Global Business Travel Group, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; financial statements are unaudited. The company operates a technology-enabled business travel platform and reports one segment.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | $578 million | $350 million; up 65% |
| Travel revenue | $467 million | $257 million; up 82% |
| Products and professional services revenue | $111 million | $93 million; up 19% |
| Operating loss | $9 million | $96 million |
| Net loss | $27 million | $91 million |
| Adjusted EBITDA (non-GAAP) | $99 million; 17% margin | $(28) million; (8)% margin |
| Cash used in operating activities | $77 million | $154 million |
| Free cash flow (non-GAAP) | $(109) million | $(175) million |
| Cash and cash equivalents at period end | $320 million | $303 million at Dec. 31, 2022 |
| Net debt (non-GAAP) | $1.035 billion | $919 million at Dec. 31, 2022 |
Interest expense rose to $34 million from $19 million, reflecting higher debt and rates, partly offset by interest-rate swaps. Total operating expenses were $587 million, including $23 million of restructuring charges, compared with $446 million in Q1 2022. The filing does not provide a clear gross-margin figure.
Changes and management commentary
- Total transaction value (TTV) increased 88% to $7.422 billion and transaction growth was 61%. Management attributed the recovery principally to the easing of COVID-19 travel restrictions that had constrained activity in Q1 2022. Global travel activity remained below 2019 levels.
- Operating cash outflow improved year over year, though working capital remained a use of cash: accounts receivable increased by $163 million during the quarter. Capital expenditure was $32 million.
- In January 2023, the company borrowed $135 million of new term loans to support general corporate purposes and liquidity. Net debt increased by $116 million from year-end.
- The company announced an operating-model restructuring, with expected 2023 pre-tax charges of approximately $20–$25 million, substantially all cash severance and related costs. Actions are expected to be substantially complete by year-end.
Debt, liquidity, risks and unusual items
- At March 31, 2023, debt was $1.376 billion principal, or $1.355 billion net of unamortized discount and issuance costs. The $50 million revolving facility was undrawn. The term loans carry variable rates; the effective rate on senior secured term loans was approximately 11.2% for the quarter. The filing estimates a 100-basis-point rate change would affect annualized interest expense by approximately $5 million, including swaps.
- Management said liquidity was adequate for at least the next 12 months, based on its operating plan, cash, business recovery, mitigation actions, available funding and operating cash flows. The credit agreement requires at least $200 million of defined liquidity at each month-end. The company reported compliance with applicable covenants and no default at March 31, 2023.
- Contractual debt obligations including interest were stated as $1.911 billion, with $154 million due within 12 months. The revolving facility has a springing maturity provision tied to refinancing or repayment of the initial term loans by May 14, 2025.
- Key uncertainties include the pace of business-travel recovery, renewed pandemic disruption, economic slowdown, inflation, interest rates, foreign exchange, customer credit losses and the company’s ability to maintain liquidity. The allowance for credit losses rose to $27 million from $23 million at year-end.
- Equity-based compensation was $19 million, versus $3 million a year earlier. The company granted approximately 18.0 million RSUs during the quarter, including awards connected with an option exchange; expected future compensation expense for unvested RSUs was approximately $160 million over a weighted-average 2.5 years.
- A $3 million gain from remeasurement of earnout liabilities and $5 million of other income, primarily favorable foreign exchange, benefited reported results. In April 2023, the company issued 413,668 Class A shares to Expedia to settle $3 million of an accrued loss-contingency liability.
- No material changes to previously disclosed risk factors were reported. Management stated that pending litigation was not expected to have a material adverse effect. Disclosure controls were assessed as effective.
Outlook: The filing provides no specific revenue, earnings or cash-flow guidance. Management described continued cost-reduction and process-rationalization efforts and said it may explore additional financing; it cautioned that future funding availability and terms are not assured.
Important facts for investors to verify
- Whether the travel-volume recovery and TTV growth continue, and how far activity remains below 2019 levels.
- Whether operating cash flow improves as revenue grows, particularly given receivables and other working-capital needs.
- The cost, timing and realized savings of the restructuring, alongside the increased equity-compensation burden.
- Debt-service capacity and exposure to floating rates, refinancing needs, the $200 million liquidity covenant and the revolving facility’s springing maturity.
- The assumptions underlying adjusted EBITDA and other non-GAAP measures; these exclude items such as restructuring and equity-based compensation and are not substitutes for GAAP results or cash flow.