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

Thank you for standing by, and welcome to the Webjet Limited First Half '24 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. Look what we've done. Webjet is a star boy. Welcome to the Webjet Limited first half results for financial year 2024. Joining me today is my esteemed colleague and our group CFO, Tony Ristevski. Let's get straight into the key metrics. As we can see on Page 2, all metrics are materially ahead of first half 2023. Bookings are up 27%, primarily driven by WebBeds, where first half bookings are 50% ahead of prepandemic levels. TTV is up 35%. Part of that growth is a reflection of international travel coming through in the Webjet domestic market in the first half of 2024. Revenue is up 39% in both of our major businesses of WebBeds and the Webjet OTA business, we've addressed new opportunities and have been able to capitalize on those new revenue opportunities and our EBITDA margins continue to be best-in-class, delivering a 41% improvement with $102.1 million of EBITDA in the first half of 2024. To go through the highlights, as many of you who have followed our story over the last 3 years have known, we've taken the opportunity of recrafting our business and putting in place a transformation strategy for both our WebBeds and our Webjet businesses to operate at greater scale with greater efficiency than we were projecting to when we were in our pre-COVID phase. We're a fast-growing business back in 2019, and we believe all the ingredients are in place for us to be an even faster growing business in 2024 and beyond. If we call out the specific highlights for WebBeds, as I've -- as we'll soon see, all metrics are significantly ahead of prepandemic levels. EBITDA margin continues to deliver above 50%, and the growth rate has been solid throughout the first half year, and we expect that, that will continue into the second half. The Webjet OTA business, again, all key metrics are up in the first half. TTV has got back to pre-pandemic levels. We have seen a nice rebound of international bookings. We'll talk a little bit about the advantages that Trip Ninja brings to that business in a second. And again, our EBITDA margins are the best flat-driven OTA EBITDA margins in the world, and they're back to our prepandemic levels. GoSee had a nice improvement in the half. However, it's still hand-strung by the lack of non-visiting, friends, family, corporate, inbound tourism, in particular, to New Zealand and other supply chain issues associated with Motorhomes. And in aggregate, the combination of the activities that I've just described have shown Webjet Limited to be a cash machine. We are throwing off $140 million, $144 million of cash, improving our cash at bank at the end of the period to be $634 million and that is after spending $27 million on capital management initiatives, which Tony will describe to you shortly. Let's get into a little bit more details about our WebBeds business who, unblinded by the lights. If WebBeds were a stand-alone publicly listed company, it would be the most organically recovered travel stock. We are up 50% at volume. "look, Ma, no hands". If you go through our metrics comparing it both to pre-COVID and FY '23, you'll see that bookings are up 50% on pre-COVID, 32% half-on-half. TTV is up 37% of pre-COVID, only up 46%. Now it's important that I call out what's driving the delta between TTV and bookings not being in alignment. What we've seen in this half is greater growth in North America and APAC, which is contributed to the overall performance. But in contrast to virtually every other business associated with selling hotel rooms, our average booking value is still lower than pre-pandemic, and that's a factor of the mix that bookings that we get. We have a higher proportion of bookings coming out of North America, and we have a high proportion of bookings that are domestic and their lower average booking values. So we're not a beneficiary of the rising tide lifting all boats, we're beneficiary of, the strategies that we adopted over the course of the last 2 to 3 years to increase our addressable market in the B2B space and being able to successfully execute on those opportunities. If you look at the revenue side, we're seeing increase of 50% half-on-half. Revenue margins have been solid over the course of the year, and leading to an outsized performance at an EBITDA level above 41% compared to FY '23, up 23% pre-COVID, and it's a reflection of the lower cost base and the efficiency initiatives that underpin the basis of the business. But I'll talk a little bit about what we've done to ensure that, that future growth can be maintained. So if we move to Slide 6, again, we'll see that booking volumes are up, average booking value half-on-half is up. It's still down circa 10% on pre-COVID numbers. TTV is up 46%. Revenue is up 50%, Oh my God, expenses are up 62%. Let's talk about that in a second, and EBITDA is up 41%. Revenue TTV margin was up 23 basis points, and our EBITDA margin was 52.3%. So as I've called out and the thing that we're most proud of in this result is the booking volumes for our largest business being up 50% higher than pre-pandemic levels. In a couple of slides, I'll talk to you about how that mix has changed and, what the implications are for our business, but we have outperformed in APAC, North America and Europe. We're up 50% in aggregate with a -- with one of our most significant regions being down as a consequence of decisions that we've made in relation to quality of earnings that we wish to maintain on an ongoing basis and ensuring that we have appropriate policies in place to manage the financial risk associated with providing credit to some customers. So overall, booking volumes were up 50%. I mentioned that the expenses were up 62%. As we headed into this financial year, we knew that we were in a great position in the recovery thematic for the overall travel industry. To make sure that we did not limit that opportunity, we have increased a number of areas of our business to enable us to have the appropriate size and scale going forward. So you'll see that expenses are up 62%. And what's going to be, and if you take a short-term view, that's an outsized increase, but what you'll see in the second half of our financial year is it will be flat half-on-half. So the bodies that we've added into the business, the tech that we've implemented into our work practices are now established and that is now the "status quo" for the business. We're operating at a business that, on a per employee basis is 60% more efficient than it was pre-COVID, and that will again increase in the second half. And what we've got is a business that, in aggregate, is well positioned without requiring any further significant investment to achieve our growth ambitions for at least the next 18 months. So we're in a strong position and that we've got the bodies on the ground. We've got people in place. We've got the contractor in the markets that we need to be. We've got the salespeople in the jurisdictions that we need to be selling. And we've got the customer service capability to support the existing business, which is at record levels and generating over 3.5 million bookings in the half. And as that continues to grow, we have the resources in place today to support that. As our business has delivered a 41% improvement on FY '23. We're naturally delighted that we've been able to maintain our world-class margins, and that's a reflection of all the efforts that we have undertaken to ensure that our business is scalable, robust, defendable with significant growth opportunities going forward. We move into a more detailed view of first half trading, you'll see, as I've already called out, our 3 now largest regions are all operating at significant momentum and at higher rates than they were pre-COVID. APAC, which had been sluggish to reopen in financial year '23 is now fully reopened and momentum is continuing to pick up. It is our largest booking volume region already, and there is significant opportunity and even greater investment that we have made over the course of the 6 months to enable us to address opportunities in the APAC region. Europe, which is our largest region by TTV and our most profitable remains our most important by size. North America has been our fastest-growing region compared to pre-COVID. And as I spoke earlier, Middle East, we have got lower volumes, reflecting decisions that we have made. The net result of that is if you look at our bookings compared to pre-COVID in FY '23 first half, we were up 106% and 119% each quarter. We've now accelerated that to 146%. And as our growth continues, we've accelerated in the second half to be 152% of pre-COVID numbers. And if we look at TTV, the numbers are similarly impressive where 93% and 109% Q1 and Q2 of FY '23 have been replaced by numbers looking like 128% and 136%, again, an acceleration of our growth rates post-COVID. So if we look at that in contrast to the overall market, the best proxy that I think we have is the global air passenger market has recovered to 97.3% of prepandemic levels. Webjet has been in excess of our prepandemic level since May of 2022. And over the course of the entire half, we are up at 152% of pre-pandemic levels of bookings for the second quarter and 150% for the half. So we have outperformed the market massively over the course of this half year. Let's give you a little bit more color on what's happened to our business. So for those who can recall to the years 2014, '15, when we first started this business and we're in our infancy, we're predominantly a business where Scandinavian travelers would go to the Mediterranean. That's where we started. And from there, we've grown and Dubai as a destination, they are our two key markets. As we've grown