Web Travel Group Limited (WEB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Webjet Limited First Half '23 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead.

Thank you, operator. As Webjet walked through the valley of the shadow of death, we took a look at our life to see what was left, and it looks like there is more than ever before. Joining me today is Tony Ristevski, our CFO, as we discuss the first half 2013 results. The most important dimension of being a travel company in a postpandemic world is, are you still relevant to your audience, and bookings are the best measure of relevance. We are delighted to announce that our bookings for the first half 2023, we have exceeded our prepandemic levels. This is especially impressive when you consider the first month of the period, April, where we were down 17%. This highlights the underlying momentum that the business has in the half. And more pleasingly -- the more pleasing aspect is that, that momentum is accelerating into the current quarter. At the AGM in August, we announced we would deliver more than $100 million in cash. We finished the half with $168 million. And the key metric that defines the complete turnaround for the business is the group delivered an underlying EBITDA of $72.5 million. We are back, baby. The key highlight that drove that result was WebBeds, which delivered $63.7 million of EBITDA. We do -- had to suffer some FX headwinds. On a constant currency basis, we actually were $68.6 million. Bookings are ahead of prepandemic levels. And EBITDA on a constant currency basis is at 94% of prepandemic levels. We experienced record EBITDA margins for the period of 55%, and we achieved 8/3/5 profitability target in the 2 seasonal peaks of July and August. The OTA business delivered $21.4 million of EBITDA. Our market share increased substantially. It's primarily domestic driven, where we were successful during the period. And our EBITDA margin was very close to our pre-COVID numbers at 41.3%. And the GoSee business was one that suffers from the most of the structural inbound impediments of lack of inbound tourism, and it did well in delivering a profit for the half. Overall, our business has been retooled over the last couple of years to ensure that these results are predicated on our ability to significantly lower the cost base across the board, and we are down 16% compared to our pre-COVID numbers and deliveries to the same aggregate booking levels as we did beforehand. Have a look at TTV. Here's -- or here are the key metrics. TTV circa 90%, revenue 77%. Expenses are down 16%. EBITDA is at a 69% level. You can see the dramatic rebound since the impact of COVID that's occurred, and we've improved the metrics across the business quite substantially over the last 4 halves. Moving on to WebBeds. The first half EBITDA at -- in Aussie dollars was 87% of prepandemic levels with a margin over 55%. Bookings were up 13% for the business. The average booking value was down 17%. As we have discussed over the last couple of years, that's a reflection of a number of things, which we've done to ensure that the business will grow substantially beyond where we were prepandemic. One is the addressing the domestic marketplace, which we've been very successful at, and increasing our presence in North America. Both of those have lower booking values. At a constant FX rate, we're actually up at TTV level at $1.528 million for the half. Revenue was -- and I'll just keep it in Aussie dollars with the exception of the TTV number, but revenue was down 16% as a consequence of lower margin. Expenses were down 19% as reflection of the cost takeout programs and the technology innovation that has simplified our business that I'll talk you through in a second. And EBITDA was down a more modest 13%. EBITDA TTV margins were at 55.7%. As I already mentioned, we exceeded our 8/3/5 profitability target in the 2 seasonal peaks of July and August. Moving forward, and the most pleasing element of this particular business unit is that we can clearly see the recovery in place. We've now had 7 consecutive quarters of bookings and TTV growth. And just as importantly, as we look towards the current quarter, our quarter 3, we can see that, that booking growth profile has continued to be delivered at both a bookings level and a TTV level. The reason that we were able to deliver the results we had is naturally our largest market, which is North America, which is Europe, had a very strong Northern Hemisphere summer. And North America, which we have invested significantly in over the course of the last couple of years, has been the stellar performer, where it's now our second largest region. And as of September, it's 3x the prepandemic level in that particular marketplace. And in APAC, notwithstanding as is well -- being well documented that there are a significant number of major markets that are closed or have just opened in the last couple of months, we are already ahead of prepandemic levels. IATA claims the overall air travel market, which is a proxy for the travel industry, is down 26% as of September. That's a volume metric. And our second quarter number is that we were up 19%. But if you extend into October and November, you'll see for the first 6 weeks of this half, we're actually up 33%. When you strip out the fact that a lot of the fastest and the most relevant group traveling on a global basis is visiting friends and family, that cohort tend not to book hotels. Our outperformance is circa 100% of the underlying market for our WebBeds business. Since May, we have been in excess of 100% of prepandemic bookings. And since July, we have been in excess of TTV from the prepandemic metric. There's been a lot of talk in the financial press, and there is a significant amount of doom and gloom about the future prospects for the global economies with global growth rates declining or expected to decline over the next 12 months. Notwithstanding that, that will be a headwind for all businesses, the WebBeds business as a consequence of improved technology, which ensures that we provide more relevant content than ever to our customer base, market share gains from new customers and share gains from existing customers will suggest that those macroeconomic headwinds will not impact the recovery thematic that you are seeing here on Page 6. So how are we doing it? We had a strategy day in August, and we explained in quite significant detail, the details are on the -- on our website and are still located on the ASX, but we've transformed the business. The transformation is focused on 3 key elements. Prior to COVID, we were the low-cost operator in the B2B space. I'm a firm believer that the low-cost operator always wins in scalable markets, in particular, when you're distributing a commodity product. We've taken the opportunity to substantially automate the processes that existed within the WebBeds business. And from industry-leading efficiency, we are now 35% more efficient on a booking per FTE basis since the pandemic began. The automation process I've described is not a step change. It's a continuous improvement in which we had a series of other initiatives in place. But as the business scales to its targeted $10 billion of TTV will be a significantly lean and efficient operation that enables that to happen. The same thing has happened on our technology. As everybody who's followed our journey knows, a significant component of our growth has been through acquisition. And with each acquisition, we acquired technology platforms. During the course of the last 2 years, in particular, we have simplified our technology stack to enable us to move to a unified entry point of where our customers and suppliers can get all access to all information from us irrespective of what platforms they're on. This has helped us scale and gives us the capability of scaling as we required to move to achieve our $10 billion TTV target. And finally, on the data side, we have an enormous repository of data. We have become much more efficient in understanding the efficacy of that data, and we are in a position in which we can lever that to ensure that we provide the right product at the right time for the right customer