Good day and welcome to the Serko FY2026 Interim Results Announcement. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Darrin Grafton. Please go ahead, sir.
Good morning from Auckland, New Zealand, and thanks for joining our investor briefing covering Serko's results for the half-year ending 30 September 2025. I'm Darrin Grafton, CEO of Serko, and I'm with our CFO, Shane Sampson. This morning, I'll take you through our performance and highlights for the half-year period. I'll then hand to Shane to cover our financial results in detail. I will talk through how we're positioning Serko for future growth, our outlook, and finishing with Q&A. As always, unless otherwise stated, comparisons are made to the previous half-year period 1H FY2025. Let's begin on slide five. This is Serko's strongest half-year performance ever on both revenue and EBITDA. This was due to disciplined execution and our focus on profitable growth.
Key callouts are: first, we achieved strong total income growth of 45% to NZD 61.8 million, and this reflects the scalability of our model with strong contributions from Booking.com for Business and the addition of Get There driving our expansion into North America. Second, we delivered EBITDA of NZD 6.1 million. This is our highest ever, ever EBITDA result. Third, we generated NZD 3 million of free cash flow, and this reflects our cash-generating existing business and the fact we're still in the early stages of ramping our investment into building Serko for the future. At the same time as delivering these results, we're setting the business up for the future, and I'll touch more on that shortly. Turning to slide six, total income was up 45%. This was driven by a strong trajectory we're on with Booking.com for Business, which continues to grow as we focus on activation, engagement, and conversion.
This is translating to substantial growth. The other driver is Get There, which has delivered significant growth in online bookings and to Serko's income. Turning to slide seven, where we double-click on our Booking.com for Business performance, completed room nights grew 32% to 2.1 million. This was driven by a 40% growth in active customers, improved onboarding, and new platform capabilities that are driving higher customer engagement. We added 40,000 new customers in the half-year, significantly stronger than in the same period last year. Completed room nights frequency per active customer was slightly lower, and our view is this likely reflects small and medium-sized businesses in Europe booking fewer trips due to the macroeconomic headwinds there. We monitor these trends closely, and our analysis gives us confidence that customer activity should normalize as macro conditions improve.
Serko crossed into the second tiering of commissions on multiple months, and we're tracking above 4.2 million completed room nights this financial year. Shane will talk to this further. We're delivering at pace against the new initiatives we told you about at our FY2025 announcement, including the latest release of incentives. We're seeing green shoots of success with Genius Level Two, and we have confidence it's driving increased customer retention. We also rolled out significantly improved checkout experience and company onboarding that improved the overall customer experience. Turning to slide eight, in Australasia, online bookings grew 2%. This was offset by a -2% decline in average revenue per booking from reduced third-party costs, some of which were previously passed through to customers. Although this impacts slightly on the ARPB, it significantly reduces our cost, creating a net cost benefit.
This mix shift improves the quality of our revenue and demonstrates our focus on sustainable margin expansion. Overall, this resulted in a stable revenue result. Our early commitment to NDC is now paying off. We are one of the few players globally delivering a fully integrated NDC offering across Sabre and Amadeus. We continue to invest and innovate as we strengthen our market leadership and as NDC starts to gain traction. Turning to slide nine, on our Get There acquisition and strategic partnership with Sabre, which has fundamentally repositioned Serko in the U.S. market. What's working well? We've fully integrated Get There, stabilized the customer base with new ARR churn on key accounts around 1% of annualized revenue. We've established our New India Development Hub and set up a global capability center that's now scaling.
Revenue exceeded our expectations in the half, reflecting some of the expected churning customers taking longer to offboard than anticipated and a very low level of new churn. Where we've been less effective, we haven't achieved our targeted U.S. sales, but we have a clear path forward. It has become apparent as we've been establishing our sales pipeline with leading Fortune 500 companies that many of them want to wait for the new capabilities we're building rather than onboarding to our existing products and going through a second migration later. The other point to note is that our partner, Sabre, has shifted their focus away from direct corporate contracts to growth and relationships with travel management companies. This change has contributed to lower direct corporate sales. Sabre is referring TMC resellers to us, but the lower direct corporate sales means we don't anticipate making any performance payments for the 2025 calendar year.
Our go-forward plan. In North America, we're now focused on scalable growth through a dual-channel approach, firstly via our TMC reseller network and direct corporate sales. Leveraging our Sabre partnership, we're targeting key management resellers. We've already onboarded two partners, Tangerine and Elite Travel, and while smaller in volume, they provide valuable insights into mid-market customer needs. On the direct side, through customer forums with leading Fortune 500 companies, they are involved in helping us to co-design our future AI-powered capabilities. With Get There fully integrated, we're in the room with major corporates, gaining visibility and confidence in our North American opportunity and our execution model. As discussed at our annual shareholder meeting, Get There and our Sabre partnership have redefined Serko's North America position.
