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

Thank you for standing by, and welcome to the Web Travel Group Limited 1H '25 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead.

Thank you, Ashley. Welcome, everyone, to the Web Travel Group First Half 2025 Result Presentation. Joining me today, I have our CFO, Tony Ristevski. Well, a lot has changed since our full year results presentation in May. Most significantly, we have demerged. And as everyone want to discuss, we have a changed revenue margin implication for our business going forward. Let's go into the demerger first. Next slide. As we announced in May, the intention was to split the company into two component businesses. That was successfully implemented on the 30th of September. Web Travel Group, which is the call that you're all on at the moment, runs the WebBeds business. And the Webjet Group runs the B2C business, which was the former OTA business, GoSee and the Trip Ninja investment. So the demerger took effect during the first half of 2025. And in our results, as you'll see in our financial statements, the B2C businesses are included as continued business in the first half results. And our results and what we will talk about today been restated to reflect the pro forma B2B business only. So let's go to the next slide and talk about how we performed over the first 6 months of the financial year. TTV continues unabated on our growth trajectory. TTV was up 25%. Margin was lower. This obviously impacted revenue and had an impact on our EBITDA results, which were both below our expectations. We're on track to deliver $5 billion TTV in FY '25. Our revenue was up 1% on the previous compare, reflecting the lower margins. There is some slides further into the deck in which I will talk about what we did as a management team that contributed to those declining revenue and how the market influenced those declining revenues. And EBITDA was down 11% on the previous compare, reflecting that lower revenue and the cost, which we had always planned to include as we invest in our business, was up 14% on the previous compare period. In aggregating -- so the net results of that, $2.6 billion in TTV, revenue of touch over $17 million and EBITDA at $77.5 million. For the group, EBITDA is $70 million. There's a pro forma allocation of corporate costs of $7.5 million. Tony will talk in his section in a little bit more detail on what the implications are for our corporate costs in the second half. Underlying NPAT was $52.5 million, and cash was $510 million. And we'll talk again in Tony's presentation about the significant cash generation that we've been able to deliver yet again in this first 6 months. The capital management initiatives, there is one that we've undertaken up until now and there's one that we will talk about again in the before we summarize the guidance going forward. But during the course of the 6 months, we invested another $19 million into equity-linked assets, which have exposure to Web shares, and we've now increased our own exposure to our own Web shares up to $8.4 million. So moving forward, 2 slides into the key metrics associated with the WebBeds business. As I mentioned, TTV is up 25%. We now delivered 4.3 million bookings during the 6 months, up from 3.49 million in the corresponding period last year. TTV is up to $2.59 billion, up from $2.08 billion in first half '24. Revenue is up 1% at $170.4 million against $168.8 million. And EBITDA is down from last year's $87 million to $77.5 million. And obviously, the key driver of that is the increased expenses compared to the revenue, which we had planned. Getting a little bit more granular on the next slide. As you can see, bookings are up 23%. Average booking value has been circa flat, up 1%. TTV is up 25%. Revenue is up 1%. Expenses are up 14%. EBITDA was down 11%. Most significantly, the revenue to TTV margin is down 150 basis points. Notwithstanding all the downward pressure that we're seeing on the revenue side, our EBITDA margin is still truly world-class at 45.5%, albeit down 600 basis points compared to the first half of 2024. The revenue being down -- only up, sorry, 1% reflects the lower TTV margin at 6.6% for the half. It's driven by a number of factors. As I mentioned earlier, there are some that we will -- we, as a management team, have contributed to, and there's some that are market forces. But in aggregate, the factors that influence the result were substantial increase in the customer financial incentive agreements, which we refer to internally as override; our response to the European summer trading; the incremental business that we're acquiring from various customers at lower margin due to a variety of mix -- a variety of factors, which include geography, customer mix and supply mix; and in addition, as we as we spoke to the market last week, there was an accounting policy change, which increased our margin from the underlying margin of 6.48% to 6.6%. Expenses were in line with what we were expecting at around 14%. We continue to invest in our technology. We continue to invest in global scale and reach. Our headcount has circa 2,000 employees now in the business. And the second half expenses are expected to be similar to what we spent in the first half. Going forward, we expect our business to revert to the norm. We started this business in 2013. And it's been a consistent period of growth over that journey. Our expected outcomes for FY '26 is that normal service will resume and revenue growth will be expected to exceed expenses growth and EBITDA margin will -- EBITDA as a percentage or an absolute number will continue to increase. So going forward, again, as we look to FY '26, notwithstanding that revenue margins are going to be at circa mid-6s, we still will expect to deliver EBITDA margins of around about 50%, which is our longer-term target. So let's move to the next slide and talk about how did we get to the 25% increase in TTV. Well, at a high level, we're on track to deliver $1 billion in incremental TTV in FY '25. There are three drivers to how we view that outperformance. There is the market or the system growth rate, which has slowed down on a global basis. If you look at all the published data for all the international hotel chains, you will see that growth rates have slowed down and average booking values haven't increased at the same rate. I already covered off that our average booking value this year is up nearly 1% compared to FY '24. So system growth is 3% versus what we described as system growth this time last year when broader global travel markets were in a period of very strong growth that has declined from 7% to 3%. That's 3 out of our circa 25 that's been accounted for. The second element is what do we do to increase our reach, both with supply, which is getting more inventory on the shelves and with new customers. As you will see, we've spent an increased amount of money on capital in the first half to deliver a point-of-sale product, which is an enhancement over we had previously, that contributed to the outperformance in our Middle East business, and we've had substantial customer wins in both APAC and in Europe in this 6-month period, which have contributed to circa 8% of the growth rate that we had in this half. And most importantly, and the key lever that will continue to take us on our part to $10 billion TTV in 2030 is the improvement in conversion. So that is getting increased volume based on broadening the scope of what we have available and increasing the level of penetration per search that each customer has with us. And that accounts for about 15% of the growth that we experienced in the first half. So in round terms, that accounts for nearly $300 million of the increase in the half. So the business and the key drivers that have been in place, continue to be in place. And the underlying thematic of what is our business model remains robust, and the ability for us to continue to outperform the market remains intact. And we have a high degree of confidence that, that will continue into the second half and will continue into FY '26. If we move to the next slide. I've had a long time to contemplate how I would present this particular slide to the market. And I could have been trite and made it as simple as possible by suggesting there was only one or two major factors that occurred in the 150 basis points decline in our margin. But I'll put it into a slightly different context for you and then break it down into what contributed to it. As you can see, our -- well, as I'll tell you, our room night rate per booking on a global basis is circa 150 million -- sorry, EUR 150. And 150 basis points on EUR 150 is a $2 -- is a EUR 2 reduction on EUR 150. So for us, where we're selling a gross up product of a hotel room, a $2 reduction on our end equates to EUR 150 -- 150 margin points. And the fact is that we control that contributed to that decline customer financial incentives and what we call overrides. Since we first launched the business in 2013, and I remember it very well, to get our very first client, we gave them a financial incentive. And over the journey, that number has always been embedded into our revenue number. And it's never contributed a significant proportion of either our results up or down, which is why we've never felt the need to call it out previously. And in our current scenario of our total of 4,000-plus end users -- or 40-odd thousand end users using our inventory, we only have override agreements with less than 100 of our partners. So it doesn't equate to the most -- across our entire portfolio of customers, but it does impact a small number who have a disproportionate impact on our financial