all the time. And that's been transformative for our business. And it's all part of the fundamental drivers of why we have outperformed the market and why the 7 quarters of consecutive growth are not the end of our story. Let's move to the Webjet OTA business. Webjet has had a very strong first half for FY '23. EBITDA margins have more than doubled compared to the same period last year and are almost at the EBITDA margins that we existed in prepandemic. That's a reflection, again, of the incredible work that's been done and the incredible resilience of the brand in being able to attract consumers to our site. The domestic travel market has been the driver for our first half profitability and full long-term resumption of our goals and aspirations that we have prepandemic will be driven as the international market returns. And we're starting to see some signs of that over the course of the last 2 to 3 months. Marketing costs continue to be lower than prepandemic levels at 1.5%. Prepandemic, that was circa 2%. We have had -- as we have across all of our business, had inflationary pressures as a consequence -- sorry, wage salary cost pressures as a consequence of inflation and rising interest rates. And notwithstanding all that, we still think that we can get back to our sort of mid-40s EBITDA margins. TTV margins, as we have highlighted in our last 2 updates, are expected to normalize around about 9% to 10%, that is up from the 8.4% now. The driver of that will be once international capacity returns to similar levels of 2019. And we have seen that, that is starting to happen, as I mentioned, over the course of the next 2 to 3 weeks -- 2 to 3 months. If we move to overlying trading, you'll see that domestic flight booking volumes are quite variable over the course of the last 7 quarters, and that's a reflection of borders opening, closing and then a reflection of airlines expanding capacity significantly and then pairing back that capacity as a consequence of the well-documented deliverable issues that they all had over the course of the first part of -- the first half of calendar 2023. We are starting to see that stabilize, and our domestic bookings are, again, comfortably above the 80% over the last 3 months. It's a reflection of us winning share in that particular market. We're seeing trans-Tasman bookings pick up consistently since the market opened up to New Zealand. And of much greater significance to our particular results, you're seeing international pick up solidly between first and second quarter, but an acceleration in the current quarter. One of the things that's been well documented for all travel businesses is the difficulty in managing the enormous increase in customer interactions. From our side, we have increased the level of customer servicing by more than 100% over the course of the last 12 months. We continue to roll out automation and self-service flight enhancements to our online offerings. And we believe that over the course of the next couple of months that we will get back on top of all of those outstanding issues and will be well placed to continue to focus on what has always been a differentiator within the Webjet family, which is superior levels of customer service. The driver of our success will be -- the driver -- sorry, the recovery for the Webjet business will be driven by the international market expanding from its current low base. We have invested in our capability to take greater advantage of that recovery. We acquired Trip Ninja earlier in the year. It actually went live in October last month. And we have a high degree of conviction that our capacity, which is unique on a global scale for lower prices, unique content and greater choice for our customers will enhance our competitiveness and ensure that we do the following: win greater share of the international market as that market rebounds; and increase our margins through the judicious usage of disparate tech platforms to provide a unique inventory to our customers; and for us to control our destiny and a pricing point of view. So far during the course of the year, we're delighted to say that on the domestic front, our bookings are up as a share of GDS bookings by 35%, and our share of all bookings are up 57%. I do take note and it's a reflection of the incredible work that the team has done, all of these market share gains have been achieved notwithstanding that we have processed more than $100 million of flight credits during the course of the year that are not represented in either the bookings numbers nor are they represented in the TTV numbers that I went through earlier. Moving on to GoSee. As I mentioned at the start of the presentation, this business has been the most impacted by the structural elements of limited inbound tourism, especially in Australia and New Zealand. The largest cohort is the visiting friends and family, and you're not likely to book a motorhome when you're doing that. So our business is this -- sorry, this business unit is the one that is most impacted, but it's a business that's done an incredible job over the last 12 months in its transformation to both the technology base and at a customer servicing base. We've rebranded the business to GoSee. We believe that when inbound tourism comes back that we will begin, they will be making a significant and meaningful contribution to our overall EBITDA number. Whilst bookings are up 107% and 144% bookings and TTV, respectively, compared to the first half, they're still substantially down on where they were pre-COVID. We expect similar to the Webjet OTA business that TTV margins will normalize around 9% to 10%. And we expect that first half numbers will be replicated in the second half, but GoSee will make a meaningful contribution to our results in FY '24. What we have done with the business is build out as the -- our partner relationships. We've aligned the business to our value drivers, and we're building a growth culture. Tactically, we signed a number of airport affiliates, and we've won the best online consumer support service, changed the nature of our insurance coverage and perhaps quite relevantly for the Australia or the Australasian market, launched Afterpay in -- for our ability to pay through our business. Let's talk a little bit now as we focus on the continuous innovation that the business has undertaken and future drivers of growth beyond what we already have in our organization. I've spoken a little bit about what Trip Ninja will do for the OTA business in Webjet, but Trip Ninja is a stand-alone entity that has a destiny to become a separate profit center in providing the same technology base to other travel providers. We have a series of products that we will launch that will be best-in-class. And as I mentioned, in our case, for the Webjet, provide us with unique airfares, which will enable us to be very competitive on the international front. What we've done since we acquired the business in November of last year is ramp up staff recruitment. So we now have a full dev team, the vast majority are based in Canada. We launched the ability to have the Webjet OTA, enabling customers to book open-jaw journeys for international flights. And we've got significant work underway for our next milestone, which is multi-stop dynamic packaging, which is due to be delivered in the first quarter of financial year '24. We're very excited about what Trip Ninja brings to us. It's piece of tech kit that is a true point of differentiation that has global opportunities ahead of it. And we look forward to updating you with their progress over the subsequent reporting periods. Moving on to ROOMDEX. We spoke about that on the back of the investment that we made in February of this year. It's an automated upselling solution. We're able to sell hotel rooms on an attribute basis now, which is unique in our industry. And we have started the process of commercializing what will be a SaaS model. We're in the very early stages, and we have a high degree of confidence that based on our robust sales pipeline that this will be a contributor to our results over a 2- to 3-year time horizon. With that, I'll hand over to Tony Ristevski, to go through our financial highlights.