We now have strong market presence, direct customer insights, and relationships, along with the data and expertise in a key market, which positions us well for our future success. In summary, the first half has been about strengthening the platform, deepening relationships, and co-designing our next-generation AI-powered capabilities. The second half is about establishing the technology to enable our growth, executing with focus, and accelerating our North American opportunity. I will talk more to the strategy and outlook shortly, but now I will pass to Shane to cover the financial highlights.
Thanks, Darrin, and good morning, everyone. Darrin has already called out some highlights for the half-year, and I'll go into more detail. I'm going to focus on the key outtakes from the result. We've also put some additional financial detail in the appendix for your reference. Turning to slide 11, total income increased by NZD 19 million, or 45% to NZD 61.8 million, reflecting growth in Booking for Business volumes and Get There acquisition. Operating expenses increased by 29% to NZD 65.1 million, up NZD 14.7 million, primarily reflecting costs associated with Get There and investment in the US market of approximately NZD 16 million, and the initial stages of our platform acceleration initiatives with investment of NZD 1.6 million in the half. This was partly offset by lower third-party hosting costs, so lower third-party costs and hosting efficiencies achieved in our pre-acquisition business.
Our preferred measure of total spend, which excludes the impact of accounting decisions around capitalization and amortization, increased by NZD 15.2 million, or 34% to NZD 59.3 million, broadly consistent with the increase in operating expenses. Higher growth in income relative to spend resulted in EBITDA improvement of NZD 4.9 million to NZD 6.1 million. Net loss after tax increased to NZD 9.5 million and increased to NZD 4.4 million. I will talk to the drivers on the next slide. Free cash flow improved by NZD 1.7 million to NZD 3 million, reflecting the stronger EBITDA partially offset by realized FX losses, increased capital expenditure, and capitalization of internally generated software and higher taxes paid. Turning to slide 12, net loss grew despite EBITDA growing and total income growth outpacing total spend growth.
The bottom part of slide 12 shows the primary drivers of the increased loss, which are lower interest income, foreign exchange flipping from a gain in the prior period to a loss in this period, and the disposal of InterplX. Net finance income was NZD 1.3 million lower, reflecting lower interest rates and less cash on hand as a result of the Get There acquisition. We incurred a NZD 2 million non-cash accounting loss on the sale of InterplX. I will talk to this in more detail later. Serko puts foreign exchange contracts, or FECs, in place as an economic hedge against revenue received in AUD and EUR.
Historically, we have not designated these FECs as hedges for accounting purposes, and therefore any gains or losses on the FECs were recognized in the profit and loss, while the revenue was accounted for at the actual rates applying at the time the revenue was earned. The significant appreciation of the EUR against the NZD in the last six months has resulted in NZD 3.7 million in recognition of losses on FECs not designated as hedges for accounting purposes and other sundry FX losses. In the prior period, FX rates moved the other way, resulting in a gain of NZD 1.4 million, but the change from the prior period was an adverse movement of NZD 5.1 million. Note that in substance, the FECs are acting as economic hedges. For FY2027, we have designated some EUR FX contracts as hedges for accounting purposes.
I will talk to this more on a subsequent slide. Turning to slide 13, while Serko has started to make investments in the platform acceleration program and acquired Get There to support long-term growth in the U.S., the faster growth in total income still resulted in total income exceeding total spend in the period. This reflects strong unit economics in Booking.com for Business and improved margins in Australasia. Through our Booking.com for Business and Australasian results, we have demonstrated our ability to invest and grow revenue and then to optimize the business to generate operating leverage, giving us confidence as we prepare to make increased growth investments again. Turning to slide 14, our balance sheet remains strong with cash and short-term deposits of NZD 65 million and no debt. Relative to 30 September 2024, cash has reduced and other assets and liabilities have increased, reflecting the Get There acquisition in January.
Relative to 31 March 2025, cash was up NZD 3.6 million, reflecting the positive free cash flow and a cash inflow relating to a working capital adjustment on the Get There acquisition. Non-current assets and non-current liabilities increased, primarily reflecting a new India office lease. Intangibles declined, reflecting the disposal of intangibles and goodwill associated with the InterpIx business and amortization exceeding capitalization of software, reflecting our conservative approach to software capitalization. Turning to slide 15, our partnership renewal with Booking.com in April 2024 revised our revenue share arrangement, with the revenue share continuing at the 50% rate for volumes up to the equivalent of approximately 4.2 million completed room nights, or CRNs, per year, and a new tiered system for higher incremental volumes. The arrangement is designed to mutually incentivize and benefit both parties.