results. And in the half, we ended up paying $7.5 million more than we budgeted, and this accounted for about 0.3% of our margin decline. We have spent, obviously, considerable time over the last 7 or 8 weeks going through those customer financial incentive agreements. And the conclusion we have reached is that they will still continue to be an important part of our business going forward. The similar number that we paid out in the first half as a percentage of sales will continue into the second half. So whilst we've reviewed them in the processes, we have made ourselves comfortable that they are appropriate for our objective to continue to deliver the outperformance that we expect in our TTV going forward. The second element, which is our pricing response to the European summer trading, is a more convoluted story. Trading for us in April and May, the first 2 months of the half, was very strong, and our margin was very strong and consistent with what we had expected. And as we've called out previously, there was a major bankruptcy at FTI, a very large German tour operator, and the Olympics were on in Paris and the Euros were on in Germany. And we could see immediately that there was a distortion in the market. We weren't selling much Paris as a consequence that the Olympic family had booked out all the hotel rooms. German outbound tourism was flat -- or sorry, actually, behind the same period last year, and there was an influx of inventory that occurred in the market. Our initial thoughts, which proved to be incorrect, was that once that inventory has flowed through the market, that there would be a reversion to normal margins. But we never saw that. And then what we did in the months of August and September, is to chase volume. And as a consequence of that, we gave away a little bit more margin than we should have, which contributed to the surprise between our AGM margin expectation and the margin that we actually delivered for the half. So that responsibility falls on us. And obviously, in a period in which there was intense management focus around the demerger, which is a complex undertaking and a time-consuming undertaking, there was significant management focus on the demerger itself. And the resources at the most senior level within the organization were focused on the demerger. And at the same time, we did have some changes of personnel within the management team. So all of that is what -- the factors that were under our control that contributed to the decline in margin. On the other side of the table, there are other things that are going to continue to happen that our expectation of the market going forward, and it's our expectation of how we will get to $10 billion in 2030 and how we will continue to grow as we had in this half, 8x the rate of the underlying market. And that was the geographic mix changes our margin. Europe, which is our highest margin region, have all the issues I described. But in addition, it will continue to grow at a lower rate than the rest of our market because of the high level of penetration that we have in the European market. Our other markets, in particular Asia and the Americas, will continue to grow at a fast rate. The consequence of that faster rate growth is that the average margin is lower. And by definition, the margin mix will be lower as a consequence. Supply mix has an impact. The very fundamental nature of why we are so successful at WebBeds is that we have supply mix of directly contracted hotels, international hotel chain agreements as well as third-party agreements. Our third-party supply mix comes at a lower revenue than our other two. And the consequence of that is that in this half, we saw an increased use of third-party supply, which again contributed to the decline in margin going forward. And as our customers grow, we also see that some of them that grow at a higher level have customer financial incentives and sometimes we run campaigns with them. Those customer mix also has contributed to the decline in margin. So 160 basis points of decline half-on-half can be circa broken up between these six disparate factors that have contributed, as I'll repeat, some of which are under our control and some of which are the market. Going forward, we expect the margins to stabilize at the rate that we currently reported for this half. And it still contributes to our ability to drive superior outcomes on TTV growth and in FY '26 and EBITDA margin of circa 50% and a substantial uptick in the level of earnings associated with the business at that point in time. To go through that in just a tad more color, Slide 10, next slide, shows how we performed over the course of the first half. Bookings up 23%, TTV up 25%, phenomenal performance in the Middle East increasing both bookings and TTV at circa 37%. That's, again, a reflection of the CapEx where we invested in our point-of-sale system and an ability for that particular market to reengage on terms that are supplier friendly to us. So we're delighted with the outcomes there. The Asian business, our APAC business, continues to be the standout performer in aggregate. It's now the largest and it has been the largest business by booking volume. It's still the largest by TTV. That's a consequence of we operate in many markets such as Indonesia and the Philippines, where the average booking value is significantly lower than it is from our aggregate across the board. But another great result, 32% increase in bookings, 29% increase in TV. Europe, very, very strong in bookings and TTV but unfortunately, not as strong. And we had the most significant impact on the revenue margin, which I've covered on the previous slide. And Americas had -- having had two phenomenal years where it's had standout growth and being the outstanding performer across our portfolio, so much subdued growth, but most businesses in the world will be delighted with a 20% improvement in TTV and a 13% improvement in bookings. So overall, our geographic mix insulates us and provides us with a broad platform to continue to grow our business going forward. Next slide. So to put this all into context, our business is highly scalable. And there's no greater comparison through what we've been able to achieve in this first half compared to calendar year '19. So over that journey in 6 months of FY -- of first half '25, we have achieved a 1% increase on bookings than we did in the entire 2019. TTV is flat, which again goes to the change in mix as we've grown geographically. As anyone who travels knows, hotel prices have increased. We are, at some extent, a beneficiary of that. But in aggregate, we continue to press into markets and opportunities where we've got domestic inventory that we're selling, where we're moving into faster-growth American domestic inventory. We're moving into Asian markets where that growth rate is offset by lower average booking values. But the net of all of that is we've been able to deliver that volume. We're able to deliver that processing capability at a 29% reduction in expenses, which goes to the thematic of what happened during COVID and the investment that the business made to enable it to become a true global player and enable it to have a 10-year time horizon of growth over that journey. And as you can see, our customer service facility has enabled us to process 175% more customer contacts in the period with only 9% increase in headcount. The 29% increase -- the reduction in expenses is predicated on the fact that obviously, our employee costs have gone up substantially over that period. And yet, we're still being able to deliver that level of efficiency. Tony will talk a little bit about the implications of our SAP investment, but it continues to be a driver of significant value as we get better insights into our business and centralization of all the finance functions. And most importantly, as I think about our business and I think about what we need to do to continue to compete, the insights that we now have through the consolidation of financial information and customer data gives us a unique insight into what's going on in the travel world and what our responses need to be going forward to deliver the TTV growth that we expect going forward. And if you see the pie chart on the right-hand side of the -- you see on the right-hand side of the page, you'll see that the things in gray are finance, IT, HR customer service. We've been able to drive great efficiency in that area. The red component, sales and contracting, you will continue to invest in. They are the things that differentiate us and create value for our business and enable us to expand the level of supply that we get and the value that, that supply gives to our customers and enables us to penetrate more deeply into all the markets that we operate. There still is a significant portion of untapped potential within the business model, and we will invest appropriately to ensure that we deliver the best outcomes for you, our shareholders. So if we move to Slide 12, we're on track. Our pathway to $10 billion of TTV growth is in place. The focus, notwithstanding everything I have said about the revenue margin, is on profitable growth. We haven't gone away from what we have done over the course of our entire history, which is we have delivered profitable growth. Every year, we have grown the top line and we've grown the bottom line. This year has been an exception. But we're on track for the $5 billion of TTV for this year. We're on track to get back to 50% EBITDA margins in FY '26, and we can deliver all of that at these reduced revenue to TTV margins of 6.5%. So with that, I'll now hand across to Tony, who will go through the financial highlights.

