American Express Global Business Travel reported decreased demand in the first quarter and lowered its earnings guidance for Q2, but CEO Paul Abbott remained optimistic about the company's outlook amid uncertainty.
"There is obviously more economic uncertainty, and as a result, less full-year visibility, but we have delivered strong Q1 results and a solid guide for Q2," Abbott said Tuesday on the Q1 earnings call. "Our approach to a slower-growth environment is to remain laser focused on what we can control: share gains, margin expansion, cash generation and driving shareholder returns."
Abbott noted "a slower demand environment" in Q1 but argued that "our value proposition to provide customers more savings and control over their travel spend becomes even more valuable in a weaker economic environment."
In the first quarter, GBT's revenue increased 2% year over year to $621 million. It recorded net income of $75 million compared to a net loss of $19 million in last year's Q1. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was up 15% to $141 million.
CFO Karen Williams said headwinds are coming from "slower macroeconomic growth and its impact on our organic transaction volume," not tariffs. Williams said there has been recent stabilization, with transaction growth trending flat year over year.
"This is down roughly 5 percentage points versus our expectations coming into the year, but we are not seeing any further signs of deterioration," she said.
GBT updated its guidance for the second quarter, Williams said, based on the assumption that flat transaction growth GBT saw in March and April continues.
For the second quarter, GBT is predicting revenue will land somewhere between $615 to $635 million. On the low end that is a 2% decrease, and on the high end a 2% increase.
During the call, an analyst asked what GBT's clients are expecting in the second quarter, and if any are talking about recession or positive growth.
Abbott said companies' outlooks varied by industry. In Q1, financial services and technology saw double-digit growth rates, for instance, while business services were "around the mean." Other sectors more exposed to tariffs, like energy, mining, marine and automotive, saw softer quarters.
"But I think when you look at the overall picture, you step back and look at the survey results from those top 100 customers, I would say the main takeaway is most customers are in a sort of wait-and-see mode," Abbott said. "They're not overreacting to the situation."
Update on CWT acquisition
GBT (No. 3 on Travel Weekly's Power List) is currently in the process of attempting to acquire CWT (No. 5 on the Power List). The transaction hit a bump in the road in January when the Department of Justice filed a lawsuit seeking to block it. Since then, GBT has amended the terms of the deal, extending is timeline for completion to Dec. 31 and reducing the value of the transaction from $570 million to $540 million.
During the earnings call, Eric Bock, GBT's global head of mergers and acquisitions, said the case is currently in the fact-discovery process, expected to wrap by early June. It has a trial start date of Sept. 8. Bock said GBT expects the trial to be completed by the end of September or October, and if the company is successful, the deal will close by the end of the year.