Delayed results announced today for the WebBeds business.

As previously telegraphed, TTV is up 25%, but due to increased discounting in an attempt to drive up volumes (which didn't work out as planned), revenue margin has declined, and revenue in dollar terms is only up 1%.

Even worse, expenses are up 14%, meaning 'underlying' EBITDA is down 8%.

Guiding for $5b TTV for the full year, which would be a YoY increase of 25%, but the guide for 'underlying' EBITDA is only $117m to $122m, compared to $162m in FY24. It looks like lower margins may be the new normal, although we are promised some margin recovery as well as reduction in the growth of expenses in FY26.

On the face of it this is a business growing and taking market share at the expense of profitability, yet the market seems to like the story and shares rebounded 13% today.

Held IRL, but my conviction is not as high as it once was.

End of year results summary (March 31st is the year end).

The Good

• Cashflow positive, generated $4m/month in FY22
• Revenue up 466% on pcp
• Expenses of $153m are a huge reduction on the CY21 figure of $251m
• Revenue is growing much faster than expenses. WebBeds business is on track for each 8% of revenue increase to be acheived with only 3% of increase in expenses
• Total transaction value in North America is twice what it was pre-covid
• 10 of the top 25 markets for WebBeds are trading at or above pre-covid levels
• Market share of Webjet (the travel agency) has grown thanks to smaller players being shaken out of the market, but also because of Webjet's superior technology and service offering. Now 10% compared to 5.6% pre-covid

The Bad

• Revenue of $138m is still a long way from the pre-covid (CY19) level of $409m
• Flight Centre revenue last year (to Aug '21) was $400m, whilst covid lockdowns were still widespread, so WEB is clearly a poor second place to FLT despite claiming to be the market leading online travel agency
• Share dilution continues after the massive capital raising which doubled the share count in 2020. The preferred financing method apart from CRs seems to be issue of convertible notes. The settlement of a 110m Euro note this year added 40m shares, an increase of nearly 12% of the shares on issue

The Ugly

• The campervan and car hire business has had another rebranding to GoSee. The revenue from this business was way down on last year due to lack of international travel, and it pulled in a loss. Revenue is only a quarter of the travel agency business (Webjet), which in turn is only a half of the B2B hotel booking business (WebBeds). I don't know why they bother with this business, it just seems a distraction from the main prize, which is to increase Webjet market share in ANZ and to further the penetration of the North American market by WebBeds.
• The investor presentation uses the word profitable 18 times, never with 'not' in front of it, yet the bottom line is the company made a loss of $85m. I dislike like this kind of smoke and mirrors reporting. On the plus side the loss has greatly reduced from the $156m loss in FY21, which only covered a 9-month period

Takeaway

Webjet has come through covid (which of course is far from over yet) in great shape, with a much leaner cost base, more differentiated technology-backed offerings, and the prospect of actual bottom line profit in the current FY. They have multiple growth paths and with a cash hoard of $434m plus $4m cash contribution each month, I can't see any reason why they shouldn't capitalise on the opportunities in front of them.

Held (with gritted teeth) in RL