Thank you, John, and good morning, everyone. I'll turn your attention now to Slide 14, which is the first half financial summary. Let me summarize it this way, Web Travel Group, I'll refer to as B2B and Webjet group, I'll refer to as B2C, just to make it a bit easier in the language. The statutory results in continuing operations represents the B2B business, and what you have in front of you there is the pro forma position in FY '24. One thing you've got to recognize is that when we did the demerger, we reported the statutory results as if the B2B will stand alone from day 1. And that was applicable when you compare it to '24 and the first half '25. As a consequence of that, what you'll find in the second -- first half of '24 results is items that relate to the revenue and expenses that don't relate to the underlying operations of the B2B business. So as we've always looked at our business, through the lens of underlying operations to the right, that continues to be the case. The other thing to call out there in the revenue line John hinted, albeit mentioned, the AASB9 application. The consequence of reverting from 137 to AASB9 meant consistent with what we said last week, and there's been no change there, that there has been a tailwind in revenue in this first half but a headwind in last year's first half of around $3 million there, which have been incorporated into the results. So when I go through the underlying operations, that's been reported consistently for the B2B business. When you go down to the corporate overhead line, I'll talk about that a bit more in the next slide because there is a bit of information to process there as a consequence of the demerger accounting that we adopted in the demerger booklet. Going down to the underlying EBITDA line of $70 million for the group versus last year's $76 million. The next line there to understand would be the depreciation and amortization. At an underlying level, the first half was just shy of $10 million. We expect it for the year to be $21 million, an increase of $11 million in the second half. Going down to the next line in EBIT, interest costs there are positive for the first half. As a consequence of the demerger and the removal of $135 million of cash, which normally would sit on deposit in the enlarged pre-demerger group, would no longer be there. So therefore, the way to think about interest in the second half is the removal of interest income attributable to $135 million that will normally sit there earning interest on behalf of the group. Moving down the line to tax as the next item at an underlying level. It's come in at just shy of 14% for the half. We expect that to revert to 16% for the full year, and that would be the way to think about our effective tax rate going forward as I mentioned back in May. The only other thing to call out there is discontinued operations is the B2C business, the NPAT there, along with the gain from the demerger, which has been well documented in the demerger booklet and equally inside Section 6 of our financial tables. So on that point, I'll turn to the next one, which is corporate costs. What you'll see there for the first half is $7.5 million attributable to the B2B business versus last year's equivalent of $11 million. The $11 million comes from the demerger booklet, and what we assumed there in the FY '24 demerger process of both B2B and B2C is the actual copper costs incurred overlay with the synergies. So in the first half of this year, we don't have the synergies incured as yet. So what we have done is appropriately apportion the corporate cost between B2B and B2C in the same ratio, which gives you 7.5. When you compare it to last year, there is a reconciliation in the appendix, where the last year does incorporate 50% of the $5.5 million of the synergies, i.e., another $2.8 million. And then you also add another $0.9 million of room cost, which has since been removed and incorporated inside the WebBeds business. So the way to think about corporate costs into the second half, meaning a stand-alone basis, it would be $11 million give or take. And then from next year onwards, it will be about $23 million is the way to forecast it. Now I move down to nonoperating gains and losses, and I'll probably have to explain a bit more as to why the '24 column has a restatement above it, and I'll probably start by going back a step, and talking to the point that John raised earlier. When we're in COVID, we were foreshadowing and identified the necessity to consolidate our booking engines. It was a critical factor for us to be a scalable business coming out of COVID. But what was a challenge for us was, obviously, we had four enterprise reporting platforms, which some were more than 2 decades of. So it's critical for us to undertake the SAP implementation. And that process started in '21 and concluding in financial year '24. And that process enabled us to process the volume of transactions we have more recently but also support us in the journey towards $10 billion and above. That process was done in three phases. We kicked it off in financial year '23. We went live with all booking platform data in financial year '24. And then most recently, we migrated across support companies that house many of our staff so we can complete the process. And then more importantly, in the last quarter of the first half, we did a critical enhancement as it relates to the payables process that gave us more clarity and insight into the error rates. Through that process, we identified that, unfortunately, we have two legacy issues that came across at that time. The first one is reported in the first half '24 restated column, which represents a period of time where -- when we went live with the implementation in April of '23 through to May of '23. We were frozen out and that prevented us from making a normal claim back process from one of the key suppliers. We missed the claim back window. And that process is a one-off in nature as a consequence of the freeze. So we've reported that as non-operating item there. The other item, this is detailed in the appendix and explicitly detailed in Section 6 of the financial statements, is we've also identified a high degree of migration balances that are debits in nature, meaning they're either payment areas, overpayments or disputes. So they go back to 2019. And that total amount is around $28 million, and that probably represents across the journey circa 4 basis points of TTV for the same corresponding period. So it's small in nature, but unfortunately and disappointingly, it's been embedded inside our data and it wasn't evident until we actually had that key enhancement done to the environment of supplier accounting that unearthed that debit challenge. So we recorded that in the appendix but also called out exclusively and gone through the details in the Section 6 of the accounts. Through that process, obviously, as we had the accounting reviewed, Deloitte actually raised concerns, which are now documented and we talked to you last in the course. So I don't plan to revisit that. But that's how we got to where we are. So if I then turn to the next slide, which is the waterfall on cash position. The first portion represents the group consolidation on pre-demerger. We closed the account of $653 million. As John mentioned, we undertook a further $19 million of equity-linked financial asset investment. To date, we've invested $52 million. So if you add that back to $653 million, we would have been about $705 million in total cash on hand. When you compare that to pre-COVID, the most cash we ever had was around $211 million. It's been a substantial accumulation of cash as we come out of COVID. As you would see there, we've allocated $135 million net to the B2C business to ensure that they're well capitalized and has every opportunity to drive the growth in the demerger outlook. And for us, in the B2B business, we have a healthy $510 million there. To the next slide, which is the balance sheet. A couple of things to call out here is that we're obviously going to take further capital management initiatives, which John will talk to in the back half of the deck. The other key thing to call out there is a negative as it relates to noncurrent liabilities. This represents the stand-alone B2B balance sheet for last financial year, and there's a corresponding adjustment inside the B2C balance sheet. They eliminated consolidation. So that's the way to think about the minus $42 million and why it goes up to $35 million. The other thing to call out there is the current ratio is sitting at a healthy 1.4%, greater than one time, which is a key threshold for myself in terms of ensuring adequate liquidity in our balance sheet. And then lastly, as you can see from a capital efficiency perspective, through the journey pre-COVID of inorganic and organic opportunities that we've been able to merge and continue to grow, it has driven a very high return on equity and return on invested capital for the group, which will continue to enhance us on our journey towards $10 billion. Turning to the next slide, which is cash flow. The pro forma columns represent the B2B business and the statutory represents the pre-demerged business. So the focus for us is on the pro forma columns. And you can see there that we have a healthy cash conversion of 139% for the first half, down on this time last year. As I called out back in May, we do expect cash conversion for the year being around 80% and that's as a consequence of two factors, one being we are seeing a traction around creditor days across the group and the other being that we had a bit of a benefit due to the Easter weekend back in March this year, where payments slipped into this year as opposed to the previous year. Going forward, the outlook is that we'll have a cash conversion circa of 100% as we climb towards a $10 billion TTV target. And lastly, just in relation to dividends, there is no interim dividend being declared for the first half '25. Going then to the last slide, CapEx. This year is the CapEx for the B2B business only. So in the first half, we did do an intentional acceleration of investment to fast-track the rollout of the new point-of-sale solution, which John covered up back in the March strategy deck. It's criticality for our business, particularly in driving growth in the Middle East. The second half, we did accelerate, not dissimilar to last year, so the outlook going forward from '26 and such will be -- the growth will be closer to inflation. And on that point, I'll hand over to John.

