Good day, and welcome to the Serko Operating Update First Quarter Fiscal Year 2027 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Darrin Grafton. Please go ahead, sir.
Thank you. Good morning, everyone, and thank you for joining us this morning. I have Shane Sampson, our CFO, on the call with me today. I'm going to make a few brief comments on the quarter one operating update we've released this morning. We'll get straight into the Q&A. As you will have seen in the release, our team has executed well in the challenging external environment. First, regarding the Middle East conflict, the identifiable impact on our business remains minimal. Prior to the conflict, the region represented less than 3% of our total group completed room nights. This minimal impact has continued beyond the end of the quarter and into quarter two. Outside of the Middle East, our overall volumes have remained resilient. Second, we saw strong volume growth. Our completed room nights were up 39% to 1.4 million during the quarter.
This growth was driven by higher active customer numbers, which are up 35% to 325,000, as well as higher booking frequency. Third, as we continue to progress our strategic initiatives towards our milestones. For Serko.ai, following our closed beta launch, we are expanding the beta to several hundred more users. We remain on track for an open beta launch next quarter. For the U.S. corporate segments, we have successfully signed two organizations in our target market during the quarter. Right now we are continuing to test, learn, and refine our approach with these customers prior to scaling. Finally, you'll note we have affirmed our FY 2027 guidance. Thank you. Shane and I are now happy to take your questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one at this time. Again, star one for any questions. A voice prompt on your phone line will indicate when your line is open. Please state your name and company before posing your question. We will move now to our first question.
Morning, Darrin and Shane. It's Josh from Craigs. Can you hear me okay?
Yep, we can hear you fine.
Okay.
Hi, Josh.
Brilliant. Well done on a strong quarter. That's good to see. I have three questions. The first one, on your FY 2027 total income guidance range, you were pretty clear back at your FY 2026 result in May that where you land within that is driven in large part by timing of bookings within the U.S. corporate segment. If I recall correctly, your guidance assumes about a NZD 2 million-NZD 6 million contribution from that segment. Are the two corporates you've signed to date sufficient to get you into that NZD 2 million-NZD 6 million range, do you think? Or are more required?
We're definitely looking to sign more customers through the year. Obviously, the rate of uptake is probably going to be one of the most critical things. We've reaffirmed guidance with this result. If you like, we've had a good start to the year, but obviously still three quarters to go, and I think we called out in the update that is still the biggest variable for us.
Okay. Thank you. Second question, completed room nights were up 39% year-over-year in the first quarter. Obviously a solid performance. Is there any reason to think growth over the remaining three quarters would deviate too far from that 39% level?
I think implicit in our guidance earlier in the year when we were talking in May was a bit less than that expected across the year. Obviously, the booking frequency in this period was reasonably high, but it's only one quarter. Obviously a lot of water's gone under the bridge across the rest of the year. We're maintaining the guidance where we hit it.
Got it. Makes sense. I guess the 35% increase in active customers is sort of supportive of maintaining-
Correct.
it's helpful support, I guess, for the rest of the year. There's sort of no pushback against that.
Yeah. We're definitely pleased with how the first quarter's gone.
Yeah.
Yep. Okay, thanks. Last question. As Australasian managed travel is up a bit versus PCP in the U.S., or get these down on PCP, are those two divisions tracking to about where you thought they would when you first set FY 2027 guidance back in May?
Yeah. Certainly we've talked about, I think from probably May 2025, we've been talking about the fact we knew we were losing some customers. The drop in the U.S., I think we've signaled well. Yeah, and they're tracking around about where we'd expect them to be.
Yep. Okay. Good one. Thanks very much, Darrin and Shane. Appreciate it.
No worries.
Thanks, Josh.
Once again, it was star one if you had a question. We'll move to our next question now.
Good day, guys. How are things? James here. Just a few things from me. The average commission down 2% for the period. Just how are you feeling about prices and market and where that 2% was versus your expectations?
I think we've talked about it on a few of the calls that we've had the slight oddity where in general you've seen other people's results that they're showing average daily rates that are up a little bit and ours have been slightly down. There's a tiny bit of mix in there, but otherwise we probably haven't got a really solid handle on why we tend to have that slight sort of disconnect between a bunch of other travel companies and our numbers. Yeah, not surprised by it, but we don't have a really good. - 2% versus +1% is kind of quite hard to pin down to exactly what the difference is.
