Global Business Travel Group, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company operates a technology-enabled business travel platform, including American Express Global Business Travel and Egencia. Figures below are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $571 | $488 | $1,741 | $1,324 |
| Operating loss | $(4) | $(45) | $(11) | $(160) |
| Consolidated net loss | $(8) | $(73) | $(90) | $(166) |
| Adjusted EBITDA (non-GAAP) | $95 | $41 | $300 | $60 |
| Adjusted EBITDA margin (non-GAAP) | 17% | 8% | 17% | 5% |
| Operating cash flow | $135 | $(81) | $104 | $(390) |
| Free cash flow (non-GAAP) | $107 | $(112) | $17 | $(463) |
- Q3 revenue yield was 8.0%, calculated as revenue divided by total transaction value (TTV). Q3 TTV rose 8% to $7.123 billion; transactions increased 7%.
- For the nine-month period, TTV rose 28% to $21.894 billion and transactions increased 23%. Management attributed growth mainly to recovering business travel and more international travel; the prior-year comparison was affected by Omicron-related restrictions early in 2022.
- At September 30, cash and cash equivalents were $432 million, versus $303 million at December 31, 2022; restricted cash was a further $13 million. Net debt, a non-GAAP measure, was $927 million, versus $919 million.
- Total debt, net of discounts and issuance costs, was $1.359 billion. The company had $43 million undrawn under its revolving facility, with $7 million used for letters of credit. Its effective interest rate on senior secured term loans was approximately 11.5% for the nine months.
- Current assets were $1.469 billion and current liabilities $923 million. Interest expense was $36 million in Q3 and $105 million for the nine-month period.
Changes versus prior comparable periods
- Q3 revenue increased 17%, while consolidated net loss narrowed to $8 million from $73 million. Operating loss narrowed to $4 million from $45 million.
- Nine-month revenue rose 32%; consolidated net loss narrowed to $90 million from $166 million. Operating cash flow improved by $494 million year over year, though working-capital movements were a substantial factor.
- Operating expenses increased 8% in Q3 and 18% for the nine months. Growth-related staffing and transaction costs, higher sales and marketing spending, and restructuring charges contributed. Adjusted EBITDA improved, but it excludes specified costs and is not a GAAP measure.
- Interest expense increased by $10 million in Q3 and $36 million for the nine months, primarily due to higher debt and rates, partly offset by interest-rate swaps.
Outlook, commentary, risks and unusual items
- Liquidity outlook: Management stated it believes available cash, operating cash flows, funding capacity and planned mitigation measures are sufficient for at least 12 months. It also said it continues to explore capital-market transactions, process rationalization and cost reductions. No specific revenue or earnings guidance is provided in the supplied filing text.
- Debt and rates: The company borrowed $135 million in January 2023 under a new term-loan tranche. Debt is predominantly floating-rate; the filing estimates a 100-basis-point rate change would change annual interest expense by about $5 million, after expected swap cash flows. A $238 million initial-term-loan tranche matures in August 2025; other major term loans mature in December 2026. The revolving facility has a springing termination provision in May 2025 if the initial loans have not been refinanced, extended or repaid as specified.
- Restructuring: Nine-month restructuring and exit charges were $42 million. The company accrued approximately $35 million for its operating-model changes, substantially related to severance; the realignment was expected to be substantially complete by year-end 2023.
- Corporate simplification: On July 10, 2023, the company eliminated its Up-C structure and issued Class A shares to former non-controlling owners. The transaction increased GBTG’s economic ownership of GBT JerseyCo, ended the former non-controlling-interest allocation, and produced an estimated $76 million net deferred tax liability charged to equity. The company expects higher U.S. cash tax expense, largely offset by ending tax distributions to former owners. The transaction also substantially increased Class A shares outstanding.
- Non-cash fair-value item: Earnout derivative liabilities generated a $39 million Q3 gain and a $23 million nine-month gain, mainly reflecting a lower share price. This improved reported results but is subject to remeasurement and is not operating cash flow.
- Control weakness: Management reported a material weakness in internal control over financial reporting related to Egencia processes still performed by Expedia under a transition-services arrangement, including controls over client revenue, vendor payments and IT. Management said it did not believe the weakness affected current-period financial-statement accuracy; remediation and integration were expected to continue through April 2024, followed by control testing.
- Other exposures: The company disclosed $231 million of non-cancellable purchase commitments, including $92 million due within 12 months, and $25 million of bank guarantees. Management did not expect pending legal matters to have a material adverse effect. Risks cited include weaker business travel, macroeconomic and geopolitical conditions, inflation, interest rates, competition, and customer or supplier relationships.
Most important facts for investors to verify
- Whether business-travel volumes and revenue yield remain resilient, and whether growth continues beyond the recovery-driven comparisons.
- Whether operating cash generation and free cash flow are sustainable after working-capital effects and capital expenditures.
- Debt-service capacity, borrowing conditions, floating-rate exposure, and the 2025 springing maturity provision; confirm the company continues to satisfy its liquidity and other credit covenants.
- Progress in remediating the Egencia material weakness and completing the planned integration and control testing.
- The final tax and equity effects of the corporate simplification, including future cash taxes and the resulting share-count implications.
- The assumptions underlying Adjusted EBITDA and other non-GAAP measures, and the sensitivity of reported earnings to earnout fair-value changes.