The chart on the left is from our May annual results and shows that in FY2025 we achieved 3.3 million completed room nights, and in FY2026 we expect to exceed 4.2 million, the approximate level at which incremental transactions earn lower commission. This reflects the strong growth in CRNs since the renewal was signed. The chart on the right shows average revenue per completed room night, or ARPCRN, as shown earlier in the presentation, with ARPCRN declining 3%. The chart in the middle shows the average commission per completed room night, or ACOMPCRN. We introduced this new metric in May as a way to show underlying changes in our share of commissions as the ARPCRN we earn is impacted by the tiering of commissions.
You can see the ACOMPCRN declined by 2%, slightly less than the ARPCRN, as we had two months in the first half where our monthly volumes slightly exceeded the first tier, resulting in the blended commission percentage reducing to 49% from 50% in prior periods. As you have seen from the strong operating leverage we've achieved over the past few years, our incremental margins are high, and therefore even on the lowest tier, our gross margin percentage is expected to be healthy. Turning to slide 16, as I noted earlier, Serko has historically had FECs in place to act as an economic hedge but has not designated them as hedges for accounting purposes. During the half, we chose to put FECs in place for FY2027 and designate them as hedges for accounting purposes.
This will reduce volatility in reported revenue, FX gains and losses, and therefore reported net profit or loss in each period. Instead, marked-to-market gains or losses at each reporting date will go through the cash flow hedge reserve and be reflected in the total comprehensive profit or loss for the period. We have included details of the accounting hedges here to assist analysts and investors to calculate the impact on projected FY2027 revenues. I note a portion of expected FY2027 EUR revenues are not covered by the accounting hedges and that we've not designated any FECs as accounting hedges in relation to FY2026 revenues. Turning to slide 17, as previously announced, we sold our U.S.-focused expense business, InterplX, on 30 September. Serko has recognized a non-cash accounting loss of $2 million on the sale, primarily reflecting intangibles and in particular goodwill.
The InterplX business made a modest contribution to revenue of NZD 0.8 million in the first half, and the disposal is expected to have a small net benefit to our profitability going forward. In addition to the financial benefit, we expect strategic benefits from the sale, including increased operating focus and improved ability to partner with leading U.S. payments and expense providers. Thanks, and I'll now hand back to Darrin.
Thanks, Shane, and turning to slide 19, let's shift to the product initiatives we're delivering that position us for growth. The first is Booking.com for Business. In Booking.com for Business, we're focused on three outcomes: acquiring, converting, and retaining customers. The pace of delivery has accelerated with significant deliveries in the half. In particular, I'd like to call out the new checkout experience, which is consumer-grade with pay now, pay at property capability, simplified VAT and company detail capture, and tighter authentication. This is reducing checkout error rates, improving completion reliability, and improving conversion. The new checkout is built in our new platform and enables faster iteration and experimentation to drive further improvements for users and improve activation, conversion, and retention. It's also a significant milestone as users can now register, make a booking, and checkout all within the new platform with a consistent user experience.
In the Australasian market, Qantas switched to NDC as their preferred channel in July. This was a big milestone and a significant investment to integrate through our partners, Sabre and Amadeus. We've seen NDC volumes start to scale since launch, and while still small in percentage of total bookings, by September this was starting to make a positive contribution to our ARPB. In North America, our focus has been on how we engage with our customers to co-design the future while at the same time sustaining our heritage products and serving existing customers with an improved user experience and travel supply. This includes key initiatives we launched during the half-year that help to deliver customers a consumer-grade experience.
Examples of new capabilities launched within our Get There product are our new hotel shopping experience and new NDC carrier connections with Air Canada and British Airways, which provide content breadth and depth for our key U.S., Canada, and transatlantic markets. This is about Serko adapting to the changing travel distribution landscape and ensuring we maintain connections to sources of supply so customers have access to the breadth and depth of choice. On the Serko platform evolution, we've designed our platform to enable performance, scale, and excellent unit economics and fast delivery of new capabilities, including for Booking.com for Business. We're building out our product and tech capability in India, and this month we officially cut the ribbon on our new Bengaluru office. We're hiring key talent to work alongside the team who came on board with Get There.
