Web Travel Group Limited ($WEB)

Thank you for standing by, and welcome to the Web Travel Group Limited FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead.

Thank you, Kayla. Welcome everybody for the Web Travel Group Full Year '26 Results. Joining me today is our CFO, Tony Ristevski and in a change to the advertised run sheet, Shelley Beasley, our Global Chief Operating Officer will also present. Since our launch in 2013, with the obvious exception of COVID, we have consistently outperformed the market. In a satisfying return to form, FY '26 has continued that sequence after a disappointing FY '25. If we have a look at our Slide 3, the most satisfying component of our results this year is our market-leading growth without margin compromise. As we can see, our TTV is up 20% to $5.8 billion. We've continued to increase our market share. In particular, we've been able to do that across the Americas and Europe, and we'll talk about that during the presentation. And we've been able to do that while expanding our margins. Our revenue is up 20% and it's particularly gratifying to see that the second half margin was 7.1%, up on the corresponding period in FY '25. EBITDA is up 24%, demonstrating our operating leverage coming through the business. And as we get to Web Travel Group and we consolidate the corporate costs against our high-performing WebBeds business, you see that EBITDA is up 23% to $148.4 million. It reflects the corporate overheads of $24.3 million, which is in line with guidance. Net profit after tax, $84.9 million. It reflects the full year of stand-alone costs post demerger. Underlying EPS, $0.238, up 16% on FY '25. And most importantly, we retained significant liquidity of cash at the end of the year with 107% cash conversion number. Moving on to Slide 5. We almost cracked 10 million bookings in the year, up 18% on FY '25. The key contributor was the significant organic growth that we were able to demonstrate in both the Americas and Europe. TTV up in line with bookings up 20% to $5.8 billion, revenue up to 20% at $394.1 million, TTV margins expanding. I'll give some clarity around how that's occurred and what's been the driver and EBITDA up to -- up 24% to $172.7 million, reflecting our operating leverage. Let's get into a little bit more detail on Slide 6. As we can see, and we've already confirmed bookings were up 18%. The 3-year CAGR for our business is 21%, demonstrating consistent high-quality growth that the business has undertaken and continues to deliver. TTV is up 20%, as I've already mentioned, consistent in line with bookings growth with a 3-year TTV growth CAGR of 27%. Revenue is up 20% and that's reflecting continued margin expansion. The FY '25 number had a DMC business that was subsequently sold in April of '25. So the margin was a touch lower than it would have been. We'll talk about how we get to the increased revenue margins in a second. What we have been able to do in FY '26 is continue to invest in our business. We've invested in hotel contracting, which we've spoken about at the half year and at last year's results. In particular, we said this would be a driver of margin expansion. I'm delighted to confirm that has occurred. We also, in the expenses side, reintroduced bonuses in FY '26, which is obviously a reflection of our normal cadence. Obviously, in the disappointing year that was '25, we didn't have bonuses. So notwithstanding the investment in the business, the reintroduction of our bonus scheme, the additional costs associated with merchant of record business, we increased the expenses 10% at a functional currency level, which translated to 17% in Aussie dollars, driving a higher EBITDA growth rate of 24%, demonstrating the operating leverage that exists in the business and will continue to exist in the business as we maintain our investment thesis in direct contracting within the organization, and continue to outperform the market with superior market growth driving an EBITDA growth business that will continue for the foreseeable future. Let's get into the most satisfying elements of our performance in FY '26. As we've said, we have increased our TTV by $1 billion, and we've been able to deliver that at an improved margin. As you can see from the table on Page 7, first half of '25 was 6.4%. We did 6.5% in the corresponding period this financial year. The second half of '25 was 6.9%, and we were able to deliver 7.1% in this financial year in the second half, giving a full year number of 6.8%. The reason we were able to deliver our TTV at improved margin is we have demonstrated disciplined growth. We have optimized initiatives across the portfolio of supply that we have. We've continued to invest in hotel contracting resources, and we have leveraged those direct contracts to give us a greater capability of selling more stuff and selling more stuff at a higher margin. In addition, the secret sauce that's driven some of our superior outperformance of AI pricing continues to deliver that, and we will talk about that when we get to our conversion numbers in the next slide. So to round out the mechanics, 6.7% margin last year at a reported level, take out the DMC sale of margin contribution of 0.1%, 0.2% growth, given the TTV margin of 6.8% for FY '26. So first half and second half show that we were actually growing our business, and we were growing our business at both the TTV and at a bookings level. If you look at the table on the right, bookings grew 18% in the first half and 19% in the period October to February. And at a constant currency level, it grew from 16% to 18%. And then you've got the comparisons in euro and Aussie dollars below. And Aussie dollars is obviously what we're reporting in. So the impact of the conflict in the Middle East was immediate from -- and was felt within our business. Two things happened in