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

Thank you for standing by, and welcome to the Webjet Limited FY '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, Rachel. Like a Porsche with no brake, Webjet is unstoppable. Thank you for joining Webjet's FY '23 results presentation. Joining me today is Tony Ristevski, our CFO. Now let's get stuck into the results. Six months ago, we forecast that in FY '24, we would exceed pre-COVID profitability. Well, we've done it 6 months earlier. In the second half of FY '23, we were more profitable and in pre-pandemic period. We've done it purely on organic business growth. We've achieved it even after closing 2 business units in GoSee Cruise division and Webjet Exclusives, all of which are included in the pre-COVID compare. We have overcome FX headwinds of circa $3 million in the second half. We've dealt with a stagnating airline capacity in Australia. And in that environment, Webjet has delivered bookings increase of 30% to 3.92 million bookings; TTV up 15% to $2.2 billion; revenue up 4% or $188.7 million; and most importantly, EBITDA up 16% to $62.3 million, a significant increase over both pre-COVID and last year metrics. If we move to Slide 3. For the full year, we can see that group bookings and TTV are above pre-pandemic levels as the first half did have the knock-on effect of the Omicron virus impacting our performance. For the full year, bookings are up 115% versus last year at $7.36 million; TTV is up 165% versus last year at $4.34 billion; and revenue is up 164% at $364.4 million. And there's a $150 million turnaround in the EBITDA number, where we delivered $134.8 million. We move to Slide 4. We can talk about the EBITDA turnaround of $150 million. It's actually more than that on a constant currency basis, where we would have delivered $139.8 million. Total cash is sitting above $0.5 billion at $514 million. That's after we have repaid our bank debt of $86 million. And as we said, our business is well ahead on a full year basis at an activity level which is the greatest measure of what we can do on behalf of our consumers and our customers. All 3 business units were profitable with WebBeds delivering $117.1 million in EBITDA, the Webjet OTA business delivered $43.4 million of EBITDA, and GoSee delivered $1.6 million. So let's get into a little bit more detail as we explore what we did to achieve these results. Moving on to Slide 6. Did you ever question our B2B strategy? Did you ever wonder why we pivoted to being a hotel wholesaler? Did you ever see in your dreams all the castles in the sky? Tell me why WebBeds builds castles in the sky. Tell me why the castles are way up high? WebBeds has had a stunning second half in 2023. Bookings are up 63% against pre-COVID. That's a reflection of everything we have done to increase our addressable market and in particular, build out solutions for the North American marketplace, and in particular, part of the recovery of the APAC market in the fourth quarter of the financial year, where TTV 31% up for the half against pre-pandemic levels. This is a reflection of a lower rate in bookings, obviously, as lower average booking values are coming through, and that's due to the changing business mix of our growth markets in North America, in particular. Revenue is 34% ahead of pre-pandemic levels. And most importantly, a phenomenal EBITDA result, which is up 130% on pre-pandemic or $30 million higher than we delivered in the second half of 2019. Moving to Slide 7. For the full year, you can see that all of our key metrics are ahead of pre-pandemic levels. Bookings are up 36%. TTV is up 9%. Revenue is up 4%. EBITDA is up 22%. Over the course of the full year, our expenses were lower than pre-pandemic, representing the scalable effect of the business transition, which I'll talk about in a little while. And the thing that we are most pleased with in our results is that we are now 50% more efficient on an FTE basis per booking, and we are confident that we can improve that in FY '24 and beyond. As we deliver each of our results and when we get back to a normal environment, we continue to see EBITDA margins that are truly world-class within the broader WebBeds business. We delivered an EBITDA margin of 49.5% in the second half, which is up 16% on pre-pandemic levels or roughly 700 basis points. So it's a reflection of a business that is continuing to substantially outperform its competitive base. It's expanding its addressable market, and we're executing and delivering all that on a lower cost per booking transaction than we ever have in history, which brings us to the next step in the evolution of our WebBeds business. In a break with our 10-year tradition, we are no longer setting percentage profitability targets. And just like Z, 8/3/5 is dead. So why are we doing this? Well, our market opportunity has changed. Our competitive landscape is different and our solutions have evolved. As I made reference earlier, and in particular, we have looked at specific market opportunities like North America, and we've built out unique offerings in that marketplace. That's changed the fundamentals of the economic drivers of our business. If you see that our second half expenses are higher than first half. They're driven by bookings growth of 63%, but a changed element of how we capture new markets. In those numbers, you'll see that our EBITDA margin is up -- sorry, revenue TTV margin is up and expenses are up. That's a reflection of merchant of record business, which is a key driver of our growth in the fourth quarter, in which we capture the credit card payment as part of revenue and expense it out of our business in the second line. The consequence being both are inflated, which contributes to our thought processes of why 8/3/5 needs to be disposed of as a metric because the opportunity has changed for us. So what are we going to continue to do for our ongoing business to give comfort around our substantially growing business? Well, what we're going to do is exactly what we've done in the second half of 2023. We're going to focus on growing our absolute EBITDA numbers, and that is going to be the driver and the key metric that we'll be focused on as a business going forward. If we move to Slide 8, nowhere is this more transparent than in the bookings growth profile for FY '23. Our customer segmentation and geographic expansion have contributed to sequential increases in bookings and TTV compared to pre-COVID. At a bookings level, we've been ahead of pre-COVID for over 12 months, and our outperformance is only accelerating. According to IATA, for the full year, international or the global air passenger market is a long way from pre-pandemic levels and is averaging at 75%. If we go to the exit run rate, it's circa 85%, and yet WebBeds has been ahead of pre-pandemic levels out of bookings since May of 2022. So we're in a position where we are well above-market growth. As that market growth continues to return to normality, we will accelerate our growth on a factor of that reversion to normal. And in