Global Business Travel Group Inc
NYSE:GBTG
Earnings Call Analysis
Q4-2023 Analysis
Global Business Travel Group Inc
The year 2023 marked another period of robust financial performance, with a record $3.5 billion in new wins and a company-high $2.2 billion of SME new wins, emphasizing the company's traction in this lucrative customer segment. More impressively, revenue soared by 24% to reach $2.29 billion, complemented by an astounding 269% jump in adjusted EBITDA to $380 million. Such financial rigor underpinned the company's operational success, including a transaction growth rate of 19%, illustrating significant share gains and a bolstered demand for business travel services. The company also prides itself on a strong customer retention rate of 96%, demonstrating the high value of its offerings.
Progress in digital platform development, specifically the platforms Egencia and Neo, underlie the company's strategy to push 78% of transactions through digital channels. In line with this, the integration of virtual cards into the Neo1 spend management platform, through a partnership with American Express, exemplifies the innovative approach taken to fuse procurement, expense management, online travel, and payments into a single, simplified workflow.
The fourth quarter capped off the year on a high note, as revenue reached $549 million, well-aligned with the top end of the company's guidance. A notable increase in revenue yield to 8.7% illustrates effective revenue optimization strategies, driven by a mix of international growth and seasonality related to annual incentives. The free cash flow narrative remains positive, with an impressive $49 million generated in 2023, marking a pivot to a more stable financial stance for the company.
Deleveraging has been a focus, with net debt to adjusted EBITDA ratio improving substantially from 8.9x to 2.3x. This financial rectitude has earned the company a two-notch credit rating upgrade from S&P Global Ratings to B+. The company is committed to further deleveraging, with a revised target leverage range setting a long-term vision for financial health.
Looking ahead, the company forecasts 18% to 32% adjusted EBITDA growth for 2024 against a backdrop of stable growth and anticipates maintaining its leverage in the travel market. The financial discipline is expected to be palpable, with forecasted revenue for 2024 set between $2.43 billion and $2.5 billion, representing up to a 9% growth rate. This will be supported by a projected 2 to 5 percentage points of growth emanating from same-store sales. The company has set its EBITDA margin goals ambitiously at 18% to 20% for 2024, with free cash flow projections expected to more than double to over $100 million.
The company's capital allocation plan is poised to prioritize growth and cash generation with a long-term free cash flow target pegged at 45% to 50% of adjusted EBITDA. Attention is also being paid to organic growth and potential accretive mergers and acquisitions as part of a long-term strategy to catalyze shareholder returns.
Investing in the company's marketplace and optimizing content access and integration stand out as strategic imperatives for the future. Initiatives like integrations with New Distribution Capability (NDC) content from partnering airlines on software platforms reflect a commitment to streamlining and enhancing the supplier integration process.
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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'll 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 our website at investors.amexglobalbusinesstravel.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 certain forward-looking statements that represent our beliefs or 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 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 points 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 continued 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 for the full year, driven by strong growth in transactions, TTV and increased demand for our products and professional services. Finally, our focus on margin expansion and driving strong operating leverage resulted in adjusted EBITDA growth of 269% to $380 million.So looking at our trends in more detail, we saw relatively faster growth from SME customers, supporting our increased focus on this attractive customer segment. Full year '23 SME transactions were up 20%, global multinational transactions were up 17%. Domestic transactions were up 13%, while international growth was even stronger at 21%.Growth in hotel transactions were up 20%, which outpaced the 16% growth in air transactions. This reflects industry trends as well as our intentional focus on increasing our volume of hotel bookings as we continue to strengthen our hotel content and display, providing customers with more value and more choice.Finally, here on a regional basis, transaction growth was 16% in the Americas, 20% in EMEA. Asia Pacific growth was significantly higher at 29% as we saw the benefit from a delayed recovery in this region. And so Amex GBT continues to grow and to gain share. Our revenue performance versus our major business services and travel peers is very favorable. This is driven by 2 factors: first, our strong new wins performance; and second, the increased demand for business travel, meetings and events from our diverse and premium customer base.So turning to the commercial highlights. We continued to gain share and reported record total new wins of $3.5 billion in 2023. Importantly, our customer retention rate was 96%, 1 percentage point higher than the previous year. Our biggest growth opportunity remains in the SME customer segment, which represents approximately $950 billion of travel spend. We are already a leader in managed travel in this segment, but 70% of this opportunity is not currently in a managed travel program.As our progress clearly demonstrates, more