Thank you, John. If you can turn to Slide 18. What we have there is a statutory P&L alongside what we consider the underlying P&L, which is predominantly through the lens of cash from operations. The key call out there is during the period, as John mentioned earlier, with regard to our technology investments, we've taken the opportunity to accelerate one of the platforms in the current half, and that's described in note 6 to our accounts. Equally, we've looked to rebaseline some of the useful lives of our policies that relates to D&A in the half, which is also described in note 6. So going forward, the way to think about D&A in the second half is described there on dot -- point 2, where we'll have circa $13 million and $8 million, respectively. But on a go-forward basis in FY '24 and thereafter, D&A should be sort of circa $30 million and grow roughly in line with CPI, and AA should be roughly $15 million, and that should be quite constant going forward in the years ahead. The other key call out here as we think about underlying earnings below the EBITDA that John mentioned around $72.5 million, is that net interest cost, which are $3.6 million, down in the $9.6 million, the difference there being $6 million of an accounting charge as it relates to the bifurcation of the bond, which we exclude from the underlying position. That collectively gives us an NPAT of around $32 million or an EPS, including the shares on issue for the employee plans had a diluted level of $0.083 per share. The effective tax rate at the moment is around 11.8%, but we see that normalize closer to 15%, which is roughly where it would have been pre-COVID levels. So then I'll turn to the next slide, which is Slide 19. This is a great slide, considering when I presented the results back in June of '20, we're looking at a cash burn where we're -- expense base of around $28 million per month, and we quickly reduced that by 60% down to about $11 million per month to then, over time, recover and being now at a positive $25 million is a phenomenal result. That phenomenal result meant at a gross cash level, we closed the half at around $590 million. And then through the success of the recovery, we've paid down what was pre-COVID, an $86 million term debt, which we then flipped to a revolver just before year-end. And that was then repaid really in the financial year and remains undrawn throughout the whole period. So our closing cash position at the end of September closed at a very healthy $504 million. The other key call out here is that with the support of the banks, which I should call out through the journey of the recovery being incredible in as far as being alongside of us in every step, despite some sort of heavy moments at the start of the pandemic, we've come out of the waiver period 6 months earlier than planned. So that's been a positive contribution from the business and the confidence in the recovery in the business. It has meant that if we were to be tested at 30 September based upon the 12 months ending, we would comfortably pass the test required. So a big thank you to the banks, and great to see that we've come out of the waiver period substantially ahead of plan. Turning to the next slide, the corporate cost summary. This is an aggregation of how we get to the $72.5 million. Corporate costs, we just saw $11 million for the half. We see that being circa $21 million for the full year. We expect this to grow by CPI thereafter going forward. The technology investments is a representation of what we have in Trip Ninja and ROOMDEX. We see a similar investment in the second half as we think about outlook going forward. So I'll turn to the next slide, being summary of our nonoperating expenses. As you can see there, it's starting to simplify as we come out of COVID. We've only got one item there in the first half '23, as it relates to our ERP implementation costs. We've previously talked about the WebBeds implementation. But what we haven't talked about concurrently is that we've also undertaken a similar exercise in our B2C and our corporate functions. So collectively, as we think about the year ending in March, there will be a complete overhaul of all financial systems across the Webjet group from WebBeds to B2C, which is the OTA business and GoSee, along with the corporate team, which is a phenomenal result of the team to achieve that. And that sets us up for a foundation into the new year with more robust systems to deliver upon the growth that's expected to come from the business. We see circa $10 million being spent across this group of expenditure, and we see that being part of the business as usual cost as we go live next year. So we won't see any sort of nonoperating expenses in FY '24 and above. Going forward to the next slide on the balance sheet. As I said, we closed the period at a healthy $504 million. When I reflect back on pre-COVID, I think that the highest cash balance we had was June of '19 of $211 million and a debt at that time of $206 million. So it's a phenomenal recovery as the businesses capitalize on that substantially in this period of time. As you can see, from March through to September, most of the drivers in the increase across debtors and creditors are a function of TTV. The pleasing thing there with regards to debt is the health continues to improve despite the material uplift in the overall balance. And the overall debtor days is down circa 25% of where it was pre-COVID while still applying a very disciplined measure against credit. So that's been positive from that perspective overall. As you can see, there's borrowings that's down about $86 million in real terms that the bond's in there. But remember, it's bifurcated, so there is an element sitting in equity. So the gross value of the one is still circa $250 million in that regard. And the key thing here as we think about capital management going forward, current ratio is an important measure. And what I'll be looking to ensure that we have a ratio greater than one going forward as we think about our balance sheet, structure from FY '24 and then we'll reassess that in FY '25 as we think about the first put date with regards to the bond in April of '24. So we're running a conservative outlook in the near term. Looking forward to cash flow. It's just a table representing the waterfall earlier in the slide deck. The only thing to call out there is that we won't be declaring a dividend for FY '23, and we'll take a cautious approach as it relates to dividends and reassess that into the new year at this stage, in line with the capital expectation of the business and the recovery as that progresses. Moving forward to the last slide, which is the CapEx summary. As you can see there, we still remain quite efficient as it relates to the expenditure and through the rationalization of the WebBeds platform, the overall spend is far less than what it was pre-COVID. We see that sort of circa $30 million for the year. We see that sort of increase with CPI going forward. So what we'll see is an incredible sort of velocity in earnings growth, but sort of a more nominal growth in CapEx and see that delta grow. And the other key thing here is that CapEx will start to align to D&A going forward as well as another sort of measure of that moderation in the outlook. So I'll leave it there. And thanks, John.

