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

Good day, and welcome to the Corporate Travel Management's First Half Year Results Conference Call. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Jamie Pherous, Founder and Managing Director, to begin the conference. Jamie, over to you. And Jamie, you may begin.

Good morning, everyone. Sorry about that. My name is Jamie Pherous. I'm Founder and CEO of CTM. I'm also joined this morning by Cale Bennett, our CFO. We're both pleased to present our 1H23 results. Look, this call should take about 30 minutes with a bit of time for Q&A after the presentation. And also my apologies for the short time between the results release and this call. I'm in Omaha in the U.S. at the moment, so we're having the call quite early Australian time to kind of -- to accommodate the late afternoon here. So thanks for your patience. But I think if we can go straight to Slide 5, please, the 1H23 Group financial highlights. I need to point out that this result is a record 1H TTV and revenue for the company, higher than FY '19 by quite a margin. TTV of approximately $4.2 billion, revenue of approximately $291.2 million, is a record for CTM's first half. More importantly, for the market, this revenue is exactly where we thought we'd land for 1H and puts us on track for FY '23 and FY '24 as we'll talk later through this presentation. This is really a testament to our strategy through COVID, our financial strength as you'll see through this presentation, the strong client wins that set up a positive momentum that we're seeing right now in 2H23. Secondly, I just want to point out this is a real clean set of results. The underlying is minimal. It's just some Helloworld acquisition costs, and that's important because at the end of the day, it's not about EBITDA, it's about making money. And whilst EBITDA for the half was $51.3 million, the business is generating fast-growing PBT at $30.4 million and NPAT -- our NPAT of $22.1 million, again, reinforcing CTM's recovery and return to business as usual. We are also paying tax, a sign of real underlying profit generation. Thirdly, it's important to note that during the half, we were clearly in rebuild mode and good staff was scarce. And as a result, EBITDA included an $8.4 million expense for investing in people ahead of the recovery to ensure we had the staff to service customers through this recovery. Now as you'll see later, we expect to leverage this capacity imminently in the second half and why the margins will be going up. Next is the financial side of things. From a financial point of view, we remain in an enviable position clearly. We have cash at balance sheet, that have over $110 million and continue to have no debt. And next, we're declaring an interim dividend of $0.06 a share. This is following on from our $0.05 per share final FY '22 dividend as the recovery for CTM continues, and we expect dividends to grow in line with NPAT and PBT growth in the second half. So now as we look forward, we expect a record 2H EBITDA result at a higher margin. This is largely due to recovery momentum, significant new client wins transacting, which we'll touch on, and operational improvements via the scale we have created through COVID. So we're now starting to get those results. And the outcome is we now expect the second half to be beyond a normal second half skew, which we'll explain to you through the presentation. Also, we're now in a position to provide guidance for FY '23. Underlying EBITDA of $160 million to $180 million and underlying PBTA of $120 million to $140 million. Both these outcomes will be a record result for CTM, and it's nice to share that CTM IDA is low and it's approximately $40 million per annum. So you can see moving forward how we're looking. Now if we can move on to Slide 6, our recovery trajectory. Yes. This slide charts our path graphically through to FY '24. And it's just an update from our slide pack in the last financial year. And if you look at this slide, as you can see on the left-hand side, FY '19 is pre-COVID, but also our record year. So what we always wanted to do, as we've said, is it's when we cut through those record times. So when you chart the green line, which is revenue FY '19 revenue and the blue line, which is the FY '19 EBITDA level, you can see the growth required to achieve FY '24's forecast is much lower than what we need for the growth in FY '23. Essentially, as you can see, the graph is flattening out in FY '24, more to a steady state growth position to CTM. That's important to note. And as we go through this slide pack, we'll talk to you a lot about why we feel so confident in the next 2 years. Basically, because of the momentum we've got, significant known client wins and the new trading that shows up our confidence for both years. So if you can now go to Slide 7, our people. So whilst much of the recovery is now behind us, it required a really large upfront investment, attracting, retaining and developing our team through what was a very complicated recovery cycle for the industry, where, as we've said before, transactions took nearly double the amount of time compared to pre-COVID as the supply chain was rebuilding. There's 4 key points I want to make. Firstly, it's about our operational executive team whose navigated this recovery. All that remained together through not only the downsize, but the recovery. So between myself, our COO and all our regional CEOs, all have over 30 years average experience in growth and execution. This has been critical to getting us to this