addition, we will continue to do what we have done, which is grow market share, which is represented in the results that you see in front of you today, in particular, the bookings graph at the top of the right-hand side of Page 8. The TTV is a little bit more muted than the bookings growth, primarily because, as we have highlighted, as part of our strategic initiatives over the course of the last couple of years that we thought the domestic travel market will be the first to recover. And as a consequence, we have targeted the domestic market to a much greater extent than we have historically. And as such, the domestic travel market has a lower average booking value. So that was the first market to recover. And obviously, leisure has recovered ahead of corporate, and we see that in our business mix, where pre-COVID it was circa 80-20, leisure versus corporate, that's shifted to something like 85-15 as we currently speak. And as corporate recovers, we'll see that growth and average booking values increase. And as we sell more international travel, and I suggest that if you look at our results in 12 months' time, you'll see a reversion of this where TTV growth will exceed underlying bookings growth as we sell more longer haul travel and more long-stay travel and more corporate travel. Let's push on to Slide 9. The results we've just discussed and we've achieved in FY '23 didn't occur because we maintain the same structural elements of our business. Instead, it was a deliberate repositioning during a sustained period of little activity to make us a materially more robust travel partner. We have expanded our addressable market. We have delivered better tech. We have gleaned better insights into our customers' behavior, and that's contributed to the top line growth that you have seen. As I previously mentioned, the FTE efficiency is 50% greater than we were prior to COVID, and that will continue to improve. We've also tightened our management of risk, all of which has contributed to a business environment, in which for the long term, we are comfortable that we have the components to enable us to achieve our $10 billion TTV target for the WebBeds business. Let's move across to our B2C business units. We'll start with Webjet OTA. Webjet OTA has made a strong return to form in financial year '23. The domestic marketplace started the year strongly, but there's been a compression of flight schedules during the course of the second half, international capacity has come on stream during the year, and our Web results reflect this supply of thematic. We are now back to 81% of pre-pandemic levels, and we have delivered, as we always do, the best OTA EBITDA margins in the world as we have leveraged our brand strength and lowered our cost base. Our environment is materially different, and this compare excludes the Webjet Exclusives business, which we no longer operate. And it's built into an assumption, as we have discussed over the last couple of years, a changed commission structure environment from our major supply partners. But from this strong base that we've delivered in FY '23, we see there are significant opportunities for us to improve our profitability at EBITDA level and at least maintaining the sort of EBITDA margins that we have delivered during the course of FY '23. If you move to Slide 12, what it highlights is the impact of high airfares on travel demand. Our performance at Web is emblematic of the contraction of domestic capacity. To put that into sharp relief, in the Australian domestic market had less domestic flights in April 2023 than we did in April 2022. By contrast, international capacity has increased throughout the year. So if you look at our results, you'll see that it's been Q2 onwards remarkably stable from the domestic flight booking performance versus pre-COVID. And if you look at trans-Tasman bookings, strong rebounds in the second half. And if you look at the international flight bookings, you see consistent quarter-on-quarter improvement as more capacity comes back into the system. But we have a considerable runway to get back to pre-pandemic volumes. To put our results into the context of the broader market, all of our booking numbers and all of our TTV numbers reflect what was booked and traveled in FY '23. On top of these results, there's been a significant number of credits that we have continued to process throughout the year that we estimate would have contributed to circa 10% to 15% of increased bookings and circa more than 15% or greater than 15% of TTV as a consequence that a lot of those flight credits were international credits. So if you added those credits to our underlying numbers, then we will be back to circa pre-pandemic TTV and booking numbers. The other thing to note, which we did call out in the half was that credits and cancellations have created significant operational impact, which has required us to scale up our customer contact businesses. And those contacts per bookings are 3x greater than we experienced pre-pandemic. Well, we're delighted to say that the level of operational challenges is subsiding as we speak, and we have reverted to our higher levels and peer group superior levels of customer service operations during the course of Q4 of the last financial year. Moving on to where we see our growth coming from, which is on Page 13, you'll see that our performance against our competitive set has been exceptional. We are up 59% on all bookings. We have significantly overachieved in the international recovery. And most importantly, the best is yet to come. We have integrated Trip Ninja into the booking flow. And with the expanded product suite of Trip Ninja coming on to the market in FY '24, we expect to significantly outperform our peers for years to come. The overall Webjet business has withstood all of the challenges that the market has thrown over the course of the last 3 years, and our brand strength has enabled us to maintain our #1 OTA market position, and as I previously mentioned, outperformed the overall market and our peers. If we move to the second of our B2C business units, GoSee, we're seeing that EBITDA has continued to improve with a turnaround of $4.6 million over FY '22 results. And you see that the GoSee market is hindered by having the least recovered profile of our 3 business units. We will not get close to pre-pandemic results until inbound tourism levels shoot up towards 100%. At the moment, they are at 65%, and a significant number of those travelers are visiting friends and family. And these folks are unlikely to rent motor homes. Notwithstanding the temporary demand challenges, we have focused the GoSee business on a broad range of strategic initiatives similar to the transformation program of the WebBeds team. It will enable the GoSee team to deliver a scalable result in a fully recovered market, which we anticipate being in FY '25 with a growth profile between now and then occurring during FY '24. With that, I'll hand across to Tony Ristevski, our CFO, to discuss the financial results in more detail. Over to you, Tony.