from there, we've grown exponentially into every geography through a combination of the M&A activities that we've undertaken to give us scale and the organic growth that we've been able to deliver from the assets that we have under management. So WebBeds is fundamentally different to our prepandemic business. As you can see, pre-pandemic, circa 50% of our TTV and an even greater percentage of our revenue came from Europe. That's now 42%. But the other aspect that's changed is APAC has continued to be relevant at both the bookings and the TTV level. Americas has come from 12% of pre-pandemic bookings to being 29% of our mix. And Middle East and Africa has gone from 18% to 6%. It's all part of the thought processes that we had in relation to what would be an optimal environment for us as an expanding global B2B business, and we've been able to achieve that by having a well-balanced portfolio across the globe. As you can now see, at a bookings level, APAC has surpassed Europe. And the thematic that I would occasionally describe in 2029 about the investment thesis within WebBeds was that if you're backing WebBeds or Webjet in aggregate, you're backing our ability to grow in Asia, and that hasn't really changed. Whilst the we have grown globally, and there were still significant growth opportunities for us in the Americas and Europe and the Middle East, it will be APAC that will lead the way for us over the course of the next 2 years to 3 years, and we'll be calling that out, in the intervening financial years when we report. Moving on to our OTA businesses. The Webjet OTA delivered an EBITDA improvement of 24%, which is many multiples above the market growth rate. For those who thought that our OTA business would struggle, you can "save your tears for another day". Webjet OTA, bookings were up only 8% half-on-half. We're still below pre-COVID at a bookings level for reasons that I've called out numerous times over the last 3 reporting periods. TTV is back to pre-COVID levels at $716 million for the half, up 17% on the first half of last year. Revenue is up 18% and EBITDA has delivered 24%, which is circa 79% of pre-COVID. Our -- the work that the Webjet team has done in light of the challenges for all OTAs, not only in Australia but globally all OTAs, but in the post-COVID world, has truly been exceptional in maximizing the revenue opportunity for the business, being able to deliver world-class revenue margins, which translates to best-of-class EBITDA margins for our OTA business. We have been focused on taking advantage of the growth opportunities as international capacity returns to the Australian marketplace. So FY '23 bookings are up 8%, average booking values are up. I'll talk a little bit about that in guidance and the implications for us, because the bookings, the average booking value for the domestic market has been in a state of flux over recent periods, and we'll call out the implications for our business later in the presentation. TTV, up 17%. Revenue up 18%, expenses only up 14%. EBITDA up 24%. Revenue margins are up half-on-half. And again, EBITDA margins are best in the world at 43.4%. So the bookings increase of 8% is driven almost exclusively through international capacity coming back on board, whilst it remains below pre-pandemic levels. We are starting to see an improvement in the number of carriers and the flight availability, and we're starting to see an easing of pricing, which augurs well for demand into '24 and '25. Our bookings, excluding everything we've just highlighted does include circa 10% to 15% of flight credits, our total volumes of circa 10% to 15% of flight credits are processed. We anticipate, thanks to the relaxation of some of the flight credit criteria that all of that should be consumed in the next half. The standout opportunity that has been integrated into the Webjet OTA business as being Trip Ninja. Trip Ninja has delivered us unique content, and I'll talk a little bit about Trip Ninja in a couple of slides, but Trip Ninja did unique content to Webjet OTA and of our circa $4.5 million, sorry, $5.5 million or $5.2 million of EBITDA improvement, $2 million is attributable to the integration of Trip Ninja, and we'll talk to you about how we did it and why that was important and why we have a high degree of confidence that there are significant other growth opportunities for our friends at Trip Ninja. We're getting better at selling hotels on the Webjet site. We're up 50% on prepandemic levels. We've done a fabulous job in increasing our brand strength and market penetration and outperforming against our peer group all while doing it with lower cost on marketing. And our overall result is we were up 24%. If we move to Slide 12, we can talk about significant market share gains where against our competitive set, we're up 37% on international market share. Trip Ninja is a key component of that. As the overall international market continues to grow, we think that we have even greater opportunities and our marketing message will be tailored around the unique inventory and content and pricing that is available on the Webjet site. That is again driven by Trip Ninja. It's now being integrated across all of our international and domestic multi-stock trips, and it's supporting our above the line international market share growth. Domestic share is 25% higher than pre-pandemic. We are the #1 OTA and we're recently recognized as such by the World Travel Awards for the leading OTA in Australia, New Zealand and Oceania. Okay. Let's go across the ditch. See our friends in GoSee. Good improvement half-on-half. The business is still nowhere near the anticipated levels that we would expect, and we still think there are great growth opportunities for the GoSee business. Most of the key metrics are up with the exception of average booking value, which created a flattish TTV. The business is focused well on executing against its strategic objectives and bookings are up 15%, primarily driven by our car business. Our Motorhomes business has been capacity constrained, and that has impacted the overall aggregate of our GoSee business. Again, similar to what I called out for WebBeds, we've invested our expenses to get us to the optimal state for the GoSee business, and that will remain flat for the second half of 2024. EBITDA is up, but unfortunately, happiness is a low base, and that's merely a reflection of where we started. And we will continue to focus on our acquisition strategy to improve site traffic and conversion. And we see that there are some green shoots emerging in the GoSee business, and we're hopeful that in the years to come, they will be more relevant to our particular call out of numbers. Let's get into a slightly deeper dive into some of the strategic decisions that we made during COVID to contribute to the improvement in our businesses. At all levels, Webjet has been fundamental in providing a solution where we aggregate disparate technology and make it consumable, whether it's through the hotel intermediary space or whether it's through the OTA space. And we made 2 acquisitions of various sizes to contribute to that broader strategic intent. The first of which was ROOMDEX. We acquired 49% of ROOMDEX in February 2022. We paid $10 million for it. The strategic intent was that WebBeds will promote it, but ROOMDEX would operate as it does under separate management, separate sales force and separate organizational structure. Over the intervening 18-month period, ROOMDEX has continued to lose money and was not in a position to get to breakeven. The consequence is that we have acquired the balance of the ROOMDEX business. We have written off our 49% investment because we acquired the balance for a nominal amount. Under acquisition and in Webjet's hands, ROOMDEX will be integrated as part of the WebBeds business offering. It's been restructured. The tech platform and the tech investment remains. However, we have removed the management layers and the sales layers and now the ROOMDEX business is operating at a marginally profitable level under Webjet ownership. We will continue to invest in ROOMDEX and will be part of the offering of differentiating our broader initiatives to the hotel supply of our marketplace. So I called out Trip Ninja and its contribution to Webjet results. Trip Ninja is now fully integrated into the Webjet business. We've also launched the business into the broader travel universe. It operates as a stand-alone entity. And whilst "I don't want to know if you're creeping, please don't let it show". Trip Ninja will be selling its product to our global competitors, and we are in the process of continuing to build out its capabilities. And as we see in Webjet, it can make an immediate impact. And in the test case of our business, which we will use to facilitate the sale of Trip Ninja product to other customers, our fare structure offering has created better fares in the GDS in 2/3 of our trips and delivered fares that were on aggregate -- on average, sorry, 30% lower than traditional pricing. That is unique to Webjet in the Australian marketplace. In a world in which there's very little differentiation, this gives us the ability to aggressively go after a market segment that has previously been out of reach for us. And we think that this will give the Webjet OTA business a growth profile above what we would have achieved in our underlying superior execution. But on top of that, we believe this will give us an extra leg of growth that will continue for the next 3 to 5 years. So we're delighted with the acquisition of Trip Ninja, which we acquired for a nominal sum. And it's now key part of our business, and we have built out a 25 strong employee base to support Trip Ninja going forward. With that, I'll hand across to Tony Ristevski, our Group's CFO to go through the financial summary.