point and beyond as they hold the IP and DNA of CTM. Secondly, we have rebuilt our workforce capacity ahead of the recovery. We needed to do that to support additional service demand through what we expected would be a rapid recovery. Pleasingly, we are now back over 3,000 staff with expectations of very negligible employment growth from here on, even in the second half, noting that we have that $8.4 million of unused staff capacity costs expensed in the first half. So CTM really is back to BAU, maybe a little bit more than you think. Thirdly, because we move to profitability before our peers, we were the first were to reinstate full salaries, bonuses and long-term share schemes, all of course, are being expensed in the P&L and are not viewed as nonrecurring costs because we see it as a future investment in the business. We've also had an array of new benefits to attract an align staff to customer success. And lastly, we have invested more heavily in bringing our clients and people together to reconnect, develop and recognize our outperformance. In fact, we've just completed all of our 4 regional awards and conference programs around the world with wonderful feedback from not only our staff, but our suppliers. This investment is higher than it's ever been and the cost forms, again, part of the 1H results and guidance. And lastly, internal feedback suggests that CTM has never been a better place to work. So we think it puts us in really good stead to serve our customers in the second half and beyond. Now on to Slide 8, performance by region. I think we can go straight to Slide 9, if we can. So we're waiting for Slide 9 to come up. This is a summary of the group result already mentioned back on Slide 5. So I won't rehash the details, but a reminder, the result includes a one-off $8.4 million investment for excess staff capacity. And while this expense forms part of EBITDA that you see, we expect to leverage this capacity imminently in the areas where it exists. I also want to point out that we're still investing. Group overhead was up around 30% to $9.2 million to ensure we have the right skill set to best support what will be a 75% larger business upon full recovery versus FY '19. But it's really about the outlook, and that's what we're going to touch upon as we go around the grounds. We are taking very strong momentum into 2H due to a combination of activity recovery and significant known client wins transacting. I want to give you 2 examples of this momentum, which we've shared on this slide pack. But firstly, January was North America's highest booking volume since FY '19. And secondly, the European region had a record profit of all-time in the month of January. Now this is good news because January is one of our weakest months of the second half for both regions. So as a result, we expect a strong second half underlying EBITDA beyond our typical 2H skew and at a higher margin as represented by our guidance range. So if we go on to Slide 10, if you go around the ground. But before I go into the ground, I want to talk about our performance by region compared to a very recent Global Business Travel Association report that just came out of survey, as you can see here. So again, this survey was done mid-January. And what you're seeing is our 3 key regions, Europe, North America and APAC, of recovery. And what we can do is compare in the green circle on the right-hand side, how we're going to the market. So as you can see, APAC bookings per GBTA are roughly back at 65% of pre-COVID. By the way, I'm talking bookings not TTV. TTV is not a really accurate position to market because we think air prices are inflated. It's really about the revenue that can generate to make profits that we think is more valuable coming out of this cycle. So going back when you look at that, the market's APAC bookings are roughly at 65% recovery. CTM ANZ is at 78%. North American market is about 60% recovered, CTM is at 73% in bookings and revenue. And Europe is back at about 61%, CTMA is at 146%. So this is the first reason why we are now confident we will recover in FY '24, much earlier than the industry because, clearly, we have won significant market share versus the industry, and we are seeing that outcome in revenue growth. Further, we have large known and new wins trading in the second half. So things are looking well for CTM. The second point of this survey, which is really valid, is that 77% of the clients surveyed expect to take more business trips than last year. This corroborates the momentum we currently experienced in January so far. Now let's go around the grounds, we'll go to Slide 11, North America, if we can. So North America, this is still a record TTV and revenue for the region versus FY '19. TTV of $1.43 billion, revenue of $146 million with a $16.6 million EBITDA. For the sake of repeating myself, the U.S. went through a well-publicized story of recovery back in May, June of '22, that continued throughout the half. As you know, this result in the U.S. holding $6.4 million of staff capacity costs for a recovery that, quite frankly, never materialized in the first half. So given the scarcity of resources, 6 months ago, we had to take a long-term view and deliberately carried this cost in the first half. This is a difference for us between a decent first half and a great first half actually. But it's really on to the outlook that matters. The corporate recovery has resumed with January booking volumes at the highest level since COVID, a positive sign. We are winning lots of new business with a big chunk