Thanks, Tony. So we have a new announcement to make. And business has undertaken some capital management initiatives, as we've covered off already. They were announced on the 4th of September 2023. We now intend to conduct, in addition, an on-market share buyback up to a maximum value of $150 million. It's in line obviously with our objectives to maximize shareholder value and potentially reduce any dilution that will occur as a consequence of the $250 million convertible notes that were due in April of 2026. These shares will be used -- these shares will be bought using existing cash reserves, while obviously, we still have flexibility to continue to invest in our business, we won't start for at least 2 weeks as part of the regulatory process. Our business model is a -- sorry, next slide. Our business model is remarkably robust. The multi-supply aggregation strategy, which I've described many times over the last 10-plus years, gives us a unique advantage and a unique opportunity to grow. In the past, we were able to successfully grow that at 8%. We now think that we will have -- we now expect that we will have that capacity to continue to grow at 6.5% for the medium term. Q2 of '25 was a difficult period for our business. And we think it was the low point for our TTV margin. As you can imagine, when you see a major drop-off of the significance that occurred, there's been an incredible amount of analysis and deep dive into every element of our business. And we certainly feel that we have a much clearer understanding of what's going on with pricing, what our responses should be, and we can do that now by market as opposed to a more granular -- a more aggregated approach than we've had historically. Our business is scalable. There's no better indication than the fact that we can do all the things that we've done in this half with 30% less cost than we did in the entirety of 2019. And going forward, our focus now that we've got the key elements of that scalability in place is to focus on the value-add contributors of customer-facing salespeople and customer-facing contracting people to expand our supply and create value for the group. So moving on to the final slide, FY '25 outlook. So trading for the first 7 weeks of this half is up 23% compared to the same period last year. TTV margin for October was 6.5%, consistent with our expectation going forward. And for the group, we expect FY '25 underlying EBITDA to be between AUD 117 million and AUD 122 million. So with that, Ashley, we will take questions from the audience.

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

Sure, there's loads of questions. So I'll just keep mine to two. The first one, John, just thinking about your guidance in terms of medium-term stabilizing at 6.5% and then thinking about the comments in terms of changing geographic mix and getting a bit of dilution there. Can you just give us a sense like when you're saying medium term, what kind of time frame are you thinking about? And does that imply that FY '26 could be above 6.5%, and then it works its way down over the medium term?

Look, Tim, the way I think about that is -- and I'll bifurcate the response. The first part, if you've gone from 8% to 6.5% as we did in the half, I can understand anyone's degree of skepticism around what are our margin is going to go forward. And the -- I sort of summarized just before I did the guidance slide. We've gone through incredible detail across every element of our business, from every override agreement to every supplier override agreement to all the third-party agreements and to look at what's going on in the marketplace and what's going on with our customers and how we think that will play out. What we are stating today is that going through the back half of this financial year into 2016 financial year, that we expect it to settle around the 6.5% number. Now we're not making any comments that it's going to go higher or lower, we are being as explicit as we possibly can with all the variables that I've described previously, to factor all of those in. We think the 6.5% is the way that people should think about our business for at least the next three reporting areas.

Understood. The second question is just around the cost base. Can you remind us again how we should think fixed versus variable for the B2B business? And just thinking about that in the context of pretty quick margin recovery towards 50% and thinking about the outer years of $10 billion. I know that you're no longer putting in that additional comment about 50% EBITDA margins in the outer years.

No, I think there's no -- well, I didn't think about that, to be blunt. We -- the 2026 FY 50% EBITDA margin is what we would expect. We're not planning to be less than 50% going forward. It's always going to be circa 50%. That does factor in, and it will be no different to what we said at the previous Strategy Day, which will be our expectation is that revenue would grow faster than expenses and contribute to the EBITDA number now. There's been a clear step change in this last 5 months. So the step change occurred since June. That step change is what we anticipate for the next 18 months. We're not saying we're not going to get 50%. We're just giving you insights into the next 18 months, I would anticipate that 50% margin is what we would expect. But we're focused -- I think, more granularly and near term than we have about long-term aspirations that the next 18 months, that's sort of expectation that we would have in the market.

Got it. And sorry, just in terms of fixed risk variable, can you remind us how we should think about that?

Tim, I said this before, we have about 75-25. And of the 25%, 10% is semi variable. So 15% is pure variable. But what we'll be doing, obviously, is continuing to leverage the grade component of what was in that slide around economies of scale inside our business and invest in the red component, which is sales and contracting. So as we think about the 50% margin, that becomes what -- by default become our cost envelope as we do our outlook. And then we go back internally and ensure that we can continue to invest in the right areas whilst getting further efficiencies in those sort of back office areas.

Your next question comes from Abraham Akra with Shaw and Partners.

So I guess having a hard time reconciling the EBITDA -- sorry, the revenue margin stepped down from circa 8% to 6.5% still. I know you get a pretty detailed explanation. I did a back of the envelope calculation for TTV mix by region by comparing the two periods to seem overly the same. I'm just wondering what's one-off and what's not one-off. So overrides firstly, do you propose to pay big overrides into perpetuity, number one? And number two, European revenue margins, has there been more competition in the region to maintain these revenue margins moving forward to grow TTV?

