Good morning. And welcome to the American Express Global Business Travel Fourth Quarter and Full Year 2023 Earnings Conference Call. As a reminder, please note today's call is being recorded. I will now turn the call over to the Director of Investor Relations, Jennifer Thorington. Please go ahead.

Hello. And good morning everyone. Thank you for joining us for our fourth quarter and full year 2023 earnings conference call. This morning, we issued an earnings press release, which is available on SEC.gov and on our website at investors.mxglobalbusinesstravel.com. A slide presentation, which accompanies today's prepared remarks is also available on the Amex GBT Investor Relations webpage. We would like to advise you that our comments contain forward-looking statements that represent our beliefs, our expectations about future events, including industry and macroeconomic trends, cost savings and acquisition synergies among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these and other risks and uncertainties is contained in our earnings release issued this morning and in our other SEC filings. Throughout today's call, we will also be presenting certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, free cash flow and net debt. All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items. Definitions of these terms and the most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release. Participating with me today are Paul Abbott, our Chief Executive Officer; and Karen Williams, our Chief Financial Officer. Also joining for the Q&A session today, is Eric Bock, our Chief Legal Officer and Head of Global M&A. With that I will now turn the call over to Paul. Paul?

Thank you, Jennifer. Welcome to everyone, and thank you for joining our fourth quarter and full year 2023 earnings call. We once again delivered outstanding financial results, driven by continued share gains and our focus on margin expansion. In the fourth quarter, we generated revenue of $549 million and adjusted EBITDA of $80 million which nearly doubled year-over-year. Our strong full year results finished above the guidance we issued at the start of the year with revenue up 24% year-over-year and adjusted EBITDA up nearly 4x year-over-year to a total of $380 million. Strong demand for our leading software and services resulted in continued share gains. We reported a record new wins value of $3.5 billion in 2023. This includes a record $2.2 billion of SME new wins, demonstrating continued progress with this large profitable customer segment. Our focus on driving operating leverage is clearly evidenced in our 2023 financial results. For the full year, adjusted operating expenses increased just 9% compared to 24% revenue growth, and we drove significant adjusted EBITDA margin expansion of 11 percentage point’s year-over-year. Finally, our evolution to positive free cash flow is an important milestone for the company that provides us with additional opportunities to invest in our growth and drive shareholder returns. We are rapidly deleveraging, resulting in reduced interest expense and a 2-notch credit rating upgrade from S&P Global. In 2023, we continue to execute our strategy and deliver outstanding financial results. Our strong momentum is clearly evidenced by our key operational and financial metrics. Starting with transaction growth, full year '23 transactions were up 19%, driven by increased demand for business travel and our share gains. TTV grew by 23%, driven by the strong transaction growth and an increased mix of international bookings. Revenue was up 24% to reach $2.29 billion…

Thank you, Paul, and hello, everyone. I've previously talked about my focus on achieving outstanding financial performance by growing revenue and adjusted EBITDA. Specifically, this translates into three key priorities when it comes to managing our financial performance, which are focused on accelerating cash flow generation, driving operating leverage and continued margin expansion and importantly, creating capacity to invest and drive long-term sustained growth, both organically and through strategic M&A. I am really happy with the progress we made in Q4 and full year 2023 in all of these areas. Our strong revenue growth, substantially higher earnings, significant margin expansion and positive free cash flow are testament to this. In addition to us triggering $30 million of incremental investments as we focus on driving long-term sustained growth. So now let's turn to our financial performance in more detail. We delivered strong results in the fourth quarter. Revenue reached $549 million which was at the top end of our guidance. Solid transaction growth and continued momentum on our yields drove our revenue growth. As a reminder, our revenue model is driven by volume, sales and recurring revenue. In Q4, our revenue yield, which is measured as revenue over TTV, reached 8.7%. This was up 70 basis points versus Q3 2023, driven by our continued focus on revenue optimization, the impact of our mix, specifically international growth and then the typical Q4 seasonality due to timing of annual performance incentives and triggers. We grew revenue by 4% year-over-year, but I encourage you to look at Q3 and Q4 together as we have different phasing of supplier revenue in 2022. H2 revenue growth was 10%. Before we talk about adjusted EBITDA, let's talk about expenses, which are a key area of focus for us. Operational efficiencies, cost saving initiatives and lower incentive costs…