conjunction. The first is much higher cancellation rate than we've had historically and a shift to shorter length of stay bookings. The Middle East is disproportionately a larger component of our business than it is of many other comparable global travel businesses. Many of our supply partners and competitors who have called out their results have circa somewhere between low single digits of exposure to the Middle East. It's -- 11% of our total TTV is in the Middle East. So it's going to have an impact when the war started late February, and it impacted us into March's results. We still -- we were positive in March, and we're still positive today. That's primarily driven similar to the outperformance of FY '26 in the continued growth that we're experiencing in the Americas and in Europe whilst APAC and the Middle East have both been more significantly impacted as a consequence of the war that commenced in late February. Moving on to Slide 9. Yes, I spoke about the most gratifying and satisfying elements of our presentation and of our results. And as we drill into the componentry of what's driving it, if we take an assumption that the market grew at circa 5%, for us, that's just keeping the light time and we need to ensure that that's the bare minimum. We've always driven the organization to superior results and the measurement of those that superiority is in growing at many times the underlying market. And we continue to do that in 2 factors and across 2 different dimensions. One is adding new customers, new supply, penetrating new markets. So it's the horizontal expansion of our business. And the second element is selling more stuff to the same clients on an annualized basis. And as you can see, we grew at 21% for TTV. That's excluding the DMC operation from FY '25, it's 20% at a reported level. So staying flat with the market meant that we had to grow at 5%, you separate out the 16% left. We have new customer supply and markets that contributed 5% and the 11% is from increasing conversion. And that's a reflection of multiple efforts within our organization to improve the quality of information that we're providing to our customers, improving the quality of bookability of our inventory for our customers, it's enhancing the quality of the content we give to our customers, and we continue to drive superior conversion on sophisticated algorithms that exist within our pricing structures to enable us to outperform the market. And we've done that consistently over the last 3 or 4 years, and it will consistently be the driver of conversion outperformance going forward. So delighted that we've been able to deliver those results, and we have a high level of conviction within our organization that, that level of outperformance will continue in the years ahead. Drilling into the regional performance. And clearly, the standout performer within our organization has been our Americas division, continues to drive sustainable growth through new client wins and market share gains from existing clients. Bookings up 41%, TTV up 30% against the euro. We have had, and you'll see in our outlook statement, there are FX headwinds that have existed in converting U.S. dollars into euro in FY '26. They will be based on current exchange rates consistent with what we think will happen in the first quarter of FY '27. And we think that will be less of a headwind in the last 3 quarters. But great performance where you're increasing bookings by 41%. And the significant delta between bookings and TTV is the vast majority is attributable to the euro-USD FX headwind. In Europe, again, great ability to increase our share through the optimization of products that we have offered to that market. We've seen bookings up 19% at -- TTV in euro is up 13%. We've had great wins in the course of the year, and we're continuing to still see market share gains going into FY '27 in Europe. Asia has had more modest growth. There has been good growth in China, but we have had a material underperformance in Japan. Q4 was significantly impacted by the Middle East conflict. Dubai is a key destination for us out of Asia Pacific. And we've seen slow growth in the second half of our Asia Pacific business. We move forward to the Middle East and Africa, virtually flat, 2% of bookings, 1% TTV in euro. If you want to know what the ironic thing that's happened to us in the year. If you -- if we looked at February 27 and our expected performance for March in the Middle East business, it was expected to be up something like circa 40% at a TTV level. It was going to be the best month that we've had for many years in growth in the Middle East. And within -- as we saw within 4 weeks later, that plus 40% of TTV growth for the month of March turned into something significantly below what we were doing in the corresponding period. But overall, in a balanced portfolio that we have within our business, we have lots of reasons to be optimistic about the future. We have strong conviction around the strategies that we have with regards to increasing our direct contracting component within our portfolio mix. We have increasing sophistication and tools available to us to enable us to understand what's going on with the drivers of market behavior and our customers. And we have improving tech platforms and resilience to enable us to more directly get the right product at the right time at the right price in the right markets. So we're in a strong position to continue our growth. And one of the things that's been a key contributor to enable us to do all the things that we have done, in particular drive efficiency within the organization, in particular, driving improved conversions is the adoption of AI tools into our business. With that, I'll hand across to our Global Chief Operating Officer, Shelley Beasley, who will talk about AI in the world of WebBeds.