Thanks for the question. Well, I'll start with the first one, which is easy, customer financial incentive agreements will continue at the same rate that they were in the first half. European summer trading is a little bit more nuanced. If our business was just this, if our business was, sell the same stuff to the same clients as we have historically, there'll be no margin degradation. If our business is that we want to continue to grow the market, grow our position and focus on getting to $10 billion of TTV, we're not going to sell at the higher margins that we have with our existing customers. So that's a more nuanced version of our business. And then there are a whole bunch of other factors that drive that. What we sell to them when we sell them to them, like, for example, if I sell them something the day before travel, it's at a lower margin than something I sold 30 days before travel. So timing, in fact, impacts all of that. So the answer is in Slide 9 of the deck that each of them have contributed to where we've ended up, and those things are now in place and are in play.

Yes. Just to clarify, all these factors there, they're permanent and not one-off?

No, they're permanent.

Yes. And also notice the USA TTV growth, I guess, slowed down quite a bit and the Middle East picked up. Is the Middle East a function of your HTML, I guess, refresh? And is the U.S.A. market taking more inventory? Or is the low-hanging fruit, I guess, [indiscernible] sales team?

Yes. Look, well, they're exactly as you just described. The HTML site has contributed to our success in the Middle East and it's our performance. The Middle East has been a laggard in the recovery post COVID. The U.S.A. has been -- the Americas but predominantly the U.S.A. has been a phenomenal uptick, and it's just slowed down in this 6-month period. There's nothing beyond that.

Yes. One more, if I can. The customer mix impact. Do you mind providing some insight to what your top 3 customers provide as a proportion of your overall bookings?

Top 3 customers. What are we talking about? 5%. Yes, about that.

Your next question comes from Lisa Deng, Goldman Sachs.

I just wanted to still get a bit more color on the puts and takes to the 6.5% over the medium term. So the customer overrides, we've talked about to continue geographic mix, probably still driving some erosion. The management focus and pricing response for Europe potentially slightly better is what I'm getting. So then the customer supply mix and the customer mix, can we talk a little bit about that forward trajectory? Like is that supposed to be positive to the revenue margin for us to get to that 6.5%? What's the forward trajectory for these two?

Well, that's a very apt summary, Lisa. So I think where you've headed on those four points, directionally correct. Supply mix in very round terms, 50% of what we sell is directly contracted. Circa 15% is through international hotel chain agreements. And 35% is third parties. That would have been as we finished the end of '14. We probably saw an erosion of 2% to 3% on the supply mix towards third parties and away from directly contracted hotels. So that's a negative. We will endeavor to reverse that over the 6, 12 months. So that's the supply mix one. Customer mix is neutral in the following sense that there are some customers that are fairly large that have an outsized impact on margin and then there's a plethora of small uptimes that have a typically a larger margin than the smaller guys. So that one is -- we view that as sort of neutral. As we continue to grow new customers, typically, they're smaller, and therefore, they should be higher margin.

Okay. So it is really the supply mix that we need to get better to be able to deliver that 6.5% of all the controllable factors that we have. Do I understand that correctly?

Yes -- well, no. Let me -- I think we have control over the factors at this current point. We have an understanding of what drives all of the outcomes. The expectation on our expected sales performance over the course of the next 18 months suggests that the things that we have insight and control over and the things that we can influence will enable us to get to 6.5%. If we can improve the supply mix and all other things remain stable, then that would see a slight uptick. But I'm not forecasting to -- I'm not saying we're going to do that. I'm saying that there are -- and the whole reason that I spent considerable time on Slide 9 in the presentation, to give everyone a high degree of clarity about what drives our margin. And there are, as I said, a confluence of factors that influence it. If we improve supply mix, of course. If I sold 100% directly contracted hotels, our margins would be significantly higher than they are today.

Yes. Got it. And second question is on Page 8. I thought the breakdown of the driver of how we're outperforming the market is quite interesting. And so looking forward, do we -- like maybe commentary on each part of the three drivers as well as the market, new customer supply and then conversion of uptick as well, please? How -- what's the trajectory on these three?

Well, the market is the market. So that will be whatever the market grows at, and that's the point one. Point two will be depending on the success of the sales team. Point three, all the work that we're doing behind the scenes at the moment to improve conversion. All of this is embedded in our $10 billion TTV expectations. So this is the 25% that we're getting next year. It will be whatever next year's forecast is. We haven't put a number out, but to get to -- if you go to Slide 12, to get to $10 billion from $4 billion at 17% CAGR over the journey, if we do 25% FY '25, then that CAGR probably reduces down to 15%. So that will contribute to the 15% CAGR required to get us to $10 billion. So the reason we call it out is the market grows or contracts as we saw during COVID, but the market will grow at a rate. We want to call out our outperformance against the market growth rate and points 2 and 3 are the things that we've invested in. So we've got sales force that's banging on doors every day. They're getting new customers. We've got a contracting team that's getting new inventory. We separate that out. And then we think of what do we do with our existing customers with our portfolio and how much more volume do we get from them. And that's -- and that will be the key factor that drives that 15% CAGR from 2025 onwards.

Do you have a view of how the market might fare from the 3% that we're looking at now? Would -- like are we looking at an improved trajectory or you don't think like there's not much from here?

I think look, I take my steer from public disclosed statements of forward bookings that airlines put out. I take my steer from what hotel chains publish. It's -- the 3% is a representation of the market for the last 6 months. And I think everyone is suggesting that's roughly what will happen for the next 6 months. There's high prices in market, volumes are declining as a growth rate. So most people -- and from the various hotel groups that I spend time engaged with, most people are happy with their average booking value and are quite comfortable that modest volume growth will achieve their financial objectives. So the market will grow. We think the market will grow circa 3%. But I'm just -- all I'm doing stating that number is recycling other people's thoughts.

Very last one. What was the consideration behind the $150 million buyback as opposed to convertible -- buying the convertible notes? And then also the equity-linked financial instrument. What is that? And why are we doing that?

We've covered that previously, and there are other questions that I'll need to address.

I can take that offline.

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

John and Tony, can you hear me okay?

We can hear you, John.

I had a couple of questions, but some have already been answered. I guess if I think about the business this way, first half '25 EBITDA to TTV ratio at margin was kind of circa 3%. The revenue margin was 6.6%, which obviously implies a cost of TTV ratio of 3.6%. How should we think about -- let's assume that the 6.5% is permanent-ish. How should we think about that 3.5% number moving forward? So therefore, that would give us some sort of a guide as to where the EBITDA to TTV margin might go. And you sort of planned around that number and the initiatives you're putting in place to -- as to where that's going and what you're doing.

