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

Thank you for standing by, and welcome to the Web Travel Group Limited FY '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, Harmony, and welcome to the FY '25 results presentation for the Web Travel Group. Joining me today is our CFO, Mr. Tony Ristevski. Wow, a lot can happen in 12 months. And obviously, it's our first full year results in which we have demerged the business, and we've separated out Webjet from the Web Travel Group. And my major goal in today's presentation is not to accidentally refer to us as Webjet because that would be breaking the habit of 14 years. So the demerger has occurred as of September 30, 2024, and we will talk about everything as if the company had been split for the entire year. And if we move to Slide 4 under the group summary, you'll see that our underlying EBITDA for the group is at $120.6 million; underlying NPAT, $79.2 million; cash on hand at $363 million, strong cash position. Corporate costs were in line with expectations. Tony will talk in a while about our capital management initiatives in which we proactively looked to address the potential dilution from the convertible notes. I will then go straight to Slide 6 and talk about the WebBeds business. Bookings for the year, up 20% at 8.4 million; TTV at $4.9 billion, up 22% in AUD, up 23% in constant currency. Euros, just to remind everyone, is our functional currency. So we have seen strong bookings growth during the year and average booking values have increased during the year to contribute to our $4.9 billion in TTV. Revenue was clearly disappointing at only $328.4 million. That was driven by a number of factors, which I called out at the half year and was going to impact us for the full year. I will talk about that in a few slides about what we have done to ameliorate some of those issues and what that looks like going forward, resulting in an EBITDA, which is disappointing, of $138.8 million, below FY '24's $160.8 million. The flat revenue is the key contributor because the operating expenses that we incurred during the year were planned and the expected outcome was that we would grow revenue at a much faster rate, which we didn't do. So let's move on to a little bit more detailed analysis of the results on Slide 7. As you can see, TTV was up 22% for the full year. We did have a higher margin in the second half of 6.9% compared to 6.6% in the first half. That margin is reflective of accounting changes that have been implemented as we discussed in the first half. That trend will continue for the foreseeable future. So in FY '26's results, we anticipate first half margin to be lower than second half margin. EBITDA down 14%, as I said, is a reflection of the lower TTV margins and higher expenses. And in the month -- post results, but in the month of April, we divested a noncore DMC business, and that was effective on the 30th of April 2025. As we've highlighted for a number of years, there are pillars of growth that drive our TTV. Growing our existing portfolio is system growth. That is, and in our case, we calculate the number by looking at every public domain hotel business and we look at their growth rates as measured by occupancy, as measured by average booking value, and as measured by new stock that comes on to the market. So if you're not growing at least 5%, you're losing stations. So 5% is the bare minimum. Then we measure within our growth portfolio, what comes on as new customers and what comes on as new supply. And for us, that accounts for about 5% of our growth. And then the rest, which has been historically is this year and will be again in FY '26 and beyond, it's the conversion initiatives that we have undertaken that drive the superior growth rates that we have had over the history of WebBeds as a business. So aggregate growth was 23%, and we've seen an improvement in our conversion rate in FY '25 over FY '24. As we've explained in various strategy initiatives previously, in previous half and full year results, the network effect continues to expand as we add more content and customers in. Our relevance to hotel supply increases, gives us better inventory, which enables us to sell and convert at a higher rate. That will continue ad infinitum as our business continues to scale. If we go to Slide 9 and focus on just some of the key call-outs of how we think about our business, we have become obviously more relevant and more meaningful to our travel buyers and partners when we're turning over circa $5 billion. But in our top 30 destinations, that continues to grow at 18%, which, by definition, means that our tail continues to grow quite significantly as we expand geographically. Same-store sales are up 21%, and we're adding more hotels into our portfolio. So we're seeing hotel portfolio booking growth of -- sorry, individual hotels within our portfolio have a booking growth of 6%. So we're continuing to expand across all of our geographies, and we're continuing to be more relevant to the hotel partners we have, and we're adding new hotel supply partners as the business continues to grow. If we move to Slide 10, and I'll spend a little bit more time in the next few slides just talking about what's happened to our business, what we have done to address those challenges and what we're going to be doing going forward. So as I called out in the half year, there were half a dozen events that created in the reduction of our take rates or revenue margin. To look at the ones that are company-driven, which are on the left-hand side, there were incentive agreements put in place and those incentive agreements are still there, and they've been appropriately structured to enable us to continue to deliver profitable future growth, and we'll see that when we roll into FY '26's results. We missed -- we had a misunderstanding of the impact of the trading that occurred in the European summer. That's created a restructure within our own business in which the revenue management on our side in global pricing and all revenue initiatives report through to myself. And we're starting to see some of the benefits of that, and we'll talk about that when we get to the outlook statement. And obviously, as we spoke about again 6 months ago, the post-demerger restructuring is now complete. However, it was an intense effort in which most of the senior management was preoccupied and less focused over that 6-month period on our underlying business. So they are the company factors, now let's talk about the factors that are going to continue because our business is not a homeostatic state, it's a business that has many, many customers, many supply points of origin, and we cover great geographies. And all of that mix is in a continual state of evolution. So if we look at our supply mix, we have started in FY '25 to increase the number of direct contractors. We started that in the Americas in Q4 of the last financial year. We will continue and substantially increase our direct contractor numbers, and we'll talk about that in a second, as we look to rebalance our supply mix. Our supply mix has always been -- the vast majority of what we sell is directly contracted and chain hotels. So hotels that we have a direct relationship has always been the majority of what we sell. It was the majority of what we sold in FY '25 as well. However, what we did see in FY '25, as we grew rapidly in the course of '24 and '25, is that we were selling a disproportionately higher percentage of third-party inventory. Third-party inventory is important to our business model, and nothing is going to change in our multi-supply aggregation model itself, however, we are going to be focused on looking at higher-margin directly contracted inventory being a key driver of our growth initiatives for FY '26 and beyond. The geographic mix continues, and we'll talk about that in a couple of slides, where you'll see that our booking volumes have doubled since pre-COVID. Our TTV has almost doubled, and we'll talk about why that hasn't correlated. But in essence, you've seen a dramatic shift in geographic mix. That's contributed to the take rate issues that we had in FY '25. And our customers grow and some of our customers are growing at a much faster rate, and that changes the way we account for the revenue take in those specific instances. So we'll talk about all of these things in a little bit more detail in a second as we look to going forward, but all of these things are front and center of the entire organization as we look to continue to be the fastest-growing travel business in the world and continue to be the fastest-growing profitable travel business in the world. And we didn't fulfill the second part of that equation in FY '25. If you move to Slide 11, you'll see that we have and will continue to invest in directly contracted inventory. For those that are new to the business, I'll give a very quick snapshot