and more SME customers are recognizing the value of our leading software and services and a professionally managed travel program. As a result, SME new wins for 2023 totaled $2.2 billion, a record for our business that is up $100 million year-over-year. Of this, approximately 30% has come from previously unmanaged customers who are looking for the service, savings and control that our solutions provide. This is 5 percentage points higher than our mix of unmanaged new wins in 2022.Moving on to our product and technology highlights. Developing our own software platforms, Egencia and Neo, enables us to improve the end-to-end customer experience and to leverage automation, machine-learning and AI to drive cost savings. We exited '23 with 78% of our transactions coming through digital channels. Over 60% of the digital bookings now come through our own software platforms, Neo and Egencia. In fact, in 2023, we have 40% transaction growth on Neo and 24% transaction growth on Egencia.We firmly believe that companies like ours stand to create significant value through automation and AI. As a leading software and services company for both travel and expense, we have the opportunity and we have the expertise to increase automation, improve the customer experience and reduce cost. And to further accelerate our progress, we recently announced the creation of a new AI initiative and dedicated team focused on increasing productivity through the adoption of next-generation AI.The focus is in 4 areas across our organization, customer service, finance, engineering and the broader workplace. This new team will play an important role delivering cost savings and improving the customer experience. And finally here yesterday, we announced an important new integration with American Express to help SME businesses control their indirect spend, manage their expenses and book travel.We are seamlessly integrating American Express' virtual cards into our Neo1 spend management platform. We're combining procurement, expense management, online travel and payments into a single software solution. And by combining these typically disconnected processes, we are delivering unique control and savings to businesses. And we're also extending our software and services beyond travel to include procurement, expense management and payment. We are excited about this opportunity to bring the value of Neo1 to more businesses through our partnership with American Express, a global leader in small business payments.And now I'd like to hand it over to Karen to discuss the financial results in more detail before we move on to our 2024 outlook.
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 3 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 was driven by volume, sales and recurring revenues.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 more than offset the investments we are making in our sales and marketing engine, software platforms and AI. This resulted in a net reduction of $15 million or 3% in adjusted operating expenses year-over-year and a reduction of $7 million quarter-over-quarter.This strong operating leverage translated into $18 million of adjusted EBITDA in the fourth quarter, up $37 million or 83% year-over-year as adjusted EBITDA margin expanded by 6 percentage points to reach 15%.We achieved free cash flow generation of $32 million in the fourth quarter, continuing the momentum we have seen in 2023 on generating positive free cash flow. This was driven primarily by our working capital actions, which I've discussed on previous calls.On a full year basis, transactions grew 19%, driven by strong travel demand and net new wins as we continue to gain market share. TTV grew 23%, aided by stronger international mix. This resulted in revenue of $2.3 billion, up 24% year-over-year and at the high end of our most recent guidance update and above the initial guidance provided coming into 2023.Our focus on driving operating leverage resulted in adjusted operating expense growth of 9%, well below our revenue growth. And to specifically call this out, we saw a 15 percentage point difference between our top line growth and expense growth in 2023. We increased our adjusted EBITDA margin 11 percentage points above the prior year to reach a 17% margin.And very importantly, on a full year basis, we generated positive full year free cash flow of $49 million. This evolution to positive free cash flow is a pivotal turning point for the company, driven by adjusted EBITDA growth and prudent working capital management, including our critical Egencia working capital initiative.Our leverage ratio or net debt divided by last 12 months adjusted EBITDA is now 2.3x as of December 31, 2023. This represents a very significant step down for us as a company. In December 2022, this stood at 8.9x. As you can see from the chart on this slide, the momentum we saw in 2023 is a critical proof point that demonstrates our discipline on the balance sheet.And as you will hear from me later, very importantly, we are lowering our leverage ratio target range from 2 to 3x, down to 1.5 to 2.5x. The reduction in our leverage ratio in Q4 drove 75 basis points of interest rate reduction on our outstanding term loan. And based upon our latest performance, we have now triggered a further step down, which drives an additional 75 basis points of interest rate reduction.And third, in total, this 150 basis point reduction results in approximately $25 million of annual interest expense savings. And as our noncore option rolls off in July 2024, we have the opportunity to refinance our debt and further reduce our interest expense. This momentum was recognized recently by S&P Global Ratings, who gave us a 2-notch credit upgrade rating to B+ based upon our rapid deleveraging and positive cash flow.I am now going to turn back to Paul to speak to how this momentum is continuing into 2024 before wrapping up with our 2024 guidance.