Well, you've accurately summarized the key metrics within the business. How you should think about it is next year, I can be no more explicit than I've been so far. It's a 6.5% revenue to TTV margin, and a 50% EBITDA margin. Then your expenses are going to be -- your OpEx is going to be 3.25% and your margin is going to be 3.25%. And then you can see that we've got an expense line that's going to be roughly the same first half, second half. You can multiply that out by a percentage increase in FY '26. And then you can -- you know that unless something dramatic happens, our TTV momentum will continue. And I can tell you, it will continue for the following reason. We've got annualization of all the clients that we've picked up previously that come into this year's results. There is annualization of the new clients that we've won in FY '25 that will get to FY '26 results. And then I have literally hundreds of people focused on conversion within the organization and how do we increase that. So the sales number will continue. The TTV growth rate will continue. And you can do the math better than I can, John, of working out what those will be. But directionally, I think we've been as explicit as we possibly can be, which is we expect circa 50% EBITDA margins next year. We still did a great job this year in EBITDA margins. So I'm not suggesting we did a great job on revenue margin, but 44% EBITDA margin, if it wasn't for Web Travel Group delivering 44% EBITDA margin, we'd be top of the tree globally. But it's -- our 44% is down from our circa 50%. So we know the gravity of what's occurred, and we understand it. And we're certainly doing everything we can to possibly rectify that going forward. And I won't say we've retooled the business, but our business now has an acute insight into every layer of expense and every layer of revenue that comes into the business because of what's occurred and our focus is on ensuring that our profitable growth on the back of increased sales in FY '26 will deliver us a 25% -- 50% EBITDA margin.

Yes. So if we take that a step further, John, without putting words in your mouth, so let's just say that TTV number this year is circa 5%. Obviously, down [ $2.6 million ]in the first half. Let's say the year after is [ 6 ], which I think you've indicated previously. I'm not suggesting you're guiding to that. If one was to apply [ 6 ] to -- [ 3.25 ] to [ 6 ], that would be the implied for FY '26. Is that too simplistic?

As a model, it's one of many. There are variable outcomes. I think -- if you were to do that modeling, John, there will be numbers below 6 that would still get you a 50% EBITDA margin.

Yes, of course. Understood. But conceptually, that's within the realms of what you -- that's what you've effectively described to the market.

Correct. Conceptually.

Your next question comes from Bob Chen with JPMorgan.

Just two quick ones. One, just circling back on that margin guidance at 50%, that's for just the B2B business, excluding the $23 million of corporate costs for next year?

Correct.

Okay. Easy. And then just around the trading update. It seems to have implied a slight slowdown in the first 7 weeks of trading. Anything we should be reading into that? Or is it the seasonality playing through?

If you -- we're on track to do $5 billion. Whether it's '23, '24, '25, it's within a bull's row of each other. Wouldn't read anything into it. We're just getting bigger. We're just getting bigger in the numbers. If you're banging out 25% on $2 billion, it's a little bit easier than banging up 25% on $4 billion. So we're just getting bigger.

Your next question comes from Ben Wilson with Wilsons Advisory.

Thanks for the detailed explanation of the movement in the margin. I just wanted to ask, I guess, a more sort of industry-wide high-level question on revenue margins. I guess one directional reason for the fall in revenue margins recently has been the fact that occupancy has materially recovered since the initial COVID reopening, which does imply incrementally sort of lower need for the wholesale channel. But looking forward, there is a huge amount of new supply, new hotel supply coming on stream from the major chains. And that will need to be filled as it comes online, which sort of implies a refreshed need for the wholesale channel. I just wonder if you could comment on that, whether you do see that sort of underpinning a next layer of growth for the channels globally or if it's really sort of other factors that play.

Thank you, Ben. Fundamentally, without trying to be confrontational about the question, I fundamentally disagree that there's any decline in the need for wholesale inventory in the marketplace. I can say without fear of contradiction on this call, I would speak to more hoteliers than any of you. And without exception, there is a need for global wholesale distribution. The alternative just -- and while I'm so emphatic about this point because I've been in this industry for 20 years, and over the journey, there has always been an expectation that wholesale inventory would disappear from the marketplace. Yet there is no empirical evidence to support that assumption. So I'm going be really clear. When I worked at GTA back in 2006, say, we're the market leader, and our FIT business was worth EUR 1.2 billion, so AUD 2 billion, and we were the market leader in 2006. Now we're a distant #2, and we're worth on track to do EUR 5 billion, and the market is -- we will continue to grow. I speak to our hoteliers without exception, and I never say, you know what I want to do, have only all my sales go through travel agencies. I'd like to be at the behest two global behemoths and it had my explicit distribution to be done through that. Everybody we speak to, without exception. Now how they do it and what they price and how they give us inventory is more nuanced than what I've just suggested. But there is an overwhelming sense that hotel wholesale distribution is here to stay. There are more than one platform that sells a hotel than OTAs. Now -- and we contribute to the facilitation of that ecosystem. So for all of those reasons, we see wholesale as being important, so much so that our internal benchmark and the way I think about it is for us to be relevant to a hotel, we need to be 1% of that total sales. And we're not the largest. So that would suggest there is many multiples of that out in the market. And we have suggested that in the overall distribution channel, this is a $100 billion marketplace. So for all of those reasons, it's the wholesale channel. All of those reasons, the wholesale channel exists, just as it did 20 years ago, and will continue to exist in the next 20 years because there is no other more efficient way. If you just go down to the bare bones fundamental economics, there is no more efficient way for a hotel supply to connect to a multitude of customers than through a pipe. There cannot be a one-to-one relationship between every hotel and every customer. It would crush their systems, and you have 10,000 hotels being popping up from disparate sources. We provide efficiency in the market. So for that reason, we're more than comfortable that we have a place in the world, not only a place today. We have a place for the next 10, 20 years. There's -- every published data, whether it's from any of the reputable research houses, shows this will continue to grow. I don't even know if I answered your question there.

No, no, that's really helpful. Great to hear that. Just my second and final question, if I may. Just on rate parity. Just wondering if you can give us a refresher on that. I think you've said previously sort of the consolidation to a single platform has helped sort of WebBeds efforts to kind of, I guess, police or control rate parity, and I think you've got your rate parity monitor tool. Just wondering if you can, I guess, give us an update on where you sit with that now, if you do still see some issues, whether in particular regions or not? Yes, if you can just give us an update on that.

Sure. One of the things the OTAs do really well is ensure that they sell pricing at the rates that the hoteliers want them to, and that's known as you accurately described as rate parity. One of the things that differentiates us as a wholesaler is we ensure rate parity as best as we possibly can. We -- our business is predicated on the funneling basic assumption, and it was no different when I was running Webjet and -- that you need to have active positive engagement with yor supply partners. And parity is a fundamental element of providing that in the hotel industry, and we continue to monitor and ensure that we are compliant with the hotels' distribution requirements. So that's predicated and fundamental to the ethos of the company. So that's in place. We continue to enhance it. There are lots of things that we're doing to ensure that our partners continue to partner with us, as evidenced by the fact that we keep selling more hotel rooms for them. They're delighted with what we're able to do and ensure rate parity arrangements are preserved going forward.

Your next question comes from Ben Gilbert with Jarden.