starting in January, and it's pleasing to see just under 2/3 of all new clients choosing our Lightning booking tool. As a result of the excess staff we're carrying and integration completion, we're now highly leveraged to a small incremental revenue gain, which we took on the next slide. This is why we expect a stronger than normal second half skew in the region. So if we can go to Slide 12 now. And this slide shows the leverage to a small revenue recovery and the position we're in at the moment. So let me explain this slide. The first column represents the first half '23 normalized, the excess staff costs we carried for recovery that didn't occur. So at that current run rate of 1H, it's 73% revenue recovery, we expect to make around $4 million a month on a go-forward basis. But if you look at the second column, as you can see, for a small increase to 80% revenue recovery, revenue grows by $2.7 million a month, but costs grow only by $0.7 million a month. This is because as we grow and leverage the operational capacity, we expect support costs to reduce over time now that, that integration is complete. So then at $0.08 recovery, we expect to make $6 million a month. As we've said before, 80% is the magic recovery number to leverage the scale, productivity and operational improvements from the integration we've done. So the last column shows 100% revenue recovery, we expect to make $10 million a month. And again, why is that growing so quickly? It's because the fixed cost or the support cost they're done. The only costs we're really adding beyond 80% is incremental travel agency to support new transactions. But as I said, below importantly, we expect to surpass 80% revenue recovery during the second half in North America. Let's go on to Slide 13, Europe. This European result is an outstanding achievement. I'll say that straight up. TTV of $924 million, revenue over $45 million, EBITDA of $17 million, all exceeded FY '19. Just a reminder that the region is cycling off a record 1H'22 due to the very large one-off COVID-related projects completed last year that we've previously flagged. But importantly, TTV has nearly doubled since FY '19. We expect the region to be approximately $2 billion plus at the end of the financial year. This scale, combined with new revenue streams as a result of project expertise we've developed through COVID, puts us in very good stead and has expanded our addressable market in this region. So as a result, our expectation for the region is really considerable. January was a regional record profit and due to significant known client wins starting in the half, we expect a very strong 2H and 1H growth well beyond normal seasonal skews. So to put this into perspective, the reason is expected to be our largest profit contributor to the half by quite a margin. Now on to Slide 14, ANZ. ANZ also recorded really good TTV over $1.3 billion in the half and record revenue of over $80 million in the half, delivering a $23.5 million EBITDA result. Importantly, TTV has recovered beyond FY '19 levels, and this includes Hello corporate in the baseline, demonstrating the market share gains that we've made over the last few years, which we have always said all along. This region saw the most rapid recovery surge of all regions in the half, with TTV off a big base up over 450% on last year. Truly surprising all of us at CTM. So as a result, we had to make significant quick investments early in the half in both our graduate program and supporting a ramp-up in resources to support our largest account in the region, the whole of Australian government. Essentially, this investment cost us $2 million without any return in the half, but is clearly paying dividends from late in the half with improved servicing across the board. The ANZ outlook is also positive like all the regions. China opening up will be welcome news to Australia and New Zealand corporate travelers because we expect the supply to boost scheduling, competition, and as a result of the competition, reduced international airfare pricing, which we expect will start an outbound in national recovery for the region. It will be good for our supplier revenues for the region as well. Importantly, we expect we'll have the staff to manage this expected uplift and combined with Hello synergies, the client wins transacting and productivity gains expected from a more normalized international market, we expect again a significantly stronger second half. On to Slide 15, Asia. I'm pleased to say Asia is also now making money. As you may know, we are highly exposed to Hong Kong and China. Hong Kong opened late in the quarter, and as a result, the region generated approximately $20 million revenue off of $513 million TTV and returned a profit of $3.4 million for the half. It's nice to share that the momentum we were building because over half of this profit came in the last 2 months of the half, showing the impact of key markets opening for travel. And our outlook is rosy. China was the last piece of the puzzle for CTM to make a full recovery in FY '24, and unexpectedly, it opened earlier than we thought. So when we take into account China's opening, Asia's continuous market share wins, competitors that either left the market or downsized to unsustainable levels, we expect a step change in performance in the second half and into '24. So as you can see around all regions, everything is coming good at the right time for CTM. Now I'm going to hand over to Cale Bennett our CFO, to talk through the group's financial summary slides. Over to you, Cale.