Great. Thank you, John. So if we can turn your attention to the first half '24 financial summary. The key callouts on this slide is underlying NPAT is a phenomenal 120% up on this time last year, delivering an EPS that's north of $0.18 per share. When I look at the underlying operations column, just as a reminder, at this time last year, we did go back and revisit the useful life of the B2B and B2C business, which has a higher D&A charge as compared to a more normalized approaches here of circa $40 million, which we'll start to see that being the same into the second half. The other key callout on the slide is our effective tax rate for the underlying operations. As I mentioned 6 months ago around the mid-teens was 14.3%. We will see that continue through into the second half of the year and being roughly 15%, and we'll see that grow into the new financial year around sort of the high teens to almost 20%. The increase in tax rate is effectively the introduction of a corporate tax in UAE from 0% to 9% which will impact us next financial year. Turning to the next slide. The phenomenal cash position for the half, $144 million being generated by the business. The pleasing thing here is this time last year, when I look at the cash contribution, it was 2/3 working capital, 1/3 earnings. And creating this half is roughly 50-50, contributing to the positive cash position, which would have ended around just north of $660 million, which is a far cry from where we were pre-COVID. In December of '19 we were low $200 million, so 3x more cash on our balance sheet despite the -- where we are for 3 years later. The key thing here, the other thing to call out is we did undertake the capital initiatives where we spent in totality $33 million, of which $27 million was settled this half and the remaining $6 million was settled in the second part or be it in first week in October. And I'll talk a bit more about that later on. And similarly also talk about the revolving credit facility when I talk about the balance sheet. But all in all, an incredible strong cash position for the half up $120 million on where we were 6 months ago. Turning to the next slide. Pleasingly, we've merged the 2 slides being corporate costs and operating expenses on to 1 slide in the past within nonoperating expenses during COVID, we undertook a lot of restructuring activity, and that resulted in the last item in last year with the ERP program. We did not anticipate any one-off this year. But with the capital management initiatives, we did have nominal adjustments as it relates to a mark-to-market on the -- on our exposure there, which has underlying exposure to Webjet shares, coupled with the transaction costs associated with achieving that. Turn also your attention to tech investments. I know this item doesn't get a lot of attention when I look at the markets that the sell side puts into their numbers. It is a combination of ROOMDEX' proportion at the losses, along with the losses from Trip Ninja. We don't report them inside B2B or B2C earnings. They are roughly 50-50 in terms of what contributed to that item. Going forward in the second half, ROOMDEX does not appear in that line, so we have acquired now 100% of the assets, and that will be merged into the WebBeds' business factored into the outlook that John will get to later. And then in the second half, we do expect to have losses around $1 million as such. And corporate costs roughly around 26% or 13% or 12.7% for the second half or thereabouts. I'll move to the next slide being the balance sheet. The key callout here is our debtors, as John mentioned earlier, continues to be in a great shape. We do focus around the credit policy and in adherence, which has resulted in largely an improvement in debtor days materially when where we were pre-COVID. In the balance sheet, we've also got this item called financial assets, being the $33 million of equity derivatives, which is linked to 4.9 million Webjet shares its underlying value. The other key callout there is the borrowings number. The convertible note, as you can recall, was instigated almost 3 years ago back of April of '21. It's a 5-year note with a 3-year put. So what that means is that the investors have the option of asking for their money back in simple spec in April '24. And as we currently stand with the share price materially above $6.35, the strike price, we would expect rational investors on to do that, and we expect the bonds to roll forward. That being said, we can't control equity markets or irrational investors, so for that reason, we've increased the RCF from $50 million to $100 million should the need arise. But we see that as being an unlikely requirement going forward and unlikely that the bond will be put to us and we would see that move forward for another [ Tier ] in April '26. The other key callout, surprising -- or not surprisingly, I shouldn't say, but more calculated is the outcome in regard to capital efficiency. Our key measure there, return on equity and return on ROIC are 13% and 22%, respectively. And that will grow into the mid-teens ROE and the mid-20s ROIC. And it's a phenomenal result considering much of that is driven through the organic startup of WebBeds, the inorganic investment over time. And then the transformation of the business over COVID has resulted in material organic growth, and that has resulted in material increases in both of those capital efficiency measures, which is delivering. Moving to the next slide in terms of cash flow. No real call out here, probably other than talking around dividends. I know there is an expectation to be a bit more explicit around what we plan to do with dividends. But like I said earlier, we want to get through the first 3-year put, which is in literally 4 to 5 months' time. Once we get through that milestone, we'll be able to then look to be more explicit around its -- albeit around capital management. So I would say just stay tuned, we'll be more explicit around what that will look like in 6 months from now. But at this stage, we prefer to be prudent and keep our powder dry related to cash and dividend policy at this stage. And lastly, on the CapEx slide, we are first half weighted in as far as CapEx for the year or what we expect to spend. We did spend closer to up to $3 million in the first half regarding our fit-outs and new property lists that we entered, predominantly in London and the Philippines. That is the first half cost that won't repeat into second half. So we do see spend circa $40 million for the year or $37 million on a like-for-like basis to what we spend with calendar year '19 pre-COVID. So it's only about a 5% step-up in overall spend despite the big step-up in bookings and volumes and TTV across the same window. So all in all, a pleasing result with a strong cash number and we've, as I said, we'll be more explicit around our thoughts around capital management in 6 months from now. Thank you. John?

