Executive Summary / Key Takeaways

• Global Business Travel Group (GBTG), operating as Amex GBT, demonstrates strong operational leverage and disciplined cost control, driving significant Adjusted EBITDA growth and margin expansion even in a softer macroeconomic environment.
• Investments in technology, particularly AI and automation, are yielding tangible productivity gains across key operational areas, contributing to cost savings and enhancing the scalability of the business model.
• The company is accelerating Free Cash Flow generation, strengthening its balance sheet through debt refinancing and repricing, and has initiated a share repurchase program, signaling confidence in its financial health and commitment to shareholder returns.
• Despite a moderation in organic transaction growth, the company's focus on winning new business, particularly within the large unmanaged SME segment, and maintaining high customer retention rates supports its outlook for continued growth ahead of the market.
• The pending acquisition of CWT, while facing a U.S. DOJ challenge, is viewed by management as strategically accretive, expected to enhance market position and create value, with financing structured to maintain balance sheet strength.

Unlocking Value in Business Travel: GBTG's Strategic Foundation

Global Business Travel Group, Inc., known as American Express Global Business Travel (Amex GBT), stands as a prominent software and services provider in the complex world of corporate travel, expense management, and meetings & events. At its core, GBTG has cultivated a powerful marketplace designed to connect travel suppliers with the specific, often complex, needs of business clients across over 140 countries. This marketplace is accessed through a suite of proprietary software solutions, including Egencia, Neo, Neo1, Select, and Ovation, backed by a global network of support teams. The company's strategy is built on a foundation of providing comprehensive and competitive content, driving efficiency for both customers and suppliers, and delivering a superior, digitally-enabled experience.

The company's journey has involved strategic moves to consolidate and enhance its market position. The integration of the Egencia business, acquired around 2021, has been a notable effort, aimed at leveraging acquired assets to strengthen the marketplace and service offerings. This integration, supported initially by transition services from an Expedia affiliate and later by an operating agreement, underscores a commitment to building a cohesive and powerful platform.

In the competitive landscape, GBTG operates alongside major players like Expedia Group (EXPE), Booking Holdings (BKNG), and SAP SE (SAP), which offers travel management solutions through Concur. While giants like Expedia and Booking Holdings possess greater scale and broader market share, particularly in the consumer travel space, GBTG differentiates itself with its specialized B2B focus and technology platform. The company's proprietary software solutions and global servicing capabilities are key differentiators. Management highlights that owning its software platforms provides a significant competitive advantage, enabling greater control over the user experience and accelerating the shift to higher-margin digital transactions.

GBTG's competitive positioning is further shaped by its strong relationships with both large global multinational corporations and small and medium enterprises (SMEs). The company boasts impressive customer retention rates, particularly within the global multinational segment (99% over the last 12 months as of Q4 2024), demonstrating the sticky nature of its integrated services. While SME growth has faced headwinds from broader macroeconomic pressures, this segment represents a significant unmanaged travel opportunity, and GBTG is actively gaining share here, with new SME wins accounting for a large portion of total new business.

The Engine of Efficiency: Technology as a Differentiator

Central to GBTG's strategy and competitive moat is its investment in technology, particularly automation and artificial intelligence (AI). The company is not merely adopting off-the-shelf solutions but is building and leveraging proprietary AI architecture designed for secure, scaled deployment within its operations. This focus on technological transformation is directly aimed at improving the customer experience and, crucially, increasing productivity across the business.

The tangible benefits of this technological focus are becoming evident. The company is actively implementing AI initiatives across four key areas that represent approximately 70% of its adjusted operating expenses: increasing service efficiencies, increasing engineering velocity, streamlining financial processes, and enabling the workforce. Specific examples provided by management illustrate the impact:

• Piloting proprietary email AI to save travel counselors time by generating responses.
• Expanding the use of GitHub Copilot, which has shown a measured 20% productivity increase in test case creation, code documentation, and new user story development.
• Deploying automation for credit card reconciliation, reducing average handling time by approximately 50%.
• Deploying AI to respond to customer program change requests faster, reducing timelines by approximately 80%.
• Developing an intelligent virtual assistant (IVA) and servicing conversational copilot to reduce manual effort for the servicing team.