of what has been the unique business model that we have run since we launched this business in 2013 and which continues to be the leading factor of why we are an attractive business partner for both our supply-and-demand elements of the hotel distribution environment. That is that we provide a bespoke and unique collection of directly contracted hotels, predominantly independent hotel chain agreements with every major hotel chain, and a selection of important third-party providers to enable us to give the best offering to the entire ecosystem of travel buyers, whether it's in the retail, wholesale or any of the tech and emerging channels. What we're seeing, as we have grown very, very quickly over the last 2 years, is our third-party supply has grown faster, and that has provided us with some downside risk to our take rate, and we saw that occur in the first half. What we will do is look at where we anticipate having the highest growth for our business going forward, and this is a 2- to 3-year view that we've taken, and that is to increase the amount of direct contractors in those markets. And the first 2 -- or the only 2 markets that we will have the highest proportion of increased contracting will be Asia Pacific and Americas. And when we get to the next slide, you'll see what we've been able to achieve in those 2 markets, and yet we have barely scratched the surface of what we will achieve as we continue to penetrate those markets more deeply. As a business, we continue to invest in our people, and we expect the investment that we have made in Q4 of '25 and have already started in Q1 of '26 to have a meaningful impact to our results in FY '27 and will be a key driver to getting us to 50% EBITDA margins for our business in FY '27. So if we move to Slide 12, you'll see that pre-COVID, we did 4.2 million bookings for the calendar year. And financial year '25, we doubled that to 8.4 million. But it's not a like-for-like growth scenario. You'll see that Europe has grown. You'll see that APAC has more than doubled. You'll see that Americas has grown fivefold, and you'll see that Middle East has actually declined. And that was always deliberate. Middle East was a market in which the creditor risk was greater than what our appetite currently is. And therefore, we never anticipated that to be a high-growth market. As the market has evolved and the level of confidence that we have with industry participants increase, we'll start to see that growing more substantively. So if we then go to the bottom part of the page, you'll see that the TTV hasn't grown at the same level. So $2.6 billion in calendar year '19 translates to $4.9 billion. I'll let everyone who's good at mathematics to derive various average booking values and growth rates across the board. But you'll see that in general, we've sort of grown proportionately of our bookings, with the average booking value for the individual regions, with the only region that's down on calendar year '19 being the Middle East, but the others are up massively against FY -- calendar year '19. And if we look at the results for this year, you'll see that APAC is up 26%, no surprise. It's been a fast-growing business, but we had a substantial pre-COVID business there. Americas is up only 20% this year, but it's up fivefold to the enormous growth that we had in '22, '23, '24. And then I don't want to give away the surprise, but if you go to our outlook statement, you'll start seeing the phenomenal growth that they have reignited into that business there. Europe, which is our highest take rate market and the second highest average booking value, has shown really solid gains and a great result, up 20%. And the Middle East, on the back of some of the investment that we've made in point of sale that Tony will talk about in the CapEx slide, is up 23%. The Middle East has always had our highest average booking value, and that continues to be the case. So we're seeing -- we saw great growth at TTV level. We've seen a business that has rebounded incredibly well from the COVID highs and -- sorry, the pre-COVID highs to the restructuring of the business to be incredibly more efficient at every level of the organization. We've got less employees now than we had in calendar year '19, and we've got circa double the TTV, but we have circa double the activity as measured by bookings. So a lot of work that's been done over the course of the last 3 to 4 years continue to bear fruit and enable us to have a highly scalable business going forward. Let's focus on the next element of our journey. As we have spoken many times, we are just a small sliver of the overall bedbank marketplace. The addressable marketplace is huge. This is in USD, it's $96 billion, and we've got 3.3% share. And we will continue to grow ad infinitum. There is no limit to what we can achieve. And the target of $10 billion of TTV by FY '30 remains on track. We talk about delivering circa 50% EBITDA margins. We're putting a specific time line that, that will occur in FY '27, and we'll continue to grow our business over that journey to get to $10 billion by FY '30. So we speak about, and we have for a number of years, growing our existing portfolio, new customer supply, building out markets and improving our conversion. What's changed between, I guess, the November presentation and today? It's something that I've had obviously ample time, and the rest of the business has ample time, to reflect on. And I think it's best surmised by the following quote that, "Mistakes are the portals of discovery," a quote from James Joyce, which resonates with me incredibly because our fundamental business model is not broken. Our fundamental business model continues to outperform, and it will continue to outperform. But we needed to fine-tune certain elements where we had lost either the razor-sharp focus that we've had historically or there were minor things within our overall ecosystem that weren't working as designed. So we've had a chance to look at those strategic priorities and how do they support the pillars of growth that we've covered off, those 3 elements at the top of Slide 14. So clearly, there are external facing elements, which is the top half of that strategic diagram. And we've worked hard, and I'll go through them on Slide 15 without going into a whole lot of detail, certainly, as I believe our competitors will probably be listening to this, but certainly well enough to give comfort, and as seen by the results that we are starting to grow into for FY '26, comfort that some of the challenges that we faced in FY '25 will no longer be as impactful for us in FY '26. A renewed focus on growing the base and expanding the reach. We'll see that when we talk about our results. Enhance supply. We've had a phenomenal 12 months in building out deeper relationships with the most important partners, in particular, the hotel chains, and that obviously helps us grow our portfolio and help us win new customers. The technology-led transformation, we've spoken about our investment in point of sale. There are things that we're doing for the last 3 years in AI that I believe are unique in the industry and drive a competitive advantage for us, and we will continue to build those out more comprehensively and fulsomely around the entire organization. There are work that we've done on robotic process automation, ensuring that we are more efficient. I speak always with a high degree of pride about the fact that we are 100% more efficient than we were pre-COVID. And we're doing a whole lot of work on ensuring that we have the right product to be able to support our customers' needs. And so that technology-led transformation continues. Frictionless customer service. I sort of covered off a little bit earlier on, but we are highly valued by our partners for providing superior customer service, and we have become incredibly focused around delivering that in a low-cost, high value-add environment. Partnership and strategic initiatives. We are always on the lookout for whatever we can do to either become a more valued partner with our hotel partners or whether we are more efficient in driving conversion outcomes for our customers. And we clearly have the firepower, notwithstanding the $150 million of cash we spent buying our own stock, we still have the firepower to make M&A deals to support the strategic objectives for the business. And underpinning all of this, and it's no different to any other organization, but if you're a world-class organization that's delivering leading growth, having great people empowered to do their jobs and to enable them in a more efficient fashion and a more collaborative fashion, drive outcomes to achieve our $10 billion TTV target. And we have a number of initiatives that we are undertaking to support that particular area. So that's the good, bad and the phenomenal of '25, if we hand across to Tony to cover off the financials.