Thank you, John. Let me start by -- with the question that I think is probably on everyone's lips. If AI is becoming so good at understanding what travelers want, the searching and the comparing and the recommending, why does the business like WebBeds need to exist? And I think it's a fair question because we all see it, AI agents are handling more of the discovery and the filtering work. So therefore, the logical assumption is that an AI agent could simply just connect directly to a hotel, find that best rate and complete the booking. That assumption contains a really critical error. It assumes that the hotel supply is already structured and connected and accessible for the AI agent to transact against. And the truth of the matter is, it's not. Because consider what that agent actually needs to do, it needs to get a contracted rate, not just a display price, it needs a rate with some defined allotment and needs confirmed availability. It needs a payment mechanism that, that supplier will accept. It needs knowledge of the cancellation terms, the servicing rules and critically, it's who is accountable, if anything goes wrong in this -- after you make the booking. So this is not a search problem. This is a transaction infrastructure problem and it exists because the hotel supply is genuinely and very stubbornly fragmented. The vast majority of hotels globally remain independent and 67% of those independent hotels in 2026 still say that managing disparate systems is their single biggest operational challenge. A typical property can run more than 7 platforms. They've got PMSs and CRSs and booking engines and CRMs and channel managers and each one of those potentially has their own data format, their own API and often none of them will talk to each other coherently. So remember, an AI agent can only book what it can reach, what it can find. So reaching that global hotel supply reliably requires an infrastructure layer. And that's what WebBeds provides. AI is going to provide multiple demand surfaces. It will have more search engines and more systems and agentic platform but every single one of them will need a reliable and structured hotel supply it can actually transact with. And that's our opportunity. So AI is definitely going to change the front door of travel, but WebBeds is the plumbing behind it. So if you go to Slide 12, let me remind you a little bit about what the plumbing looks like. And I'm sure many of you have seen this slide before. On the left-hand side, that's our supply side, it shows we contract with over 60,000 chain properties, 32,000 independent hotels, 21,000 ground service providers, and we've got over 65-plus third parties and that's delivering us more than 0.5 million properties in total. At the very center, you can see what we do with all of those hotels. We process over 8.5 billion searches per day. That's not just volume, it's a data asset. Every search, every booking, every rate comparison, we'll train our models, it will improve our quality content, and it makes our platform more intelligent. On the far right, you see the demand side. That's our OTAs, travel agents, corporates, tour operators, all the ones we've talked about in the past. If you look in the top right now, you'll see there's AI agents. They are just a new demand point. So the key insight about our position in this ecosystem is this. The LLMs are very good at understanding and recommending but recommending that hotel is just not the same as reliably selling one. At risk of repeating myself, I'll say selling requires a valid contracted rate. It requires that real-time availability check, it needs a payment mechanism, and it needs an accountable party when something changes. And LLMs just don't generate those things. They can only access them if they exist and WebBeds makes that possible at scale. So looking at that ecosystem, which we've showed you before, our product remains the same. But in an AI world, it's simply consumed differently through more interfaces by more types of buyers, including these buyers that are not humans. So moving on to Slide 13. Let me talk to you a little bit about what WebBeds actually does at that infrastructure layer. It's important to understand we normalize all of that fragmented hotel data. And it's not just the descriptions and images that you've heard us talk about before, but it's the detailed level rate rules who we can sell to. It's the cancellation policies, it's the payment terms, and it's all the allotments that goes with hotel contracting. And that's across thousands of hotels, all with different systems, different contract types, different legal frameworks and different currencies. We validate all of those details, and we manage the commercial controls. We also own the 24/7 servicing and dispute resolution. Again, none of that disappears when AI improves. In an agentic world, when machines are executing these transactions at super high speeds with high volumes, accountability becomes more important, not less. When that booking fails at 2 a.m. and a high-volume period, someone has to own it, and that's WebBeds. So a useful analogy that we use internally when we think about our position in the world is Visa. Visa doesn't own the customer or the merchant. It doesn't set the price of the goods, but it does own the transaction infrastructure. It owns the rails, the settlement, the fraud management, dispute resolution. And that ownership is enormously valuable because every party in the ecosystem depends on it. WebBeds is effectively the Visa of hotel distribution infrastructure. So we describe our role is that abstraction layer. We are in practice transforming all of that complex fragmented hotel supply into something that any demand channel can consume. And again, all of the old demand channels that we had, OTAs, tour operators, et cetera, and the new ones, the AI agent, the function of doing all of that consolidation doesn't become redundant in an AI world, it becomes the foundation on which AI travel is enabled. Now moving on to Slide 14. AI