Thanks, Tony. So we're on the outlook for FY '23. First half, we exceeded bookings. For the second half, the group bookings will materially exceed prepandemic levels. For the WebBeds business, for the full year of FY '23, our profitability at an EBITDA level will be in excess of what we did at a prepandemic level. To make up for the shortfall that we've had in the first half, by definition, our second half EBITDA is expected to exceed prepandemic levels by at least $10 million, which puts us on track to be circa 40% greater than prepandemic for the second half of the year. With that business tracking at 113% of bookings, we are in a handful of global travel companies who can achieve that milestone. And where I think we will separate ourselves from that handful of global travel companies is the acceleration of the WebBeds performance in the second half, which will put us in rare company of travel companies that are substantially trading at both a bookings TTV and EBITDA level superior to what they did prebooking -- prepandemic. On our B2C businesses, Webjet and GoSee, we're -- we are at the mostly macro events and in particular, air supply arrangements, both domestically in and out of Australia. We see second half profitability being consistent with first half with the possibility of some upside if air capacity, in particular, international air capacity, comes back into the Australian marketplace. And as we look further out to FY '24, the Webjet Group is expecting to exceed prepandemic underlying earnings in that year. So as I summarize, I'd just like to thank all of our partners, suppliers, customers, consumers and employees for living in a Webjet paradise. Over to you, operator.

