Global Business Travel Group, Inc. — Q3 2022 Form 10-Q
Reporting period: Unaudited quarter and nine months ended September 30, 2022. The business provides technology-enabled business travel management, supplier and partner marketplace services. The May 27, 2022 SPAC business combination was accounted for as a reverse recapitalization; GBTG operates through GBT JerseyCo in an Up-C structure.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $488m | $197m | $1,324m | $476m |
| Operating loss | $(45)m | $(124)m | $(160)m | $(367)m |
| Net loss | $(73)m | $(106)m | $(166)m | $(275)m |
| Adjusted EBITDA (non-GAAP) | $41m | $(75)m | $60m | $(239)m |
| Adjusted EBITDA margin (non-GAAP) | 8% | (38)% | 5% | (50)% |
| Net cash used in operating activities | $(81)m | $(107)m | $(390)m | $(343)m |
| Free cash flow (non-GAAP) | $(112)m | $(117)m | $(463)m | $(371)m |
- Q3 revenue increased 147%; nine-month revenue increased 178%. Travel revenue was $387m in Q3 and $1,032m for the nine months; product and professional services revenue was $101m and $292m, respectively.
- Q3 basic loss per Class A share was $0.43. Nine-month basic earnings per Class A share were $0.02, while diluted loss per share was $0.38; the filing explains that the diluted calculation includes assumed conversion of Class B shares.
- At September 30, cash and cash equivalents were $312m, down from $516m at December 31, 2021; cash, cash equivalents and restricted cash totaled $325m. Current assets were $1,298m and current liabilities $835m.
- Debt principal was $1,240m ($1,221m net of unamortized discounts and issuance costs), versus $1,042m principal at year-end 2021. Net debt, a non-GAAP measure, rose to $909m from $507m. The $50m revolving facility was undrawn.
- Debt is principally floating-rate LIBOR debt; reported effective interest rate on term loans was approximately 7.5% for the first nine months. A swap covered $600m notional, with a fixed rate of 3.6858% under the replacement swap.
Material changes and drivers
- Growth reflected both recovery in business travel and the inclusion of Egencia, acquired in November 2021. Management attributed $95m of Q3 travel-revenue growth and $263m of nine-month travel-revenue growth to Egencia; it attributed the remainder primarily to recovering transaction volumes.
- Total Transaction Value rose 270% to $6,585m in Q3 and 367% to $17,054m for nine months. Transaction growth was 207% and 291%, respectively. These measures were materially affected by Egencia and the comparison with pandemic-depressed 2021 activity.
- Operating expenses increased 66% in Q3 and 76% for nine months, including Egencia costs, higher staffing and operating costs as volumes recovered, and increased technology and content costs. Nine-month capital expenditure was $73m versus $28m a year earlier.
- Interest expense increased to $26m in Q3 and $69m for nine months, primarily from higher debt and interest rates. Net debt increased mainly due to a $200m delayed-draw term loan borrowing and lower cash.
Outlook, risks and unusual items
- Management said it expected available cash, funding capacity, operating cash flows and mitigation measures to provide adequate liquidity for at least twelve months. It also said it continued to consider cost reductions, process rationalization and possible capital-market transactions. No quantified revenue or earnings guidance is provided in the filing text.
- Business travel remained below 2019 levels. Management cited uncertainty around COVID-19 and variants, travel demand, inflation and vendor/labor costs, rising interest rates, foreign exchange movements, Russia’s invasion of Ukraine, competition and the possibility that virtual meetings could reduce travel demand. The company does not hedge foreign-currency exposure.
- The credit agreement requires at least $200m of defined liquidity at each month-end. The company reported compliance with applicable covenants and no default at September 30, 2022. A separate revolving-facility leverage covenant did not apply for the period.
- Non-cancellable purchase commitments were approximately $186m, including $77m due within twelve months. The company reported $19m of bank guarantees. Management did not expect pending legal matters to have a material adverse effect.
- Q3 included a $19m charge for a probable loss contingency associated with an event existing at the Egencia acquisition date. The company also recognized $124m of deferred tax assets related primarily to tax-deductible Egencia goodwill. Fair-value movements on earnout and warrant liabilities affected reported results.
- After quarter-end, GBTG exchanged and retired all warrants for Class A shares, issuing approximately 10.8m shares in total; it reported 67,753,543 Class A shares outstanding as of November 8, 2022. At September 30, 394,448,481 Class B shares were outstanding and are associated with noncontrolling JerseyCo interests and exchange rights.
- Management concluded disclosure controls and procedures were effective. The company expected to lose emerging growth company status on December 31, 2022 because of its revenue level.
Investor verification priorities
- Separate underlying travel-volume recovery from Egencia’s contribution when assessing growth and future margins.
- Track operating cash burn, receivables and working-capital needs: nine-month operating cash outflow was $390m, with a $478m cash use from accounts receivable changes.
- Review debt maturities, floating-rate exposure, the swap’s coverage and terms, and compliance with the $200m minimum-liquidity covenant.
- Assess dilution and ownership implications of the Up-C exchange rights, Class B shares, post-quarter warrant exchange and equity compensation.
- Follow the Egencia loss contingency, purchase commitments, and the sustainability of non-GAAP Adjusted EBITDA relative to GAAP losses and cash flow.