Thanks, Tony. So after a year of worry, the macro environment still looks vulnerable. Inflation is very sticky. And in our home market in Australia, we see continued interest rate rises. Adding geopolitical tension, it's easy to gravitate to the downside risks yet we don't see this translate to the underlying position in the global travel market. In the last 30 days, all major hotel chains, all global OTAs and many American European airlines have reported quarterly results. Unanimous consensus is that the global travel market is expected to be strong and with growth continuing into 2024. That's consistent with our view of how we see the market. If we come to what's happening in Australia, in the last 6 weeks, we've seen a material shift in domestic airline pricing. Last year at their peak, which was circa the lead into Christmas of 2022, we saw airfares that were up, on average, 35% and over the same period pre-COVID. If we compare and contrast to the last 6 weeks of trading for the Webjet OTA business, we're seeing airfares drop from that peak by more than 17%. And as our investment community knows that Webjet, our results are less influenced by average booking value and more highly correlated to bookings growth. We continue to see modest booking growth in the second half and it's why we're expecting an EBITDA result for both of our B2C brands in the second half that's comparable with the numbers that we delivered in the first half. Moving to the WebBeds business. The geopolitical conflict in the Middle East has had an impact on demand in Europe and the Middle East. There's no impact on Asian and American bookings. Therefore, in aggregate, we are similar to our hotel chain partners in seeing continued booking growth and marginal, if any, increases to average booking values. It is against this backdrop that we expect WebBeds to continue its post-COVID recovery with significant above-market outperformance. As per our first half, it will be a record second half delivery from WebBeds. This will result in Webjet delivering record bookings, record TTV, record revenue and record EBITDA in the second half, culminating in the expected full year EBITDA in the range of AUD 180 million to AUD 190 million. So with that, operator, we are more than happy to take any questions that come our way.