[Operator Instructions] Your first question comes from Tim Plumbe with UBS.

Congratulations on a good result. Just 2 questions for me, both around the B2B business, if possible, please. John, apologies if you have already said this, I came on a little bit late. But noting that you guys are well ahead of pre-COVID levels despite the fact that you've still got a fair amount of the markets that are still closed, can you give us a sense for what portion of that B2B market is still closed or very slowly opening up?

Thanks, Tim. The proportion that in the first half was the most material for us was China and Japan. China is still close to outbound and inbound international tourism. Japan already opened up 6 weeks ago. It's remarkable in the opening up of the Japanese market that because airfares are so expensive, the vast majority of the airplanes are filled with inbound tourism. So the Japanese outbound market is still really low, even as we speak today. And then obviously, Russia and Ukraine, which used to account for circa 5% of our business, we're not seeing anything from there at the moment. So probably around about 20% would be shut over that journey. And as we've previously indicated, China is our largest market in APAC. So notwithstanding China being shut, notwithstanding Japan being shut effectively for this period, our Asia Pacific business at a bookings level is ahead of prepandemic, and that's a reflection of increased wallet per existing customers. Some new customers were picked up. And most importantly, the fact that we have successfully penetrated the domestic travel markets. They're the 3 contributors behind that performance.

Got it. And just a second one around the B2B FY '23 outlook. You mentioned 10 -- at least, 10% above, I guess, second half calendar year '19 of $26 million -- excuse me, at least, $36 million, which gives you kind of EBITDA of at least $100 million for the full year '23. Am I calculating that right? And also, how should we be thinking about full year EBITDA margins within that business relative to the 8/3/5?

To the first part, a big tick. That's correct. So EBITDA margins, as I think most people would know on this call, the seasonality impact is that we typically sell less in the Northern Hemisphere winter period than we do in the summer period. But that is a little bit more muted than it would have been pre-COVID, which is why we're able to deliver at least $10 million more in the second half. . The business has transformed itself from a European-centric kind of a business to one that's got relevance on a global basis and therefore, the sensitivity to July and August is less than it used to be. And to put that into context, in the old days, the 2 worst months for us was sort of November and February, for example, and we didn't even make money in November and February. So that doesn't exist. We will make money in every month going forward. As for the revenue margin, we expect to be around about 8%. And the EBITDA margin will depend on the volume that goes through and the cost base, it will be pretty consistent with what we had in the first half with some modest wage growth built into that. So that would be the mechanics [ that will allow anybody ] to get to the answer, I think, Tim.