Just on the -- sorry, I apologize, I'll ask another question. But just around the revenue margin. Can you sort of, I suppose, sort of plan for the worst, hope for the best. Just interested in terms of if there are opportunities to think about taking on inventory again. You've obviously got a really strong balance sheet. You get more control over product, you get high-margin products. You probably insulate, and I fully appreciate the previous answer to the question that the OTAs are certainly going to take over the space because you need it, but you probably slow some of that shift in terms of mix within business. Do you rethink your willingness to take on inventory at this point in time, just sort of build the moat of your business even more?

Look, that's obviously an interesting question, and it goes to the fundamental nature of how we compete. If you look at our business tree, the margin reduction that we're seeing today, it was comparable to the largest player in the market's margin. And they had a substantial proportion of their inventory coming through pre-board inventory and various other variations of it. So from our perspective, it's not something that is fundamental to our ability to execute and to drive the $10 billion we can do without having to go down that path. So we have a very -- we have a great business. We've had a shock to the business over the course of these last 5 months. But in that, we've refocused about what is it that we do exceptionally well and how can we continue to deliver great outcomes for our supply partners and how can we continue to be relevant to our customers. And we think that we -- our focus remains on the multi-supply aggregation strategy that we have in place. The combination, again, without wanting to repeat myself, but I will, the directly contracted hotels, international hotel chains and third parties, we think that's an optimal outcome for a low-cost scalable business that will drive 50% EBITDA without having to engage into a more capital-heavy prebuilt inventory environment.

So just to confirm that, so you don't think that sort of this push by the OTAs can probably becoming less so customers more so competitors and groups like SiteMinder, et cetera, launching these products means there's going to be a continued slow shift. I appreciate it's not going to take over the market, I fully appreciate and you've got a really strong front end. You're not going to see that sort of slow gradual shift towards more towards third parties. That's the case.

I can be very explicit on this in answering the session. There is no OTA. There's no publicly disclosed OTA that's growing at the rate that we are at a sales rate. So the market is a market of plurality. I can't even speak anymore. It's a market that is not homogenous where it's a single point of distribution of inventory. And it's not a market where one player dominates the entire market -- the consumer market. There's two very, very, very strong players who have global presence and contribute to the story. But they're all growing sub-10% as consumer businesses. We're growing at 25%, and we will continue to grow at a faster rate than the market. We'll continue to grow at a faster rate than they do. So I don't feel I need to do anything other than focus on the things I can. And my focus will be and will continue to be delivering margins around the 6.5%, growing our customer base, improving our supplier mix and ensuring that we maintain relevance to everybody at both ends of the spectrum. So that's what we'll continue to do.

That's helpful. And so a very final quick one for Tony. Just on that cost split, you said it's around sort of [ 75 ] fixed. We should assume sort of a CPI-type increase of fixed and then we make our assumptions around the variable component relative to revenue.

Correct. Correct.

Your next question comes from Sam Seow with Citi.

Look, I just want to talk about revenue margins quickly. It looks like the second quarter '25 might have been a low point, and then -- but it seems improved probably 6.5% in the third quarter. You talked about overrides being the same. So wanted to understand what's driven that sequential improvement.

Good question, Sam. And self-regulation isn't my strong suit, but what we did in response, and I spoke about this during the call, what we did in response to the European summer trading is when we didn't see the margin recover, we continued to price down and chasing volume. And it was an inappropriate response to what was going on. It's the peak period. It's the period with the lowest availability and we're pricing down. And for the sales, we probably would have got anyway, we're taking a back off the price and sacrificing margin along the way, which was an appropriate response. So yes, it was lower than the 6.5% in that quarter. And that's a little bit -- and I don't want to be as explicit as I can because obviously, this is the potential burning platform for the business if it was to continue. There was the reallocation of the customer financial incentives all falling into that quarter as well, not being smoothed out over the 6 months. So those two were the major contributors to the low point of Q2. Q3 is what we said, and I'll repeat myself. The expectation is over the next three halves, next three reporting periods, that's what our expectation is based on everything that we can see about the business and where it's heading and what's going well and what we need to continue to focus on to improve.

Got it. That's really helpful. And then maybe just again, in your prepared remarks, you mentioned an influx in inventory in recent months. Just wondering what you mean by that. Has it been a material change in the competitive environment? Or where is that inventory coming from?

Sorry, the inventory, I think this is the reference of FTI bankruptcy in June. That was the influx. That was circa AUD 2 billion, hit the markets all at once as people were scrambling to rebook all of FTI's customers. That was the influx of previously booked inventory. It's not a change in supply mix. It was just a change at that particular juncture because a major player went bankrupt in the travel industry.

Okay. That's helpful. And then maybe just on that, maybe could you talk about the competitive environment then, if it has changed or not? And two, are you selling or powering your competitors at all by selling that inventory?

It's -- I'll answer the second part. The competitive environment hasn't changed dramatically in the last 6 months, the margin scenario has for us. If the competitive environment has changed, we wouldn't be growing at 25%. So the -- yes, we sell to everybody. We sold to our competitors. We sell to -- and our competitors have a part of the third-party inventory that we sell. So yes, we are in a coopetition model.

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

A couple of questions from me. So your business has gone through an incredible amount of disruption in the past 6 months. You've had a demerger executive resignation deteriorating financials. Can I ask about your sense of staff morale and engagement in sort of a priority is that for you?

Delightful shift in question, Wei-Weng. So thank you for focusing on a slightly different topic. Of course, it's important. Yes, I've run this business for over 13 years. I'm talking about the Webjet business as well as this business over 13 years. And we've had an incredibly stable management organization, which I think is a great positive. And I take great comfort that I've got a reliable management team that has executed at an extremely high level over a long period of time. And the key components of that still remain. Over the last 2 months, I have been to all of our major geographic centers where we employ people to get a sense of what's going on and understand how they feel about the business. And there is -- as you can imagine, and there's limited things that I can say even to our people internally about forward-looking statements. There is a degree of concern when you see what's happened to our share price over the last 4 months. So that's a topic. And there's also a disconnect from their perspective and that they can see sales are going great. And yet the underlying value of the business has declined. So we have to step through that. I will do an all-employee call tomorrow night and go through it in a lot more color. But to go to the nub of your question, for the most senior people that I've had interaction with, there is complete buy into our processes. We are still notwithstanding the turmoil that we have been rolled on the financial markets. We've got a senior leadership team that wants to be part of this organization and will contribute successfully for us over the next medium term, long term, however long that they're around. They've bought in.

Yes. Okay. And the actual management resignations, are they being used as a cost-out opportunity? Or will all those positions be filled?

We're talking to people. It's not material.

Okay. And then just a question that I've been asked and I'm sure many of my peers have, if margins can go from 8% to 6.5%, why can't they go to 5%? I guess I don't have a great answer. Hoping you could give me one.