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

John, Tony, can you hear me okay?

We can hear you, John.

Good effort in the first half. Excellent result there. Look, just a couple of things from me. Just wanted to perhaps, first of all, give a question on the guidance. Obviously, the number you've done in the first half, given the seasonality, I'm just trying to understand sort of the framework in which that's given. Obviously, you've done a pretty strong number in the first half. It wasn't actually, given the nature of the way the business has changed, I wasn't sure there was that much seasonality in the second half compared to how it has been? Or are you expecting a significant slowdown? Because I'm not quite -- I'm just trying to get my head around how that actually looks to me, it doesn't sort of really make sense to me. I guess that's the first question. The second one is your write-off of ROOMDEX. Is that an indication of you sort of saying, look, that investment hasn't worked? Or is it more a case of you taking control of business? So it's either one or the other, I guess. So they are the two questions from me.

We'll deal with the easiest one first, the ROOMDEX. It's -- the write-off of ROOMDEX is driven by accounting standards and best practices, and it's not a reflection of the value. We purchased a half share for USD 10 million circa and we've written off what was left on the balance sheet because we bought the balance for a nominal sum. As I called out in the presentation, the underlying economics have now changed. It was a loss-making entity as a stand-alone business. It's no longer a loss-making entity for us. So it's merely accounting standards that required the fact that we paid a nominal sum to attribute a nominal value to it on our balance sheet, and that's why we're write it off. So that's pretty straightforward.

Makes sense.