Your next question comes from John O'Shea with Ord Minnett.

Well done on the results, guys. Excellent outcome. Just if you could -- wanting to -- I know you haven't necessarily gone into a level of detail on the geographical side. Perhaps if you could maybe on the B2B side, clearly, that's been a massive performer in the half. Can you just talk us through in a general sense without obviously giving too much strategically a way as to how you sort of see the performance in those businesses and how we should think about that moving forward as to relative importance and the scope for further growth and all that sort of stuff within B2B around the grounds, if you like?

Sure. I'll go through the 4 geographies as we see them, and we'll start with the Middle East and Africa. The recovery there is the most muted against the other 3, and that's a deliberate strategy as a consequence of ensuring that we minimize our risk profile in that particular area, where we were bitten hard when the pandemic struck and that was the deliberate policies from literally the start of the recovery process that we would minimize the exposure there, and that's quite deliberate. And we don't intend to get back to 100% for at least a couple of years in that particular region for that reason. If we go to Americas, which used to be smaller than the Middle East, and it's now our second largest, the nature of why WebBeds and B2B is relevant to our customer base or relevant to the market is that our customer base has expanded and will continue to expand in an environment where the competitive dynamic for all travel businesses is to get great product at good prices where you can deliver it to your end consumer, whether it's a business travel or a leisure traveler, is -- and you can get a decent margin on the way is becoming increasingly important. We are an important supply element to doing all that. So in Americas, we have tapped into 2 particular markets that we're able to be successful, and that is the domestic market and that is the online travel agency market. And both of those have seen significant growth as evidenced by the results that are in the additional information on Page 29 of our pack. So we would see that continuing to demonstrate strong growth. APAC as per Tim's question earlier, we think that we can see significant growth from these numbers because basically our 2 largest markets are still effectively shut, and we're ahead of prepandemic booking level. So we're -- if you were to roll forward 12 months down, I'd say probably the fastest growth being APAC and Americas. Europe is approaching 100% of prepandemic numbers at a booking level. There's still plenty of growth in that marketplace. So to put it all into context, John, we had a strategy session with all WebBeds guys in London last week, and the takeout is no different to what we're trying to communicate over the last 12 months. There's no shortage of opportunities for us to win more customers. There's no shortage of us having the ability to increase our share from our existing customers. And all that's predicated on the work that we've done on the tech platforms, but it's not as simple as having one single platform. It's as simple as manipulating and looking at the data that exists and marrying that with the customer requirements and being more relevant. And we've started that journey, and you're starting to see the impact of that journey in our market share gains, but we're in our infancy on that journey. And we went to considerable pains during the Strategy Day to outline how we were doing it. So if anyone, again, wants to go back and revisit those decks, you'll see in chapter and verse what we're doing to ensure that our conversion rates continue to improve.

Your next question comes from Darshana Nair with Goldman Sachs.

My first one, if you can give me a sense of your staffing levels for the OTA business. What are you at versus pre-COVID levels? And where do you see this settling once the high customer interaction requirements settled down?

Darshana, it's Tony. Look, the staffing levels are pretty consistent with where they were pre-COVID overall. The staffing levels overall are quite a small proportion to the overhead -- overall cost of that business pre-COVID. Overhead, we're about 20% of the overall cost base, the 80% was variable. So when we think about staffing levels, the incremental costs that we incurred are in low-cost geographies to get through the service requirements. But the overall EBITDA margin is still going to be north of 40%. So that doesn't change from where we were pre-COVID.

Okay. Got it. And secondly, maybe on GoSee, given that you're still a bit behind in terms of seeing that inbound volumes recover, what are we really watching for in terms of key KPIs to actually track the impact of your rebranding?

The key API -- the key KPIs will be Australia and New Zealand, international capacity getting above 80% and inbound tourism becoming meaningful, which it's not at the moment. So people coming here for leisure to Australia and New Zealand will be the key driver of GoSee's rebound.

Maybe a little bit more color on how you're thinking about measuring the success of your rebranding itself. What do we need to see maybe over the next 12 months?

I think the KPI there is really -- as John alluded to, is around international visitors and if leisure level has been consistent with where it's pre-COVID. And we will look over to consistent profit as being [ where we were ] pre-COVID. So I mean that's what success looks like.

Your next question comes from Abraham Akra with Credit Suisse.