Yes, good question. There's no downward impediment. It's sort of bit like why investment banking rates can go from 3% to 1% or 1% to 0.1%. Market forces would dictate that efficiencies would need to be delivered -- sorry, market forces would dictate that supply would need deliverable to a broad-based customer. And these rates are now sub OTA rates. If you think about 6.5% and then you get a retailer adding a 7% margin on top of our 6.5%, that's 13.5%, that's sub an OTA rate. That's a lower cost of distribution for the hotel industry. So they want a broad-based supply. They don't want to be locked into two customers. So those two customers don't control circa more than 20%, 25% of the global market is the other 80% -- 75%, 80% that people need to sell into. So all of that is why we're relevant. Now I can go to, as we have done, look at what our competitors are pricing, look at what their margins are, look at our -- I've done it not by a simple [ 6.5 ] across the board. I've done it by every market that we operate in. I've done it from a market that's -- I'll pick our lowest booking value market, something like the Philippines to something like Norway. And by market, we have gone through and looked at what our margins will be, what the incentives are in market, what is the supply mix that we're providing to those markets and how are we going. And that's the only way I can answer it. It's like most things in life. It's a matter of faith.

Your next question comes from Sophia Mulligan with Macquarie.

Tony, just two for you quickly. The first just on the corporate cost allocation for the first half. Could you just explain why that was sort of lower than expected and why that will normalize from here?

Yes. Look, it's allocated consistent with the way we did the pro forma P&L and the demerger booklet. It assumes corporate costs, which myself, Shelby and John are a part of, are proportionally split between B2B and B2C. So if you look at the B2C results, they've got about $6.1 million and the $7.5 million is what we would have been collectively if we did not demerge, which is pretty much consistent with last year's sort of $13.3 million or $13.5 million. But then going forward from the 1st of October, our costs, as an example, won't be separated. They'll be all sitting inside the B2B business. So on a run rate basis going forward, the actual stand-alone cost is closer to 11%.

Yes, that's helpful. And just I'm sorry, just on CapEx. So you called out the expectations for CapEx from here. Can I just clarify, is that also maintenance CapEx? Or is that growth CapEx?

Growth CapEx, Sophia. So it's pretty much what drives the variability there. You can see the ratio there or the first half, second half split isn't inconsistent. We did intentionally accelerate for the reasons John outlined earlier on the point solution, which had a benefit to the Middle East. That's demonstrated by their highest TTV growth across all the regions in this first half.

Your next question comes from Aryan Norozi with Barrenjoey.

First one for me, just on the net cash balance. I mean the pro forma demerger docs for FY '24, it was $303 million of net cash and first half of $280 million. Given the fact that you've obviously generated cash of 138% conversion, there hasn't been a lot more outflow that from CapEx. What does net cash step down from FY '24 pro forma level, please?

Also we did the $20 million or thereabouts of the capital management initiative in the same time frame. And equally, the working capital online was less as well to the contribution. So we had a credit base contracted. Last year, we had a more material contribution from working capital. This year, we don't.

Yes, but you're generating you made 70 million some of EBITDA and 138% cash conversion. And like CapEx of $25 million, $20 million of the equity incentive program, but like it still doesn't reconcile down by FY '24. Is there any other adjustment that you made post demerger or that makes the FY '24 profile number not comparable?

The other thing there is obviously intra-company cash. There is an element there of intercompany loans between two companies. So there is a contra $32 million sitting in the B2C business. You look at their cash flow and their pro forma, that's probably any other item to call out there.

Okay. And the 6.5% revenue margin in October that you've called out. So can I just confirm, first of all, is that -- is October sort of seasonally normal period, so there's no peaks and troughs there? And secondly, you fixed the European pricing issuing the fact that you're not discounting from basically no volume benefit. But then if you haven't improved third-party mix, so is there upside to that 6.5? Or is the way you're thinking about it, if you improve the third-party mix, then you still got geographical mix headwinds and you're giving yourselves a margin of safety? Can you just talk through sort of moving parts there?

Yes. I think I'll comment a little bit earlier on with some of the earlier questions. I forget who asked it. But we're guiding to [ 6.5 ] in different terms, if we improve supplier mix, it will be better than [ 6.5 ]. There are some other contrary things that are occurring with geographic mix that could make it lower, but we are very comfortable that in aggregate with all the things that we can have clarity over and insight into what will happen down the track, we think that we're comfortable guiding to[ 6.5% ]. And I'd be concentrating. There are various elements that can go up and down, but we expect it to be over the medium term 6.5%. And to go to your first part of the question, October is normal, 6.5% is normal. It's a shoulder period. It's not the peak summer. Northern Hemisphere summer is not that November and December where it starts to slow down a little bit.

Okay. So just to clarify the 6.5%, so within that guidance, you're factoring continued compression from obviously, geographical mix because you know what you're sort of targeting. But then the upside, obviously, is a supply mix.

Correct.

Okay. And the guidance of EBITDA for FY '25, that only includes the $2.5 million of AASB9 benefits. There's no assumption you're making on your AASB spend in the second half?

There is no upside to that number in the second half expected and that's included in that number, correct. We'll move to the last question. We've run out of time. It's 10:30. So, last question?

Your final question is from John Campbell with Jefferies.

Hang in there. Good to get the opportunity. Look, just two quick ones. Firstly, John, is the wholesale market or the wholesale channel, is it growing per se? Or is it sort of just holding its own?

I think it's growing at the rate the market is growing, John. That would be my assessment.

Yes. So clearly, the top couple of players within the market, including yourself, are taking share effectively, taking significant share.

100%. The three of us collectively would be outperforming at a similar rate. Look, I don't -- I can't speak for one of them, but obviously, Expedia has got public data. They're not growing as fast as us, but they're having a great -- they're growing incredibly well. I don't know the other guys. It's not published, but I know they're doing well. So the three of us are massively outperforming the market. It's, thankfully for us, consolidating towards the three of this, and that's great for our business in the medium term.

Yes. And do you still see a long tail of sort of subscale competitors that are sort of eking out in existence but not really offering a great offering?

Yes, absolutely. There's -- I just came back. There's two major trade shows that we exhibit at, and one is World Travelmat, which is in the last week -- sorry, first week of November, which means, unfortunately, every week, I don't get to celebrate Cup week. But the consequence is I always look around and I see many of the same tide sad organizations that are doing nothing different to what they were doing 5, 10 years ago. And there's occasionally a number of new entrants that come in who then disappear 2, 3 years later. So that cycle continued when I was at WTM thinking about who wasn't there anymore and looking at some of the new guys who have replaced them. So it's still a dynamic marketplace. They're still attractive. It's massive in its scope. It's got incredible importance to the travel ecosystem. So for all those reasons, we'll be here long after I've left this motor coil.

Yes. Last question, share-based payments. Do you expect that they would continue at a similar rate to what we saw in 1H?

Yes. In short, that would be the expectation going forward. We'll formalize it all post these results because the accounting is always predicated on the closing share price. There's a bit of variability there until we close it off. But yes, directionally, it's the best way to think about it.

Thank you, operator. Sorry for those guys that we couldn't, I know there's more questions, but we've run out of time and going to go to our next meeting. Thank you very much.

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