Second, the seasonality of the business has changed compared to what it was pre-COVID when we were circa [ 75-25 ] at an EBITDA level. It's somewhere between [ 55 and 65 and 40 and 45 ] now. And that is our expectation going forward. There still is higher booking value and a summer peak, but it's no longer -- it no longer defines our overall success of our business going forward. So the number is as per those sorts of directional numbers that I've just given you about how we see the first half, second half split being for the business. And I specifically called out in my summation of the -- getting to the guidance number, that we have seen a change in booking activity out of Europe and the Middle East over the last 6 weeks. We're still growing many multiples above the underlying growth rates of any market, but we are seeing Europe -- Middle East going backwards and Middle East the growth has subsided in the last 6 weeks. So our guidance number reflects that. And as I called out as well, no change, in fact, accelerated growth out of APAC and North America. So in aggregate, that's where we've landed.

Next question comes from Lisa Deng with Goldman Sachs.

I've got two questions. The first is to dig a little bit further into APAC and North America for WebBeds. Can you please talk a little bit more about your views on further recovery, especially from APAC. And if there's any room for us to also see booking values and the associated margins revenue or EBITDA margins for those two regions improve, like what we could do around that? And the second question is more about operating leverage. So you mentioned that we are largely done with main investments over the next 18 months for the platform. So does that mean if I look at, I guess, the first half drop-through for WebBeds business, revenue to EBITDA is about 45%? Do we expect that sort of revenue to EBITDA drop-through to further improve from here?

Thanks for the question. So I'll deal with the first part, come to the second part in a second. So first part, we're looking at growth rates that we think will continue to accelerate in the second half, in particular for Asia. The easiest answer is the compare is easier because Asia wasn't fully reopened in the second half of last year. So we only started to see that emerge. So you'll see a further improvement from APAC. And the Americas, we have invested over the course of the last couple of years to get to the position where it's meaningful mix in our overall business. We will continue to do that. And we again expect to see above our aggregate growth rates coming out of Americas for at least the next 6 months. So both those businesses, we are focused on growth. To come to what I think traverses both your second part of your question and the second part of the first question is margins, are not something that we are focused on as an output that is going to dictate our behavior. What I called out and the reason we abandoned 8/3/5, notwithstanding hasn't changed our EBITDA margins at all is the outcomes that we've got are different by region and different growth rates will affect that. So as has been called out, APAC and Americas are lower average booking value markets than Europe and the Middle East and the higher growth. And therefore, that will skew our results across the board. And to be blunt about it, I don't really care what the margins are, and it's not a focus. It's just, it will be what it will be as long as we're improving the overall EBITDA result and increasing revenue, then we're doing that. So to go to the second part of your second question, what does that mean with regards to the rate that falls to the bottom line? Our expenses will be flattish as we've called out for the WebBeds business, will be flattish to GoSee, it will be marginally up on where there's a consequence of some marketing activity. And the rest of our business will deliver whatever revenue and growth it does and the cost base is well established. And all of that is factored into the $180 million to $190 million. So beyond that, we're not going to get the microscope out and break out the individual parts, but we're pretty comfortable that directionally, everything you've seen in the first half will continue into the second half as per the commentary that we've provided over the course of this presentation.

Your next question comes from Tim Plumbe with UBS.

Just two questions from me, if possible, please. John, first one, can you talk a little bit about that strategy of taking the top 20% of the inventory for specific customers in the B2B business? How are we progressing with that strategy at the moment?

Tim, I'd probably call that out. We'll do an Investor Day in March in which we will call out in detail what strategies that we have adopted across the board. That is one of them, and it's contributing to our business, but it's in its infancy, and I don't think that's making a material change to what we're doing, but we will call that out in the Investor Day, and we'll talk a little bit about some of the other things that we will do that will give us confidence about getting to our $10 billion TTV target that we have for the WebBeds business.

Got you. And then the second question maybe for Tony. Very strong cash flow generation obviously, working capital has played a role in that, and there's some seasonality to factor in. Can you remind us again just how should we think about that seasonality impact in the second half, please?

It wouldn't be dissimilar to this time last year, Tim. So as you can recall, last year in the second half, we had a negative working capital unwind, the portion of the first half that we make. But then we expect probably earnings to come through to sort of compensate for that. So note, December to last year, the same sort of behavior would probably contribute into the second half.

The next question comes from Ben Gilbert with Jarden.

Just a couple of questions on the WebBeds business. Just first one, John, just how do you think about the trade-off in WebBeds in terms of making that actually taking on inventory in that space? Because I think some of your competitors probably be more aggressive, take a more capital-intensive approach, take on inventory, which can drive potentially high margin and potentially some share opportunities. Have you ever thought much about that? Would you have a look at taking more capital-intensive approach given how strong the balance sheet is?

