Business context and reporting period
This is Apollo Strategic Growth Capital’s unaudited Form 10-Q for the quarter ended March 31, 2022—not an operating-company quarterly report for Global Business Travel Group, Inc. Apollo was a blank-check company seeking a business combination and had not commenced operations or generated operating revenue. It had agreed to combine with GBT JerseyCo Limited, with the combined company expected to be named Global Business Travel Group, Inc.; closing remained subject to conditions.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Total expenses | $1.49 million | $4.64 million |
| Trust investment income | $321,889 | $141,517 |
| Change in warrant fair value | $4.15 million loss | $24.79 million gain |
| Net income (loss) | ($5.33 million) | $20.28 million |
| Cash used in operating activities | $81,035 | $354,564 |
Margins are not meaningful because the company had no revenue. At March 31, 2022, assets were $818.1 million, including $817.7 million in the Trust Account; cash outside the trust was only $80,242. Current liabilities were $15.7 million and working capital deficit was approximately $15.2 million. Total liabilities were $104.3 million, including $60.1 million of warrant liabilities and $28.6 million of deferred underwriting compensation. Sponsor notes payable were $5.8 million; the company also owed related parties $4.3 million in non-interest-bearing advances. Trust funds were principally held in short-term U.S. government securities and were intended for the business combination, not ordinary operating liquidity.
Material changes versus the prior comparable period
The company swung from net income to a net loss, primarily because warrant liabilities generated a fair-value loss in Q1 2022 versus a large fair-value gain in Q1 2021. General and administrative expenses fell to $1.44 million from $4.59 million. Cash outside the Trust Account declined from $161,277 at year-end 2021 to $80,242. The warrant liability increased to $60.1 million from $55.9 million at December 31, 2021.
Outlook, risks and unusual items
- The December 2021 GBT transaction agreement contemplated an Up-C structure and a $335 million PIPE investment at $10 per share. The filing also described 15 million potential earnout shares. These were transaction terms, not completed financing or realized results as of the reporting date.
- The company said it lacked sufficient liquidity to meet anticipated obligations over the next year. Management cited access to Sponsor funding for working capital, but warned that failure to complete a business combination by the applicable deadline would require liquidation and raised substantial doubt about going concern. The stated deadline was October 6, 2022, with a possible extension to January 6, 2023 if a qualifying agreement was in place by October 6.
- Deferred underwriting compensation of $28.6 million and approximately $7.0 million in service-provider success fees, plus placement fees based on specified PIPE proceeds, were contingent on completion of the GBT transaction. The underwriters’ deferred fee would be waived if no business combination occurred.
- The company reported no off-balance-sheet arrangements, no legal proceedings, and no material changes to previously disclosed risk factors. It noted that the effects of COVID-19 and the Russia-Ukraine conflict were uncertain. A $1.5 million Sponsor promissory note was executed on April 1, 2022, after quarter-end.
- Management said a previously reported material weakness related to complex financial instruments had been remediated and disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Confirm the status and closing conditions of the GBT business combination, including any changes to the PIPE, earnout, redemption levels, and transaction deadlines.
- Verify available operating cash and Sponsor funding arrangements; distinguish Trust Account assets from funds available for expenses.
- Review the warrant-liability valuation and its impact on reported earnings, which is non-cash and potentially volatile.
- Check the treatment and payment of deferred underwriting compensation and contingent transaction fees if the deal closes or terminates.
- Read the later Global Business Travel Group filings for the post-combination company’s actual operating results; this 10-Q does not provide GBT revenue, profit, margins, or operating cash flow.