internally has also played a really important role for us, and John has talked about it in a couple of slides already. So I won't belabor all of the data points that we've put on this slide, but there's 3 big buckets we're using internally that we categorize how we're using AI. We've got improving conversion, delivering cost efficiencies and improving the customer experience. One of the key elements that in terms of improving conversion that John already touched on, was that 50% of the TTV growth we delivered in FY '26 was attributable to conversion and AI pricing was a key driver of that performance. We've got over 40% of our product currently being priced through that tool and it's delivering. When we look at cost efficiencies, we now produce 2.5x more bookings per FTEs than we did in calendar year '19. And that's a direct result again of our use of AI and other automation to improve our productivity. One of the callouts there is that 38% -- we've seen a 38% reduction in customer service requests being seen through the implementation of our self-service tools and other automations. And lastly, on the customer experience side, I'm delighted to say that we have enabled a conversational search and our point of sale which will only continue to improve over time. And we're also improving the image quality we have through AI curation of the images. So when I think about the risks,that people talk about with AI, we don't see it as a risk we're managing. It's an operating lever that we are pulling. And so as we continue to scale, the marginal cost of each incremental booking will continue to fall. And moving on to Slide 15. Looking forward, the opportunity in front of us is larger than our current business. We call this shift from B2B to B2A, and that's business to agent. In the past, on the left-hand side of that chart we've shown you, there's all of our traditional human-operated systems. But in the future, more of that demand is going to start flowing through AI agents and automated procurement tools. Just to be really clear about what that means and what it doesn't mean. It does not mean that every hotel booking in the future is going to go through an AI layer. For a small number of highly connected hotels or hotel chains, that AI platform might connect directly. But hundreds of thousands of independent hotels, regional chains and boutique properties that are in the long tail, they're still running 7-plus disconnected systems. They're not going to build AI connectivity directly. They will rely on intermediaries to be visible and transactable. And as AI channels proliferate, that need intensifies, it doesn't diminish. This is a bifurcation reality that AI optimists miss. AI will not replace the need for aggregation across the long tail. It just continues to intensify it. That AI-enabled travel buyer, whether it be a human using an AI assistant or whether it's an automated procurement tool, they're going to query WebBeds for independent hotel supply because that's the best place that supply is going to be structured, contractable and transactable. The moat that we've developed here is not just technological. It's about relationships, both personal and contractual. A new entrant who wants to come in and replace WebBeds position in the long tail, they're going to need to negotiate direct contracts of tens of thousands of independent hotels. They'll need to build rate compliance infrastructure across dozens of legal frameworks. They'll need to establish payment and settlement relationships with suppliers across 140 source markets and only to staff the 24/7 post-booking servicing center. This isn't a compute problem. It's years long operational capital problem and the relationship network we've built is not replicable cheaply or quickly. And on the buyer side, the switching costs are equally real. The travel buyer who's integrated our API, he's mapped their workflow to our content taxonomy, and then they built their settlement processes around our infrastructure has made a substantial operational investment that investment creates stickiness that no new entrants can overcome simply by having new technology. Every tour operator at TNC and OTA that automates its procurement still needs that rate compliance, structured supply access. So all of these agents that are going to be deployed, they'll have less tolerance for error and not more, and that plays directly into the strengths of WebBeds because we've got scale, data depth and fulfillment capability. So before I hand over to Tony, I'd like to quickly give you a summary of the way we are thinking about WebBeds in the AI world. AI will shape the front door of travel. The way travelers do their searching and comparing will be very different in the next 5 years. The interfaces may change and they may change rapidly. We have no argument with that. But the front door is not the whole house. Behind every AI assisted booking, the industry still needs the contracted rates, the commercial controls, the payment, the settlement and accountability. All of that intensifies in an AI world, because the infrastructure must be more reliable, not less when you have lower human oversight. And the relevant analogy is not travel companies in the past. It's the infrastructure businesses at present. Visa doesn't own the customer relationship, AWS doesn't own the application and SWIFT does not own the payment instructions. But each of them owns the rail that every other participant in their ecosystem depends on. They don't get disintermediated; they become more embedded in the ecosystem that scales around them. And that's the position that WebBeds is building. We've got 8.5 billion searches a day, 0.5 million properties from 50,000 buyers, 50,000 buyers in 140 markets, that's our foundation. Internal AI is our operating leverage and B2A is one of our growth vectors. AI is going to make it easier to ask for a hotel room, but WebBeds makes it possible to reliably sell one. So with that, I'm now going to hand over to Tony Ristevski, our CFO, to cover our financial.

