can see revenue was up 120% on the prior corresponding half. But also we're only 27% behind pre-COVID CTM. I think that's really important to note because of the acquisitions. Importantly, we are investing for the future at CTM. We'll talk about technology shortly, but our group overhead is also back to pre-COVID levels to ensure we support a sustainable recovery in the business. However, we don't expect to see growth significantly further despite substantial acquisitions in the size because of the scale we've developed in the business. If we come across with a current update in terms of outlook, we know Omicron reduced travel through November and January. However, there are rapid recovery signs in February, led by our largest regions of North America and U.K. as travel impediments are totally withdrawn, and we'll talk about this in coming slides. As a result, we are well positioned to leverage activity recovery through our overinvestment in staff capacity, but also, as you'll see in the next few slides, the very swift integration speed we've been able to achieve in North America, which we're really pleased. Let's go on the next slide, if we can, on to North America. So as you will see on this slide, revenue was up 213% on the PCP. And again, when we compare to pre-COVID CTM, revenue is already 32% ahead of pre-COVID stand-alone CTM. And we think this is a testament to our successful M&A strategy and execution. As you'll also see, we talked about the excess capacity. A lot of that excess staff capacity was in North America. We need to do that to recover because it's got the one with the biggest scale. But again, I'm pleased to say the same thing I said last half, North America is leading client wins across CTM. It's a really strong sign of support for the service proposition over in North America, particularly our service and technology offering combined in this market. If we go to outlook. As we said, COVID affected us from November to January, but February is very, very different. Over in North America, there are no domestic travel impediments whatsoever. You can get on a plane, vaccinated or unvaccinated, you don't need any test. And international impediments are expected to be minimal in the fourth quarter of '22. And as a result, we're experiencing a rapid recovery. We're double digit week on week on week for the last 3 weeks, and that's a really great sign. And just to put a stake in the sand, last week was a first trading day in excess of USD 10 million in a day. It's been a key milestone and one of our first milestones, and it is materially above any other day since COVID began. This is to show you how fast things are coming back. So when we put this together with the accelerating client wins, the integration completion, which we'll talk to on the next slide, with the recovery, you can see that North America will be a key region of the group in both in profit contribution and client wins. On to Slide 10. So now that North America is approximately half of the global business, we want to bring you up to speed on where we're at because now we're expecting an early return to pre-pandemic profitability through 3 key drivers, and it might be quicker than we all thought. Firstly, it's all about our increased penetration of the CTM tech suite and specifically the Lightning booking tool. As we have seen recently in Europe and previously in the ANZ region, we know at CTM exactly what a high uptake of proprietary technology does to the business. It frees up time for our experts to service complex bookings, which is our strength and will be a strength in this environment, and it also results in better scalability, efficiency and, in turn, profitability and profitability margins. Importantly, pleased to say that Lightning is getting solid traction in North America. We are signing up blue-chip U.S. and global clients being won and implemented on Lightning. Customers are telling us it's easy and logical to use. We continue to build features specific to the U.S. market. So that's very pleasing. Secondly, it's the integration benefits we're extracting over here. As you're all aware, we made the T&T acquisition very early in the cycle. Some, in hindsight, thought it was quite bold when we had to absorb losses. But we told the market very clearly that whilst we expected to absorb some short-term losses by acquiring early in the cycle, we thought the benefit was the ability to integrate significantly faster versus when a business is running at full steam. But we're really pleased to say that's working out really well. And we now can advise you that all clients in North America will be operating on one system by June 30. This brings significant benefits beyond our initial expectations, which we've spoken to the market on a full recovery. It also allows the things that we know will be important given the potential constrain on resources as we get closer to full recovery. We know that one system will unlock further automation proprietary agent tools and booking efficiency improvements, which we've seen in other markets. And this, in turn, will create more time and better productivity, allowing our travel advisers to be truly consultative to our customers, and be more valuable to our clients in the recovery. So this is playing to CTM's strengths and the value proposition. And lastly, to the market share gains driven by a superior value proposition over here. As we said before, we're exporting the financial advantage we have to continue to invest in enhancing not just client, but as you'll see in coming slides, in tech, agency solutions we've been toiling with through COVID. I'm very proud to say that client wins are running at the highest levels in