Global Business Travel Group, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts are in U.S. dollars; financial statement amounts are generally in millions. The business combination with Apollo Strategic Growth Capital closed May 27, 2022 and was accounted for as a reverse recapitalization, so the company’s post-combination share structure and Class A per-share results cover only a short portion of the quarter.
Business context and performance
GBTG operates a technology-enabled business-travel platform serving corporate clients, travel suppliers and third-party travel agencies. At quarter-end it reported approximately 20,000 corporate clients and more than 240 network partners. Management said travel activity continued recovering from COVID-19 restrictions but remained below 2019 levels; transactions reached 76% of 2019 levels in June 2022.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $486 | $153 | $836 | $279 |
| Operating loss | $(19) | $(114) | $(115) | $(243) |
| Consolidated net loss | $(2) | $(55) | $(93) | $(169) |
| Adjusted EBITDA (non-GAAP) | $47 | $(74) | $19 | $(164) |
| Net cash used in operating activities | $(155) | $(122) | $(309) | $(236) |
| Free cash flow (non-GAAP) | $(176) | $(131) | $(351) | $(254) |
Q2 revenue increased 217%; six-month revenue increased 200%. Travel revenue was $388 million in Q2 and $645 million for the six months; product and professional services revenue was $98 million and $191 million, respectively. Growth reflected travel recovery and Egencia, acquired in November 2021. Egencia contributed $107 million of Q2 revenue and $173 million for the first half of 2022. Adjusted EBITDA margin was 10% in Q2 and 2% for the first half; these are non-GAAP measures and should be considered alongside GAAP results. Q2 operating margin was approximately negative 4%.
Q2 consolidated net loss of $2 million differs from the $21 million of net income attributable to Class A common stockholders and reported basic EPS of $0.44; the filing attributes the difference primarily to the Up-C structure and non-controlling interests. Diluted six-month loss per share was $0.21. Prior-period per-share comparisons are not presented as meaningful.
Liquidity, debt and cash flow
- At June 30, cash and cash equivalents were $446 million, versus $516 million at December 31, 2021. Current assets were $1.284 billion and current liabilities $777 million; working capital was approximately $507 million.
- Debt, net of discounts and issuance costs, was $1.221 billion; principal outstanding was $1.241 billion. Net debt, a non-GAAP measure, was $775 million, up from $507 million at year-end. The $50 million revolving facility was undrawn.
- During the first half, operating activities used $309 million of cash, including a significant working-capital use as travel activity recovered; capital expenditures were $42 million. Cash from financing was $298 million, including business-combination proceeds and $200 million of additional term loans, partly offset by $168 million to redeem preferred shares.
- Term loans carry floating rates, including LIBOR plus 6.50% on the $1.0 billion tranche B-3 balance. Management estimated a 100-basis-point rate change would alter annualized interest expense by approximately $12 million, excluding swap effects. A $600 million interest-rate swap was replaced in June at a higher fixed rate; the company received $23 million on termination of the prior swap.
- The credit agreement requires at least $200 million of defined liquidity at each month-end. The company reported covenant compliance and no default as of June 30.
Material changes, outlook and risks
- Revenue and travel volumes improved substantially year over year, but comparisons reflect both pandemic recovery and Egencia’s inclusion. Operating expenses rose to $505 million in Q2 from $267 million, reflecting acquired operations, higher staffing and platform costs, and restored compensation levels. First-half revenue growth also included the acquired business.
- Management stated that existing cash, the revolving facility and expected operating cash flows should meet anticipated needs for at least 12 months. The filing provides no specific revenue, earnings or travel-volume guidance.
- COVID-19 effects remain uncertain, and business travel was still below 2019 levels. Management also identifies risks from renewed travel restrictions, Russia’s invasion of Ukraine, inflation, interest rates, market volatility, competition, customer and supplier relationships, and possible substitution of virtual meetings for travel.
- Non-cancellable purchase commitments were approximately $202 million, mainly for IT services, hosting and licensing; $76 million related to the next 12 months. Management said pending legal matters were not expected to have a material adverse effect.
- A $36 million Q2 gain from lower fair values of earnout and warrant liabilities reduced reported losses; the liabilities are remeasured and may cause earnings volatility. The company reported $121 million of these liabilities at quarter-end. Q2 government salary-support benefits were $1 million, compared with $17 million a year earlier; first-half benefits were $7 million versus $43 million.
- The reverse recapitalization generated $365 million of gross proceeds, including PIPE and remaining trust cash; after transaction costs and preferred-share redemption, management reported $128 million of net proceeds. At June 30, 56.9 million Class A and 394.4 million Class B shares were outstanding. Class B shares carry voting rights and relate to continuing owners’ economic interests in GBT JerseyCo; exchange rights and earnout awards may affect future ownership and dilution.
Key facts for investors to verify
- How much of reported growth reflects organic transaction recovery versus Egencia and other acquired-business contributions?
- Whether working-capital cash usage moderates and liquidity remains above the credit agreement’s $200 million minimum.
- Floating-rate exposure, hedge effectiveness and the maturity, pricing and covenant terms of the secured debt.
- The assumptions and earnings effects behind the fair-value accounting for warrants and earnout liabilities, and the stock-price milestones governing potential issuance or forfeiture.
- The sustainability of adjusted EBITDA improvement, including the recurring nature of costs excluded from non-GAAP measures.
- The potential effects of the $202 million purchase commitments, ongoing pandemic-related uncertainty and continued travel demand below 2019 levels.