Thank you, Johnny. Good morning, everyone. I'll turn your attention now to Slide 17. I'll cover off the financial summary. It's quite a busy slide, consistent to what we reported 6 months ago at the half. And I'll probably take you through not so much the restatement in the accounting changes, which I did talk at length last time, but talk to what's changed in the second half instead: the P&L structure where Web Travel Group is at the top, which encapsulates the WebBeds business and corporate; and then the bottom will be the discontinued B2C business. On the left, which is our statutory results, the only net inclusion at the second half that wasn't there in the first half is an item called impairment expense. This relates to the disposal of the DMC business. DMC was a small component of the JacTravel acquisition back in 2017. We had some intangible assets attributable to that small division that was run independently of the B2B business, but included as a subset. We've had to obviously impair that as we've disposed of that asset. I then turn your attention to the column on the right, underlying operations. This is how we look to understand the commercial performance of the business. It's the way we've presented our P&L now for the better part of 7 years, in a consistent format. John has gone through the revenue and expenses item, which is attributable to the WebBeds business, the corporate item I'll go through in the coming slides, and that results in an EBITDA at an underlying level of $120.6 million. The next underlying item that we consider is relevant when considering our performance is depreciation and amortization of $22.6 million. This is obviously correlated to the CapEx spend. As we spend, we amortize as it relates to our platform. If you recall, at the first half, that was a pro forma item of $9.8 million, as determined for the first half. Second half, the expense is $12.8 million. The best way to think about it, I do get questions around outlook and how to think about items below the EBITDA line, look at the $12.8 million, which is the half to D&A, annualize it and then add 10%, and that 10% going forward, if you're thinking about how to best model the D&A number going forward. Then you go to the next item there, which is EBIT, of $98 million. The next item there is net interest costs. If you recall, in the first half, we had a positive $600,000 for net interest. That's because we had a substantial amount of cash. Obviously, across the second half through the demerger, we did appropriate $135 million across to the B2C business, which we don't have anymore. And coupled with that, we've also spent, which I'll talk about later in the cash flow slide, close enough to $170 million on capital management initiatives. So those circa $300 million of cash that was sitting there and potentially earning a lot more interest is no longer the case. So what you'll find is, from an outlook perspective, that interest expense line will grow and it's anticipated to grow into the mid-teens. But look at the details in Section 3.4E of the annual report, where it goes into details of each of the respective line items. Next is then the EBT number, or be it earnings before tax, of $94.3 million. Tax, consistent with what I said at the first half, we expect an expected tax rate of around 16%. It ended up coming in at 16% to land on an NPAT number of continuing operations of $79.2 million, down on last year's $101.1 million. The other key call-out here is, from an outlook perspective, we're modeling out the tax, we've forecasted effective tax rate to be 17% for '26 and thereafter in the near term. I'll then turn your attention to the slide, which is capital management. Consistent to what we announced at the first half results in November, we kicked off the buyback program of $150 million in December, and we completed that program in March of this year, resulting in a totality of around 31.2 million shares being acquired and canceled. That represents approximately 8% of our issued capital. When you also add to that, and probably you may not recall, but back in September of '23, we initiated a capital management initiative whereby we're buying equities around derivative instruments of circa $150 million. We didn't quite get there. But nevertheless, what we did acquire was an exposure to 8.4 million WEB shares, which currently sits on our balance sheet as part of other current assets. So in totality, that addresses the potential dilution of the bond by about 88%. And look, we have a high conviction around the outlook for our business despite the short-term share price position at this stage. But nevertheless, we can't always predict the world in which we live in and how equity markets will behave in the next 12 months. We recognize in 12 months' time that we have the finality when it comes to our bond. So there's going to be really 2 options there for the bondholders to convert or redeem. So we've looked through the lens of conversion and tried to deal with that proactively and confident in delivering maximum shareholder value. But on the flip side, should they choose to redeem, we've, subsequent to year-end, upsized our revolving credit facility from $40 million to $200 million. And when you add the cash from operations we generate in the next 12 months, that gives us ample liquidity to deal with any consequence regarding the bond preferences or be it the bondholders' behavior at that point in time. So it completely derisks our business and we can focus on running our business for the next 12 months, and then we'll deal with the outcome closer to the conversion or be it the bond expiration date. Moving forward to the corporate cost line. Again, a bit of nuance here as it relates to the corporate costs. It came in at $18.2 million. The second half was $10.7 million worth of expense as opposed to $7.5 million in the first half. If you can recall, 6 months ago, the $7.5 million was really a function of the process that we used to allocate the cost across B2B and B2C, consistent with the demerger booklet. The half 2 run rate of $10.7 million is the best way to think about it. If you annualize that, add back in STIs, which weren't paid in the last 12 months, coupled with CPI, you get something close enough to $24 million from an outlook perspective. Going down to the next slide, nonoperating expenses. Subsequent to the demerger, we did restructure our business, which incurred, plus advisory costs, close enough to $10 million. The other item there of substance, and a noncash item, is capital management initiatives. Last year, when we kicked off the instrument, or be it the equity-linked instrument, the share price appreciated. So the value of that asset on our balance sheet did appreciate, which resulted in a $10 million book gain. Unfortunately, with the share price contraction year-on-year, that resulted in a write-down of that asset on our balance sheet of $24.3 million. The next item there is onerous lease provision. This is really as a direct consequence of the DMC business. We've got people based in our London office who we're moving across to the purchaser's office, so that renders that space surplus. So hence, we've booked an onerous lease provision as part of the overall transaction. I'll move forward to the next slide, which is our balance sheet. Look, the key call-outs here, without going to every line, is obviously the healthy cash position. And I obviously called out that we have spent over $300 million as a consequence of the demerger and the buyback, which still leaves us with a healthy, just shy of $365 million. The other key call-out here is our debtors and the way we continue to manage those. We've been pretty vigilant from the team as it relates to debtor days in our credit policy. That was sort of circa mid- to high-20s pre-COVID, and we've been moving that down to circa 20 days over the last sort of 4 years. The other side of that is trade payables. I foreshadowed this 12 months ago at the FY '24 results that we're going to see a contraction in our creditor days, which is going to impact cash conversion. And similarly, the same call-out was done 6 months ago in the half. We have come from pre-COVID days circa 50 days to now being in the mid-30 days, and we see that normalizing going forward. And I'll talk about the consequences to cash in the next slide. But the other key thing since COVID that I've been referring to when it comes to liquidity and the overall health of our balance sheet for the medium term is really the current ratio. The focus there is really having a position greater than 1 because obviously, we have a lot of intra-month swings when it comes to working capital, debtors and creditors, so what's important is a healthy cash position to be able to deal with that intra-month and then also deal with any potential risk of volatility or unforeseen events in the near to short term. Going on to the next slide, which is cash flow. The key benefit of our business is, as earnings grow, cash grows. They're highly correlated and it has been for many, many years. In the last 12 months, as mentioned earlier, we've had a contraction in creditor days for the first time, and that's impacted cash conversion. But we've telegraphed that 12 months ago and 6 months ago, and that ended up being 73% from a cash conversion perspective as that normalizes in this financial year just gone. But going forward, from a '26 cash conversion, we'll get back up to 100% as creditor days normalize and debtor days have normalized. But as you can see there, as I mentioned earlier, we spent close enough to $170 million in the period on capital management initiatives as it relates to the confidence around our outlook. And then the other thing there is obviously the demerger resulted in $135 million being handed over to the B2C business. Going on to the next slide, which John talked about earlier regarding the investment in our business, we telegraphed 6 months ago that the point of sale was an important aspect to our delivery and supporting the incredible growth numbers, particularly as John will talk about the trading update. In the second half, we telegraphed 12 months -- 6 months ago that we'll spend circa $12 million. We ended up being $11.9. So as we think about our business in the next 12 months, we expect CapEx for '26 to be in line with the '25 number and thereafter grow with inflation. And the key call-out there is, as John had on the previous slide, we had an expectation of a 50% CAGR on TTV. And as you can see there, the CapEx growth is substantially less than that. So that just highlights the scalable nature of our business. So on that last note, I'll hand over to John.