Thank you, Jamie. If we can turn to Slide 17, the group profit and loss. CTM has delivered another strong half on revenue and other income of $291.9 million in first half '23, an increase of 79% on the PCP. We earned underlying EBITDA of $51.3 million, up 182% and an underlying net profit before tax of $30.4 million. Our statutory net profit after tax of $21.9 million continued the momentum from FY '22. As Jamie mentioned earlier, this was a clean set of results with just $1.1 million of nonrecurring costs in total, driven by integration costs for Helloworld Corporate. We've outlined our D&A expectations for FY '23. The impact of the Hello corporate acquisition, a lower Australian dollar and the timing of project completion and movement out of WIP, pushed our D&A up in the half to $27.2 million or $19.9 million, excluding acquisition amortization. A similar amount is expected in second half. This will bring our total D&A towards $55 million for FY '23 or $40 million, including acquisition amortization, which is a noncash amount. Our effective tax rate for the half is 28.6%. Expectations for our effective tax rate in future periods should sail around 27%. On to Slide 18 and the balance sheet. CTM continues to maintain a very strong balance sheet. We have not utilized our committed funding facility since June 2020, and the company maintains significant cash holdings of $110.3 million, including $30.4 million of client cash. Our reported cash was affected in the half by balance date timing and working capital rewind in ANZ in Europe, which are now -- which are both now above 2019 levels of activity. Airline suite payment timing was unfavorable for us at 31st of December '22. This changes from period to period. June '23 is more favorable -- is a more favorable timing period as was last 30 June, which we flagged at the time. If we can just move on to Slide 19, the cash flow. Consistent with historic experience, our operating cash flow conversion remains strong. Management remains focused on maintaining discipline around cash preservation, noting the working capital requirements of recovery are largely complete in ANZ in Europe, 2 of our hungriest working capital regions. Our corporate cash balance remains robust with business profitability contributing cash to the business. Our investment in software has stepped up as we invest in the ANZ region for integration of Helloworld Corporate and in North America as they build out global functionality to our tech suite and work to improve productivity within that business. The lower Aussie dollar impacted the reported number during the half also. We do expect the CapEx program to revert towards historic averages in FY '24 and beyond as these projects are delivered. If we just move to Slide 20, I'll hand back to Jamie to talk to the outlook.