North American history, and we expect it to actually accelerate when we look at our pipeline. And also, now that we really have scale on both sides of the Atlantic, the time was to really leverage up and step up our global segment. And late in last quarter, we built a dedicated team to focus on global clients, the global client segment specifically. I'm pleased to say we won 3 global clients with over USD 80 million in annual TTV in that last quarter attributed to the specialist team just to that team alone. So again, it's another lever of growth for this region. If we go on to the next slide now into Europe. And as you can see with Europe, revenue is up 229% to $43.8 million. And when we compare it to pre-COVID, it is just 8% down on pre-COVID, which is an amazing result. So again, a record first half EBITDA of $20.9 million on a lower revenue bodes really well for the trajectory for the rest of the business, and highlights all the automation gains we've made in CTM since 2019, which is best seeing it because I've got the scale. It should be clearly obvious to everyone by the recovery rate that we have won a lot of business and projects and we delivered such a stunning result when things are closed. But importantly, in that first half result, U.K. domestic, which is clearly our largest and most efficient segment, was not a material contributor in 1H, given the U.K. lockdown throughout the half. So we come to outlook, very much like the U.S. Whilst Omicron reduced activity in November to Jan, U.K. domestic travel is recovering quickly, and it's a large incremental contributor. It's again growing at double digits, week on week on week for the last 3 weeks. Of course, U.K. is leading the way in eliminating all travel impediments. As you know, you don't have to get tests now to go from U.S. to the U.K., you still need a test to come back. But this is pretty material because we know impediments are the strongest recovery -- strongly indicator towards a swift recovery. We've seen it before in other markets, and we've seen in other pandemics in Asia prior to COVID. I also want to point that overnight, France no longer require PCR test to enter or leave France. Again, another material impediment removed to Europe's performance. So -- and lastly, of course, we talk -- we don't talk about customers, we know it's public. So I think we have to talk about it. The U.K. government contract extension to 2025. This really underpins the long-term strength of this region moving forward. But it's also important to note that previously, we had this contract, we were on a panel of 3 providers servicing the government. Now we are the only provider on this contract. So that tells you that there's a lot of growth in this contract alone. So we're very pleased with Europe, how it's setting up for the future. If we come now to Australia, New Zealand, Slide 12. So again, as you know, living in Australia, New Zealand has been a really tough place to operate and travel, but we think it's been a really resilient performance. We actually eke out of profit given ANZ was essentially in lockdown throughout the entire first half, with little government assistance either, by the way, particularly none for us, is a really resilient outcome. To knock out 34% revenue recovery versus pre-COVID and despite all these border closures, just tells you how resilient this business is because of our essential travel client base. And of course, just like America, we're carrying some excess staff because as I mentioned, and we've seen it a number of times, when things come back, particularly the golden triangle, that comes back very swiftly. So when we come to the outlook, we all know it's very clear now that, thank goodness, international and domestic travel impediments are finally being removed and they're being removed very quickly. And as -- just to remind you, we are highly leveraged to activity recovery given, like Europe, a high online domestic mix with our excess workforce capacity. So that bodes really very well. And we just want to note the TTV is building week-on-week like North America and Europe, but it's just a week or 2 behind. For example, TTV as of last week rebounded to 55% of pre-COVID, right? We note in the half is running at 34%. Now I want to remind you, we've seen this rebound before in times when things are open in ANZ, and we expect it to occur at similar rates and speed. This time will be different because international is now open for business. So if we go over to Slide 13, Asia. So Asia is still a tough trading environment for us. Clearly, we remain challenged due to the reliance on international travel. So Asia, again, is a good read of what normal travel looks like for everyone else. However, revenue and other income was at 14% of pre-COVID levels, and this is subject to 2 things, really, the government support pretty much stopped after last year, and that's despite the worsening lockdown conditions. So again, as you can appreciate, there's really strong cost control given the operating environment. But we are carrying a lot of staff, and we're doing it for a number of good reasons when we come to the outlook. Clearly, we expect to be marginally loss-making until travel reopens, but here's the key point. We continue to win business. We continue to move as many people as we can on to Lightning. Competitor closures are accelerating, which means our market share is increasing, which means we're really well positioned when things do turn to be a much bigger player in that market. And of course, as we said before, the cost controls are going to remain in place until these restrictions ease. So now if we go to Slide 14, if we can, technology and sustainability. And