Thank you, John. I'll turn everyone's attention to Page 17, where we go straight to the P&L. The intention there being the underlying color, whereby consistent with the first half, we've gone through a series of adjustments to get to an underlying NPAT number and underlying EPS number. We've excluded the nonoperating items, which I'll talk to a bit later on alongside share-based payments to give us an EBITDA for underlying operations. We've excluded the amortization from acquisitions alongside the accounting costs associated with the bifurcation of that convertible bond from the interest line to get to a profit before tax of just over $80 million. An income tax of around $11 million resulted in an NPAT number just shy of $70 million, which is north of $100 million of turnaround from NPAT from this time last year. The way to think about interest going forward, as I said at the half year, is circa mid-teens overall. And we see that slightly progressively climb into the following years as there is a change in tax rate in the UAE, which will mean that, that will sort of start to climb up into the high teens over due course in due time. The D&A adjustment, I talked about that in the first half, we did accelerate the useful life of the platform, which was detailed in our annual report on note 4.7, and that then results in a more normalized D&A for the years ahead, where consistent with the first half I called out $30 million and $15 million, respectively for D&A and AA, and the same applies at the full year for next year's outlook. So turning to the next slide. The waterfall chart as it relates to cash position on Slide 18. Reflecting back, I've done this slide there 6 times in a row. It was first introduced in the first half '21 results as a way to demonstrate to the broader community that what our cash burn was because that was a metric that was a key focus for us at the depth of COVID in terms of the accumulation of cash burns as a consequence of working capital, earnings or losses back then, CapEx, interest and tax, i.e., the cost of keeping the doors open as it is probably best akin to. And over time, we've gone through and driven a lower number of burn into a positive number. And at the half, that positive number was the consequence of more working capital and the smaller earnings. And then it's pleasing to see at the full year, the key driver of our cash surplus is earnings, and that will continue to go forward. So $82 million of the $12 million per month came from effectively the profit the business is generating and a smaller portion came from the working capital benefit. At the first half, we did have a benefit of $102 million, and that's down to $56 million, because there is a natural unwind of working capital. Our TTV in the months of August and September is a lot higher as it is as compared to the month of February and March. So as a result, what you find there is we get paid before we pay our suppliers. So they end up having a positive benefit in the first half, and that unwinds in the second half. And we'll still see that trend going forward as it relates to '24 as such. The other key positive is we did pay down our debt in the first half of $86 million. If we had not done that, we would have north of $600 million of cash on our balance sheet, but we felt it would be prudent to do that. And equally at the first half, which is pleasing. And as John said, we've come out of the gate pretty fast, that we did revert to normal covenant testing 6 months ago -- 6 months ahead of plan. That's been a quite positive. And again, thank you to the banks for their support for the last 3 years. Moving forward to the next slide, corporate costs overall, Slide 19. We did index a bit higher than what we would have anticipated at the half. We did sort of call out $21 million or circa thereabouts, and we ended up being just shy of $23 million. Obviously, a high compliance cost as it relates to audit and security and the like we incurred in the second half. Equally higher short-term benefits as we start to index against our internal results were higher than we had expected. We see the run rate in half to continue into the new year. So we're guiding towards a number of circa $25 million for next year, and that in our minds grow with regards to CPI going forward. The technology items there are a combination of ROOMDEX and Trip Ninja. They came in sort of likely where we thought, which would be sort of just under $5 million for the year. And looking ahead, we expect that number to half in '24 as it relates to the losses from those 2 combined businesses as they start to turn around and start to contribute revenue to their cost base, and that will start to mitigate some losses as such. Moving to the next slide, which is a summary of our nonoperating items, which is one-off. The pleasing thing here to say is this will be the last time I'll be going through this slide. The pleasing thing also is we went live with all our financial system upgrades albeit ERP implementations. So collectively across the whole organization, we've replaced anywhere 10- to 20- and 30-year-old accounting platform in B2B, B2C and corporate, which is pretty exceptional that we have done that in the space for the last couple of years. So now that's behind us. So the cost of running the platforms are incurred as part of our BAU costs going forward, which would be in the '24 numbers. So this will be the last time we would be effectively showing a one-off nonoperating item as such. Moving forward to the balance sheet on Slide 23 -- sorry, Slide 21, so consistent with the first half, a big focus around cash, a big focus around managing our debtors, and they are down relative to September as a consequence of TTV levels overall. Our credit policy has been adhered to and continues to improve with debtor days down from 25% at the half to 30% at the half as compared to pre-COVID levels. Payables are consistently in line with regards to trading at this time of the year and relative to where we were in September. We paid down the debt as the other key call out. The other key item to note is obviously current ratio is a focus of us going forward. Liquidity is a key requirement. So for me, looking at this going forward, in terms of what does cash look like or what does a healthy balance of cash look like, it's really going to be governed around the current ratio greater than one, ensuring that we have enough liquidity to obviously fix the delta between working capital. That was detrimental to us 3 years ago, but we'll take a different perspective and a more cautious perspective going forward as such. Turning to the next slide in cash flow. This is just a table representing the waterfall from the earlier slide. The only thing to call out here is, obviously, the contribution from earnings being a major contributor to our cash this year, and that will continue to be the case going forward. The other thing to call out here is we might declare a dividend for '23. We're taking a very cautious approach with the pending first put of the bond, which is due in April of '24. In our mind, with the share price where it is, it's obviously in a more positive position, but we can't control what the markets do. So therefore, it would be prudent of us to sit on the cash for the next 12 months and await that decision from our bondholders. And at that point in time this time next year, we'll have more to say as it relates to where we would go with the cash on our balance sheet. So the key thing there is it might be a bit boring, but it's probably more conservative at this point in time to preserve that and give us all the optionality we need to deal with that event should it arise in 12 months from now. Going forward on to the next slide being CapEx. We did spend a bit more than what we anticipated at the half. We did indicate at the half that the spend will be around circa $30 million. The B2B guide did spend a bit more in the second half as it relates to the unification of their platforms and some of the foundational investments that went along with it. But the pleasing thing there is, going forward, it has to deliver the benefits of the business that John outlined earlier into the scalability. And for us, going forward, the outlook for CapEx will be circa $39 million and sort of close enough to 70% of that will be in the B2B space as we continue to invest in that and the rest will be in the B2C space. With that, thank you, and I'll hand it back to John.

