6 key takeaways from Flight Centre's earnings call

Flight Centre (ASX: FLT) shares tumbled as much as 8.5% on Wednesday after the company reported a softer-than-expected set of first-half results.

• Total transaction values up 15% to $11.3 billion but 4% below Goldman Sachs estimates

• Revenue up 28% to $1.29 billion and in-line with Goldman estimates

• EBITDA up 185% to $219 million but 7% below Goldman estimates

• Management reiterated a 33% and 67% split between the first and second half of FY24

Numbers aside, here are some of the key highlights from the company's earnings call on Wednesday, 27 February.

The below dialogue features comments from Corporate Chief Executive Chris Galanty, Chief Executive James Kavanagh and Chief Financial Officer Adam Campbell.

Flight Centre Q&A Highlights

#1 Leisure division growth: "Leisure is really positioned to grow following the transformation that has been achieved in recent years with opportunities to grow in our core markets of Australia, New Zealand, South Africa and really our challenger position is in the UK, the US, Canada and Singapore, where we hold less than 5% market share."

#2 Corporate division improvement: "I think from a corporate perspective, a lot of it is about mix shift ... faster growth in Northern Hemisphere where we operate at a higher revenue margin, particularly in markets like the UK, US, Canada etc. In addition to that, we are looking at new revenue streams, which are growing, have grown 100% on last year up to 8% of revenue, and they typically operate at much higher revenue margins. So they're the initiatives at play. So we do see a bit of opportunity to continue that improvement."

#3 A 2% profit before tax margin by FY24: "We are aiming for 2% for the full year. With those caveats that I put, that I said earlier and I think there are important ones. But if you look at the business right now, even now, in corporate and leisure, we've got sporadic months, where we're up at or awards even slightly above 2% for those businesses."

Ben Wilson from Wilsons Advisory asked if FLT is experiencing any changes in its leisure customer base after CBA data showed savings and spending across the 35-54 age bracket going backwards in the first-half of FY24.

#4 Leisure customer base changes: "What we have seen though is the one area that was affected the most was families. And that's starting to normalise a little bit more now because airfares are dropping a little bit, and the cost of travel is starting to be a bit more attainable to different segments of the market. So broadly speaking, not too much change."

#5 Inquiry numbers continue to grow: "Just the inquiry numbers, by the way, just to share with you, has continued to grow. So we're actually seeing - We're not seeing a slowdown by any stretch in terms of the inquiry numbers ... we're still continuing to see growth going into this financial year."

Lisa Deng from Goldman Sachs flagged a comment from a travel peer that the corporate recovery to around 70-75% of pre-pandemic levels is largely done. And from here, they're not expecting any further recovery. What does this mean for FLT?

#6 Market share growth over recovery: "I think based on their research [GBTA], corporate travel will recover back to 100% over the coming years. Our view is we don't want to guess that. Instead, we want to focus on market share growth ... And we still - Even though we're one of the largest travel management companies in the world, we still have tiny market share, because the market is so fragmented."

Analysts were relatively divided with the result – Across 10 sell-side ratings, the average target price was unchanged (upgrades and downgrades pretty much offset each other) at $22.26.