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 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 2 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 growth opportunities. Our free cash flow is accelerating, thanks to our EBITDA growth, a significant reduction in restructuring expenses, lower interest expense from deleveraging and prudent working capital management. Now that we are firmly free cash flow positive and growing, we can shift more focus to organic and inorganic growth investments.And finally, as part of our financial model, we have a proven track record of accretive M&A and delivering on the synergies that can further accelerate our financial model. M&A remains a significant and attractive opportunity in a large fragmented market where scale is becoming even more important.So looking to the year ahead, we feel the ground beneath us is more stable and the demand outlook is robust. There are a few external data points I want to draw your attention to here that show our customers and industry experts also expect business travel demand to remain robust.First, our own -- most recent customer survey shows that our top 100 customers expect travel spend to be up approximately 4% in 2024, client sentiment has improved since the previous quarter's survey with a 6 percentage point increase in positive sentiment and the percentage of clients expecting to spend more on travel has increased by 3 points. With many organizations embracing hybrid and remote work, bringing distributed teams together regularly for face-to-face interactions at meetings and events is a growing necessity. According to our meetings and events 2024 global forecast, it surveyed over 500 meetings and events professionals from around the world, 67% of respondents say corporate meetings and events budgets are increasing through 2024.Forward-looking spend in our own meetings and events business supports this trend, currently up 10% versus the same period in 2023. GBTA's most recent poll shows that 87% of travel buyers expect travel budgets to increase or hold steady in 2024. Morgan Stanley's corporate travel survey shows 8% expected growth in business travel in 2024. Finally here, one of the largest U.S. airlines issued guidance for 3% to 5% capacity growth in 2024.So in summary, I am more positive than ever for our future. We are confident that 2024 will be another year of share gains, strong growth in profits and cash flow and continued margin expansion.I'll now turn it over once again to Karen to provide our 2024 guidance and our capital allocation framework.
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 platform 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 $100 million of free cash flow in 2024 or more than double our 2023 free cash flow. This significant step-up is driven by a strong adjusted EBITDA growth, the reduction of integration and restructuring costs, lower interest expense as we deleverage and the continued benefit from the Egencia working capital initiatives.While I'm not going to walk through it on this call, I encourage you to review the free cash flow details provided in the appendix of our earnings presentation.Now that we have reached a stabilized level of travel demand growth in the industry, we will no longer be providing quarterly guidance. However, we have also provided historical quarterly seasonality details in the appendix of our earnings presentation to help you with your models. We expect the seasonality of revenue and adjusted EBITDA this year to be similar to last year.And so thinking about capital allocation, 2023 was a pivotal moment for us as a company as we turned free cash flow positive, and this accelerates in 2024. Our capital allocation framework is now very much focused on growth, cash generation and reinvestment to drive shareholder returns. Our first priority is accelerating cash generation with a longer-term free cash flow target of 45% to 50% of adjusted EBITDA. Second, we continue to deleverage, now targeting a range of 1.5 to 2.5x net debt to adjusted EBITDA over the long term. And as I said earlier, this new target leverage is lower than our previous range, reflecting our strong focus on the balance sheet. And third, we will look to invest in high-return organic growth and accretive M&A.So to wrap things up, why should investors be excited about Amex GBT in 2024 and beyond? First, we expect revenue outperformance as business travel stabilizes at or above GDP growth, and Amex GBT continues to win and gain share.Second, operating leverage, focus on productivity and leveraging AI and automation is expected to deliver 18% to 32% adjusted EBITDA growth in 2024. And as we look over the medium to long term, we expect further opportunity to expand our margins.Third, we are accelerating free cash flow after last year's positive inflection. On top of this, we have an opportunity to refinance our debt for even more interest expense savings. Finally, our evolution to positive and accelerating cash flow supports investment in long-term sustained growth organically and through accretive M&A.So we can now move into Q&A. Paul and I are joined by Eric Bock, who is our Chief Legal Officer and Global Head of M&A. Operator, please go ahead and open the line.
[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 2 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 trends are going to remain pretty consistent.The other one that I would just call out as we look ahead to 2024, in 2023, we saw a much more, I think, significant increases in average daily rate and average ticket price. We do think that's going to moderate in 2024. 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, Duane.
And 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.
I wanted to ask about the products and professional services on 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 out?
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.
Okay. Great. 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 '24 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 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.
Nice trends here. 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 SME 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 U.K. 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 payments.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 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.I mean, your point on working capital, yes, 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 in build, the more it improves working capital.
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'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 -- 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 high 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.
Great. I mean focusing on the full year guide a bit more. So it 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. The biomass 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've 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, it's 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 the next 12 months. And 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.
Great. And then maybe one[Audio Gap]Opportunity 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 in terms of 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 costs 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 a 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 costs and really improve productivity.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 will 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.