Thanks, Cale. And if we can move certainly to Slide 21, if we can. We look to FY '23 and FY '24 guidance. On to the next slide, if we can, to 21. So firstly, FY '23 guidance. As we've said before, underlying EBITDA range of $160 million to $180 million, but importantly, we're giving full year underlying PBTA guidance of $120 million to $140 million, just again to show people that we are making real money. And again, I want to remind you, both would be record results for CTM. Secondly, we expect strong momentum from the -- into 2H 2023 and the result is expected to set up a strong FY '24 with that second half skew. Third, we expect significantly higher revenue EBITDA margins in 2H '23 due to significant client wins transacting the supply chain stability, increasing productivity and supplier revenues accordingly. So if I look at things, I'll just -- again, just summarize the group activity update. Firstly, whilst we continue to monitor recession, we've been doing this all the way back since May or June. We're monitoring those impacts closely. Demand still remains strong. We don't see any signs of macroeconomic impact on recovery at this point. Secondly, the good news is the supply chain is stabilizing, assisting in increased productivity because booking times are lower, so we get better returns for upper time, also helping our supplier revenue streams and margins. And thirdly, our client wins are great. The clients in pipelines are all-time highs, and we expect 97%-plus client retention this year like we have every year since 2000. Then we go -- just to go around the ground and just some just to recap where we're at, as we stated earlier. North America, January booking volumes were a record since COVID, and we expect to surpass that 80% revenue recovery at some point during 2H '23 and at that point, we'll have strong ongoing profit contributions from this region. Europe, again, we set a significant client wins are transacting, expect to provide a company leading 2H result by a big margin compared to other regions. We also said January was a record profit despite January being a seasonally weak month. ANZ post-vacation period activity at record levels, again. International supply, operational improvements and synergies to provide a stronger 2H '23. And we've talked about Asia. Asia with, as we said, we experienced an immediate activity increase upon China opening on the eighth of January with demand from our corporate base outstripping supply. So on to Slide 22 to FY '24 trajectory, if we can. So again, this is more of a recap of what we said before. This really -- I just want to share why we're confident that we're on track for both FY '23 and FY '24. And it's really those 4 points. Firstly, the first point, we've demonstrated how we are tracking well ahead of the corporate industry referring to the GBTA January survey back on Slide 10, and that's particularly Europe ANZ and North America. This is where we expect to be at full recovery by FY '24. We're just clearly recovering faster than market, but we've said that all along. Secondly, it's a significant known wins transacting in 2H 23. We shared with you the large client wins transacting and the knowing client wins that will keep this momentum building through 2H 23 and into '24. We shared the early results of the wins by the strong January outcomes in North America and also in Europe. And clearly, a large 2H bodes very well for FY '24. Thirdly, from a profit point of view, we expect significant incremental margin through scale, the integration completion in Helloworld and also in North America and the flowing operational improvements in productivity we'll get from that, and that plays out well. And lastly, China is now open. This is the last piece in the puzzle for a full recovery in FY '24 for CTM. And we think that region will go well and into '24 now. So on to our last slide, Slide 23 is really about our long-term strategy and execution. It's a good time to remind the market. It's been very shortsighted with all the things we've had to encounter in the last few years, just about the key investment piece of this business. Firstly, we have a track record of strong performance and execution. I want to remind you that we've been successfully operating for nearly 29 years, and CTM has delivered TTV, EBITDA and dividend growth in 26 of those 29 years in all economic conditions. When I say that, there's a lot of recessions in that and other little economic factors that we couldn't control. The only exceptions that we didn't grow was COVID and September 11. So we've got a very, very good track record. Secondly, we're in an industry that has huge untapped growth opportunity and now we're finally positioned to seize that opportunity. As we said before, the corporate travel segment is a huge and fragmented sector, estimated at USD 1.5 trillion by FY '25. Yet we are currently the fourth largest corporate travel brand in the world, yet manage under 1% of that global market. So there's a big opportunity there, but furthermore, we also expect further industry consolidation after COVID. And CTM clearly has the expertise and the balance sheet to be part of any industry consolidation. The third point is our value proposition. It's compelling and sustainable to the corporate market. We said this before, we believe no one can do all 3 that you need, which is highly personalized service, with technology and deliver return on investment through good data and reporting to our customers. We believe this is the only way to be long-term sustainable in this industry. And I think it's fair to say that we've been able to execute to this strategy at scale in every region we operate. Fourth is the technology competitive advantage that we have. As you all know, we build our own client-facing technology in collaboration with our clients. There has been a large investment that's delivered strong market returns and margins in ANZ in Europe, with further margin opportunity in the U.S. and Asia, once both these regions reach 80% revenue recovery, and that's what we're looking forward to. And lastly, it's the investment pieces of CTM. Beyond '24, we've said we're targeting double-digit compound organic revenue growth and of which half of that incremental revenue will convert to EBITDA. So that means we get double-digit top line growth, we expect more than that at the EBITDA line. And of course, our FY '24 growth expectations are already outlaid in this paper, but will be much higher due to the recovery phase that we're still going through. Secondly, to do that sort of growth, but also generate free cash flow and not require debt to generate growth is unique. And we also have expectations that 50% to 60% of NPAT will be paid out in dividends to our shareholders. And lastly, in the environment we live in, we're really pleased to say that CTM is already carbon neutral for internal travel, and we're targeting net 0, the scope to greenhouse gas emissions by FY '25. And that's something we're also very proud of, as is our staff. So with that, I'm going to hand back over to the moderator for any questions.