Thank you, Tony. Webjet team has demonstrated incredible resilience and skill to deliver the result in FY '23. Together with our supply partners, our customers, our consumers, and other stakeholders, we have fortified the knowledge that we delivered a superior result over the last 6 months. The first 7 weeks of the new year do not change any of the underlying metrics of our business. They fill us with even greater confidence that FY '24 will continue to see us significantly exceed our pre-pandemic results. As of May 19, WebBeds is up over 40% at a TTV level and greater than 35% at a bookings level compared to the same period in FY '23, which indicates a reversal of the declining average booking values in FY '23 as we proportionately sell more long stay and international hotels. Webjet OTA business is upgraded 3% at a TTV level and greater than 10% at a bookings level on FY '23 as we continue to sell more international flights. And the contrast is GoSee is up 5% at TTV and 15% of bookings as we see more supply come into the rental car market, resulting in lower average booking values. The outlook for us is very positive in the context of all 3 businesses have had a remarkable rebound from FY '22, and we've covered off the results in FY '23. We have said previously that we would exceed pre-COVID numbers on a full year basis in FY '24. We are now saying that we will significantly exceed FY '24 numbers and all 3 business units will improve substantially on their underlying performance in FY '23. So with that, Rachel, I would like to thank everyone for listening to our presentation and if you open up questions at this time.

