Serko Limited (SKO) Earnings Call Transcript & Summary

Good day, and welcome to the Serko Interim Results Announcement Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Darrin Grafton, Chief Executive Officer of Serko. Please go ahead, sir.

Thank you for joining this morning. I'm Darrin Grafton, the CEO of Serko, and I'm joined today by our CFO, Shane Sampson. There'll be an opportunity for Q&A following our comments. I'll start on Slide 5. At our annual meeting at the end of June, we affirmed that we are relentlessly focused on our aspirational FY '25 revenue and cash flow positive goals which will be achieved through winning in our chosen markets, achieving global scale and operational leverage and building a globally competitive business. We've continued to grow in both our key revenue areas of managed and unmanaged travel. There's been significant growth and progress under the Booking.com for business partnership, and we have successfully delivered with Booking.com, our hotel chain content and servicing with Booking and Serko's partner, CWT. There's also been an increased transaction volume uplift of 14% in Australasia to 2 million bookings as part of a deepening of our expertise across the entire organization. I'm delighted to have further strengthened the executive team with 2 new appointments. Joydip Das as Chief Product Officer; and Liz Fraser as Chief Revenue Officer. We are particularly pleased with the increasing benefits from our focus on cost discipline, our lowering rates of cash burn and the significant improvement in EBITDAF and net loss after tax. Our financial highlights on Slide 6 shows Serko's continued strong performance with reference to the first half of '20 -- FY '23, unless otherwise stated. In particular, total income was up 87% to $36.3 million. Operating expenses was up 7% of total spend, up just 3%. Revenue growth and cost discipline led to a 64% improvement in net loss after tax and a 96% improvement in EBITDAF loss. We remain well capitalized with $84.3 million of cash on hand and no debt. We have materially reduced our cash burn to a monthly average of $0.6 million. Turning to Slide 7. As mentioned, total income was $36.3 million with a strong revenue growth across managed and unmanaged travel. Our strong results for the first half reflects increased conversions on Booking for Business, the travel recovery and new customer addition. The first half result also benefited from a higher average revenue per booking, favorable exchange rates and higher-than-expected business travel volumes in Australasia. The 87% growth in income on the first half '23, largely reflected the growth in the second half FY '23 and growth into the first half of FY '24 over the second half of '23 was 27%. The graph on Slide 8 shows the half-on-half progress since the beginning of the FY '22 year. The middle graph shows online bookings were up 26% to 2.5 million on the first half of FY '23. And the graph on the right shows completed room nights comprising of the Booking.com for Business rose 192% to 1.3 million. Slide 9. I'm now on Slide 9. In addition to revenue growth, we have been very focused on cost discipline, balanced with targeted investments for growth opportunities. Shane will provide additional commentary in his section. Slide 10 shows a continued revenue trajectory that has consistently risen faster than cost growth in recent periods. We continue to make appropriate levels of investment to support sustainable growth. On Slide 11, shows our total underlying average monthly cash burn for each period. Since the start of FY '22, we recorded total cash burn of $3.4 million across the 6 months to 30 September, equating to an average of $0.6 million per month. This was ahead of our expectations and was helped by continued recovery of travel along with stronger than projected foreign currency rates. During FY '24, we focused on the delivery of technology needed for the growth in both our managed and unmanaged business. We saw the go live of hotel chain loyalty rate content with Booking.com for Business along with servicing provided by managed travel provider, CWT. In Australasia, we have continued to see strong transactional growth with record monthly transactions occurring in the first half. We continue to invest in our key revenue areas and are focused on continuing to build team capability as we move Serko to the next phase of its growth journey. We've also continued our investments in evolving our platform to ensure it is well positioned for the changing travel demand, in particular, our investment into our cloud native and independent, high-scale platform. This investment is designed for Serko to stay ahead of the global demand. We are continuing our investment in the [ openization ] of the platform frameworks and systems to enable future partnerships to both connect and build on our platform. Before I comment on our unmanaged and managed travel performance, a few comments on our leadership on Slide 14. Recent appointments further strengthen the depth of experience of Serko's leaders