Thank you, Karen. Now I'd like to turn our attention to the year ahead. I want to start by sharing how we think about our financial model in 2024 and beyond. How our financial model can deliver industry leading returns in a more stable growth environment. You've already heard from the airlines, hotels, OTAs that the industry is now settling into a more stable level of growth. The powerful financial model that we have built positions us for industry leading returns in this more as stable growth environment in 2024 and beyond. We expect to deliver 18% to 32% adjusted EBITDA growth in this stable growth environment in 2024. And let me take you through the build. First, we expect business travel demand from our premium customer base to grow above GDP, as it has done consistently for several decades prior to the pandemic. Second, we have a significant runway for growth in a very large fragmented market, and we expect to continue to gain share and deliver revenue growth ahead of the industry. Third, margin expansion. Operating leverage is expected to drive 18% to 32% adjusted EBITDA growth, benefiting from increased productivity and scale. We're focused on a disciplined cost structure and margin expansion. We continue to shift more and more transactions to digital channels, making further investments in automation and AI and delivering on the synergies from the Egencia acquisition. Now that we've reached a more stable growth environment, we can shift even more of our focus towards driving productivity and efficiency gains. After two years of significant hiring and training in response to industry recovery. Fourth is capital deployment. We have reached a pivotal moment in the business where our free cash flow can now fund incremental opportunities. Our free cash flow is accelerating, thanks to our…

Thanks, Paul. And so let's turn to 2024 guidance. We believe our operating leverage can accelerate above industry revenue growth into even higher adjusted EBITDA growth and free cash flow generation. We are guiding to full year revenue of $2.43 billion to $2.5 billion which represents growth of 6% to 9%. As Paul described, the travel demand environment has reached a point of stability. As such, we expect same-store sales to contribute 2 to 5 percentage points of revenue growth in 2024. On top of this, as we continue to gain share, we expect our net new wins to contribute approximately 4 percentage points of additional growth. As discussed, we are very focused on driving operating leverage and margin expansion, which scales single-digit revenue growth to significant adjusted EBITDA growth of 18% to 32% in our 2024 guidance to a range of $450 million to $500 million. This reflects expected margin expansion of 150 to 350 basis points to reach a full year 2024 adjusted EBITDA margin of 18% to 20%. And it is important to note that this strong margin expansion is net of significant investments in future growth, particularly in driving our sales and marketing engine, our software platforms and AI. In 2024, we will benefit from the carryover of some of our cost transformation initiatives and will additionally realize incremental benefits from our continued focus on productivity within the enterprise. Finally and critically, we expect our strong positive free cash flow generation to continue to accelerate in 2024. We are targeting free cash flow conversion of approximately 25% of adjusted EBITDA. This means we expect to generate more than a $100 million of free cash flow in 2024 or more than double our 2023 free cash flow. This significant step up is driven by strong adjusted EBITDA…

[Operator Instructions] First question comes from Duane Pfennigwerth with Evercore ISI.

Maybe first just on the business travel recovery. Can you please speak to the geographies and industry verticals that showed the biggest sequential improvement? And maybe since we're sitting here in early March, could you touch on trends into the first quarter? I mean, the airlines that remain fully committed to business travel have noted continued pickup or continued building here into the March quarter?

Yes. Sure. Thanks, Duane. The trends actually remain pretty consistent with what we've shared before. We're still seeing Air outpacing hotel. We're still seeing APAC as a region outpace the U.S. and Europe. So I would say those are the two main trends. We have been continuing to see SME growth, outpace multinational and global. But I think as I look ahead to 2024, which was the second part of your question, I think we will see a continuation of some of the trends. I think we'll continue to see hotel outpace air. I think we are going to continue to see APAC outpace the U.S. and Europe. But I do think we're going to see our growth in global multinational and SME start to become more consistent because we certainly to your last point, have seen a pickup in the global multinational segment certainly in December and into the first quarter. And I know this was referenced in some of the airline presentations. We've also seen a pickup particularly in the technology sector and professional services. And I think we will see a narrowing of the gap, if you like, between SME and Global Multinational as we go through 2024, but I think the other trend is going to remain pretty consistent. The other one that I would just call out as we look ahead to 2024, 2023, we saw much more, I think, significant increases in average daily rate and average ticket price. We do think that's going to moderate in 2024. And so we're expecting sales to be 1 to 2 points ahead of our transaction growth in the year ahead. So those are the key trends I'd pick out outline.