Thank you, Shelley. Good morning, everyone, if I can turn your attention to Slide 17. I will take you through the P&L. Consistent now for my ninth year end in presenting the results, we've got our statutory version to the left and the more appropriate version as we presented our results, which is the underlying operations. John has already talked through the key components of revenue expenses as it relates to WebBeds, but there are 3 other major items inside the underlying component that aren't unfortunately like-for-like as a consequence of the stand-alone approach in the '26 year as opposed to the hybrid approach when it comes to those items in the '25 year, namely with regards to corporate expenses, depreciation and amortization, and the net interest and finance costs, I'll cover those off in the next slide and go through them in a bit more detail. But when you look at the EBITDA at an underlying level, $148.4 million against last year's $120.6 million, did grow by 23%. But then if we were to revisit last year's $18.2 million corporate costs and look at the first half, which is a pro forma allocation fees as per the demerger principles, that was $7.5 million as opposed to the second half last year of $10.7 million. So if you hypothetically assume the first half replicated in the second half, the EBITDA last year, in the compare, would have been close to the $117 million. Our growth would have actually been closer to 26% on a like-for-like basis. So the business continues to scale. It scales at a WebBeds level, and it scales at a corporate level. But unfortunately, the compare doesn't make it obvious as a consequence of the demerger. That probably goes away next year in '27 when comparing it to '26, but I just wanted to highlight the nuances and how material difference it makes when it comes to the KPIs. When you then look to the next item down at the NPAT level, which is continuing operations, we're at $85.9 million, up against last year's revenue of $9.2 million. That's 8% growth. And that highlights the balance between the group growth of 23% down to the 8% as a consequence of an apples and oranges comparison across the DNA and the interest line. Nevertheless, when you look at underlying EPS, it is up 16%, which is $0.238 against last year's $0.205. The key driver in the growth, which is double that of the NPAT number is the buyback that we instigated last financial year. We did cancel 31 million shares that has been facilitated a higher growth in EPS. And we'll start to see the benefits of the buyback as we continue to grow and scale the business and deliver higher impact numbers in the following year. Next, I have to talk through the effective tax rate of 17.2%. That was in line with the circa 17% that we've provided for the past 12 months. If I then turn to the next slide, which goes into a lot more detail as it relates to the 3 major items that does skew our numbers. The '25, as I said, is a hybrid where the second half is a stand-alone position. The first half is a pro forma position. We have consistently for the past 12 months now guided across those 3 numbers. In terms of what we expect for '26. And I'm glad to say that for corporate costs, we guided to $24 million. We ended up at $24.3 million. D&A, we guided to $31 million, we ended up at $32 million. Net interest and finance costs, we guided initially between $15 million and $16 million, but courtesy of the finance team and the treasury team, we managed to bring that number down by effectively managing our cash. And the last guidance was around $13 million in February. We're at $12.7 million. So overall, as you can see there against the compare, the compare is not an apples and oranges like-for-like compare, unfortunately. So when we think about outlook, the corporate costs are expected to grow by 10% next financial year, a combination of CPI and a combination of investment in security and compliance resources. D&A is expected to be flat next year and interest and finance costs will grow proportionate to the new capital structure, which I'll talk about in a few more slides from now. And that is replicating, albeit collapsing the $250 million CB, which we're paying 75 bps and then replacing that with a $200 million revolver, which has a closer effective interest rate around 5% and that would be the delta to model as you start to think about net interest and finance cost from '27 onwards. Moving on to the next slide, which is the balance sheet. As John stated, at the highlight section at the front, our cash position was just shy at $450 million, which provides us ample liquidity. The other pleasing thing is that debtors and creditors have normalized in this financial year in terms of our working capital numbers. And I'll talk a bit more about that when it relates to the cash slide. Borrowings. We do have it sitting in current, just shy of the $250 million, and I'll talk about that in the pro forma capital slide. But the pleasing thing here is our capital efficiency. We have grown ROE and ROIC by 31% and 36%, respectively, and that is a function of organic growth. We started our WebBeds journey as John said back in 2013. We bought $1.4 billion of TTV and here we are just shy of $6 billion in TTV which is an extra $4.5 billion organically growing. And that comes through those 2 capital efficiency measures to be in the mid-teens in the low 20s is an outlier and a great success story around our inorganic conversion into organic growth. And the other key thing that I've been calling out for the last couple of years as a consequence of COVID. Our current ratio remains above 1, and that will be the focus for us going forward when we think about liquidity. I'll then also touch on briefly, and I won't go into any detail, the tax audit. At this stage, we continue to comply with the authorities, and we have no more comments to make until we have something else further to disclose. At this point in time, it's still business as usual. Going on to the next slide, cash flow. As I mentioned earlier, strong cash conversion coming from our scalable business model generating over $130 million in cash from operations. We have managed our working capital in the current period. That's also helped to contribute towards a positive cash number and a cash conversion of 107%. Last year, 73% was foreshadowed 12 months out as debtor days or credit days contracted. They've normalized in '26, and we expect this to be normalized again in the '27 year and a similar cash conversion of 100% for FY '27. The other key call out here is, unfortunately, as we work through the current sort of macro environment, particularly geopolitical unrest, it was prudent to preserve our liquidity and the optionality around having cash on our balance sheet, and that resulted in no dividend being declared for FY '26. I'll then turn your attention to the next slide, which is the capital structure, please, Slide 21. As you can see there to the left, our statutory balance sheet shows cash position just shy of $450 million and current borrowing just shy of $250 million, and it's not quite $250 million and that's because of the bifurcation of the instrument and the accounting standards, the bond collapse is 12 days after year-end. So there's another $400,000 of bifurcation adjustments to make, which goes through the noncash interest line, which makes the number $250 million an accounting level. But nevertheless, what you can see there is our net current cash position of $198 million. 12 days later, we collapsed the bond through the redemption, which we foreshadowed before year-end. The sources of the repayment was $50 million from our current cash reserves, reducing our cash balance of $398 million and then drawing down on $200 million of the upside, $300 million revolver, which was the other source of funds. So now we have a strong capital position, where we've got cash of $400 million on a pro forma basis. We have got a revolver, which doesn't expire until April '28. So it's noncurrent going forward. And we still have $100 million of available liquidity sitting there undrawn. So in totality, we've increased our liquidity position from $448 million to just shy of $500 million, and that gives us optionality in the current sort of uncertain world that we're currently operating in, but also optionality when it comes to pursuing inorganic opportunities. Lastly, on the last slide, another great feature of the AI impacting our business. For the past 12 months, the guidance around CapEx wise, it will be like-for-like in a functional currency level. It actually ended up being like-for-like at a dollar level. which then is default in flows, we actually spent less year-on-year at a functional currency level. And that's, again, through the use of more efficient resources and tools and Shelley touched upon those in the AI world, helping us also through our CapEx spend. Equally from an insight around our spend around IT. 90% of our CapEx is on IT-related spend and then there's a circa $52 million of OpEx that we expense as IT. So in totality, the overall investment in IT is just north of $80 million of the group. Lastly, as we look forward to FY '27, we expect CapEx to be in line with '26. So on that note, I'll hand over to John.