This is a key part of our platform strategy and a focus for our leaders. AI coding tools are firmly embedded across our engineering team, with more than 55% of daily active users using AI coding tools. More than 30% of the suggestions from AI are accepted by our engineers, and these stats compare well with industry benchmarks, and we continue to drive them even higher. We're continuing to roll out additional AI metrics and support our developers to grow their capabilities as tooling matures, and we update our collection of analysis of the related data. We're also trialing a wide range of AI tools and models. Turning to slide 20, Serko is in the strongest position operationally and strategically that we've ever been in.
With ongoing improvements across the business and a clear blueprint for our AI platform, we're now able to accelerate our investment to capture the opportunity ahead. We're well positioned to achieve our NZD 250 million revenue aspiration for 2030. Booking.com is the strongest business brand in global travel, and our partnership with them has enormous potential. Booking.com for Business is already driving significant revenue and contribution, but we've only captured a fraction of the opportunity. We have a clear strategy in place for growth for Booking.com for Business through both our partnerships and platform investment. We're accelerating our platform transformation to deliver AI-powered capabilities for customers, and we're optimizing our operating model to enable fast delivery and scalable, profitable growth. Turning to slide 21, we have strong momentum delivering Booking.com for Business capabilities and a track record that proves we're executing on our growth strategy.
Our platform is successfully powering core components of Booking.com for Business, including the new checkout experience and all hotel room bookings. As part of our accelerated investment program, we have major initiatives underway as we continue to deliver new platform capabilities and value. This includes flight service modernization, a core service of the platform, allowing flight content to be retrieved across multiple supply integrations. We continue to lay the technical foundations for Serko's future, including removing any dependencies that the new platform has on legacy technology. We're also building AI and data frameworks powered by Serko data as part of our strategy to unlock the value of AI and emerging technologies. Turning to slide 22, AI is central to our strategy and our roadmap. We're increasing our investment in AI, a targeted, disciplined way so we can launch new capabilities to customers and deliver future growth.
Our teams are working alongside customers and prospects in the U.S. as we co-design new AI-powered capabilities. To enable our future, we're optimizing our operating model to ensure we allocate resources where they generate the greatest long-term value. In October, we launched an internal program to reallocate some of our people investment to focus on delivering AI and data capabilities. Around 60 roles from our global team of 460 may be impacted, while at the same time we're creating new roles we're hiring for. The proposed program is expected to deliver NZD 12 million in annualized savings, providing capacity to reinvest further in AI and innovation while supporting continued margin expansion. You've previously seen the outcomes of how we've successfully managed our resources and grown revenue while holding back cost.
You've also heard how we've activated AI across our teams to establish new ways of building technology and deliver new capabilities to market. Turning to our FY2026 outlook on slide 23, we reaffirm our FY2026 total income guidance of NZD 115 million-NZD 123 million. Serko is revising its total spend range to NZD 124 million-NZD 128 million for FY2026 from the NZD 127 million-NZD 133 million previously. Risks to Serko achieving its FY2026 goals include macroeconomic and geopolitical factors and currency and ARPCRN movements. We're all in on executing our strategy with scalable global platforms, strong partnerships, and a clear roadmap to profitability and growth. Serko is positioned to deliver sustained shareholder value. Thank you. That concludes our presentation, and we're now happy to take questions. To allow more people to ask questions, we request that you ask one question then go back into the queue. Thank you.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question from Guy Hooper with Jarden.
Yeah, good morning, team. Well done on some strong growth numbers. Maybe just to start with one on the spend. I mean, you previously outlined a base spend rate over the next couple of years and then what an accelerated path might look like. I mean, how should we think about the change in the FY2026 guide and the reduction in spend in that context?
Hi, Guy. It's Shane. I'll take that one. I think there's probably a couple of things that are worth calling out on the spend. One is you'll note that the midpoint of guidance implies meaningful growth into the second half, up to the first half for total spend. If you like, you will start seeing that acceleration, and that really reflects, as Darrin talked about in his speech, we've been quite prudent in our spend. Teams are using AI throughout the business, but in terms of the particularly dedicated spend on building AI into the product, we've been relatively prudent while we get clear what that looks like. Now we're at the point where we have the confidence to really start investing and accelerating that. You will start seeing that acceleration in spend in the second half.
I think the other thing Darrin called out in his presentation was that we are effectively looking to reallocate some of our resources. That will result in reduced spend on an annualized basis in terms of the roles that will go, but we're actually looking to reinvest that next year again back into that more AI-focused build of the future product. Effectively reallocating resource from our heritage businesses, generating more operating leverage in those, and then that resource to build the future products that are going to drive our growth. I think those would be two callouts. As you be sort of familiar with our performance over the last few years, we're generally reasonably prudent in how we spend, so we've tended to be at the bottom end of the range.