we might move straight to Slide 15, if we can. So I want to talk here how we're enhancing the client experience in a very complex environment. As we have said numerous times before, we think that CTM has a key competitive advantage having our own proprietary technology. And we want to remind you why. It's clear through COVID that we can adapt rapidly and deal with a changed environment for our customers much faster and relying on a number of third parties. This creates automation and material productivity gains through our workforce as well. So given its widely assumed that there may be inflation pressures and a difficulty in returning to a full pre-COVID site workforce, particularly towards the end of the full recovery, we know this competitive advantage will benefit CTM and its customers through the recovery cycle. But I want to share the 3 key focuses through calendar year '22. Firstly, it's about the global segment. We know the prize is huge. We've got scale on both sides of the Atlantic, but in the past, you'd only really use 3 global travel providers that have call centers. And here we are, a nimble company with expert service with our own technology that users like. So it's really about the global focus and that's making sure that we can have a portal, a global portal to improve visibility of staff from all over the world using us and, of course, the global deal of travel spend. These are the bare minimums. But as we go through this road show cycle, Kevin is with me as well, we're talking deeper about what we're doing in this area. But when you combine that with our high service culture, it creates a very powerful value proposition versus the call center model for global clients. We see this as a major segment that we want to build upon in the coming 12 months. Secondly, it's always about enhancing user experience. We're now using machine learning to improve client productivity and Lightning OBT to make things more logical and faster. But we're also focused on delivering the most relevant content to customers to reduce their time to book and enhance the user experience of using CTM. But thirdly and most importantly is personalization automation on the inside of the business. We've been toiling away at this for 18 months, and CTM Advisor is our proprietary automation tool. It's fantastic because it enables a deeper client understanding and a more effective servicing in a complex environment. And by that, it's really important to sort of share what we're doing with this. It really allows us to bring the online experience the customer has with the agent experience and bringing them closer together. And those benefits then make it just faster and a much more intuitive service experience whether you're on or offline. And considering all the changes and things that are happening, we think this is going to give us much of a major competitive advantage in service, but again, drive productivity and efficiency gains, which are going to be critical on a recovery phase. So now if we go on to the next slide, if we can, Slide 16. So we know right now that proprietary technology, we said before, is pretty important. And because we're building it ourselves, we are also leading the way in client sustainability and partnering with our clients to build things. But before I go into this slide, I want to share a few survey feedback that was recently done. In our most recent global business survey just 4 or 6 weeks ago, sustainability came in actually just low on the priorities. It came in fifth for travel programs in 2022. This came after traveler risk safety well-being, number one; service in a complex environment, number two; cost; and then fourth was travel compliance in a complex environment. Now all these priorities actually are areas where CTM is very strong. So then it's very pleasing to hear. That's what clients are focusing upon. However, sustainability was important to large professional service providers. And this is because they have a very low energy input in their business. However, sustainability is a very low relevance to most other industries where travel is frankly negligible to the carbon footprint. So that's important to note. But irrespective, we are leading the way in client solutions with the CTM tech suite and specifically, our CTM Climate+ program. CTM now has thousands of customers globally. We've come of the realization that the best way we can make a positive impact on the environment is through our technology in the hands of our clients, and that's what we're doing. As we've said in the past, our resources developed our technology with and for our clients, and our regional tech hub allow us to do this. So clients have been telling us that this is what they want CTM to do. They want us to support their goals as it relates to sustainability with flexible options and settings. We also want to be able to influence travel decisions at the time of booking in Lightning, not after the fact. So they can choose travel by aircraft and hotels that are more efficient and effective. They also want to be able to report on results at a granular level to drive change, but also ensure they can fulfill their third-party reporting obligations. And lastly, they want the choice to offset their carbon footprint to support an array of global sustainability projects. I'm pleased to say this can all be managed by the CTM tech suite. And as a result and proof of this, we recently won a [ BCBP ] Europe Travel Award in 2020 for [ sustainable ] suite of technology we've built. So now if we go on to Slide 17. And before I do that, I want to hand over to our CFO, Cale Bennett, to talk through a high-level financial summary. Over to you, Cale.