as we increase our focus on building capability and scale across the organization. In particular, the changes reflect the critical importance of data to our strategy, technology and products and how we work and measure the impact. In addition, AI holds many opportunities for the travel industry and Serko, and we have been actively building capability and experimenting with AI. Joydip joined in October and is already helping reshape our product delivery function. Our VP of Engineering, Simon Young has also recently joined Serko, bringing a wealth of experience from notable New Zealand companies Trade Me and more recently, [ tech ] start-up Halter. Another key hire to the executive is Liz Fraser, who has previously held senior roles with TV New Zealand, in Air New Zealand and most recently Commercial Director with MediaWorks. Liz will be helping the Serko team drive focus and sustainable high growth across the 2 key revenue focus areas of managed and unmanaged travel. Liz starts from early January. Turning to Slide 15. The results being delivered under Booking.com for Business, partnership reflects the continued focus of Serko and Booking.com team and encouraging levels of customer demand. Completed room nights on Booking.com for Business rose 192% on the first half of '23 from 454,000 to 1.3 million. For the second half of FY '23 completed room nights for Business rose 22%. Average revenue per completed room night was in line with the first half of '23 -- FY '23 and increased 12% over the second half of FY '23. Active customers using Booking.com for Business have continued to increase, up 61% to 176,000. I'm now on Slide 16. We're now focused on implementing our scaling strategies with Booking.com, alongside the delivery of new features found on our Zeno platform. Scaling initiatives include bringing more of the features found in our Zeno platform, along with the new product offerings. This includes the introduction of Traxo, which provides real-time corporate travel data capture through the product enhancements scheduled to be released continually in the second half. We're in a position to add new incremental features to support retention, activation and growth of customers as a result of the investments made in the Booking.com for Business platform. We've been learning from the team at Booking.com, adopting new ways of working as part of evolving our product and development culture and delivery approach. This includes increasing the number of experiments we undertake, improving how we build and test and impact on innovation. During the half, content and servicing from CWT within the Zeno technology platform went live in the Booking for Business offering. A comment on our contract with Booking Holdings, we entered into a 5-year agreement in October 2019 and will undertake formal renewal discussions at the appropriate time. We keep -- and we will keep the market appropriately informed. Slide 17, our managed revenue strategy. Online bookings were up 14% in Australia and New Zealand to just under 2 million, the result of continued strong growth and increased market share. We continue to win new business, Rio Tinto, one of the largest corporate travel accounts in Australia went live on Zeno during the half via American Express Global Business Travel. We continue to see future growth in Australasia underpinned by high rates of customer retention. This growth will be primarily be through increased revenue per bookings, our reflecting our strong market share, the additional value and from new features. In North America, we continue to invest to develop the market and deliver to our partners. We continue to refine our market strategy and work with our partners to identify and strengthen our offer. We're executing on our plans, including taking steps to activate additional customers via our travel management partners, increasing the depth of capability, undertaking targeted product development. And our focus for the first half of this year for managed travel and our markets have been around features that removes the friction for both our reseller partners and their customers. The first of these features that launched this half is the advanced airline changes. Since COVID changes the airline schedules, along with the resourcing needed to service these impacts has been a key pain point. Serko is pleased to be able to launch this new technology to start -- to alleviate some of the ongoing impacts of disruptive flights. The second initiative is on NDC. NDC is one of the many technologies that we continue to work on to support our partners and customers and to ensure we remain at the forefront as travel evolve. Our focus has again been around the operational friction caused by this market change. With high usage of the Sabre GDS or global distribution system by our key resellers and partners, we have focused our development efforts to improve operational efficiency by aiming to bring NDC on Sabre into the second half. Thank you, and I'll now hand to Shane to talk about our financial update in more detail.