Just following up on Tim's question on B2B EBITDA guidance. You referred to 1H '19 -- sorry, 2H '19 as the base period, but that doesn't have the 4, 6 months of the Destination of the World's earnings within that number, as it was acquired and completed in late November. What is the -- I guess, the true base earnings EBITDA number that we should be looking from, [ included performer number ]?

Yes, look, we did provide a calendar year '19 EBITDA, which has DOTW for the full year, which is 96.3%. And that was in the appendix to the full year deck, both May of '22 and May of '21. And what we also provided in the back was seasonality, where first half was 73%, second half 27%. So that's the way to think about it when you apply that against the $96.3 million, and then if you overlay an extra $10 million into that second half number, that's sort of the guidance we're providing as to how we think about earnings versus the...

Yes, got it. Awesome, makes complete sense. And also on the guidance for B2C, you're guiding to 2H '23 earnings will be consistent with 1H '23. I guess with international bookings ramping up and revenue accelerating, it's a higher revenue margin business. Does guidance imply, I guess, a step up in marketing cost integrations versus 1H? Or am I reading that incorrectly?

No. Look, if the international airline capacity sustains for the period, as I made reference to in the outlook summary statement, there's some upside to the first half, second half scenario. The variables are a couple of things. The capacity hasn't increased linearly in the course of the last 12 months. You just need to look at the domestic numbers to see that. And if the international numbers were to increase in a linear fashion as the early indications are for the first 6 weeks of the third quarter, then there's potentially some upside to those numbers.

Yes, got it. Can I sneak in one more on B2B for me?

Sure. Give us something easy, what would have been easy. You can do a hard one, if you want.

Okay, I guess a little bit hard. Can you comment on your customer mix within B2B? And I guess is it -- the OTA mix has risen strongly, I guess my interest -- industry feedback is just total beds OTA mix has just risen from 30% to 70%. Is this mix seen as structural or cyclical moving forward? And if it's structural, does that, I guess, pose risks with hotels just directing volume to OTAs and bypassing bedbanks?

That is a hard question. And not in the sense, it's difficult for us to answer, it just requires a longer answer than a Q&A. Happy to go through it with you. There is no -- yes, this question could have been asked 10 years ago when we started the business. Why do bedbanks exist? And why doesn't everyone just book through Bookings and Expedia? I've probably had, I don't know, circa 150 conversations around this over the journey. I'm happy to go through it, I know we're seeing you tomorrow, in more detail, but the summation is as follows. We -- and the numbers are nowhere near the ones you described, 30% to 70%, that's in a different stratosphere to our mix. There's no way that we're 70% of our customer base in OTAs. But the reality for us is that in a marketplace that's previously described as USD 50 billion and our ability to get to $10 billion is a 20% market share -- or AUD 10 billion is a 15% market share, that has increased because of domestic travel and because of the opportunities within the OTA, not the threat within the OTA. And there are unique structural elements about what we do, which is substantially different to what OTAs do. And again, it's a very long answer, but I can tell you, if that was the case, Booking.com would not have bought Getaroom if it could do what a traditional B2B wholesaler could do. We operate and service the hotels from a different viewpoint, and we distribute that inventory to our customer base using different needs of those hotels. So we're -- we have and I've made it -- I couldn't be more bullish about the prospects through the course of the call over the last 30 or 40 minutes. We've got a runway to $10 billion. We're not one where we're going, "Oh, my god, what's going to happen in 6 months' time when we run out of headroom?" That isn't going to happen.

Your next question comes from Wei-Weng Chen with RBC Capital Markets.

Congrats on the results. Just a couple of questions from me. Wondering if there's anything to point out regarding your intentions for your cash balance. So it's, I guess, net cash of $250 million now. What are the intentions with that balance? And at what point -- how much is too much?

Yes, look, at this stage, when we spoke of it at the time we went through the balance sheet, we're going to keep the current ratio greater than one. So for the near term, that's going to be sort of a measure of what we choose to keep. And the other thing we're going to constantly think through is, obviously, we got the first put down of the bond in April of '24. So that's another sort of decision point for us to consider when we think about the next 18 months on that basis, and we'll preserve as much as we can and that gives us optionality as it relates to what we do later next calendar year.

Okay. And that's, I guess, why the -- there was no dividend declared, is that correct? There's no -- not been a change in the -- your dividend?

Until we have the -- a sort of certainty around the bond, we prefer to be cautious and preserve as much of the cash as we can.