These quantifiable improvements directly contribute to the company's ability to manage costs and drive operating leverage. By automating tasks and increasing the efficiency of its workforce, GBTG can handle higher transaction volumes with less proportional growth in operating expenses. This technological edge is a critical component of its strategy to expand margins and enhance profitability, differentiating it from competitors who may rely more heavily on manual processes or less integrated systems.

Furthermore, GBTG is investing in enhancing its marketplace content through technology, including expanding NDC content with over 20 airlines and making it available to over 15,000 customers. This not only provides customers with more choice and potentially better pricing but also positions GBTG at the forefront of industry evolution in content distribution. The company's ability to deploy new airline or country NDC connections every two weeks highlights its technological agility.

The "so what" for investors is clear: GBTG's targeted investments in technology, particularly AI and automation, are not just buzzwords but are translating into measurable operational efficiencies. These efficiencies underpin the company's ability to expand margins, generate stronger free cash flow, and maintain a competitive edge in a market where cost control and service delivery are paramount. This technological roadmap is a key driver of the company's long-term growth strategy and its potential for sustained profitability.

Financial Performance: Demonstrating Leverage and Resilience

GBTG's recent financial performance underscores the effectiveness of its strategy, particularly its focus on operational efficiency and cost control. In the first quarter of 2025, the company reported revenue of $621 million, a 2% increase year-over-year on a reported basis. This growth was driven by a 3% increase in both Transaction Growth and Total Transaction Value (TTV), partially offset by a modest decline in yield (to 7.4%) and adverse foreign exchange impacts. The yield decline reflects the expected shift towards digital transactions and the nature of the revenue model, where only about 30% of revenue is directly tied to TTV fluctuations.

Despite the relatively modest top-line growth and a softer macroeconomic backdrop than initially anticipated, GBTG delivered strong bottom-line results. Adjusted operating expenses decreased by 1% year-over-year on a workday-adjusted basis in Q1 2025, a testament to the company's rigorous cost savings initiatives and productivity improvements. This operational discipline resulted in Adjusted EBITDA of $141 million, a 15% increase year-over-year, and an impressive Adjusted EBITDA margin expansion of 260 basis points, reaching 23%. This performance highlights the company's powerful operating leverage – its ability to grow earnings significantly faster than revenue by controlling costs and increasing efficiency.

For the full year 2024, the company achieved revenue of $2.42 billion, up 6% year-over-year, and Adjusted EBITDA of $478 million, a substantial 26% increase. This translated to a 310 basis point improvement in Adjusted EBITDA margin for the year. The company's ability to deliver such strong earnings growth on moderate revenue growth demonstrates the scalability of its model and the impact of its cost management efforts, including achieving over $100 million in cost savings in 2024.

While the company reported a net income of $75 million in Q1 2025 compared to a net loss of $19 million in Q1 2024, this was significantly influenced by non-core items, particularly a $74 million gain on the fair value movement of earnout derivative liabilities in Q1 2025 (vs. $18 million in Q1 2024), driven by the decrease in the company's stock price. The effective tax rate in Q1 2025 was more normalized at 21.7%, compared to a significantly higher rate in Q1 2024 due to the impact of pre-tax income levels on certain tax items.

Strengthening the Balance Sheet and Accelerating Cash Flow

A key focus for GBTG has been accelerating cash flow generation and strengthening its financial position. The company's principal sources of liquidity are cash flows from operations, available credit facilities, and cash on hand. In Q1 2025, net cash from operating activities was $53 million, an increase from $49 million in Q1 2024. Free Cash Flow, defined as net cash from operating activities less purchases of property and equipment, was $26 million in Q1 2025, up from $24 million in the prior year period.

The company has taken significant steps to optimize its capital structure. In July 2024, it refinanced its senior secured term loans, lowering interest rate margins and extending maturities to 2031. This was followed by a repricing of the term loans in February 2025, further reducing the interest rate margin by 50 basis points, which is expected to decrease annual cash interest payments by $7 million. The company also upsized its revolving credit facility to $360 million, which remained fully undrawn as of March 31, 2025, enhancing liquidity and financial flexibility.

These actions, combined with strong operational performance, have led to a significant reduction in the company's leverage. The Net Debt to Adjusted EBITDA ratio stood at 1.7x as of March 31, 2025, a notable improvement and within the lower half of the company's target range of 1.5x to 2.5x. The company also received credit rating upgrades from S&P and Moody's in February and March 2025, respectively, reflecting its improved financial profile and momentum.