Thanks, Darrin, and good morning, everyone. Darrin has already called out the highlights for the half year, I will go into a little more detail. I note that unless explicitly stated otherwise, all comparisons are against the prior comparable period in 6 months to 30 September 2022. Turning to Slide 19 for the high-level profit and loss. Total income grew by 87% or $16.9 million, to $36.3 million. I will talk about revenue in more detail on the next slide. Operating expenses increased by 7% or $3 million. I will talk to operating expenses in more detail on a later slide, but note that we consider the more useful measure to be total spend, which I will also talk to on a subsequent slide. Net finance income grew by 98% to $2 million from $1 million, reflecting stronger interest rates, partially offset by lower cash balances. Our net loss after tax has reduced by $12.6 million or 64%, to $7.2 million, reflecting the operating leverage Serko has been able to achieve as revenue grew strongly, and we've held cost growth. Our EBITDAF loss reduced by 96% or $16.1 million to $0.8 million, and as a percentage of revenue, the EBITDAF loss fell to 2%. Looking at revenue in more detail on Slide 20. The key highlights are that travel platform revenue grew by $1.1 million or 13% to $9.6 million, primarily reflecting increased travel volumes in Australia and New Zealand and some increase in market share. Net of -- and net of consideration payable to customers, supplier commissions revenue grew by $15.5 million or 215%, primarily driven by increased Booking.com for Business completed room nights. Looking at revenue by geography, ANZ's revenue grew by 14% reflecting the partial recovery of travel, increased services revenue and some increased market share. The strong growth in the Europe and other geography was driven by increased supplier commissions and Booking.com for Business. Average revenue per booking or ARPB, the travel-related revenue, increased by 64% to $12.88. The growth in ARPB is primarily driven by the increase in the number of Booking.com for Business bookings as a proportion of total bookings, and by a stronger euro relative to the New Zealand dollar. The ARPCRN or average revenue per completed room night in euro terms was in line with the prior comparable period, reflecting similar hotel prices. Turning to Slide 21. Operating expenses grew by $3 million or 7% to $45.4 million. As a percentage of revenue, operating expenses fell to 127% from 225%, a decrease of 98 percentage points, reflecting significant operating leverage as revenue has grown. Remuneration and other benefits fell by $0.5 million or 2%, reflecting a reduction in employee share scheme costs and planned reductions in contractors, partially offset by wage growth. Third party direct costs, external costs driven by activity in our platforms increased by 27% to $6.4 million, in line with the 26% increase in online booking volumes. Amortization and depreciation increased by $2.3 million or 38% to $8.3 million. The increase relates to higher amortization as the value of capitalized software has grown and as most new assets capitalized since early 2022, are being depreciated over 3 years rather than 5 years. Looking at Slide 22. This is a reconciliation of total spend to operating expenses. Total spend is a non-GAAP measure which Serko uses internally to measure spend before the impact of capitalization and amortization. In software businesses, the nature of the projects being worked on can result in significant differences in the proportion of product design and delivery costs capitalized under accounting standards. We consider that total spend is a more useful measure of the cost base of the business as it removes the volatility, which can occur as a result of capitalization decisions and focuses management on managing the real costs of the business, remuneration and benefits and external spend. Note that total spend is not exactly the same as cash costs. In addition to timing differences in working capital, Serko's employee share scheme drove $2.4 million of total spend in the half but does not have any cash impact. Total spend grew by 3% to $42.2 million and as a percentage of revenue of 101 percentage points to 118%. Growth in total spend was primarily driven by increased third-party costs as a result of the increase in online booking volumes. Looking at head count. Head count declined to 345 from 364 at 31 March 2023. The reduction is primarily related to lower contractor numbers. In the prior financial year, we chose to add contractors to provide additional capacity for key projects while giving ourselves the ability to scale resourcing back once those projects were completed. Turning to Slide 24. Product design and development has driven much of the growth in operating expenses with expense after capitalization and amortization up $3.7 million or 19%. The growth reflects increased investment in staffing and higher amortization. Turning to Slide 25. This is a reconciliation of underlying cash flow and non-GAAP term used earlier in the presentation. Underlying cash flow is intended to provide a clearer view of the cash flow trajectory of the business. Underlying cash flow adjusts out some of the noise in the GAAP cash flow statement. In particular, the net movement in short-term investments is shown as a cash inflow or cash outflow in the GAAP cash flow statement. However, from an economic perspective, those net movements are not part of the cash burn. Underlying cash flow improved by $18.2 million to an underlying cash outflow of $3.4 million. This was driven by operating cash flow improvement from a cash outflow of $17.4 million, to a positive operating cash flow of $1.7 million, an improvement of $19.2 million, primarily as a result of operating leverage as revenues have increased. Finally, looking at the balance sheet on Slide 26. Our balance sheet remains strong with cash and short-term deposits of $84.3 million and no debt. Relative to 30 September 2022, other current assets grew by $3.4 million or 26% reflecting revenue growth, while current liabilities fell by $2.8 million, primarily reflecting the repayment in the second half of FY '23 that was adjusted in the underlying cash flow for that period. Thank you, and I'll now hand back to Darrin.