[Operator Instructions] Your first question comes from John O'Shea with Ord Minnett.

Very well done on the result. A couple of questions from me. Firstly, the CapEx side, interested there in your thoughts as to the importance of that, the relevance to Webjet and where you're trying to position yourselves moving forward given your sort of original sort of bases being a sort of a tech-oriented company, I guess? And secondly, when we look at FY '25, is it fair to say that '24 is like a transition year in many ways in terms of the trajectory towards a normalized travel environment? Do you think that's the right way to think about it, given that there's still capacity constraints, China is not out there, Japan, all of those things. How should we think about '24 in the context of that picture relating to '25, if you know what I mean? And I guess the first one on the CapEx side the importance and relevance to your company and how we should think about that.

I'll give both questions a go, John. And if I miss anything, Tony can chip in. So on the CapEx side, where you've see in Slide 23 that CapEx is up on FY '22, but we're still below pre-COVID levels, but we will definitely be up in FY '24. It's a reflection of our desire to extend the lead that we have in the recovery thematic. The broader opportunity, which we have discussed at numerous strategy days, in particular, on the B2B Strategy Day is to deliver a business that can scale up to $10 billion in TTV. To deliver that, you need market-leading tech initiatives and you need to address specific opportunities in the broader market that a singular monolithic tech stack could never achieve. So we are utilizing the CapEx and predominantly the growth is on the B2B side to achieve that strategic outcome. And your information is very apt. We've always been a travel tech business, and our great skill has been in taking disparate content from global suppliers and packaging it in a way that either consumers in the Webjet brand or travel companies in the WebBeds business can digest it more efficiently than anybody else. And that opportunity, notwithstanding any of the tech innovations around AI and market initiatives that we currently see occurring in the travel business, is not going to disappear. So the consequence is, we will continue to invest in the capital, in our CapEx profile. But that investment in CapEx will be substantially below that -- sorry, that incremental investment in CapEx will be substantially below the underlying EBITDA growth profile of our business. Tony, anything else you want to add?

No, that's true. The correlation here is, we'll grow with inflation and EBITDA will grow materially a lot.

So to move to the second question, the...

The way we think about '24 interjected to '25, I guess?

Yes. So the travel market is circa 85% fully recovered. Leisure is circa 100% fully recovered on a global basis and corporate is circa 75% to 80% fully -- 75% recovered. There are 2 elements to the question. There is geographically, what's going to happen? You picked the 2 biggest markets that are least recovered. The 2 biggest global contributors to the overall tourism marketplace in China and Japan are a long way from getting back to pre-COVID levels. At the end of financial year '24 for us, we think that China will only have circa 50% of its international outbound capacity. So even into FY '25, we're not expecting a fully recovered international outbound China market. The Japanese market would have a similar kind of trajectory. While both are open, both are operating well below 30% of its pre-COVID capacity as we speak today. So that is potential upside to the recovery of the market. The second element which I touched on is, the corporate market, we're expecting to see a stronger rebound in FY '24 from the corporate market because it is still trading in the broadest global sense dramatically below where it was in the pre-pandemic environment.