Thank you, Tony. Thank you, Shelley. I just want to touch on the outlook and what we're seeing in early doors for FY '27. But before we do that, I just want to reflect back on FY '26 and talk a little bit about why we are so optimistic about our business going forward. The key element, and we touched on that by highlighting our 3-year CAGR growth rates over the course of this business is the business has consistently gained market share somewhere between 3 to 5x the prevailing market conditions. And we see no reason for that to ameliorate over the course of the next couple of years. Structurally, and Shelley talked a little bit about what we're doing in the AI componentry. I touched on earlier on about the strategic push into more direct contracts. The way we think about our business is that we have enhanced the quality of the people that support us internally and the quality of the management team continues to be bolstered. The experience -- the deep experience that we have across our industry means that we are well connected into the decision-making that occurs at both supply and demand. That will enable us to continue to facilitate the strength of winning share without having to compromise our margin. It's going to be a key component of why we are well positioned. And naturally, I could talk in considerable detail about this over an extensive period across all of the initiatives that we're running within the organization. But the business has never been in more structurally sound, more mature as an organization and the ability to continue to grow with the entrepreneurial spirit that has characterized us over the journey that will enable us to facilitate that growth, if not increase that growth. Let's give an update on what's happening in FY '27. Clearly, geopolitical instability in the Middle East is impacting that market. I called out that it's -- we're disproportionately impacted there. It's also impacting APAC. Whilst the operating environment remains uncertain, we continue to demonstrate resilience across a number of key markets. Our bookings are solid at 6%. I'm sure that's up on market. I don't have any current metrics to talk about it, but I have seen other players in the industry talk about that bookings have been impacted over the course of the first few weeks of April and May. So at a bookings level, we continue to do well. If you break it down to our regional performance. The first 2 buckets of Americas and Europe continue to operate remarkably similar to what they were doing pre-war. America continues to do a phenomenal result. Europe is still growing. APAC has seen an improvement in May over April, but still tracking below last year. And Middle East is the most materially impacted. So within that portfolio, we're still seeing aggregate bookings growing. And at a TTV constant currency level, we're seeing that we're up 4%. The biggest impact for us in translating it to Aussie dollars is we're impacted by 2 separate FX componentry. The first one, which I described earlier is the euro-USD where we're growing the fastest. That's probably about 3% to 4% of the headwind that exists. For most of the first quarter, we think that will plateau in quarter 2 onwards. The other headwind is the AUD to euro exchange rate. That's circa 6% to 7% headwind in these results, and we expect that to continue over the course of the year. So you translate the plus 4% constant currency, it's minus 6 at TTV level. It's way too early to call anything out of the implications that it will have for our financial results, primarily because as I've described, and given ample amplitude towards the potential improvement in our TTV margin, we continue to see that it will be at least 6.5% for FY '27. There's plenty of work that we continue to do to support that and potentially improve that and I look forward to calling all of that information out when we do our half year results in May (sic) [ November ]. So whilst the macro impacts of the conflict remain uncertain, as I've described, the group remains remarkably well positioned to benefit from any recovery in travel activity across the affected regions, and we continue to expect long-term growth in bookings and TTV consistent with historical trends. I just want to take this opportunity as I try to, every time I get a chance to update, thank everyone within the WebBeds family for their commitment to the business. Their resilience and their ability to drive superior outcomes is being recognized in what has been an exceptional set of results that we've been able to deliver. So thanks to the operating business and the guys at corporate and everyone in Web Travel Group. So with that, we will provide an update on overall trading at the AGM on the 27th of August, and we are open to questions.