Thanks, Shane. And looking at the outlook now on Slide 28. Considering the growth in the first half and the second half seasonality, Serko revises its anticipated total income for FY '24 year upwards, from $63 million to $70 million, to $67 million to $74 million. Serko affirms its total spend guidance of $86 million to $90 million for the FY '24 and anticipates tracking towards the lower end of the spend range. As Shane mentioned, Serko is well capitalized with cash on hand of $84.3 million as at 30 September, declining cash burn and no debt. Serko continues to be open to organic and inorganic investments and will consider opportunities that would advance our strategic objectives. Macroeconomic and geopolitical factors continue to be uncertain, which may impact future performance, including in the short term. Factors that could impact results include currency fluctuations, the impact of regional conflicts and changes in hotel room rates. Serko retains its aspiration of $100 million in total income in FY '25, and Serko remains committed to achieving positive cash flow for the FY '25 financial year, with the appropriate cash reserves on hand at the end -- at the point of breakeven. We now welcome your questions. And if you could keep them to 2 per person, please.

[Operator Instructions] And we will take our first question. Caller, please go ahead.

Shane, Darrin, can you hear me okay? Good work in the first half. Terrific. Look, just for me, a couple of questions. Clearly, you can see the leverage coming through here with the revenue that you just mentioned. Just about around the costs. Is there anything to that we should be aware of as we look at the second half '24 and into FY '25, that we should be aware of that sort of changes the profile of those costs. Obviously, I know Shane, you alluded to the amortization there being over a shorter time frame. So assuming that means that, that starts to increase. Is there any other areas that we should be mindful of when we look through those numbers, obviously, with a view to looking at where the EBITDAF settles and so forth given the revenue guidance you've given, do you understand the question?

Yes. I think the -- we effectively have guided to -- we've kept the same guidance range for total spend for the full year. But we signaled that we're currently tracking to the lower end of the range. So in terms of thinking -- or I guess we kept the range despite where we're tracking to EBITDAF. We continue if we see opportunities to invest to go faster. We're sort of, if you like, keeping up our sleeve, the ability to do that rather than guarantee that we're banking debt. So you could see some additional spend in the second half in the event that we see clear opportunities for that to add value heading into FY '25. And in terms of -- and probably the other element if you would think about EBITDAF is we had a reasonably low level of capitalization in the period, obviously, that have been kind of in line with the second half of last year, we would have had a positive EBITDAF. We -- that's partly around we've got a big focus on experimentation through the booking things. We're adding a bunch of new features and we're trialing different things and we've taken the view that for the most part, that doesn't get capitalized. So probably say in terms of capitalization, [ we're least ] focused on that lens to why we give guidance on total spend and not OpEx, but starting point, you could probably have seen something similar to the first half for capitalization, maybe a touch higher.

Okay. So if I take that one step further to my second question then. In broad terms, obviously, you've guided to a stronger second half in terms of the seasonality. In broad terms, so should that mean we should be expecting an EBITDAF number, in broad terms, better than the first half, other things being equal?