Thanks, Jamie. If we can turn to Slide 18, the group profit and loss. CTM has maintained monthly positive underlying EBITDA since we crossed that threshold in early 2021. As Jamie referred to earlier, the fourth quarter '21 momentum, particularly in North America, gave us cause for optimism in early first half '22. However, COVID variants in the form of Delta and then Omicron served to make the half a challenging one. Relative to the previous corresponding period, revenue and other income rose 120% to $163 million and underlying EBITDA recovered from a negative $15.2 million to a positive $18.2 million. I note that we only own T&T for 2 months of the first half of '21 and inherited a loss-making position in our business. We've outlined our D&A expectations for FY '22, the impact of owning T&T and also the lower Australian dollar are expected to see D&A up slightly in FY '22 when compared to FY '21. Should the Hello transaction complete as expected, D&A is expected to increase marginally beyond the numbers noted. So moving on to Slide 19. Nonrecurring costs in first half '22 relate primarily to the Helloworld Corporate acquisition and the ongoing integration of T&T. We expect the Helloworld Corporate acquisition to complete at the end of 3Q '22, with acquisition costs in line with the $5 million disclosed at the time of the transaction. The regulatory approval process is tracking to expectations. Most of the T&T integration costs are now complete. The financial and functional integration will finish at 30 June '22 when it is expected that the client-facing integration will be complete. Some back-office work will continue, but that's business as usual. If we can just move on to Slide 20, the balance sheet. CTM maintains a very strong balance sheet. We have not utilized our committed funding facility since June 2020, and the company maintained significant cash holdings of $193.2 million, including $75 million raised in the institutional placement conducted prior to Christmas. A further $25 million was raised in January by way of an SPP, which together will satisfy the cash component of the Helloworld Corporate acquisition in full. The group's receivables and payables are driven by client activity. The quiet period in December due to both seasonal impacts and Omicron variant have seen receivables fall from 30 June 2021. Payables are higher than they would usually have been at period end by approximately $20 million due to a client project reconciliation wash-up that was resolved in the first few days of January. This also impacted the cash holdings and cash flow. During the half, the team have achieved IATA's GOGlobal accreditation, which views CTM's credit on a global basis when determining the need for bank guarantees. Due to the financial strength of the global organization, our guarantees have reduced further and are never expected to return to historic levels, even with the much larger business at full recovery. If you can just move on to Slide 21, the cash flow. Working capital was impacted positively by the collection of outstanding receivables due to the strong activity in fourth quarter '21. The impact of the $20 million cash held on the balance sheet due to the client wash-up noted on the previous slide, should be taken into account when calculating our cash conversion for the half. CTM's cash conversion fundamentals have not changed from pre-COVID. At full recovery, we will continue to be strongly cash generative with airline payment sweep timing impacting at the end of each half. Investment in software will stay relatively stable in second half '22 with CapEx up slightly due to the impact of a $2.2 million hardware refresh in the North American business that will lead to improved agent productivity. If we can move on to Slide 23. I'm now going to hand back to Jamie to talk to the FY '22 outlook.