Thanks, Tony. So just picking up on that point, we have a great business. And I don't say that lightly. We've got a phenomenal track record of delivering growth. So to hold ourselves accountable internally, we always measure ourselves against what did we acquire and what have we grown. So as you -- as anyone who's followed our business over the years has known, we made 2 major acquisitions in '17 and '18. We bought the JacTravel business and the DOTW business. Both businesses were both largely larger than the individual business that was WebBeds at the time. And what we've been able to do is lever the $1.5 billion of TTV that we acquired pre-COVID and derive an incremental $3.4 billion of organic growth on top of that. Everything that we expect to achieve between our number now of $4.9 billion and $10 billion is organic growth. This is not coming with the stimulus of M&A activity to drive that. It's the fundamentals of a business model that continues to resonate in a global marketplace in which we have an incredible opportunity. So you look at the numbers, even though I've been instrumental in being involved in this business over the journey, a 10-year CAGR of 36% with the middle of COVID there, a 3-year CAGR of 49% TTV growth are incredible numbers. And we expect us to double the size of our business over the course of the next 5 financial years. So we're on track to be able to deliver that outcome. So what's happened? And why are we confident? So I think that of all the headline summary -- of all the headings in the deck, refocused, recalibrated and back on track clearly resonate with me about what's happened over the course of the last 6 months in particular. We're not only maintaining our market-leading TTV growth rates, we're actually going to be, in one more slide, showing how we're increasing those market-leading TTV growth rates. It's a large addressable market. As we've spoken about, we are rebalancing our supply mix for FY '26 and beyond. We think that's going to be really meaningful for us in FY '27. In the medium term, we are reaffirming our expectation that our take rate will be maintained at circa 6.5%. As I highlighted earlier, the first half will be lower than the second half. That's an accounting change issue that's driving that outcome. It's nothing else that's underlying other than accounting change of how we recognize revenue. But we're a highly scalable business. We will deliver 50% EBITDA margins in FY '27. In FY '26, we'll be up from our circa 43% or 42.5% EBITDA margins to between 44% and 47%. The reason we're not higher is obviously, our expenses will go up in FY '26. That OpEx growth is expected to be high single digit. And the vast majority of that high single-digit OpEx growth is bringing high-quality, impactful employees into our organization. They're going to contribute to the superior profitable growth targets that we have from FY '27 and beyond. We don't normally call out individual markets, but we're making an exception this year, primarily because of geopolitical issues and the impact it appears to have with some other publicly available information about trading for various people in the travel ecosystem. Clearly, whatever is happening in the globe is not impacting us. So we'll look at it from 2 different perspectives. So if you think of the United States as a destination, and we sell domestic in the United States and people flying into the country, how are we traveling? Well, we're up in aggregate 30% to the United States. And the United States is our largest single country that we send travelers to. Marketplace is up 36%. Oh, my God, even Canadians are going to the U.S.A. That's up 32%. The rest of the Americas is up a big number; APAC, pretty normal; Middle East, big number. And the only market that we're seeing some softness to the United States is Europe traveling to the United States. The aggregate of the United States as a destination is up 30% for the first 8 weeks of trading as of Monday of this week. So what's happening with the U.S.A. market? Consistent with the first one, domestic is -- Americans selling to America is up 36%; Americans going to Canada, up 30%; and the rest of them are up very, very strongly, with the reverse happening where Americans going to Europe, up a phenomenal 57% over this 8-week period. So the United States, over this 8-week journey as a source market, is up 37%. So how have we gone in the first 8 weeks? So if I get you to look to the right-hand side of the slide, as we've already covered, the Americas -- this is all as a source market, Americas are up 36%, Asia Pacific is up 22%, Europe is up 25%, Middle East is up 32%. So all markets are up, well up, on this time last year and obviously well up on whatever the market growth rate is. And the indication that we have from our industry colleagues and published data by some of our competitors and some of the other players, whether they're airlines or hoteliers, is the market is slowing. The market is slowing, WebBeds is accelerating. So the story doesn't change. We've always been a market share story. I was reflecting just a couple of months ago that one of the best things about having the demerger, and it wasn't a motivation, but we were completely decoupled from the share price movements of the other Australian travel stocks. But clearly, that hasn't been the case in the last 2 months as other travel stocks have made announcements. It's had a negative impact on our business, which is surprising when 97% of our revenues all come from outside of Australia. But in aggregate, what has our business achieved over the first 8 months? Well, I'm calling it out 3 different ways to say that there's complete transparency about the outperformance that we've delivered. And it's been a little bit strange, and I'll just cover off the strangeness first. Well, firstly, bookings are not strange. That's a phenomenal 29% up. But what is strange is, when you translate it into either euros or Australian dollars, you get a significantly different number. Our 29% bookings in euros is up 28%, which is down 1%. It's the first time in living memory average booking values across the group are down. And there's 2 factors to that. There is the fact that Americas and the Middle East, where many of the currencies are pegged to the U.S. dollar, have got a modest depreciation against the euro from this time last year. And we are seeing a little bit in those TTV and bookings number, a very modest 2% to 3% decline in length of stay that's occurring. So what normally would happen, and you saw it this year as a great example, bookings up 20% -- sorry, last year being FY '20, bookings up 20%, TTV in constant currency up 2% or 3%. And that's a factor of average booking values going up 3%, and that's been the historic norm. That isn't the norm in the first 8 weeks. I thought we'd be calling that out to explain the delta between 29% and 28%. And clearly, as everyone who resides in Australia knows, the Australian dollar has collapsed over the course of the last 12 months. And so the economic benefit of us being listed in Australia is that our TTV in Aussie dollars, the 28% that we were up in euros translates to 37% in Australian dollars. So we have had an exceptional start to the year. And clearly, we're targeting record EBITDA in FY '26. So with that, Harmony, we are open for any questions.