I guess, probably what I say is we are sort of guiding on EBITDAF just because the capitalization kind of can be somewhat randomizing. And also, if we do choose to invest a little bit more debt then that would potentially push EBITDAF backwards. So, yes, I guess -- at the moment, I'd say we're not focused on the EBITDAF line, is a line that we mentioned to we're focused on delivering growth and sort of underlying profitability through that total income, total spend area, and we are still willing to spend a little bit more. So any possibility that debt will be better, but we'd be comfortable if it was slightly weaker, but we're generating really strong results in FY '25.

[Operator Instructions] Caller, please go ahead. [Operator Instructions] I am not getting a response from that line. We will move to our next question. Caller, please go ahead.

It's Siraj from Citi. Just the first question. Can you just talk to -- because looking at the -- I mean, I know it's sort of deja vu from last year, but your midpoint for the full year revenue guide implies that revenue is down [ half-on-half ]. Just keen to understand, just the assumptions you have assumed for that, back that first across managed and unmanaged and where you're tracking to currently? That would be helpful.

Yes. No, I'll talk that one, Siraj. So I think there's a couple of things in there. One is that there's a seasonal headwind in the second half. It's stronger in ANZ where it is effectively about an 11% seasonal headwind as business travel almost stops the month over Christmas and New Year, and Booking for Business the seasonality is smaller, but still probably somewhere in the 3% to 5% range. The other part is that we had a really strong first half volumes exceeded the numbers we needed to get to the midpoint of our guidance. However, yield was also a key contributor. So the euro to New Zealand dollars at near 5-year record rates and the average revenue per completed room night while it was in line with the prior comparable period, it was higher than what we were anticipating. So when we were thinking about guidance, we took the view that there's a relatively low probability of those yield sectors improving further, but there's potential for them to turn negative. So to some degree, you can think of the top end of the range is really reflecting the current trends in the bottom end of the range is providing some provision for a decline in FX rates, hotel rates coming off a little bit and potentially a little bit of volume headwinds and we think that any of those macroeconomic factors start impacting. So really strong first half, good volumes, but with the yield factors really driving that outperformance. And then for the second half, the top end of the range kind of assume similar trends and the bottom end assumes that some of those yield sectors go against us.

And just clarifying though Shane, what are you seeing in terms of the ARPCRN? I guess, the currency can change this ARPCRN, what are you seeing currently?

So we in terms of our...

Like, in second half that's right now.

So with -- yes, effectively we aren't able to talk past the period. I guess, there's nothing particularly that's saying to us that, that's coming down, but we also only have about sort of a 4- to 6-week ahead average booking which is a little bit different to Booking.com leisure where people tend to book these bookings a lot further ahead business bookings at lowest rates. And, I guess, we're just seeing the potential for that to fall as we head into the Northern Winter as opposed to we've got concrete signs that that's happening.

Okay. Second question, just in terms of the customer adds and bookings per customer, that was down [ half-on-half ]. Just keen to hear what you're seeing on that? Because you only had like 19,000 active customers, surprising given CWT went live in June, right? And as Darrin mentioned, there's loyalty rates. So there's -- yes, what are you seeing in terms of customer -- active customer growth and also bookings per customer?

Yes. So I think in terms of -- from the external numbers, if you take the completed room nights and sort of average the active customers, I think there's a very small decline. This is -- the previous period, I think, some of that is around, if you like, as we add more active customers because an active customer is only booked from the 12 months, you effectively do have a little bit of an impact of some customers who book very infrequently starting to dilute that number, but it's -- that impact, I think is relatively modest. The increase in active customers is sort of not -- was in line with where we were expecting, where we were setting guidance at the start of the year, and we did sort of signal the high rate of growth that we've seen in the prior period was partly the sector of people coming back from COVID and also just the 12-month active customer measure. So from our point of view, we don't necessarily see those things as being a surprise. We're simply looking to grow the number of customers that we add, but we see that as being an ongoing process as opposed to something that we're expecting to have a huge impact in the first half. And if you just look at CWT, in particular, we launched in June, a number of the chains were not available at that point. We've been steadily adding chains. The other part of that proposition is us bringing through some of the business features into the Booking for Business product, if you like. In June, we launched solid [indiscernible] foundation, now we're starting to roll new features. So I think still early days with that proposition. We are seeing some increase in the number of registrations and a material increase in the number of registrations we're getting, that's not fully flowing through the activations, but it's hard to tell as where the market is to macroeconomic things or is it something that we're offering so we can continue to kind of monitor that. But overall, from our perspective, the CWT thing is still early days, which was our expectation when we see it back in May that we were expecting record results. We do think that will help give us some trajectory into FY '25, but we weren't expecting a big impact this year.