[Operator Instructions] Your first question will come from the line of Hailey Kim with JPMorgan.

Just my first one is on the incremental EBITDA margin. I think the incremental revenue to EBITDA conversion in the half was well below the 50% you're targeting previously. I understand this is partly driven by excess staff and integration cost, but can you just provide some more color on this, whether there was anything else that contributed to this? And also what this means for your full recovery EBITDA guidance of $265 million?

Yes. Thanks, Hailey. It's mostly the staff and other investments we made that we couldn't get a return on. And as you could appreciate, at the time staff was scarce, and we were going to hold on to them. We're certainly not going to let them go in that market, knowing and expecting a full recovery. But I think the takeaway is FY '24, we're very confident at this stage of -- because of the other things we're seeing, it's the growth, the scale, the supplier payments are coming back, the productivity from -- I mean don't forget we've had a lot of integration as well through this that's coming through. So we expect better productivity not only from the integration, but also as travel is getting more stable, the time to make a booking is becoming less. So we've got all these things that we're seeing coming our way.

Okay. And I guess the follow-on is the logistics-related revenue in Europe that you've highlighted. Can you just elaborate on this a little bit more and what that actually relates to? And how the margins for this revenue stream compared to the underlying EU business?

It's more related to things outside of travel logistics and the revenue streams are pretty good and better than travel. So we'll leave it at that for now. But it just sets us up really well in 2 ways. Obviously, it's a big unaddressable market that no one's really attacked that we've got a great opportunity to go after. It's working well for us, and it's just going to set Europe to be a much bigger addressable market for us to go after than we probably would have thought pre-COVID. So that's probably an advantage of COVID. I think through COVID, we've proved some expertise for some pretty unique challenges achieved scale that we managed well, and that's playing out for us. We flagged it earlier, but now it's really starting to play out as normal business is getting back to business that have that same demand and need. I'll leave it at that.

Okay. Quite clear. And then just my last question is on the client wins. I understand that you don't provide your client win values, but can you just give some sense around your client win momentum on an annualized spend basis potentially, and what this sort of looks like compared to your prior halves and quarters? I guess what I'm trying to understand is you benefited from the elevated level of activities post COVID in this sector. So I'm just really keen to understand how much of this has not been played out and whether we're sort of back in the more normalized environment in terms of client wins and market share gain momentum?

Look, as you know, we don't mention the numbers because we're going to have the 100% confidence right now on what a customer says that we wanted that actually happens. But I think for us to give guidance, we don't take that lightly. We have a good track record. And that guidance in that second half skew tells you 2 things. just how much is transacting. But as I've said over and over in this presentation, we also know known wins that are starting -- either started in January were starting very soon that are quite significant. So when we did the math on that, we feel pretty comfortable about FY '23. And the sort of second half, we're looking at doing -- sets us up very nicely for FY '24, which would make '24 a very normal type of year for us. Clearly, we're a much bigger business, so we expect a lot more growth. And we've outlined that over the long term, we want to get double-digit top and that's going to go higher, but at the moment with we're clearly winning more than that on that aspiration.

Your next question will come from the line of Darshana Nair with Goldman Sachs.

Quick question on North America recovery. So can you give us a bit of sense on what you're seeing on the ground in terms of color with how different activity was in January versus the past half? And also in terms of the new client sign ons in the region, should we think about the margin profile as being similar to normalized levels? Or is there anything different about it?