[Operator Instructions] Your first question comes from Ben Gilbert from Jarden.

Just in terms of the year-to-date trend, obviously, it's a cracking start to fiscal '26. And I just noticed in your opening comments, John, you talked to you think you can maintain those levels of conversion. I suppose broadly speaking, not looking for guidance here, but just sort of that field that you talked on previously, it feels like the conversion contribution has probably kicked up a bit, and it feels like you're sort of suggesting it could be sustainable. So is this a run rate you'd be hoping or you think is feasible to maintain through the year, particularly given you're cycling some of the issues in the PCP?

Look, I'll start with the broader statement and then go into the specifics as best I possibly can. We'll start off with, per normal, we will provide a trading update at the AGM on the 26th of August. So we'll give you the next stage. The bookings for the first 2 months have been very strong. For the near term, as we look out 2 to 3 months, they're strong bookings. So there's not -- we're not expecting it to fall off a cliff, if that's the question. But directionally, we are expecting to continue to drive vastly superior growth rates to the underlying market for at least FY '26 and beyond.

Is the conversion contribution, appreciate you've done a lot of work around this, is that stronger? Because it seems like it's a pretty decent...

Yes. Conversion, you saw an uptick in conversion from FY '24 to FY '25 and you see an uptick in conversion from FY '25 to FY '26. Yes, that's the key driver. Let's just see market -- I'm making a hypothetical here because I don't know what the market growth rate is because that's a backward-looking statement for us as we reflect on everyone else's published data. So we say the market growth rate was 5% last year. I guess the market growth rate will be close to 2% at the moment. And we're banging out 29%. And we haven't picked up a whole lot of new clients. We always pick up clients every single day, right? There's barely a month go by where we don't pick up something meaningful. But that's low to mid-digits -- single digits, and then the rest is conversion, correct.

Great. And just final one for me. Just trying to understand, obviously, you got a lot of leverage that runs through the P&L with your EBITDA, but just contract realignment, what you've sort of talked to with that guidance for EBITDA margins for next year? Because again, I appreciate you're obviously cycling some issues in the PCP that I thought would have given a bit at the kick at the margin on a like-for-like basis.

Well, we're still growing -- let's go through the -- and this is indicative, and this will come as no surprise to anyone, if we're growing at 29% -- say we're growing at -- we'll do it on a euro basis. We're growing at 28% at TTV level. Americas and the Middle East are growing the fastest at the moment. And historically, Asia has been our fastest growing, but it hasn't been this 8-week period, but it has been our fastest. All three of those are in aggregate lower than our underlying 6.5% margin because Europe is a higher margin base than that. So you've got the counterbalance of fast-growing lower-margin areas, offset by the restructuring of our supply agreements to ensure that we sell more directly contracted higher-margin products. So those two counterbalance are why we're confident in the medium-term outlook of 6.5% for the margin. And as we push forward into '27 and the growth rate continues, we expect the supply increase in hotel contract is improving our quality of direct contract supply, to improve that balance even further in FY '27, which gives us confidence around the margin in FY '27 as well.

Okay. And then obviously get the leverage through your cost line, that you [indiscernible] increase...

Yes, yes. I look at it and think about our business very, very broadly. Vastly superior growth rates top line, modest growth rates on the expense line, take rate being consistent, gives you a highly leveraged outcome down the track.

Your next question comes from Sam Seow from Citi.

Maybe just following on that conversion question. I mean, clearly, it's accelerated. I just want to understand, can you boil it down to some key initiatives that are really driving that acceleration? Is there any seasonality in that conversion, like first half or second half? And then maybe just the economic -- I mean, is there an interplay between that higher conversion and higher override? But yes, any color on the conversion would be great.

Well, I'll go through a few components with the exception of the first part. We're not going to give you the specifics of what we're doing to convert because that's the secret sauce. Let's go through the seasonality. The only seasonality I'd call out is Europe being up 25% was impacted by Easter in April. So that was March the previous year, so there's a little bit of seasonality there. There's no other seasonality in the other numbers, per se. So that's the first bit. Yes, there are some of our customers that are growing that have overrides, but I don't want to overstate the impact. The impact is material as one-off, but as it stabilizes, that doesn't change dramatically the take rate compared to the growth rate. So there's no overreliance on incentivized override customers to achieve this growth.

Got it. That's really helpful. And then maybe on the supply mix and some of the investment in that space. I guess some of the terminology and the OpEx step-up sounds like you've had a bit of a change in your thinking around that space versus not too long ago. Just wondering if you could go through why, I guess, hotel contractors were less a focus in recent years and then maybe if there's a target for direct contracts in the supply mix medium, long term?

Yes. We -- it's a fair question. So there was never a deemphasis in hotel contractors, per se. So if I go back to and pick any time period, whether it was 2014, 2019, 2024, we always had circa 60% of our TTV, plus or minus 5%, right? So circa 60% of our TTV directly contracted. And we always had circa 70 third parties aggregated on our site, and the 70 third parties contributed about 40% of our TTV growth. And as we have grown into new customers and new geographies with different hotel sales, that fell on our third party to a higher extent than it did on our directly contracted inventory. So -- and nothing's changed in this element other than we want to reaccelerate the percentage of directly contracted hotel sales. We then go, okay, so what's happening to our business? Well, here's our top 1,000 producing hotels. They're all directly contracted, no surprise. Here's our next 1,000. Here's hotel #2,200 that didn't exist 3 years ago and now it's doing substantial volume. We'll go out and contract it. It might -- and some of them might even be in places where we didn't even have a contractor. So from that perspective, we're just getting a little bit more geographic coverage, that I make specific reference to Asia Pacific for that; and a little bit more depth, that I make specific reference to the Americas. So in both cases, we haven't deemphasized it. It's just that we've had runaway success with third party as we've built out new sales to new customers predominantly in new geographies where we just didn't have that coverage. That's been what we're now redressing. And clearly, over the course of the -- yes, it was a chastening experience reporting 6 months ago about where our business was and some of the unintended consequence of the growth that we had. So it's given us a chance to recalibrate the emphasis that we have within the organization and use the data that's available to us to ensure that we are more on top of this and not only for today, but less likely to make the same mistakes going forward.

That's helpful. And I guess is that 60% the new, I mean, the target going forward? Or do you think you can go higher than that?

It's not the new target. It's the old target being revisited. It was always the target. We were always circa 60%.

Your next question comes from Sophia Mulligan from Macquarie.

Congratulations on the results. First...

Sophie, you need to speak up. I can't hear you?

Sorry, can you hear me better now?

Yes.

First question, just quickly on OpEx. So I know you provided expectations for OpEx next year. Was thinking out of year terms to get to that 50% target, does that mean OpEx growth is going to move more to a mid-single-digit level?

Yes.

And just quickly on the TTV target. I mean, you've had a great start to the year this year. So historically, we've thought about the TTV growth on that $1 billion a year run rate at straight line run rate. Do you think that this year could potentially beat that with the strong start you've had?

It could. But the $1 billion year run rate is -- directionally we did $900 last year. We might do more than $1 billion this year. We will see. But we've had a great run rate. We -- I'll reiterate the same points I've made earlier. We know what we need to do to improve the underlying value that we provide to our supply and demand partners, and we'll continue to focus on those and that will increase our conversion rate. If we're able to maintain that, it's not -- we're always hopeful of the upside. We're not afraid of it.

Your next question comes from James Leigh from Goldman Sachs.