We will take our next question. Caller, please go ahead.

Shane and Shane. It's Josh Dale from Craigs. Can you hear me okay?

Yes, Josh.

First question, you reported 1.3 million completed room nights by Booking.com, but there were some room nights going through CWT, on what you did not share in the revenue. How many of those room nights were there over the half?

So we haven't disclosed that. What I would say is that it's minimal. And you noticed we've just tweaked the definition of completed room night to only be revenue generating room night. So effectively, those CWT numbers are not counted in there. The number was small in the period. We have seen the number, the proportion boarding, and so that may start becoming material in the second half. And we've been looking at -- we've been -- report that, obviously, we'll need permission from CWT and Booking in terms of anything we disclosed around that. But in the first half, effectively not meaningful, second half might start becoming material.

Got it. And your active customer numbers, are you reporting those the same way? Do they exclude those booking the CWT content?

Yes.

Okay. That's helpful. Last question. Are there any comments you can make on the performance of North America. It feels like at one point, you announced CTW was -- had included Serko as a globally preferred online booking tool, you had won Visa and it feels like progress has gone a bit quiet there. Are there any comments you can make?

Yes. We've been adding other customers in there, and we've just been focused on -- because of the size of those accounts, although the progress in that sort of market. We're focused on the customers that we have been adding, and around there like customers and really concentrating on the ones that we have and expanding out that part. We've played around with some additional technology offerings in that market, which you may have seen through some of the webinars we've been doing. And we're just continually focused on making sure that we're delivering incredibly well to those resellers and customers that we have on board and then finding like customers in that and balancing that overall capital allocation with the opportunities that we've got ahead with both Booking, our home markets and the global markets as well. So it's steady.

Caller, please go ahead. [Operator Instructions] We will move to our next question. Caller, please go ahead. [Operator Instructions] We will move to our next question. Caller, please go ahead. [Operator Instructions] We will move to the next question. Caller, please go ahead.

Shane and Darrin, can you hear me?

We can.

We can.

Vignesh from UBS. Congrats on the results. A couple of questions this morning from me. Firstly, just on the core unmanaged travel side of the business, sort of commentary from corporate traveler in Australia recently sort of suggested that the key reason behind a couple of their share gains were coming from utilizing online booking tool that they had. So are you still seeing an increase in churn out Zeno in the ANZ market, and you still see any risk sort of in the ANZ share that you have with more kind of TMC pushing their kind of in-house online booking tool or potential value chain kind of consolidation at all?

No. And you will have seen that we've specifically called out that we've got a very high retention rate and a very strong win rate, which is on our target of what we're looking at and also the onboarding of companies like Rio Tinto, which is one of the largest market in corporate accounts in the region as well. So we continue to win in that market and also have a very high retention rate.

And do you sort of expect Australasia ARPB to kind of grow into the second half of '24 or is it still sort of...

Correct. We've indicated to the market that we are also reviewing our pricing structures in line with inflation, and we'll start to see some of that impact mostly probably we expect into the FY '25 year.

Right. So you can expect maybe flat year-on-year for the second half of this year from there on?

I'll let Shane cover that.

Yes. We're sort of moving customers steadily. So we -- in sort of underlying Australian dollar terms, we should see a little bit of an uplift in the second half versus first half. There's still a little bit of risk that effects -- offsets that. But if you like, a little bit of an impact this year, positive and we'd expect that to be stronger in FY '25.

Okay. That makes sense. Just turning to unmanaged travel. Just wanted some help breaking down the results a bit more. Looking at sort of the reported room nights, sort of 1.3 million at 18% growth versus the second half of '23. Breaking that down a bit rather sort of 12% increase in active customers that kind of implies 6% of the delta there, which is kind of room nights booked per customer growth. So on that kind of 12% active customer growth, how much of that is the new business add versus activation of the prior customer base?