Probably the other callout would be the, effectively, as we noted, we're not where we want to be in terms of U.S. sales. A chunk of our executive and senior staff remuneration is on performance, and so it's effectively that also reduces the spend a little bit this year. Yeah, those combination things, but definitely starting to get to the point where we're pressing the goal on investment, and that's because we have that clarity that we're clear what we do and how we're going to do it. We're currently, I think, targeting to have an event today on the 12th of March and hoping that we'll be able to show some of what we're doing there at that.
Yeah, great. Thank you. I'll cut back in the queue.
We will go next to Wei-Wing Chen with RBC Capital Markets.
Hey, team. Yeah, just a question from me about the U.S. You previously warned that lower U.S. government work had impacted on Get There volumes. Wondering if you could speak to, I guess, what happened during the shutdown period, which happened in, I guess, your second half. I assume it's all covered within the reiterated guidance, but it'd be good to kind of get some color on what exactly happened there.
Yeah, so hi, Wei-Wing. Shane, I can talk to that. Yeah, so we continue to see weakness in U.S. government through the half year. Definitely, the government shutdown had an even more extreme impact, but yes, that's all incorporated within the guidance. Yeah, obviously, we're pleased that the shutdown has finally come to a conclusion after setting a new record. Obviously, still a little bit of risk of another one on 30 January when they have the next kind of deadline in the U.S. Yeah, so that's all incorporated within our guidance.
Yeah, no, thanks. Is there anything you can quantify there or not really?
I think in terms of, yeah, not a massive impact in terms of the shutdown across our U.S. business as a whole. As Darrin noted, we've seen churns being very low in terms of new churns. So even with that government shutdown, we'll still expect the U.S. to be a bit stronger than we were anticipating in May.
Yeah. Okay, perfect. Thanks.
Once again, ladies and gentlemen, it was star one if you had a question. We'll go next to Vignesh Nair with UBS.
Morning. Darrin Grafton, can you hear me?
Yes, we can.
Okay, awesome. Just a quick one on Booking.com. Obviously, you talked to some of the weaker macro-impacting completed room nights per active business, sort of a mid-single-digit compression there year on year, it looks like. Can you just talk to what style of number you're expecting through completed room nights per active business based on the last two months of trading for the second half of 2026 and how we should think about it?
Yeah, certainly in terms of the last couple of months, I think consistent. I think in terms of where we saw that drop in the frequency per active customer, that really kicked in from kind of mid-May. Hopefully, just as we'd talked to you guys back in May, we were just starting to see that, and then it's pretty much carried consistently through. The sort of September and October in terms of the last couple of months are seasonally strong months. We've seen that seasonal uptick, but with that same consistent issue of slightly weaker booking frequency. If you like, that will have a little bit of a dampening effect across the year, but at a similar effect to what you've seen in the first half of a few percentage points lower relative to the size of the base.
If it started in May, that's sort of—sorry, Shane. If it started in May, that's kind of the second half of the first half, so the second quarter. Are you expecting that to continue into the third and fourth quarter?
Yeah, or sorry. May is kind of middle of the first quarter of our financial year. Yeah, at the moment, we're assuming that continues in terms of in our kind of base case. Obviously, we've got a reasonable range of guidance for total income, and that's one of the reasons is potential for that to recover. In terms of just the last couple of months, we've kind of seen that being reasonably consistent.
Okay, that's helpful. Thanks, Shane. I might just hop back into the queue.
We'll go next to Joshua Dale with Craigs Investment Partners.
Morning, Darrin and Shane. Just a quick one from me. Total income grew 45% to NZD 61.8 million. What were those numbers in constant currency terms?
Apologies. So Josh, Shane here. Apologies. We haven't actually got those to hand. I will look to dig into that. It would have been a little bit lighter. I think off the top of my head, we had about a 7%-8% upswing in Booking.com for Business revenue through FX. The Australian and U.S. impacts would have been meaningful. Yeah, a little bit lighter if we hadn't had that FX benefit.
Okay, thanks.
Just one final reminder with star one if you had a question. We currently have no other questions holding. We'll turn the conference back to the speakers for any additional or closing remarks.
Thank you, everyone. We are entering the second half with strong momentum, a clear plan, and unwavering confidence in our ability to execute. Thanks for your continued support as we deliver on Serko's next phase of growth.
Thank you very much, everybody.
Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.