Just a quick question on the EBITDA margin guidance, that 44% to 47% and how we should think about that into '27. I think you've clearly articulated some of the further investment you've put into direct contracting. How should we think about into FY '27 you've got a 50% guidance? How should we think about the, I guess, the envelope of offsetting those costs into '26? Because like, as I said, there's been an additional investment but we've kept the EBITDA margin guidance unchanged in the long term. So what are the benefits we're seeing? And like how do we have confidence on the offsetting that additional investment?

Well, I think that Sophia asked the question, what does OpEx look like. And I think mechanically, the numbers should align where we've got high single digits this year, we've got EBITDA targets of 44% to 47% mid-single-digit next year. That gives you an implied growth rate in FY '27. That will get you a 50% EBITDA number. So we will continue -- notwithstanding everything I've just said, but we will continue to invest in direct contracting to FY '27 as well. We're not -- it's not one and done where it's -- our business is getting much, much bigger, we'll be circa a number of around 6% at that point, heading for potentially 7%. In that environment, we need bodies to be on the street negotiating best rates so that we can put it into our platform.

I guess maybe to ask it a different way is previously we talked about 48% and now it's at the midpoint, call it, 45.5%, but there's no delta to '27. So what's -- that's clearly changed for '26 from '27, the offsetting. What's the benefit that we previously weren't expecting if that 6.5% revenue margin kind of stays flat?

Look, James, it's Tony here. It's really just a step change in our business. I think in the past, we've been asked this question. Because mechanically, if you do the $1 billion growth, 6.5%, surely, that will spit out a number that's greater than 50% margin in time. And what we've always said there is we'll always reinvest the additional sort of upside and scalability back into the business, back into our people both sales and contracting. Yes, mechanically by FY '30, you could get to a margin in the high 50s in EBITDA, if you mechanically do it on an Excel, be in the year a 6.5% take rate with mid-digit OpEx growth. But that's not the reality. The reality is that each year we'll face into the reality of where we're growing and what we need to invest in. So for '26 year, we are going to invest in those resources in the geographies that John mentioned. So it's a bit of a step change, prematurely brings some of that spend forward. And FY '27 will revert back to the normal expectations around 50%, which would imply OpEx growth somewhere in the mid-teen, mid-single digits or thereabouts, as John mentioned.

Your next question comes from Ben Wilson from Wilsons Advisory.

Congratulations on the resilient results and, yes, very strong trading update. Just firstly, in terms of the update in terms of U.S. inbound and outbound sales in the first half to date, very strong. Just wondering if you've seen -- or just confirming, I guess, those are TTV growth numbers. Just wondering if you've seen any change in the average booking window in that period. So just wondering if there's any kind of potential downside to TTV going forward as you see bookings translate into TTV.

Well, it doesn't matter which way you cut it. Even if booking windows are extending or compressing doesn't change the results. We're not seeing anything dramatic occur. We're seeing a modest shortening of the booking window, but that's a trend for the last 2 to 3 years. So that doesn't change our results. It just changes bookings minus cancellations being a slightly different calculation internally than what it was historically but doesn't change what actually gets on the book. So any change to that booking window doesn't really impact our results, only if it becomes shorter and you're not creating as much earlier. And we're not seeing that. We're seeing, as I mentioned earlier, strong creations going forward. And the booking window, we're talking infinitesimally small numbers being compressed. So it's not something that's keeping me awake at night.

Got it. That's helpful. Just then further on, I guess, the increase in contracting staff. Do you get the sense that your sort of large competitors are doing the same? Or do you think you're investing more in this area? I guess just confidence that, that investment will see sort of direct results in terms of better contribution from higher-margin directly contracted hotels going forward?

I can't make -- I'd never make any comments about what our competitors are doing so I genuinely don't know. But I'll just reemphasize the point. We're on a great run rate without these direct contracts going forward. Direct contract is making a meaningful contribution to these results. There's a little bit of in these U.S.A. numbers from what we invested in the first quarter. But just to remind the audience that when we invest in a contractor, it's normally an 18-month payoff. It takes time for them to get the best contracts in those markets and for us to be considered a helpful trading partner. So it does take time for that pay off, which is why we're suggesting FY '27 will be important and beyond. But I'm not diminishing the contractors we have onboard. They've done a phenomenal job. And the majority of the TTV that you saw in FY '25 came from our existing contracts, and that will continue into FY '26. And hopefully, we get it back closer to 60% as opposed to the mid-50s that we're at, at the moment.

And just lastly, in terms of EU demand, thanks for some helpful detail provided on the responses you've had to the issues in the first half. Obviously, different seasonality in the second half versus first half in Europe, but just wondering if you've seen sort of demand recover or normalize in the second half, to the extent you can.

Europe was pretty consistent over the full year. We're up a little bit above trend, and I think that's Easter. So if it wasn't for Easter I think Europe would be maybe 20% instead of 25% or some number like that. There's maybe 1 or 2 of tailwind from Easter being in April this year versus March the year before. But Europe was up 20% last year. So that's what we would expect.

Your next question comes from Tim Plumbe from UBS.

Congratulations on resilient result. Most of my questions have been asked. So I'm just going to ask a slightly different one. John, you've been in this industry for a really long time now. If conditions do slow somewhat -- sorry, that was a compliment by the way. If conditions do slow somewhat, can you talk a little bit about how the bed bank industry typically performs relative to other players in the industry in terms of offsets that you get from hotels offering better rates and how you can kind of stimulate sales off the back of that?

It'll take me a little while to get back to the speaker phone, Tim, because my walking cane fell over and I just made it. Look, if it was 10 years ago, I'd answer the following, definitely, it's a strong tailwind for the bed bank industry. And as soon as rates have softened, the market gravitates to all forms of distribution. I reckon it's on the margin today. I think there might be a little bit of a tailwind but it's marginal. The global hotel distribution dynamic is an enormous business, and the bed bank industry is $100 billion out of that enormous business. So it is fundamental to the distribution of hoteliers. And for many of our independent hotels in which we have a direct contract, we are virtually, if not their major or probably their major -- or maybe one of our competitors is their major distribution and marketing channel to the world. That doesn't change whether the market is going up, down or sideways. Hoteliers need to fill rooms. We provide them with the technology that gives global distribution to enable them to fulfill the occupancy requirements of the hotel. So what happens in a period of slowing demand, which we are obviously entering into? Historically, and I'll give you the age old version, people come to you with special offers and there may be more special offers that come. And the beauty of being a bed bank is -- especially a technology-driven bed bank like ourselves, we can get a special offer and have it live within minutes of receiving. So we're more agile to the needs of hoteliers to -- as they look at their demand patterns and we fit into them. So that all works fine. But I don't expect a massive tailwind from that, a modest one at best. I'm talking if the market slows by 2%, it might be a 2% tailwind our way because the other channels that are slowing down or the other channels that are maybe not growing, they might look to us to help fill that because they know that bed banks provide ad infinitum demand against finite supply. And we provide them a complementary outlet for all of that excess inventory.