Thank you, Cale. Okay. So here we are. Basically, given the uncertainty of strains, CTM is not able to offer FY '22 profit guidance, but we do outline our key expectations. Firstly, we expect COVID to move from pandemic to endemic. This is already the rhetoric in U.K. and the U.S. And [ look whilst ] all of our investors are sitting on this call in Australia or New Zealand, it might be hard to see this. But the mood in both the U.S. and U.K. is very, very different. People are simply getting on with things at a rapid rate. We expect ANZ to follow suit, not in months, but in weeks. I've now flown on 24 of which are international, and I can tell you, airports over here are busy and things seem pretty normal other than flying with a mask. So that's the first point. And let me tell you something else. Travel has been very valuable to our immediate success at CTM as well. We've won material clients because of our willingness to get in a plane. We've resolved many supply issues that were simply not possible to resolve remotely. And we're getting much better results in cohesion, teamwork, strategy and problem solving by getting our teams together. In fact, in America, we've sold more things in 4 days getting together with the wider team than we could have hoped to do in 4 months on Zoom. So as a result, we expect the same response from our clients and the corresponding buildup of EBITDA through Feb and March. Then it's really about our third point. It's really about the fourth quarter. We expect a material step up as governments around the world relax impediments of testing and the momentum we are currently experiencing continues to build. As I said before, it's pleasing to see France follow the U.K.'s lead earlier this week with 0 testing requirements to travel into and out of France. We expect the U.S. to follow suit shortly, hopefully, by the end of February. Whenever we see these impediments relax, we see a swift recovery in corporate activity. We've seen it through this cycle in Australia, New Zealand and China, and we expect to see it again. I also want to remind you that we expect a stronger second half seasonal profit skew. Historically, the second half represents 67% of our full year profits, but we expect it to be higher this year as things loosen up. We also want to touch on a few medium challenges because as you can see through this presentation, we've got a lot of work. As we've referred to many times through this presentation, we are really laser-sharp focused on measures to improve productivity of staff to limit the impact of any inflation and potential resource shortages as we get closer and closer to full recovery. We also expect to rebuild staff numbers to activity levels, but with some contingency in staff to ensure that we get the balance right between servicing and costs when the recovery is not exactly linear. And we think this will be a competitive advantage and help us retain clients as we move forward. And lastly, it should now be very clear that the COVID cycle acquisitions are creating a much larger business at CTM, in fact, 77% larger on a full recovery. We're now targeting EBITDA of $265 million when it does recover. Further, we don't think the M&A cycle is over. We continue to assess acquisition opportunities that support global strategy to create more levels of organic growth in the long term for this company. Now if we go to the last slide, Slide 24, where we demonstrate what that larger business will look like. So as you can see on this slide, what the blue bar chart shows you first in pro forma FY '19 revenue, the blue chart there -- blue bar shows the $459 million, which the company did pre-COVID. Now with T&T and in Helloworld, you can see how we're going to get that to $810 million when we combine on a pro forma basis. The same goes for the right-hand side with EBITDA. Pre-COVID, we were doing $150 million underlying EBITDA. With T&T and Helloworld, this is on a pro forma basis, we're going to do $265 million, okay? So this is the key point. North America and Europe combined revenues are already exceeding CTM pre-COVID levels. This is terribly reinforcing to us, but also reinforcing that the recovery trajectory targets we're setting up are really doable. And I think that's a key point. The other point to make is we have won significant market shares in CY '19, and we expect this to continue and the proof to you is the recovery rates in all the regions we're working in. So for us, the $265 million in terms of the target, it's not if, but it's when. I think that's a key point. So again, thank you for listening. Now I'll hand back to the moderator for -- to take any questions, if I can.