Yes, 2 things. Just the first on activity. It's funny. I'm in North America with Kevin, our CEO, and Kevin has been with me traveling around the world, and he also said the same thing, you see everywhere the world, travel is pretty easy, but it's still pretty frustrating here. It's getting better. Obviously, there's been some interesting things that have happened over here with Southwest going down, pretty bad weather events. But we speak to the airlines, and the airlines are really conscious of getting that ease of travel back and they're working really hard at that. Your second question in terms of wins and margins. We're winning stuff at the same old margins. I think what we're starting to see, and you'll see in the second half as well, is that if you go back to when we made this acquisition, we said we'd get clearly synergies at the bottom line through just the elimination of duplication and one system and the productivity that will flow from that. We're also seeing nice gains in the top line through [indiscernible] buying power, which we hope to get that we're really starting to see as things are normalizing. So it just bodes well. The challenge for us is, again, we're carrying extra staff for recovery that didn't happen in the last half, but if we can leverage those -- that opportunity this half, we're going to see a step-up change in profit with a very small incremental gain in revenue, and that's what we're looking forward to.

Just a second one on the operating cash flow. I noted that there was a weakness in terms of the timing issue on payments. Can you give us a sense of what quantum that was for? And also what is your longer-term expectations of cash conversions as activities ramp up?

Cale, I'll leave that to you.

Thanks, Darshana. Yes, look, I guess we have a well communicated and well poured over timing around our cash flows at each half. I want to talk to the specific numbers for the half, but just, I guess, when you think about the size of our TTV relative to our EBITDA, I'm sure you can put the numbers together and see that it is swamped by movements in sweep timing, which we can't control. With respect to our cash flow conversion, nothing -- there's been no fundamental changes in the business from pre to post COVID. So we are -- we give some terms in -- sorry, in Europe and ANZ, but not a lot. That has mostly played out now. And from here, we'll look to revert back towards that around that 90% cash conversion percentage is what you should expect. The only variable to play out just sort of simply -- the only variable to play out is the recovery of Asia, specifically in wholesale, but we'll see that.

Your next question will come from the line of Mitchell Sonogan with Macquarie.

Jamie, just quickly on the FY '24 guidance, you're still talking about a forward recovery, but is taking away any information. Are you still guiding to the $265 million EBITDA. I'm just wondering whether there's upside to that, given that at the time, you were expecting China to have reopened by June this year. And you've mentioned how big that part of the business is for CTM. So just keen to understand what you're thinking about FY '24 guidance.

Yes. I think the key message, Mitchell, is we're still on track, and that's a really good thing to say. I think -- I don't expect China or Asia to be back in FY '24 because the time that momentum comes, we've learned from the other regions, it takes longer and so forth. But there's other regions that are outperforming like Europe. Europe is going to materially outperform what we would have thought it would have done when we were back in FY '19. So all in all, the good thing about being diversified, we're going to take owners and overs but the way the business is going and if we continue to do what we're doing, we're right on that pathway. Of course, we'll give guidance next year for FY '24. I don't want to get too far ahead of ourselves. But if you look at that graph, you go back to the graph we're showing pre that the growth curve between FY '23 and FY '24 is actually getting flatter. So that sort of tells you how we're thinking about things.

Yes. So sorry, just to clarify, is that FY '24 $265 million EBITDA, is that the full recovery?

Yes. yes, we'll be giving guidance somewhere around that mark at a point in time. But that's -- as a full recovery number, that's still what we expect, give or take, yes.

Yes. Okay. Just jumping on to the North American region, if I look at the revenue and EBITDA recovery, this is just simply doubling the first half versus what your calendar year '19 pro forma was for CTD in Travel and Transport. It looks like the EBITDA is probably only the 30% or 35% recovery, revenue is about 65%. I'm just trying to understand how you compare that versus how you're seeing the market over there in North America through first half '23, because just looking at the commentary from airlines and other data available, it's tracking at around 70% to 75% through that half. Just trying to understand if you think you were meeting the market or if you're exceeding the overall market activity levels?

