Global Business Travel Group, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The company operates a technology-enabled business travel platform, including American Express Global Business Travel and Egencia. Financial results are unaudited.
Financial performance and liquidity
| Metric | Q2 2023 | Six months 2023 | Prior-year comparable |
|---|---|---|---|
| Revenue | $592 million, up 22% | $1.170 billion, up 40% | $486 million Q2; $836 million six months |
| Net loss | $55 million consolidated; $14 million attributable to Class A holders | $82 million consolidated; $16 million attributable to Class A holders | $2 million consolidated loss in Q2; $93 million consolidated loss six months |
| Operating income (loss) | $2 million | $(7) million | $(19) million Q2; $(115) million six months |
| Adjusted EBITDA (non-GAAP) | $106 million; 18% margin | $205 million; 18% margin | $47 million; 10% margin Q2; $19 million; 2% margin six months |
| Operating cash flow / Free Cash Flow (non-GAAP) | Quarterly cash flow detail is not clearly presented in the financial statements | $(31) million / $(90) million | $(309) million / $(351) million six months |
Q2 revenue growth reflected 13% growth in total transaction value (TTV) and a 0.6 percentage-point increase in revenue yield to 8.1%. Six-month TTV increased 41%; six-month revenue yield was 7.9%. Travel revenue grew 23% in Q2 and 47% for the six months; product and professional services revenue grew 16% and 17%, respectively.
At June 30, cash and cash equivalents were $335 million (restricted cash was an additional $13 million). Debt net of discounts and issuance costs was $1.359 billion; net debt, a non-GAAP measure, was $1.024 billion, up from $919 million at December 31, 2022. The company had $43 million undrawn under its revolving facility, subject to borrowing conditions, and reported compliance with applicable debt covenants. Its credit agreement requires at least $200 million of defined liquidity at each month-end.
Changes versus the prior period
- Business travel recovery and increased international travel drove higher transactions and revenue. Management attributed part of the six-month comparison to Omicron-related travel restrictions affecting early 2022.
- Operating expenses increased 17% in Q2 and 24% for the six months, below revenue growth over the six-month period. Cost of revenue, sales and marketing, and technology spending rose with activity and staffing; six-month restructuring charges were $30 million.
- Interest expense rose to $35 million in Q2 and $69 million for the six months, compared with $24 million and $43 million, respectively, primarily due to higher debt and interest rates. The six-month net loss improved from $93 million to $82 million, while the Q2 net loss widened from $2 million to $55 million, including a $19 million non-cash earnout fair-value charge versus a $36 million gain in Q2 2022.
- Operating cash outflow improved substantially year over year, but capital expenditures increased to $59 million from $42 million for the six months, leaving Free Cash Flow negative at $90 million.
Outlook, commentary, risks and unusual items
- Outlook: No quantified revenue or earnings guidance is provided in the supplied filing text. Management expects adequate liquidity for at least 12 months, based on its operating plan, cash, travel-volume trends, mitigation measures, funding capacity and operating cash flows. It continues to consider cost reductions, process rationalization and capital-market transactions.
- Restructuring: The company expects approximately $30 million of 2023 pre-tax restructuring and related charges, substantially cash severance costs, with the operating-model realignment expected to be substantially complete by year-end. Facility rationalization also resulted in accelerated amortization.
- Debt and rates: January 2023 financing added $135 million of term loans at floating SOFR-based rates; the effective term-loan interest rate was approximately 11.3% for the first half. A hypothetical 100-basis-point rate change would affect annualized interest expense by about $5 million, after swaps. The revolving facility has a springing maturity condition tied to refinancing or repayment of earlier-maturing term loans.
- Post-quarter corporate simplification: On July 10, 2023, the company eliminated its Up-C structure through exchanges that made it the sole owner of GBT JerseyCo and eliminated Class B shares and non-controlling interests. GBTG became subject to U.S. tax on 100% of GBT JerseyCo’s equity; management expects the net cash-flow and effective-tax-rate effects to be immaterial, partly offset by the end of tax distributions to former owners.
- Other exposures: The company identified macroeconomic slowdown, inflation, interest rates, foreign exchange, reduced business travel and virtual meetings as risks. It had $205 million of non-cancellable purchase commitments, mainly technology services, hosting and licensing, including $84 million due in the next 12 months. Management said pending legal matters are not expected to have a material adverse effect. No material change to previously disclosed risk factors was reported.
Important facts for investors to verify
- Reconcile reported GAAP results and cash flow with non-GAAP Adjusted EBITDA and Free Cash Flow, including the exclusions and the working-capital effects.
- Review the company’s ability to meet the $200 million minimum-liquidity requirement and the conditions governing access to the $43 million undrawn revolver.
- Assess floating-rate debt costs, refinancing needs and the revolving facility’s springing maturity provisions.
- Monitor whether travel-volume growth and revenue yield persist as recovery comparisons normalize, and whether operating costs grow more slowly than revenue.
- Evaluate the post-simplification tax consequences, ownership dilution from equity awards and earnouts, and the $106 million earnout liability’s exposure to share-price changes.