[Operator Instructions] Your first question comes from Sam Seow and Citi.

Just on the cost base, it looks like it increased circa $27 million a month. Just wanted to get a feel of how much capacity, I guess, as a percentage of FY '19, that can service before you start investing back into the business?

Yes, I'll take that one. We like to think $2 million a month, a lot of staff, right, Sam. I think though what we're going to do, though, we've got to -- now I think the challenge in the first half really was I don't think anyone -- we're all blindsided by Delta and Omicron. Now if it all pans out and as everyone is saying to us, that is now at an endemic state, we might get a lot more assurety. We'll just start employing as we go. But in the interim, too, we get to assure you want to employ ahead because what we don't want to do is leave our customers short. But the trade-off particularly North America, we've got all these productivity measures really swiftly underway, particularly once we've got all clients in one system by June. We think by the first quarter of FY '23, we're going to be very, very well advanced, which will give us lot of capacity. Secondly, in markets like North -- like Europe and ANZ, we've got such high uptake on our booking tool. We just don't need the people that we would need, say, in North America to be successful. So I hope that answers your question.

Yes. Yes. I mean would you hazard a guess at the full monthly run rate per month, so we can just kind of take a guess in between of the range?

I don't like to guess, but, look, I have to come back to you. I mean, look, like I said, I hope it's very clear things are ratcheting so rapidly in our largest 2 regions that we -- that things are changing weekly at the moment. I mean when you start double digiting week on week on week, that's quite incredible for a business that's taken 26 years to get to this size. To start ratcheting at that rate, you can imagine that, that cost staying to come in already. But again, as we've said before, we're very comfortable that we're going to get to $265 million on a recovery of revenue. Now whether we get that through growth and a bit of structural fall, or it just comes back, we don't know. But as I said before, it's not when -- I mean certainly it's certainly going to happen, I guess, it's just the time we don't know.

The next question comes from Wei-Weng Chen and RBC Capital Markets.

Just first a couple of questions from me. So just the first one was wondering if you could maybe let us know what happened in December. You guys provided, I guess, in your trading update biggest in November. I guess now with the full year results -- or full half results, so everything that backs off, I guess, what December was. It looks like you added about just under $30 million of revenue that only grew EBITDA by about $200,000. Just wondering, was there a sharp uplift in cost there in December? Or what exactly happened?

I couldn't quite hear you. I think, obviously, December was pretty bad with Omicron, but I think it's really more about moving forward now. We've talked about how the incremental revenue will drop to the bottom line. You're going to get a short-term hit because we've got capacity. We're looking forward now, rather than looking back. But we know that incremental dollar to the bottom line will be a lot higher than our terminal revenue EBITDA margins, and that's what we're trying to manage as we go through the year. And like I said, if it's not obvious, things are coming back pretty quickly in the Northern Hemisphere in our 2 biggest markets, and we're just trying to manage that. I'm sorry if I haven't answered your question, it was very difficult to hear from over here, something wasn't quite right with the line.

Sorry, I was just asking about the December results. It seems like you added about $30 million of revenue, but only about $200,000 of EBITDA. Can you hear a bit better?

Sorry, Wei-Weng, I'll just jump in there if Jamie can't hear you so well. There wasn't necessarily an uptick in cost. It was really a -- the impact, as Jamie mentioned, of Omicron and just bearing in mind seasonal impact of Christmas as well.

Okay. All right. And then my next question was just on the Europe result sort of circa 48% EBITDA margin. Is this a new level that we should be thinking about in terms of sustainable margin in this division? Or are there other factors which are kind of moving that number around?

I'll take this one, Cale. The answer is we don't know, but we feel pretty good because in that number, there was no domestic, very little domestic. You remember, the whole half of the U.K. was pretty much shut down. And I think the takeaway from the U.K. is that we know we've got very, very high online. And so as that comes back, it's incrementally pretty effective for us. So we'll have to wait and see. But yes, we have to wait and see, but we're getting quite confident.

The next question comes from John O'Shea and Ord Minnett.