Ben, that's a remarkable prescient question because it will be almost like you were in my boardroom last week as we were discussing this very topic, and we were having, it would be fair to say a robust debate around taking financial risk to improve underlying performance as does the leading player in the market. Historically, which has been up until last week, for 10 years, I've been adamant that that's not what we were going to do, and it wasn't how I intended to operate this business. We've always been asset-light and cash generative and with limited financial risks. As we've got to the point where we've got 44,000 endpoints of people who sell our products somewhere in the world, and as we have demand patterns that fit in with a business that's going to generate circa $4 billion in TTV in our WebBeds business, we've got data analytics tools that give us greater insights into consumer demand and booking patterns and in particular to, we can get down to a granular level by hotel. So we are thinking about it is the best way to put it. We haven't landed anywhere. We've got a number of working -- well, a working party who's exploring what that could look like in our environment, and we will put that -- as we debate everything, we will put that into the mix and come to a conclusion over the course of the next 6 months. There's nothing imminent, but it's a topic of conversation within our business.

I can guarantee that I wasn't there. But conceptually around that, that a delay to potentially drive some accelerated but it should also be margin accretive as well, right? But I appreciate it [indiscernible] margin...

It should be margin accretive. Absolutely. Absolutely. Look, the numbers for those who don't know, directionally, if you do a prebuy or a guarantee or whatever other financial instrument you undertake with a hotel, you should be getting margins of circa mid-teens. So that's circa double what we currently operate. And part of the reason that it's a consideration for another day is we have the bond falling due potentially in April. So we've got to make sure that we're in a strong position at that point, which we are today. We're generating a lot of cash and the business will generate a lot of cash next year and the year after. So if you think about what that business would look like on the growth profile that we anticipate over the next couple of years, there's circa another $0.5 billion of cash that comes into the business over the next couple of years. And that gives us a different set of opportunities with regards to this particular commitment that you could make. Our largest competitor, we know has had in the past, and I can't speak for their current iteration, but they've had north of AUD 0.5 billion sign up in commitments of some description. So that's the scale of what they're doing. It's, as I said, it's a contributor to our thought process. It's part of the mix, but we haven't landed anywhere on what we're going to do. But it does give improved margin. It would give you accelerated TTV growth, but you have changed the profile of the business a touch. And we're very conscious of everything that's happened to us in our history, to make sure that we minimize any financial exposure for our investors going forward.

And just final one from me. Just in terms of the U.S. and on WebBeds as well, is, my understanding was moving to a single platform potentially should accelerate your growth in particular engagement with some of your biggest suppliers around sort of pricing integrity, et cetera, on the platform. Is that fair? Are you seeing any step change in terms of some of these bigger supplies coming on in terms of number of hotels customers, is that all accelerating? I just thought your comment that you're saying the next 6 months should be higher for the U.S., I would have thought this could carry on for some time?

I agree. It will carry on for some time, but I'm not trying to put out an 18-month forecast here. We're just putting out the next 4.5 months what we think where we'll land. But your comments are on point. They are exactly what's happening. I can tell you that I spoke to a major hotel chain just yesterday in which the point that you've made, which is maybe lost on some of our investors is that pricing integrity has become paramount in our relationship with hotels, and we provide distribution to a broad array of travel partners, some of which we can opaquely price and the hotel partners encourage us to do that, and some of our distribution is restricted to price parity arrangements that the hotelier has with the broader marketplace. In every conversation we have had in the last 90 days with every major hotel chain without exception, we have been called out for being leading proponents for ensuring that the integrity of our pricing is maintained in line with established hotel supply arrangements. So that's been a key driver. And the single tech platform, we couldn't have done that without the single tech platform. So moving to the single tech platform has done that. Our overall relationship as a consequence of that has improved with all of our hotel supply partners. So going forward, I don't anticipate having some of the more difficult conversations that we've had in the past with them because the pain point has been removed from our interaction with our hotel supply partners or one of them, not all of them. We like more inventory at a lower price that will be there forever that pain point.

Your next question comes from Sam Seow with Citi.

Congrats on the results. John, when you think about the great, I guess, 30% TTV growth you achieved, how would you break that down from contribution from cyclical factors like higher ADRs and the general volume recovery versus kind of like a more structural market share or what percentage are growing faster than the market?

I think, Sam, we called that out with bookings. It's the booking growth that demonstrates the structural shift to WebBeds that's been the driver. We have not been -- in aggregate, we have not been the beneficiary of higher average daily rate. Now I can't pretend we don't get higher average daily rate for same hotel sales, but our mix has changed completely from pre-COVID. We're still down 9% on average daily rate compared to pre-COVID. So let's break that down into what are the contributing factors. We had a higher skew to Middle East in pre-COVID, much higher average booking value, much longer length of stay. We had a higher skew to Europe. Higher average booking value much longer stay. And what's happened since our growth rate, which is circa up 50% ahead of pre-COVID is because we're selling more domestic, lower -- shorter length of stay, lower average book value. More America, same characteristics, more APAC, same characteristics, lower length of stay, lower booking value. So our mix has changed dramatically. But I'll be shocked if it didn't because when we talk about our transformation strategy, it's got a number of factors. Factor number one is moving to a single unified tech platform, which we've achieved; Two, being able to offer inventory that's more salable in different categories than we had previously. Our mix has changed from directly contracted hotels to a lower factor of directly contracted hotels to a greater factor of chain hotel agreements. So as our business evolves -- or sorry, as the marketplace evolves, our ability to address that business continues to shift and adjust to prevailing market conditions. So to then come to the final point, Americas will continue to grow, and APAC will continue to grow because we are so under penetrated in those particular markets.