Your next question comes from Tim Plumbe with UBS.

Congratulations. Just two questions for me, if possible, please. John, both around the B2B business. The first one, can you talk a little bit about the improved conversion rates that you're seeing against your historical customer base. And I don't know if it's possible to split it out when you think of that growth that's come through from existing customers versus new geographies/new customers that are being brought on board?

Yes, no problem. So again, the summation is, we are selling to new customers. So we called out in the deck that Europe is up 10%. 10% of the growth that we've achieved in Europe is from new customers. North America is up threefold. So that's new customers that we didn't have pre-pandemic. And APAC, the customer mix has changed. And Middle East, the customer mix has changed less dramatically. So you're seeing -- if we exclude Middle East from that conversation, you're seeing us win on the following 2 different parameters. Point number 1 is more customers in existing geographic mix and winning share from existing customers. Now let's talk about more customers. The growth profile that we touched on in the first half and we called out in our Strategy Day last year is that there's been a significant shift to OTA customers and a decline in traditional tour operators vis-a-vis our pre-pandemic numbers. So we're not seeing an acceleration of that in the second half. We're just seeing a consolidation of what happened in the first half. Where we did see a significant acceleration is in North American bookings as we've rolled out merchant of record solutions for our customers in that particular marketplace. The second element and the more gratifying one for many reasons within our existing business is the increased share and the conversion number that you've just made reference to from our existing customers. One of the things that the WebBeds business has taken the opportunity of refining is the relevance of the direct contracts that we've been able to procure, and we've refined that over the course of the last couple of years. And we're seeing that we were able to make better offers at the right time to our customers, and we're winning greater share as a consequence of that. We think that is a longer-term game. There will be plenty of new customers that we will add, but winning our share of wallet in our existing customers will be the major contributor to getting to that $10 billion TTV target that we've made reference to previously. Was that both your questions, Tim? Or is that just one of two?

That was the first one. Second one was just if you can touch a little bit on the competitive environment that you're seeing in the B2B space, both at the top end and that long tail, please?

It's always difficult because we're the only publicly traded business that carves out the B2B results as we do. So any commentary I'd make here, I would like to do with a high degree of conviction. What I can say, and as you would have seen in our results, is we've been able to dramatically increase the bookings growth rate in the second half versus the first half, and we've been able to do that at increased revenue to TTV margins. So we're not seeing pricing pressure being put on our business at this point. And we think the sort of above 8% revenue TTV margin is sustainable for FY '24. And I previously would have indicated around 8%. We're now saying it will be greater than 8% for FY '24. So we have a high degree of confidence around our competitiveness, which is influencing pricing. So we're very happy that we will continue to win share, we'll continue to grow our business, and we'll do it at a reasonable margin, and we will do that without the significant growth in expenses that you saw in the second half, which was a reflection of a couple of things that occurred in our business. One is it's the first time in 3 years that we paid short-term incentives to all our employees. And that was a significant contributor to the expense increase. The merchant of record that I made reference to in the presentation also increased significantly in the second half. And then we had annualization and CPI increases as we have brought our business back to scale. And to put that into contrast, we operated with circa 2,550 people pre-pandemic, and we're back to 2,200, but at greater volumes. So that just shows all the effort that the team has put in is delivering greater efficiency across the board for our business.

The next question comes from Ben Gilbert with Jarden.

Just following on from the prior question about price sensitivity on that [indiscernible] expenses. If we think about that second half run rate, what sort of capacity does that give you on TTV? Should we sort of think about that $69 million running through sort of into first half of '24 or continuing to ramp as you sort of build towards that ability to do $10 billion of TTV any time?

I think the best way to think about it is that sort of $69 million will sort of grow with inflation into the second half -- into the first half of '24 and then so forth into '24 half 2. The volumes will be materially higher year-on-year as it relates to that second half in '23 to '24. And you can see that in the first week's trade. So that's probably the best directional sort of guidance I can give you there in terms of how to think about expenses of WebBeds.

And then just following up on that in terms of the productivity because I think you gave some numbers around sort of bookings for FTE in sort of those mid- to low 800s at your Strategy Day last year. I think you said you're running about 50% higher. With the investment you guys are putting in, in systems, do you have a view on where best-in-class is in terms of productivity per FTE? Could you be pushing to 2,000? What sort of numbers should we be thinking?