Then maybe just for a follow-up. You touched on it with AI and productivity. But maybe on the supplier integration side, can you talk maybe about your top priorities, maybe 1 or 2 top development priorities into 2024? And maybe the reality is there's nothing there, but I'd be curious on the supplier integration side if you feel like there's anything strategic?

Yes. I mean, certainly, one of the key areas of focus for us in '24 on the supplier side is to continue to invest in our marketplace and continue to make sure we've got the most comprehensive and the most competitive content and really leveraging the investments we've made in our supply management platform, which enables us to bring in content from multiple different sources and display that content through all of our channels. And so, access to content and integration of content is a key priority for 2024. As you would expect, NDC is part of that. We're now working with 10 airlines on NDC, airlines that are either rolling out or piloting NDC. I'd say each airline is at a different stage of development, but we are now live with NDC content in both our software platforms, Neo and Egencia. As you know, we continue to integrate hotel content through our supply management platform around 30% of our hotel transactions actually come from third-party API integrations and not through the GDS on the hotel side. So, yes, we'll continue to be an important area of investment for us to ensure that we're offering the most comprehensive, the most competitive content, and that we continue to deliver the most valuable marketplace in travel.

We now turn to Toni Kaplan with Morgan Stanley.

Wanted to ask about the products and professional services and how that performed during the quarter. I think we didn't see the split we normally do. And so, if you could just give some of the drivers and why you decided to take that up?

Thanks, Toni, for the question. We, from a trend perspective, it was very much in line with the trends that we've been seeing through the year, continued strong performance in terms of our Meetings and Events business. We will take an action in terms of your question in terms of not breaking that out and come back.

And then, just a follow-up on the geography question. Have you seen any impact from the slowdown in China, and how that is, how you're thinking about it and how it impacted your 2024 outlook?

Yes. China is a market, Toni, is a joint venture market for us. We actually don't consolidate the volumes. So you won't see an impact from that in our numbers. Our domestic business in China, though, actually remains you know, pretty robust, but it is a small part of our business. And as I said, we don't consolidate it. So you're not going to see, an impact from that in our 2024 outlook.

Our next question comes from Peter Christiansen with Citigroup.

Paul, I was wondering if you could in any way, if you could frame the opportunity on the B2B payments launch with Amex, I guess, as it relates to your current base of clients, potential uptake there. And I'm also curious if this solution can help improve working capital management as it relates to some of your SMB clients?

Yes. Look. We're very excited about the launch with Amex that we announced yesterday. Neo1 is a product that we've launched in the UK and the U.S., and we've been very, very pleased with the acquisition results. But we have been working in parallel with payment integration with Amex because it's a really important feature of the platform, and it brings a lot of the functionality to life. But just stepping back for those who aren't aware of, Neo1, it's an all in one spend management platform. So it enables businesses to manage their indirect procurement. It also enables them to book travel through our Neo travel platform, and it enables them to manage all of their expenses. And now we've added payment. So for companies that really don't want to have multiple SaaS solutions to manage procurement and indirect spend and travel and expenses, you have it all in one place as a as a turnkey solution, and we know that that's very attractive to SME customers. But the integration of payment is really, really important because what customers can now do in Neo1 is they can simply add their eligible American Express business or corporate card account into the platform, and then they can use that to set budgets and to issue virtual payment cards to employees across the company, and then they can do that also, at the same time, setting controls and policy in the platform. So, it's a very powerful solution for businesses that are really looking for that turnkey all-in-one spend management platform, and we are looking forward to working with American Express to increase our sales and marketing spend on Neo1 both through our own channels and, of course, through the Amex partner channels as well. And to your point on working capital, yes, it's it also helps because, or the ability to essentially just implement customers immediately with authorized payment on card, it is our preferred payment method and definitely is one of the things that we've been doing across the business to improve our working capital performance. So the more that we can scale Neo1 and the more that we scale our software solutions with payments inbuilt, the more it improves working capital.