Got it. And just the second part, I just wanted to get two clarifications, if possible, please. Were you saying that if we back out the Easter impacting year-to-date, you're saying that 28% is more circa 26%? Is that how we should be thinking about the underlying BAU TTV growth?

You could do that, Tim.

Okay. And the second one, just in terms of when you get the contracting up and running and full momentum there and then you get a bit of a normalization in terms of some of these lower revenue to TTV margin businesses, are you saying FY '27 could potentially see upside to that 6.5%? Or are you saying that it gives you comfort that you can maintain that 6.5% in FY '27?

Gives me comfort about FY '27. It's too early to tell there's any upside to it. But we need to get the people onboard. We need to see what they can deliver. We need to make sure that the pockets of demand that we're contracting are still strong and we've got a competitive offering. If that's the, case potentially. But no, we -- for the messaging, what I wouldn't be really clear is we're not suggesting it's going to revert back to a number north of 7%. But we will be very conscious of the contradictory elements of our business. Fast-growing businesses that are traditionally lower margin being offset by more directly contracted supply gives us comfort around the 6.5% number.

Your next question comes from Aryan Norozi from Barrenjoey.

Just in terms of the direct versus third-party contract mix. So you mentioned that you're typically at 60%. At the moment, you're a bit lower, around that 55% mix. Just trying to get an idea around like the magnitude of improvement. So is it fair to say direct contracts are 5 to 6 percentage points higher more than third party in terms of the revenue margin between the two, please?

Sorry, I didn't -- I found it difficult to hear the question, Aryan. The 6.5...

Yes. Just trying to get an idea around the revenue margin difference between direct contracts and third-party contracts. Is it fair to say direct contracts have 5 to 6 percentage points higher revenue margin than third party?

No, no. No, it wouldn't be fair to say that. It's much more compressed than that. That would suggest that we're operating -- that would suggest by default that we're operating third party at circa 2% or 3%. No.

Yes. Okay. Perfect. And then just in terms of revenue margin, the comment in the release, I noticed that you maintained or you're confident in 6.5% at least. Previously, it was circa 6.5%. I think that was in the release today. Just the rationale behind that, do you think there's more upside risk to that number? And...

I think I covered that off in the last question from Tim. We're targeting 6.5% for the medium term, and let's see what FY '27 delivers.

Yes. Got you. And then this AASB 9 impact, what was the impact in FY '25 that got you to -- is it basically a difference between 6.5% and 6.7% that you did? And how do you think about that sort of annual impact moving forward?

Sorry, Ary, can you repeat them?

Yes, just the AASB 9 impact on your revenue margin. What was the benefit -- I mean, you disclosed it for first half '25. Sorry, I couldn't see the second half '25. What was the benefit to your revenue margins in the second half of '25? And how do you think about...

It's nominal, Ary. So what you got to recognize is, and I'm happy to take this off-line, is that the error rates that we report retrospectively relates to the summer period. So there is a bit of a tailwind in second half margins as a consequence. And as John alluded to, the first half, which is Europe, for us, will be slightly more muted. The exact percentage we haven't called out. But you can see from the trading for half 2, it did improve, which is a consequence of that and a few other factors as well.

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

Congrats on the results. Refreshing to get an upgrade in the travel sector. So I guess my first question is just on the EBITDA margins of 50% in '27 and then you've got your target of 50% in '30. I think, John -- sorry, it was Tony who said you guys are looking to sort of manage to margins in the interim years. Does that mean we should be thinking about an acceleration of growth in sort of '28, '29 as you reinvest margins back into the business?

At a take rate, Wei-Weng? Or...

EBITDA margins, rather.

Look, it's too far out to say anything definitive one way or the other. Look, when we set the targets 3 years ago of $10 billion and a 50% EBITDA margin, we knew we weren't going to be trading at 8% as a take rate. We never in our wildest -- not in our worst nightmare, thought we'd go from 8% to 6.5% in a 6-month window. So let's be clear about that. So that's the reality of what we've dealt with. It doesn't change our optimism about getting to 30%. It doesn't change our optimism of 50% EBITDA margins. We've got 50% EBITDA margin in '27. There would have to be a series of either massively slowing growth for us and we don't achieve the $10 billion, or the OpEx is growing at a faster rate and we're not able to offset that with the take rate to not at least maintain those 50%. So any modeling that you do once you get to 50%, something that hasn't happened in the last 12 years with our business would have to happen, which is that we would moderate our growth rate to circa market growth rates and not control our expenses to maintain that 50%. So if we get to 50% in FY '27, notwithstanding something exceptional occurring, you would be confident that, that 50% would be maintained, at least 50% to FY'30.

Yes. No, makes sense. And then next question is just on the 6.5% margin sort of for next year. I guess let's just take it as 6.5% and talk about no upside from here. But you've identified, I guess, building blocks that will be positive for margins. So you directly contracted inventory, reengineered supply contracts, et cetera. But to do that and kind of end up at 6.5% means that you're only just matching headwinds on your take rates. So can you maybe speak about the headwinds and then the quantum of their impacts that you're looking to offset to get back to the 6.5%?

Sure. And I touched on it earlier. So three of the regions are growing at less than 6.5% by definition because Europe is growing above 6.5%. So that's the headwind. You keep growing, but it's no longer the major headwind than it was 12 months ago because it's much closer to the underlying number. So if you've got four geographies and three of them are below 6.5% and one is above 6.5% and the three below are growing faster, that's a natural decline. But as I said, we have mitigation plans with regards to the -- what we sell to them to ensure that we continue to improve that number, that headwind. The other factor, which we touched on is the supply mix of what we sell. So I think I've covered that enough. More direct contracts as opposed to third-party, geography mix, trying to sell higher-margin products within that geography mix, customer mix which we haven't spoken about a lot, some of our customers are growing at a faster rate than others. So that potentially can be either a headwind or a tailwind. So both of those factors all need to be calibrated in the conversation around what take rates are. It's not as simple as there's one factor that drives the overall take rate. What we're saying, as opposed to what happened in the first half, we have within our entire organization and we look at this now on a daily basis, what are we selling to who, what's the growth rate of those customers, what inventory we're providing, what's the margin, what's not working, why isn't working? What do we do and how do we pull those levers to at least ensure that we get the growth rate at that 6.5%? I spoke about it, and clearly, I'm not going to go into any more detail than this oblique reference to it. But when I spoke on the pillars of growth, there is a line in there, AI-driven competitive edge. Enough said.

Very good. And then just last one, if I can. Where are you getting these hotel contractors from? Are these like very specialized hires? Or are they kind of easy enough to find? And your now listed larger competitor has 100,000 directly contracted hotels. What's your comparable number to that? And where do you think you can get to with these investments?

Are you looking for a job, Wei-Weng?

Well, we can talk about that one off-line.