Got it. Got it. Okay. Well, then maybe an easy one on the operating leverage. Just a follow-up. You've obviously talked to generating more absolute dollars and the head count increases. Just more broadly, how should we think about that fixed versus variable split with the [ MRR ] business now included?

Yes. It's one of the reasons we didn't call out the [ MRR ] number and the variable versus because that's customer specific in the sense that we have less than a handful of very large customers who are merchant of record. And as a consequence, it mucks around with our expense base, which is why, again, to reiterate the decision we called out circa 6 months ago, which is EBITDA margins are not the focus. I don't have one internally. We have bottom line EBITDA results that we're focused on, and that's what we'll continue to do. So we're not going to call it out. The variable component, Tony, how much has it shifted 5 basis points over the half year?

For we were pre-COVID, [ 15-85 to now 25-75 ].

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

Just a couple of questions from me. So I guess when you called out the Middle Eastern Europe, are you talking about them as source markets or destination markets? Because this destination, do you think there's a redistribution of demand into other regions?

Source market, but you have to -- well, source market, Wei Weng, but the 2/3 of every region, this is one of the generalized rules that applies for our entire business, 2/3 of it is intra market. So if the source market is down on its growth rate, I'm not saying it's going backwards. I was saying it's down on its prevailing growth rate for the previous 7 months. If it's down, it means that basically it's down at source and will be down at destination because most of what we sell is in market. So Middle East to Middle East, Europe to Europe. The Americas where -- the exception is the Americas, where it's 90% domestic. But APAC, I'm saying.

Okay. And then just on the guidance range, is it a case of, I guess, midpoint is where you're tracking to right now, including, I guess, Middle East and Europe the way they are? Any color on what needs to happen to get to the top end and bottom end of your range?

Geopolitical tensions were to be ameliorated immediately would change our expectation tomorrow. This number includes the downside risk of what I've just described as being the implications of the last 6 weeks of trading. So this assumption is that this underlying last 6 weeks of trading continues for the rest of the year. That's the assumption. There's no heroic assumption in getting from $180 million to $190 million in the numbers.

And then just a follow-up on the inventory prebuying or guarantees. You made a comment that your largest competitor has about $0.5 billion tied up in these commitments. They're probably, I don't know, let's say, 3x bigger than you guys. Is the thinking that at scale that you'd be maybe like 1/3 of that $1 billion. Is that how we should think about it?

There's nothing to think about. We haven't made a decision. So I can't guide you anywhere other than we are thinking about it, but we haven't landed anywhere. So there's -- it'll be premature to factor that into any calculations about expected outcomes for our business.

Our next question is from Mitchell Sonogan with Macquarie.

Just one for me. Just in terms of the Webjet OTA, just looking at EBITDA margins back to prepandemic levels. Can you maybe just talk to how we should think about that looking out for 12 to 18 months? Is there further upside as international bookings continue to come back, but also the second part there, you've called out a $2 million EBITDA improvement from Trip Ninja. Is that what we should expect each half going forward? Is there a further upside from that looking out?

Yes. Good questions. I called out the headwinds that the OTA business has undertaken has been faced with over the last 2 to 3 years have been well documented. The reduction in commissions been issued. The customer service challenges are providing great service to consumers has been adopted by events outside of our control. So in light of all of that, I'm really delighted with the underlying performance of the OTA business to get back to the pre-COVID EBITDA margins. I'll reiterate my comments from earlier that we're not particularly focused on EBITDA margins, but we're focused on absolute numbers and, if the market improves, we will improve a multiple of the market, especially at the EBITDA level. And this last result is indicative, though, not prescriptive of what we can achieve. 8% volume improvement drives a 24% EBITDA improvement. And with a full year of Trip Ninja, a full year of marketing, the benefit of multi-trip into our website, opens up a significant opportunity for us. So we think there -- to go to the answer to the question, we think over the next 2 or 3 reporting periods, our expectation is whatever we achieve at a bookings level, we will multiply 2, 3x at an EBITDA level to get the outcomes that we've done in the first half, similar to the first half. Okay. I think that is it for the questions. So thank you very much for your time. To the broader Webjet community, great result. You've worked really hard to deliver a world-class result. We, as a business, substantially better than we were pre pandemic, and we have significant opportunities ahead of us, and the execution has been exemplary. So thanks to our team for a phenomenal result, and good luck to the rest of you for rest of the day. Cheers.

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