Thank you, Paul. I'd imagine it also helps client stickiness as well. I just had a quick follow-up back to vertical exposure. Just curious specifically as it relates to some of your technology clients. I know that that's been an area that saw some of the deepest contraction during the pandemic. Just curious if you could talk about some of the underlying trends with that particular vertical and how you see that evolving over the next year?

Yes. We're pleased to see the pickup in that. We've had double digit growth within the technology vertical, Q4 and into Q1. So I think that's a positive sign, and I think it just reflects the higher level of confidence in that sector and with many of the large technology clients that we have. And we do see that trend continuing through the balance of '24.

[Operator Instructions] We now turn to Lee Horowitz with Deutsche Bank.

Focusing on the full year guide a bit more. So, seems to suggest that there's sort of no more recovery tailwinds left for business travel broadly, and you're settling back into sort of the GDP perhaps GDP plus type growth algo. But Bio RMF transaction recovery relative to '19 is probably sub-80%. So why do we expect the industry to not benefit from some ongoing recovery dynamics? And perhaps can you comment why the industry is now, let's say, fully recovered at something below sort of 2019 levels?

Yes. Lee, I mean, I think I said this last quarter when we did earnings that the way that we're looking at the industry going forward is that we will now see growth that is above GDP plus our new wins, Trying to frankly identify what relates to a recovery from events that are now 4 years old is just more of an art than a science, quite frankly. So what we've tried to do is be transparent around the level of growth that we think the industry will see, over in the next 12 months. Again, we've been pretty consistent in saying, I think what we will see is the industry will grow somewhere between 3 to 5 points, and then we'll put 4 points of share gains on top of that. So that's how we think about it. What I would also say is that I think one of the exciting things, frankly, about 2024 is that, it is a year of, I think, normalized growth, more stabilized growth. And what that will do is highlight how successful our model is in that environment because even in an environment where we have higher inflation, where there is lower GDP growth, we're able to deliver 18% to 32% adjusted EBITDA growth. And I think that we're excited about 2024 because I think it will highlight the advantages of our model. We will deliver 18% to 32% adjusted EBITDA growth. Our forecast for underlying EBITDA is to grow around 69% with $90 million of adjustments coming from reducing restructuring, integration and interest expense. We're going to more than double the free cash flow generation of the business, and we're going to continue to expand margins by 150 to 350 basis points. So, I think we should look at 2024 as an opportunity to really demonstrate how our model can deliver above industry returns in a more stable growth environment.

And then maybe there to remake both your cost base and perhaps customer facing products. Can you maybe talk to some of the early wins you've seen on either side of that coin that may be transforming your business and perhaps, the time line to which you expect to see meaningful returns in the next year or so, on either the customer experience or sort of taking meaningful cost out of your business, as you lean more aggressively into generative AI, technologies?

Yes. Look. Thank you. I think the key point for me here is that we have both the expertise and the opportunity to make a significant difference through AI and automation. And what I mean by that is we have the expertise because 78% of our transactions come through digital channels. We own our own software platforms in Neo and Egencia. We've been using machine learning and AI for several years to deliver strong results in terms of our drive to automate our business and our drive to generate efficiencies and margin expansion. So we've got the expertise here, but we also got the opportunity. 40% of our costs are still, people in servicing organization. We have significant amount of cost in our finance organization and also in our product and platform engineering teams. And those are the areas that we've identified where we see proven use cases for AI and generative AI in order to take out significant cost and really improve productivity. And we have a 3-year plan, for our cost reduction efforts and our margin expansion efforts. And our AI initiative is an important part of that. So you're going to see the results from those initiatives show in the margin expansion of the business as we go through '24, '25 and '26.

This concludes our Q&A. I'll now hand back to Paul Abbott, CEO, for final remarks.

Okay. Well, thank you. Thank you for the questions. In closing, I would just like to thank our team for their dedication to our customers, the strong results they delivered in 2023. We are very confident that '24 is going to be another year of share gains, strong growth in profits and cash flow and continued margin expansion. Thank you very much for joining us today and your continued interest in American Express Global Business Travel. Thank you.