Yes. It's a mix of -- we're still seeing existing customers reactivating, definitely, what we have seen is a skew from more -- previously a significant proportion of the newly activated customers were migrated customers that we're going live for the first time versus now that the majority of the growth is coming from [ new ] customers. Probably just on the completed room nights per active customer, I think the one thing you probably just need to look at the average number of active customers over the period. And I think if you do that calculation, there is a slight decline in the completed room nights per active customer, but not meaningful, but -- and that's partly just around the timing of the growth in the prior period, but the sort of the endpoint had -- if you just use the endpoint, you get a slightly different answer that makes it look like the completed room nights per active user has gone up, but I think using the average is a better guide.

Okay. Okay. That's helpful. And finally, just very quickly on the shared marketing costs, presumably, that's still embedded in the revenue number. I think in the full year, you have guided to something in the mid $3 million, has that changed at all with this result?

Yes. So we have included that within the financial statements and the revenue notes. And so taking it up. So in the half, that was about $1.7 million effectively, that was netted off the revenue line for marketing spend, which is roughly about double what we had the prior year. And...

And you're still guiding to [ $3.5-ish million ] for the full year?

Yes, we -- that may come back slightly in the full year. But yes, broadly, that kind of number.

[Operator Instructions] And we will take our next question. Caller, please go ahead.

Guys, can you hear me?

Yes, we can.

Mark here from Forsyth Barr. Just a question from me with regards to both your full year guidance for '24 and your aspirational revenue goal for FY '25. How do you sort of marry the flat revenue growth in FY and the second half of FY '24 and then pretty strong growth to get to $100 million in FY '25. Can you talk about your expectations of revenue over the next sort of 18 months?

As Shane indicated, we lose almost good 3 to 4 weeks in our home markets and part of that in the European market as you go through. So it's quite common if you look at our previous growth models where we have a pre -- prior -- you have a half-on-half, which is pretty equivalent even though you're losing a part of that trading period due to seasonality and the focus is now on, of course, execution into that second half and the strategies that we're doing. So we're just getting into those scaling phases and new additional platform parts for our Booking for Business as well. And also the increases in ARPB across our home markets as well into FY '25. So those will take time to get into place and then you start to leverage them up. That doesn't say that we don't have work ahead of us, but that's -- we've checked off our first check point of where we need it to be. And we've been able to revise our guidance up accordingly. So we still feel pretty confident around our aspirations around that both from our cost management structure and both from our revenue and strategies that we're implementing.

And in terms of the no reduction in the range, there's still $7 million range there. Does that speak to the uncertainty around where this yield might go in hotel rooms and demand? Or what does that speak to?

Yes. So it's basically both FX and the potential for hotel room rates to come back are the 2 main things. And we've also affected a little bit of potential for any kind of macroeconomic impacts on business travel in Europe. There's a lot of things going on in the world. So we put a little bit of provision into that, into the bottom end of the range as well. So as I indicated earlier, if you like, our current course and speed takes us towards the top end, but we tend to -- we see more downside risks than obvious upside. So we -- so rather than -- if you like, rather than facing our guidance on here is the midpoint and then here's -- but we decided that we're more focused on, here's where we're tracking but here's the potential risks that we see that could see us going lower.

Right. No, useful. And then I guess, finally from me, just on the balance sheet, obviously, it looks like you guys are going to get to cash positive with quite a significant cash buffer. And you've alluded to the potential for M&A or inorganic measures of growth. Should those not arise? Can you talk about what you might see yourself doing with that cash balance?

Mark, Darrin and I just looking at each other and fully free to say at the moment we're more focused on how do we invest that money to drive greater shareholder returns. Traditionally, particularly ANZ companies have tended to run maybe leaner balance sheets and look to do buybacks or those kind of things. If we aren't -- if we don't see that we can do better things by holding that capital then that's something we can look at. But first and foremost, our focus has been on how do we drive superior shareholder returns. So I would probably say that question as being one we might have to address down the track, but hopefully you don't need to.