Got it. Thanks. Obviously we haven't really had quarterly stuff before, but just down 11%. Your expectations for that ARPCRN for the full year would be. Obviously we don't know the monthly stuff as well and what's fallen in there. Would that be a reasonable outcome for the full year?
I think, apologies I could be crystal on this off the top of my head, I'll confirm back to you. I think we'd indicated back in May that we expected the average commission rate to be about in the sort of 42%, 43% blended commission rate across the year be the biggest thing that's driving that. Yeah, I would probably still expect that to be the average for the year. Obviously at the key is just the seasonality in which months we drop into those bigger.
Exactly.
We're getting to the point now where most of the growth is going to July and August are low months, in December's a low month. Otherwise, yeah, most of the months we're going to be getting into those other tiers. I think that 42%, 43% for the year is probably still the right sort of general direction.
Yep. There. Got it. Then just a few generally just on Serko.ai. Just with regard to sort of early feedback, are you getting any sort of positive, negative signs from customers in that beta?
Yeah. It's been very well received and we're going through that initial beta processes, that general hardening of a true agentic system that's running. Some of the ways we've presented that to market with the cancel for any reason when you've got an agentic system booking on your behalf kind of gives some pretty key kind of comfort levels, I guess, in actually making the bookings and doing those sort of things. We're testing out a lot of those sort of aspects that we'd actually had planned. As we indicated, we're on track to head towards that quarter release as well. We will be, if you've followed stuff on LinkedIn and things like that, we are doing a soft launch of that at GBTA in Chicago next week.
Yeah, got it. Yeah, no, those updates are useful. Just with regard to sort of the beta testing and as you go through it, do you have most of that product stuff ready to go and you're just trialing it or is there still a lot of development work over the next two or three quarters to go?
There's still a lot of. We've got a very big ambition of what we're building out in this platform. I think we're starting, as we've indicated, with what we call low complexity companies in the small business sort of realm to start with. That enables us to kind of test out the technology first before scaling it up to the bigger end of town. That's definitely the starting point and where the first version is designed for. Then it'll be iterated from there, and the features continually going through from that point.
Just more generally, just on AI side of things, there's been I suppose a lot of industry players come out and talk about I suppose connections into either Claude or ChatGPT, sort of as a more of a wider connection rather than just like Serko.ai. It's sort of somewhat closed. Can you just talk to your ambitions about integrating it into one of those larger models if need be?
For us right now determining how we make sure that our IP data in that isn't necessarily leaked or shared into the larger language models that they can learn from and making sure that we own our part first and build the right trust models in there is absolutely essential to us. We understand the boundary of where we're working for before opening up MCPs into all of these systems right now. We use the systems outward but not necessarily inward at the moment. We have a very strong belief around the human area around how do you kind of make sure that the goal or context that you're putting into Serko.ai is something that we can control right now to make sure that our own inference and data is built our side.
We will start to look at that approach once we've determined what we actually share with those models as well as receive from them. We've got a slightly different approach to it with business travel and making sure we have a high responsibility around the data and PII information that's sitting in there before we go wider right now.
Yep. Got it. Last one from me just with regard to good heads up obviously on the 3% for Middle East and obviously you've been able to outgrow that, which is quite impressive. Just in the quarter, what has that Middle East 3% gone down to that you've been able to outswim, I suppose?
Yeah. I think it's dropped by. There's two issues. One is we have bookings. Those have probably gone down by about two-thirds. The other issue that we had, particularly more in March, April, was bookings, then canceling went up, and that region's always had a high cancellation rate, but that went up. Probably in the order of a third, loosely. I think there were a couple of weeks, more recently, where everything was going good and suddenly the bookings were flowing again. We were actually even, I think we had one week that was up year-over-year. Obviously that's dropped back again. Might be like a headwind of 1%-2% or something.
Yeah. Got it. That's a good heads up. Okay, thanks, guys. Much appreciated and well done on the quarter. Cheers.
Thank you.
Cheers.
Thank you.
One final reminder, it was star one if you had a question. With no other questions holding, I'll turn the conference back for any additional or closing remarks.
Cool. Thank you for your time and questions this morning. Before I wrap up, our three key takeaways from the quarter one are: The identifiable impact from the Middle East conflict remains minimal, and that has continued beyond the end of the quarter as well. We are seeing strong growth across completed room nights, which are up 39% on PCP, and we continue to progress our strategic initiatives towards our milestones and look forward to keeping you updated on these. Thanks again for joining us.
Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.