We're -- well, I'll tell you what, we're swimming -- sorry, we're fishing in a pond full of appropriate people. There are -- all of them -- sorry, let me be clear, I'll be very explicit because it's public domain information. I'm not saying anything negative about anybody. But Booking has a cost takeout program at the moment, Expedia has got a cost takeout program at the moment, both of which is in the public domain. In a market that's slowing, people tend not to shift -- tend not to invest in slowing markets. We're investing in the slowing market. So we are finding high-quality people and we have already found high-quality people. So to put that into perspective, some of the staff that we've recruited in the last 100 days in North America have been outstanding candidates that we've been able to pick up from some well-known institutions who are in the travel space with deep industry knowledge.

Yes. Cool. And then just that number on your comparable number to...

Sorry. We're 30,000. We're just a touch over 30,000 directly contracted hotels -- 32,000, I've just been told.

And is there a goal for that number, where that -- where you want to see that?

Look, even of that 32,000, there's a TTV goal, not an absolute number on contracts. Because there are some contracts that we will discontinue because it's not worthwhile for both us and our supply partner, and there's others that will replace it that are much more worthwhile. As long as they're valuable contracts, I don't care if we still have 32,000 in a year. If I get back to 60% of my sales through directly contracted, it can be 32,000. The number isn't important. It's the value that's being produced by those contracts, it's much more important. And my 32,000 are very hard working contracts compared to others in the industry. And we'll talk about that later on. Come send me your resume, Wei-Weng.

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

Can you hear me okay?

We can hear you, John.

Look, a bit like yourself, John, I've been around the industry a while. So I was a bit slow to put my questioning because I was on the walking cane walking across to the phone. So my questions have largely been answered. But I was just curious to understand it, I think this has been asked a million times, but -- maybe I wouldn't ask it, but I'll ask it anyway. I'm just trying to understand how you've delivered an improved revenue margin across for the whole year of sort of 6.7-ish number, but you're guiding to a 6.5% number. I know you've answered that question already, but I'm old and I kind of need some reassurance or some further clarity, if that makes sense, John.

Well, you're right. I'm not sure. I'm aged according to Tim Plumbe, and as a consequence, the neural pathways go down one particular branch, and it's the same one I've delivered so far.

No, that's okay. Just move on then. It's fine. The questions have already been answered.

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

I'm not old but I'm a bit retarded. It was on mute. So three very simple questions. Firstly, is there any scenario for TTV growth where OpEx growth could be more than the guide?

No, it's not envisaged. And we're not tracking to that, so no.

No. Perfect. Secondly, you've outlined investments in your contracting arm in the Americas and Asia, I guess, building up internal investments. Is there any avenue for M&A to secure more contracts under management like you've done historically?

No. No, we have no plans. So we have M&A firepower, as I made reference to. And I'll repeat what I've said over the last couple of years. We would never make another Jac or DOTW type acquisition because we're winning that share anyway. We're outcompeting everybody. And in that context, I don't need to make an acquisition to grow. I have a global business. I have scale. I don't have the best scale. Clearly, there's a larger competitor that has greater scale and greater efficiency than we do. That's our aspiration, and we want to get there, and I believe we can get there through organic growth. Now having said that, we won't do what we have done in the past, and we've demonstrated that we've been, at a TTV level, great custodians of that money because we've been able to triple the size of those businesses off the back of our own endeavors. So I have confidence in what we can deliver. But as I think about us over the course of the next 5 years, I've got a great business model today that just needs to be more finely tuned than it has been, and we spoke about that a lot in the presentation so I won't go back over the old ground. But we have a business model that gets us to $10 billion. We have a business model that in FY '27 gets us to 50% EBITDA margin. Unless something dramatic changes, that should be the bare minimum going forward. However, we deliberately named ourselves Web Travel Group as opposed to WebBeds, even though it's confusing to me and others, because we believe there are other things in the travel space that are attractive to us, and we will continue to look at those potential opportunities. Now again, without getting into the specifics of what we want, anything that is travel tech-enabled at scale that makes life easier for hoteliers or there is some customer-facing technology that enables their lives to operate more efficiently or more effectively, then we are interested in those businesses. I'm not interested in mopping up another small bed bank unless it comes with something unique that I can't get by myself. And at the moment, if you think about it, we've got great relations with hotel partners globally. So unless they're giving us a bespoke relationship that somehow we're excluded from or I can't invest into organically, I would look at that, or a customer base with some, I don't know, defendable attributes as opposed to what I'm doing at the moment, which is winning it in hand-to-hand combat, where my conversion rate is better than their conversion rate. And I've always liked my ability in a one-on-one, mano a mano kind of grappling contest.

Nice one. And I guess lastly from me. Have you noticed any churn from directly contracted hotels? Just curious.

Churn, not really. Not really. We -- there's a churn factor every year. There's some that we discontinue, there's some that discontinue with us, but it's always in the high 90s that I'll repeat. So no, no discernible churn.

Your next question comes from Bob Chen from JPMorgan.

Just a quick one. I mean, you mentioned it earlier, John, just around how you can sort of leverage AI better across your sort of platform. Would be cool to understand how you guys are thinking about leveraging AI in the bed banking industry.

Yes. We -- I remember -- because you're our last question, Bob, I'm going to give you the extended highlights, for those who are patient and us to listen to the end. I remember sitting on the balcony of my holiday house in the middle of COVID and contemplating our industry and what the recovery would look like and beyond survival. We've got past survival at that stage. So we're talking 2021, 2022 -- I think it was '22, actually. And I -- so apart from availability, what is the key determinant that enables someone to have a superior outcome? And availability is the reason that Expedia is the dominant player in this industry. They have last-minute room availability on the back of that phenomenal machine that produces all of those market-facing contracts that they have. So I'm thinking about availability and matching availability with the unique supply that we have and delivering that more effectively to our customers. And then we made an investment, initially external, where we invested in a third party to come and provide us with specific answers to questions that we raised around how AI could facilitate that combination. And I've told this story before publicly. So they ended up helping to solve -- provide the IP behind the Pfizer vaccine at the time. And the question that we asked, and I won't go into the detail and what it was specifically, the question we asked them is, is this infinitely more complicated what you're trying to achieve than what you achieved with Pfizer? So over time, we worked with them. They provided us with a framework, and then we took that framework in-house. And for the last 18 months to 2 years, we have been working internally for solving that specific question. And that question all relates to conversion, and I'm not going to go through what the question is, but question all goes into conversion. That's why the conversion number has been vastly superior to the underlying market growth number for us over the course of the last 2 years. Thanks, Bob. And Harmony, I believe that's it. Thank you very much to everybody who attended the call. I'd like to, as I do as custom, thank everyone in Web Travel Group for the commitment and resilience that they have shown over the course of the last 12 months. And as we had noted for many months internally, with a much higher degree of confidence and optimism, that we go into FY '26 with a view that we're in a better position as a business and we'll continue to grow. So I'd like to thank everyone in our organization for their phenomenal resilience in FY '25 and their unbounded and unbridled enthusiasm for FY '26. Thank you, everybody.

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