We will take our next question. Caller, please go ahead.

Darren and James, it's [indiscernible] from Citigroup. Can you hear me okay?

Yes. Again.

Yes.

Just on cost guidance for the second half. You sort of implied a $2 million to $3 million increase in cost, but just given head count is down, I appreciate that you also mentioned that you're keeping some optionality, but have you stepped up any investment so far? And what areas would you like to invest in?

We have some core areas, of course, the 3 core areas that we focus on is, one, our Booking for Business opportunities. And can we do things slightly faster to bring some of those changes online. The second area being in our North American market and what we can actually be bringing about from that sort of side of -- and the third being on the transformation of how we can actually invest more into our -- in our overarching platform, which we kind of indicated. And the backbone of that is data. So we have invested into data and data capability, executive strengthening with new hires into the key areas to help -- to meet some of those frameworks for delivery of where we want to be into FY '25 and the second half of FY '24. And so we're still continuing, and that's why we said we're currently tracking towards the lower end of that spend range, but we want to enable that flexibility as we go through the second half that we may still want to pull some of those investment of capital item expenditures into some of these areas that we can actually see ahead of us as well. So we're still -- although we're still tracking to that level, we still want to enable that flexibility of execution where we need to be based on what we've got to so far.

Yes. Got it. And just my second one on ARPB in ANZ. Could you talk to the quantum of the price increase that you indicated?

Yes. I think, obviously, why don't you do, there's some commercial sensitivity to be -- talk to sort of where we're with individual customers. We're probably seeing the second half and sort of underlying Australian dollar terms is probably in the sort of 3% to 5% uplift kind of range. We're expecting we'll get something more material next year, and as Darrin talked about, we're partly referencing inflation from our perspective, has been in the region of 20% over the last kind of 5 years. And pricing in ANZ has been relatively consistent over that period. With COVID we didn't do price rises for a while. So between this year and next year, that's the kind of amount we're looking to get, whether we get all of that in FY '25 is probably a question mark, but that will be the target we will be looking to exit FY '25 with.

We will take our next question. Caller, please go ahead.

Just a couple of follow-ups. Just first one, I know you mentioned it's a 5-year contract with Booking.com. So just when do you expect to start renegotiation for you, just kind to understand how we should think about timing.

Darrin here. Look, into the new year and we would hope by the time through our full year earnings to be able to give a pretty good indication at that point. So that will enable us to guide appropriately and everything thus far.

Got it. And secondly, Shane, just clarifying on your guide, I appreciate the 3% volume headwind in Booking.com. But shouldn't there be -- let's forget yield, but shouldn't there be room night completed growth because you're growing more customers? Is that not the way to think about it?

So we're still seeing how sort of run rate does include continuing to add customers. So we are, if you like, on a sort of seasonally adjusted basis, I think even without adjusting seasonality, we will still see growth in volume in the second half. That's just -- the seasonality just offsets a little bit of that. And if we're at the top end of the guidance range, then we have a slightly stronger second half than first half. As I noted that we're least focused on the midpoint for the guidance range and more focused around current course and speed probably that's more sort of bullish position and there's more risk to the downside as we've set that as we set that guidance range.

Got it. Got it. And just clarifying, just on the price increase in ANZ. Just -- have you started talking to people about that sort of 20% increase? Just keen to understand whether there's been pushback on that?

Yes, we have started conversations with our customers on that.

And you sort of assume that...

If the -- yes, if you think about it, if you're a commercial person, any organization, you're always going to start by pushing back on pricing. So yes, so we're having constructive conversations. As I said, whether we get all of that in FY '25 is to be determined, but we expect to get a meaningful part of it.

Correct.

We will take our next question. Caller, please go ahead. [Operator Instructions] And at this time, there are no further questions. Mr. Grafton, I will turn the conference back to you for any additional or closing remarks.

Thank you, everyone, for joining. And I really do look forward to catching up with you -- many of you in the next coming days. So thank you very much for your support and see you soon. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.