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

Congratulations on that second half targeting the TTV margin, pretty impressive given fully approximately with the financing. So just thinking about the drivers behind that. And...

Tim, can I interrupt? Can I ask you to either speak more closely to the mic because I'm really struggling to hear.

Sorry, guys. Is that better?

A little bit.

Okay. So sorry, just in terms of the second half revenue, the TTV margin uplift and some of the drivers behind that. John, I know you said you have more to talk about later. But in terms of the directly contracted inventory piece, can you give us a sense of where you are relative to your targets? Do we think about that initiative continuing into FY '27 and providing some good offset or opportunities to increase revenue to TTV margins. And then the second part is around the AI conversion, 40% of the products now using that AI pricing model. Can you remind us where is the potential end game for that? And how quickly could you get there?

Thanks, Tim. Yes. Look, as I called out during the presentation, genuinely delighted with our ability to increase margin half-on-half compared to last year. So it all goes well for the future. The key driver on the story is direct contracting and our ability to extract greater value from the contracts that we've had. If I just remind the sort of audience of how we view that, we're circa being a multi-supply aggregation strategy over the course of the last dozen years that we've run the business. And at the end of the day, as simplistic as it sounds, all value is created out of supply. And all value is created out of getting great pricing. All value is created out of getting great pricing and be able to demonstrate and put it in front of customers and ensuring that they convert with your product as opposed to somebody else. And we're getting much better at that. And we're getting much better at delineating between what we want to sell versus what we've got in our supply bucket. So to that extent, without going through it in mechanical detail, there are 2 components I'll just highlight. One is that, historically, all regions with the exception of the Americas have had circa 2/3 directly contracted hotel rates and 1/3 through third-party supply. That continues to be the prevailing run rate. And the Americas was the opposite. It was circa sub-30 indirectly contracted and greater than 70 third-party supply. And what we've seen is a meaningful shift through the efforts of direct contracting the Americas business to facilitate a circa 10% shift in improvement in direct contracting in the Americas combined with the superior growth rate that we've had in the Americas and you've seen the uplift in margin. The other component, which I did call out, and we've called this out over a number of years, one of the reasons that we've had tremendous success in the Americas over the course of the last -- in the post-COVID era, is, obviously, great management team, great individuals who run the business. But, in particular, we've got solutions that we built exclusively for the American marketplace that builds in our capability of taking a credit card on behalf of our customers and being the merchant of record and that's been another facilitator of our margin expansion. So that's the margin story. Well, the second question, Tim?

It was also to do with the margin expansion. The AI conversion or 40% of the inventory now, how do we think about the potential end game there? And how long could that take?

Well, it will continue to evolve. If we had this conversation 4 years ago, it was sub-10%. So with circa grown at 10% per annum over the year. I think it will slow down a little bit, but it will slow down in AI pricing. But at a conversion level, I think it will continue to facilitate superior conversion numbers. So we can do more with it within that 40% or 50%, whatever that number plateaus at across that customer base with AI pricing. So I'm not so much focused on what percentage of our overall pricing is a function of AI. It's more about the effectiveness of that AI pricing. That will be the driver of superior conversion. And we've demonstrated that aptly over the last 3 or 4 years, and we'll continue to demonstrate that in FY '27.

So our next question comes from Sam Seow with Citi.

Just maybe following on the revenue margin that strong, I guess, implied 7.1% in the second half. Really appreciate the color on the direct contracting. But I just want to understand, was geographic mix a headwind or a tailwind during the period? Or was there any other kind of cyclical or seasonal factors you call out in that improvement either way?

No, it's pretty neutral. We had some markets that improved and some markets that plateaued across the board. So now the key driver was just improving the underlying margin itself rather than the geographic mix.

Got it. That's helpful. And then maybe just on cash. You had quite a strong result there, Tony. I think it was 100-plus percent on conversion. Is that the standard now going forward? Anything to think about in FY '27 and the future?

Sam, it's always been the standard. The exception was '25 to be fair. So if you reflect on pre-COVID and post-COVID, our cash conversion has always been targeted at around circa 100%. '25, so the -- as I mentioned in the past, our supply days contracted and that was a onetime step change in the '25 financial year. So that was the only exception. The normality is 100%.

Got it. And then just below the line items, I guess you got the nonoperating expenses. I think the $17 million, most of that looked like it was mark-to-mark losses. Will that disappear, I guess, as we go forward? I mean, what should we expect in that line?

Yes. Look, good point raised. I could have raised it on the call. We still got access to 8.4 million web shares, which is our exposure on our balance sheet and now to declining share price, each reporting period dictates the value of that asset and hence, you've got another negative, unfortunately, at the end of March. We'll continue to hold those because we have obviously a positive outlook around where the share price should be. So they're still sitting on our balance sheet as a liquid asset.

Your next question comes from James Leigh with Goldman Sachs.

My question is probably one, just picking up on a comment you made around direct sourcing and the 10% uplift we've seen in the North American business. How far through that journey are we? Like how much further can that go in terms of direct sourcing in the medium term?