Okay. Great. And then just a question on competition. I guess the last few years, you've said that you guys haven't had too much insight into what your competitors are doing because you haven't seen them at conferences and things like that. I think you guys have started attending now. I was just wondering if you could maybe speak to kind of what you're seeing and hearing from a competitive perspective?

Yes, World Travel Market was on last week in London in which we had circa 80 of our employees attend. And clearly, we had a large number -- a significant dialogue with all the major hotel chains, all the major distribution partners, all our major customers. Without exception, from supply through to demand, we've materially picked up share and materially changed the perception of being a vibrant #2 to a very, very strong #2 in the marketplace.

Yes. Okay. And then just on Europe, I guess Europe has been a bit of a tricky operating environment for a bunch of corporates, travel and not travel. But just wondering if you could maybe speak to kind of some of the macro there and whether you're seeing that having an impact on your business.

I made it really clear, Wei-Weng, that the headwinds that we're seeing in Europe is not going to impact the trajectory of the business. The negative sentiment around consumers and travel has been well documented since the end of the European summer. And as you can see from our results, it's had no impact. In fact, we've accelerated our growth rate at both bookings and TTV level in the second quarter and gone even faster and harder in the third quarter. Europe is suffering economically. We are not seeing that translate to activity within the WebBeds business for the reasons that I've outlined. And I've been very, very -- I'm trying to be as clear as I possibly can. Macro conditions in Australia will impact what happens to the Webjet and the OTA business, in particular, the flight capacity. Notwithstanding the looming recession in parts of the world and the slowing growth rates in the other parts of the world, the 3 factors that I've highlighted a couple of times will ensure that we will continue through the use of tech and data to win greater share from our existing customers. And we have got new customers in the pipeline to ensure those growth rates will be maintained. Otherwise, we wouldn't have come up with a circa 40% improvement in the EBITDA result in the second half for WebBeds. So I think we've got one more, operator.

Right. Your next question comes from Sam Seow with Citi.

Congrats on the result. John, I just want to ask about average daily rates at hotels. Have you found the same kind of inflation through the net rate channel over, I guess, the last 6 months? And any comments on the ADR level implied into your guidance going forward?

Yes, ADR, look, we're -- yes, sometimes the math just doesn't stack up, and our ADR doesn't stack up with the reality. You only need to read any international hotel chains' published results over the last 12 months to see a substantial increase in ADRs. And on a like-for-like basis, we are seeing a substantial increase in ADRs on a global basis. Yet our ADR is down, I don't know, I haven't got it in front of me, circa 13% or something from memory. So our ADR is down 13%, yet ADRs are up double digits everywhere in the world, and that's a factor that our mix has changed. And the mix change has occurred for the following reasons. We are skewing to domestic, which are lower. But the ADR of domestic hotels may be low, but that's not the reason ours are lower. It's the length of stay that's lower. So that's impacting our -- because we just divide bookings by TTV, not room nights by TTV. So length of stay is lower. Therefore, our -- naturally, our ADR mix will be lower. And then the second element is that the growth in America, which does have lower ADRs than Europe, is a reflection on that. What we'll see in circa 12 months, is our -- as the normalization of our domestic push becomes annualized, the increase of, hopefully, China and Japan, which are higher ADR markets. If that comes to fruition, our overall ADR will reflect the market. But today, our ADR does not reflect the underlying travel market.

Got it. And then the length of stays, can you maybe talk about where that is now and what's normal? And then I guess that kind of tailwind is ADR [ reverse ]?

Length of stay for our traditional customers selling traditional European summer holidays is the same. Our length of stay for interregional travel, whether it's Europe, Middle East or Asia, is very, very similar. And domestic is substantially lower. It's typically 1 night as opposed -- or 1.2 nights or whatever the number is, but it's substantially lower than our traditional booking, which is more circa 3 nights. And operator, I will wrap up. I'd like to thank everyone for attending the call. And echo, as I do at every point, the hard work that all the employees within the Webjet enterprise have made -- who have made a substantial contribution to this particular result. It's been a difficult 2-year transition, and it's pleasing that the strategic intent of the repurposing and the repositioning of our business is coming to fruition. And we look forward to many further half and full year updates demonstrating that, that strategy is playing out as we envisaged. With that, thank you very much.

That does conclude our conference for today. Thank you for participating. You may now disconnect.