Yes, I think the airlines, that was a combination of leisure and corporate. Secondly, we know we're at 73%, we know what a full recovery looks like. It's around $33 million a month. So -- in Aussie dollars. So that's what we're hunting down in terms of full revenue recovery. What I can say is we've put out January booking volumes. Again, we're not too concerned about TTV because TTV prices are moving around, but that's how we make our money. It's mostly transactional. So when we compare to GBTA, that's pretty -- that's a 2-week old data or a 3-week old data. So that's a pretty good price point to measure against. And as I said, January booking volumes are the highest since COVID. So we think we're doing well. We know we had a big chunk of new clients start in January. There'll be another chunk coming up as well. So I think we're in good stead. And like I said, we've done a lot of work through integration and things, and it's really now about how we get to 80%, and that's when we really start to make very good money out of this business at the levels or to do 100% actually. So I think it's going -- we set it up to do well. Just a matter of now of continuing winning and seeing a bit of recovery come back.

Great. And sorry, just one super quick one for Cale, if I may, Jamie. Just on the $160 million to $180 million EBITDA guidance, there's about $40 million of capitalized R&D in the first half. What's the expectation for the second half built into that guidance?

It's about the same as first half, Mitch. So it has stepped up a little bit in this year for those points that I spoke to earlier.

So Mitch, if you could go to the P&L slide, it shows the D&A. So roughly $20 million first half, $40 million second half is what we expect and hence, the PBT guidance as well. We want to put PBT guidance out there because we know a lot of other people with EBITDA are making some very interesting nonrecurring costs.

Your next question will come from the line of Tim Plumbe with UBS.

I'll keep it to 2 questions. Just the first one, Jamie. You've mentioned historically, that 30%, 70% EBITDA seasonal skew. If I take $51.3 million, apply a 30%, that gives me kind of full year at $171 million. But you've also commented you're expecting a stronger usual second half than the typical seasonal skew. So can I kind of read into that based of those comments that it should be more than $171 million if as long as everything goes right?

I guess hold your horses there, Tim, would be the best advice. I mean firstly, just our normal skew is more like a 33%-66%, but we've said because of recovery dynamic, it's 30%-70%. I mean you're on the right track in the sense that obviously, in the first half, we had $8.4 million of staff cost that we didn't really get a return on. But it's still 5 months to go. It's still a bit up and down, and that's why we've given guidance to $160 million to $180 million and let's just here we go with that. And if we do well, we'll talk to it, and we'll just see where it goes to. But right now, I mean, just the fact that we're putting out guidance of $160 million to $180 million and a PBT guidance as well is, I think, it's sufficient at this point in time.

Got it. And just the second one, again, another question around seasonality. I mean, when you guys look at recovered revenues, you're kind of looking at it versus the simple average of 810 divided by 12, whereas there is normally a natural seasonal skew to the second half at the top line revenue. I mean, if I go back and look at FY '22, it's kind of 43.5, 56.5. Once I back out how we -- if I did kind of adjust -- sorry, go ahead.

You're on the right. So I think what we said, we said $291 million or so was right on track for what we hope to do. You go back, we're hoping to get to 80% of revenue. So the thing is, if you look at this result, it's right on track where it's not on track because essentially the extra staff we employed that we didn't get a return on, but that was deliberate. And I think I can't stress to you guys that our workforce is nearly back to where it needs to be. What we forecast on new staff is so marginal because of all the productivity gains we're getting in North America and ANZ through the acquisition. So we're -- my view is that we're a lot more rebuilt than our peers and maybe a lot more rebuilt than you think. And unfortunately, we took those costs in the first half, but we've got to take a long-term view, staff is scarce, we weren't going to eliminate staff because our recovery took 6 months longer than before in North America, for example. It's just -- it's one of those reopening things. We said we're going to go -- it might be a smooth line to '24. But I think the theme is you can understand from listening to Cale and I, it's getting a lot more BAU, particularly in -- with the exception of Asia, it's getting very BAU. So that's a good thing.

Your next question will come from the line of John O'Shea with Ord Minnett.

Can you hear me okay?

Yes, Hi John.

Look, a couple of things from me. Firstly, if you can give a bit of comment around the revenue margin or the EBITDA margin. I noticed in a couple of the regions, revenue margin appear to get all backwards and what your expectations on that are? And the second thing in the U.S. of note, I noticed that American Airlines have made some comments around closing down their corporate division and the likelihood that they don't expect corporate traveling to recover to more than 75% of pre-COVID levels. Just wanted your comments on those 2, please, guys, if I could.