Yes. Just on the M&A front, I noted your comments there. Can you give us some sort of sense as to how people were kind of viewing the current dynamics in that market? Obviously, clearly, there's -- the sector has been savagely impacted. Obviously, you've got a couple of players that -- there's only really a couple of players that are actually in a position to actually do anything regarding M&A, frankly. And a number of people have sort of been hanging on, hanging on, hanging on. Do you feel that -- what are you seeing there? Are you seeing people sort of multiples coming down? Are you seeing people that are keen to get out? Or are you seeing people saying, okay, well, recovery is around the corner, multiples are kind of what they were before? Or can you give us some sort of sense as to what the market looks like from a kind of a buyer's perspective from your end?

Yes. Yes, sure. I mean, firstly, from a seller's perspective, we'll wait to see our peers, but I can tell you, I think we've bucked the trend. I would imagine this half was terrible and people would have gone backwards from the last half, but wait and see because of the lockdowns. And -- but don't forget, what we're seeing around the world, you're seeing is a terrible -- again, we're just the exception to the rule. You had no government support, a little government support, with probably worse conditions for travel. And when you put that together, that's put a lot of pressure on businesses, particularly in the Asia Pac region. When it comes to North America and Europe, the same thing. Whilst things are starting to turn, I mean I think the U.K. has been very tough. We are again an outlier, but even in North America, I think because they never got government support, while things are coming back, people look at their balance sheets and a bit enormous debt, and I don't know how they're going to trade out of that. So I think when I look at all, what we're seeing, we're seeing a greater demand to sell. And as you correctly pointed, there's not many people that can buy. So the supply-demand curve is starting to favor the buyer.

Yes. That's a good summary. And would it be fair to say in that environment that the margins these people are starting to ask for is obviously coming down as they get more desperate? Is that over dramatizing things? Or do you see that from what's coming across your desk?

I think we're just looking at things differently. I mean it's a bit hard now to go and look at pre-COVID, isn't it? That seems like light years away. It's more -- I think that we're in a really good position now. We've got -- I mean, the good thing for us, really pleasing that most of our -- if you think about what we've done in North America in what, 21 months, it's quite incredible. So I think we're in good position. Europe is obviously in a good position as well. Clearly, in ANZ, we've got a lot of work to do. I'm really looking forward to hopefully getting the -- as I said, the approval so we can get cracking with that. But I think what we're learning through this cycle is that we're getting better and better at acquisitions. Clearly, just time on the ground doing them. We're -- now that we're bigger, they're more of a tuck-in than ever before. And we're now -- as we're getting a lot bigger, we've got, I guess, a very strong recipe on what to do. And we've got a great team in this business that does them all. So what that tends to say is that if we're really looking now, I think the synergies we can extract are getting more material than ever before. If you remember in the old days we're building this business, we buy a business, and in fact, we have to throw more cost into it to make it scalable. So essentially, there was a sort of a, I guess, an anti-synergy. Now the synergies are becoming a lot more immediate, a lot more obvious and they'll extract quicker. So that's -- that we take into account when we're looking at value. But again, I think it's fair to say everything we're going to do is always going to be accretive. Thankfully, I think we've got a pretty good track record, over 12 years or whatever it is since we've listed of executing pretty well, and we're clearly getting better at it. We've got dedicated resources that understand how to do it better.

The next question comes from James Bales and Morgan Stanley.

So I've got two questions, one on revenue and one on margins. So firstly, on revenue, how large an impact do you see the customer wins being versus the $810 million pro forma? And are those wins incremental?

Yes. I think -- I don't think I quite heard your first question -- I think I did. Firstly, margins are moving around a bit, right? This is a revenue yield. But now things are starting to get a bit steadier. But there is no doubt, places like North America, we're getting buying power benefits that -- and we also, as we said, we're finding the productivity gains in one system. Now we're actually doing it. We're halfway home to a full recovery now, it's actually the results. Things are getting -- things are actually better than we predicted, and that's a good thing, but there's still a way to go. Your second question, James, sorry, on EBITDA margins. So can you just repeat the second part of your question?