Well, I'll answer it historically and then move to what we're doing today. If you go through our results pre-pandemic, we always said we were the low-cost provider in our WebBeds space. And we're now at least 50% better than that. I don't know what best-in-class is, but I know nobody in our industry is doing what we deliver. We've had anecdotal feedback about what that looks like in other businesses, and we're very comfortable that we've got capacity to improve our numbers. We're at plus 50% FTE per booking greater efficiency today. When we're sitting here in 12 months' time, I wouldn't be surprised if we're 20% better than that. So they're the sorts of numbers that we'd expect. And then I think the year following, we could be another 20% better than that again. So all the things that we have delivered in unifying the tech platform that contributed to that on the WebBeds side, all the things that Tony spoke about in integrating back-end accounting and ERP solutions across the board will minimize the need to invest in human resources as we grow our business. And most importantly out of all of that, which overarches all our thinking, is that we needed to do all of this to get a business that's going to deliver $10 billion in TTV. So we would've never been able to do it at the rate that we now can deliver against it as a consequence of the changes that we have made. So we're very comfortable that our efficiency stats will continue to improve over the medium term and our business will continue to scale and our growth expenses, especially at the employee line, will be moderate in comparison to the overall growth rate of the business. Now the expenses that we don't control are things like search cost, which is a major contributor. When you're doing billions of searches on our website each day, and that's all being expensed through cloud-based providers, that's an expense that again was significantly up in the second half or the first half, but you expect that to continue as we explore and expand into new markets.

But it is not a bad problem to have to see those costs continue to rise.

Look, we're delighted with the underlying metrics of the business, and we're happy that whilst there is a half-on-half increase, as Tony suggested, going forward, it will be more moderate in comparison to what we're going to achieve with increased conversion rates on the sales side.

That's great. And just one final one for me. Just on the Webjet and the OTA business, the revenue TTV margin, I think you said at the half you thought you could still get back to that 9% to 10% range. Is that still the aspiration as you see more international add-ons, et cetera, coming through in this part of the business?

Yes. It's a good question. We think it will get closer -- it will improve. We'd like to be between 9% and 10%. We need the market to be more fully recovered to have a high degree of confidence. But we would expect, as the second half -- sorry, FY '24 reveals itself to us, we would expect that we would get greater revenues than we did in FY '23 as the amount of international increases. Because our international is higher margin, albeit not as great a delta as existed pre-pandemic because of the loss of front-end commissions from a number of international carriers. So it is still higher margin than domestic, but not as great as it was. So that's sort of a work in progress, and we'll probably give a little bit more color to that at the half year results.

Next question comes from Sam Seow with Citibank.

Congrats on the result. Couldn't help notice that despite I guess the great result, the ABV was still down 20%? I know you provided some color there on some factors, but just wanted to understand what level you think that ABV can get back to versus pre-pandemic after some of those, I guess, temporary factors unwind, but that includes, I guess, the structural and strategic shifts you've made there in geographic and customer mix.

So Sam, the ABV, we would be probably one of the few, if not the only, travel businesses in the world that's got a lower average booking value when we're selling hotel rooms. And that's purely mix. It's got nothing to do with the underlying average booking value. Every hotel just about in the world is selling at a higher rate than it was pre-pandemic, so that's a given. But as I touched on in the presentation, and I'll expand a little bit more fulsomely now, when we thought about the recovery dynamic in 2020 and 2021, we thought that domestic tourism would be the leading indicator or the leading recovery indicator. As a consequence, we shifted our resources and addressed the market that previously we had underserved. So domestic was circa -- I'm doing this contemporaneously, so I don't have the exact numbers in front of me. But I think domestically, we were sort of 10% to 15% of our overall business in FY '19 and circa more than double that in FY '23. So the consequence of the domestic business is not that the booking value is less, it's just that the length of stay is lower. So the average booking value is lower as a consequence. That's reflected in our results. Nothing to do with pricing. Our margin on those bookings, as we've highlighted, is still 8.4% over the full year, which is healthy. So what we will see in FY '24, and we're already seeing it in the outlook, is that TTV is tracking ahead of bookings. And that's a consequence of us now selling proportionately more international than we did at the same time last year. And you got to remember, at the same time last year, April and May of 2022, Omicron just had its first wave, and we were in the start of the recovery process. So again, disproportionately, we had more domestic and now we're selling international. So that's the reason why average booking values are a little bit unusual in our results versus everybody else's.