The reality of the American market, it's a significantly -- it's a unified economic block, and it's got consistent currency, it's got a very disparate source of markets that we're serving because it's primarily a domestic market as opposed to what we do in the vast majority of our other markets. There are other examples, Saudi and China, where we have a very strong domestic presence, but it's -- the strongest driver is domestic. So to get to domestic means, you need to continue to invest because you need to be across -- into more supply markets. So historically, we've done really well in New York, Florida, Vegas, California, and the Midwest or the South where Shelley is from, we haven't had as much of a focus. We're starting to address that, and we're expanding our capabilities in that area. I'd like to think over a multiyear period, we can get somewhere closer to the 2/3, 1/3 mix that we have in the other geographies. That will take a bit of time. It's -- we moved at 10 points this year. If we do mid-single digits next year, I'd be happy with that cadence, and it would set us on the path to continuing to grow. And if we did do the 5% and the U.S. continued to grow at a similar level, that's potentially margin accretive for us.

Great. And maybe then just a follow-up on how we should think about costs into '27? I know we've got the long-term 50% EBITDA guidance, and we've had a massive disruption in terms of the Middle East. Like how should we think about cost growth in '27?

Look, at this stage, James, we're sort of contemplating a similar investment thesis of '26 into '27, so will be in the mid- to high single digits at a functional currency level.

[Operator Instructions] Your next question comes from Wei-Weng with RBC Capital Markets.

Just 1 question from me. I guess you previously said you were going to deliver 50% EBITDA margins in FY '27. This hasn't been reiterated today. I guess, is there any kind of reason for this just related to the current geopolitical issues? Or is there something that kind of makes you kind of walk away from that? And then maybe at what level of TTV growth do you think you might get enough confidence to kind of reinstate that target?

Great to hear from you, Wei-Weng. The question is appropriate, but it's difficult to answer under the circumstance. So yes, we have got statements around 50% EBITDA margin. We had expected it to be in FY '27. There's clearly been a disruption as a consequence of the war. As we sit here today, that's got an unknowable end date. So it would be inappropriate for us to be putting any statement around that 50% EBITDA margin. To the second part of your question, this is an operationally scalable business. Even when we invest in our existing businesses we have, and we know that there is a lag between putting a negotiator into a market and getting a return on that market. We continue to do that and deliver improved EBITDA margins, and we continue to improve growth rate within the organization. At a right number, that will come to 50%. Now I'm not going to put a number out there today for the obvious reason mechanically, you can work it out just as much as I am. But at the right juncture, we'll give an update on what those market metrics should look like for us in an environment that is not in the chaos that it currently is in.

Yes. And then maybe just on M&A. Like, I guess, what's the kind of view on like M&A now? Like what would you be interested in? Do you find that I guess, asking prices or valuations have come down as much as kind of public market valuations? Or is there kind of a mismatch there? Do you think M&A is kind of more likely?

Yes. Look, clearly, Tony referenced that we're in a remarkably strong cash position. He also referenced that inorganic opportunities are on the table. Specifically to your question, the valuations have fallen as had the valuations of the publicly traded bed bank businesses. So the market opportunities need to reflect the reality of what is being traded. And we are seeing some activity in the space. And we are actively looking for M&A opportunities. Now to go to the specifics, just as I listen in on my competitors' calls, I'm sure they're listening in on this. I won't call out the specifics, but we are a bed bank business. We have deep knowledge of the bed bank industry, we have deep knowledge of what we do exceptionally well. And we have deep knowledge of where we have holes in our portfolio. We will look to flesh out those holes within our portfolio to make us more competitive and -- more robustly competitive on a global basis.

Yes. And is there any appetite for kind of more large-scale moves like mergers or things like that, with kind of equally large businesses just kind of in a sort of stronger together sort of, I guess, thematic?

I'd like to think I'm stronger than everybody else by myself. So -- but I don't need somebody else to make me stronger. I'll paraphrase the advice that I've got from both chairmans that I've run under with David Clark and Roger Sharp, we've always been open for business. And if the right opportunity comes along, we will evaluate it on its merits. But I -- if nothing happened in the next 5 years, and we didn't buy anything else, we didn't merge with somebody else, less strong than us, but albeit strong, I think we would be delighted with what the signposts would look like of the results at that juncture. So -- but having said that, we have leverage -- we have financial capacity, sorry, and we have the capacity to leverage that into other assets that will continue to enhance our position. We are certainly looking at that.

There are no further questions at this time. I'll now hand back to Mr. Guscic for closing remarks.

Thank you, Kayla. As I said earlier, been a really strong result. I'm delighted that we're seeing a return to form. And I'm optimistic that we will continue the trajectory that the business is on. And we will be continuing to outperform the market and just reiterate once again my appreciation for the entire team within our family for doing a phenomenal job. With that, we'll wrap up. Thank you very much.

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