With accelerating cash flow and a stronger balance sheet, GBTG is executing its capital allocation strategy. This includes continued investment in organic growth initiatives, particularly in technology and sales channels. It also provides capacity for strategic M&A, such as the pending CWT acquisition, which the company expects to fund with cash and stock, remaining within its target leverage range post-close. Furthermore, the company has reached a point where it can return capital to shareholders, initiating a private share buyback in Q3 2024 and authorizing a larger $300 million share repurchase program through December 2027, with $298 million remaining available as of March 31, 2025.

Outlook and Risks: Navigating Macro Headwinds and Strategic Opportunities

Looking ahead, GBTG's outlook for 2025 reflects a pragmatic view of the macroeconomic environment while emphasizing the strength of its operational model and strategic initiatives. Management acknowledges increased economic uncertainty, including potential impacts from U.S. tariffs, recession risk, and inflation, which have contributed to a softer organic transaction growth trend. Transaction growth was trending flat year-over-year in March and April 2025, down roughly 5 percentage points from initial expectations for the year. Customer sentiment has moderately declined, with a small percentage of top customers implementing new budget controls.

In response to this backdrop, GBTG has updated its full-year 2025 guidance. The baseline assumption is now for flat total transaction growth for the year, comprising a 2% decline in organic transactions offset by a 2-percentage point positive impact from new wins. The company has increased its gross cost savings target for 2025 to approximately $110 million (up from $95 million) to protect earnings and cash generation. Despite this, the company plans to invest an incremental $50 million this year in areas like share gains, software platforms, automation, and AI.

The updated guidance midpoint for full-year 2025 projects flat revenue year-over-year and Adjusted EBITDA of $510 million, representing 7% growth over 2024. This implies continued Adjusted EBITDA margin expansion of 130 basis points, reaching 21%. For Q2 2025, the midpoint guidance is $625 million in revenue (roughly flat year-over-year) and $130 million in Adjusted EBITDA (up 2%), reflecting 50 basis points of margin expansion.

Crucially, the company expects to generate strong Free Cash Flow, guiding to $140 million at the midpoint for 2025 ($190 million on an underlying basis excluding nonrecurring M&A costs). This represents an underlying Free Cash Flow conversion rate of 37% of Adjusted EBITDA, demonstrating continued momentum in cash generation.

The primary risk to this outlook is a further deterioration in macroeconomic conditions leading to a more significant decline in business travel demand than currently assumed. Geopolitical conflicts, inflationary pressures, and the risk of recession remain factors that could impact future results.

Another significant risk is the pending acquisition of CWT. While the U.K. CMA has approved the merger, the U.S. Department of Justice has filed a lawsuit seeking to block the transaction, with a trial scheduled for September 2025. The outcome of this legal challenge is uncertain and could impact the company's strategic growth plans and potentially result in a $25 million termination fee if the merger fails due to antitrust reasons by the end of 2025.

Other risks include fluctuations in interest rates and foreign currency exchange rates, although the company uses derivative instruments and has a natural hedge between revenue and expenses to mitigate some of these exposures. Competition remains intense, both from direct rivals and potentially disruptive indirect players leveraging new technologies.

Conclusion

Global Business Travel Group (GBTG) has demonstrated a compelling ability to translate operational excellence and strategic investments into robust financial performance, particularly in driving Adjusted EBITDA growth and Free Cash Flow expansion. Even as the macroeconomic environment presents headwinds and moderates organic transaction growth, the company's disciplined cost control, technology-enabled productivity gains (especially from AI and automation), and relentless focus on winning new business are proving effective levers for value creation.

The updated 2025 guidance, while reflecting a softer top-line assumption, underscores management's confidence in delivering healthy earnings growth and strong cash generation through operational leverage. The strengthening balance sheet, successful debt management, and initiation of shareholder returns through share buybacks further reinforce this positive financial trajectory. While the outcome of the CWT acquisition and the broader macroeconomic picture introduce uncertainty, GBTG's core strategy centered on its differentiated marketplace, proprietary technology, and operational efficiency positions it to navigate these challenges and continue its path towards sustained profitability and enhanced shareholder value. Investors should monitor the CWT legal proceedings and the evolution of macroeconomic conditions, but the underlying operational strength and financial discipline presented by GBTG offer a compelling investment narrative.