CEO Series: John Guscic – Steering Webjet Through COVID

Bryce: [00:00:14] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down the barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going? [00:00:29][15.1]

Alec: [00:00:30] I'm very good. Bryce very excited for this episode. At the start of the year, you threw the gantlet down and you said you want to interview all of the ASX 200 CEOs and we're slowly making our way down the list. But the CEO that we're speaking to today probably runs one of the more discussed companies in the Equity Mates community. Definitely, definitely one that generates a lot of conversation. So I'm really excited to get stuck into this one today. [00:00:57][27.0]

Bryce: [00:00:57] Absolutely. Well, I don't think that I'm overstating things to say that the pandemic has really impacted everyone's life in many ways. But some industries, individuals and companies have certainly bore the brunt of this more than others. So today we're talking to a managing director who is definitely in that camp, and that is John Kasich is our guest today. He's certainly qualified to speak about the effect of coronavirus on the travel industry, and that is because he is managing director of Webjet. He was first appointed to his position in February 2011. But before that, John was previously managing director, Asia Pacific for GTA and formerly managing director of the travel part business group Pacific Region, based in Tokyo, Japan. He was responsible for the Galileo and JTA brands in Australia and New Zealand, Japan, Korea and Indonesia. And previous to that, John was managing director at South Pacific and Flávia Travel. So, John, welcome to Equity Mates. [00:01:57][59.7]

John: [00:01:59] Well, I am just delighted to be here. You know, they told me that I was going to be interviewed by two young Turks, but now that I can see on the screen, you don't look that young. You must have had a really hard life based on your you're looking at [00:02:13][14.8]

Alec: [00:02:15] my hair line makes me look a lot older than I am [00:02:17][2.2]

John: [00:02:20] anyway. So thank you very much. And clearly, your ASX 200 list of CEOs you want to interview, you've got to do so. Well done. Exactly. [00:02:30][9.8]

Bryce: [00:02:31] We're close [00:02:31][0.1]

Alec: [00:02:31] that. We're closing it out. We're almost there. But look, John, as far as Bryce said, probably one of the most affected companies by the pandemic, Webjet. So we want to hear about that today. But I guess we want to have a conversation that's broader than than Covid in the pandemic. We want to hear about your time at Webjet and what you see the future holding for the company. But before we do, we always like to start these interviews with the same question, and that is to hear the company leader describe their company in their own words. So to kick us off today, what is Webjet? [00:03:08][36.8]

John: [00:03:09] Webjet is a digital travel business and we are a business that sells travel product to consumers and it sells to intermediaries. So the vast majority of people in your community will know us because we've got the market leading online travel agency site Webjet dot com w and it gets a bit tricky when the sticker is Webjet, but you do a lot more than what people perceive Webjet to do. So on top of our business in Australia, we have one in New Zealand Online Republic and we have a completely different business where we provide hotel rooms to other travel businesses. So we're an intermediary in the travel space. And in that business, it's actually bigger than the Webjet business and it's global by nature. So in the old days, I used to just describe us as a group of humble travel agents trying to take over the world. And that's that's that's probably the most apt way of describing what we're trying to do. [00:04:27][77.4]

Bryce: [00:04:27] And is that intermediary business waterbeds, its wabbits? [00:04:32][5.2]

John: [00:04:33] Correct. That's the web. It's business. So that that business generates 99 per cent of its TV ad revenue outside of Australia and print Covid was more profitable than the Webjet business in the Webjet business is a very profitable business in its own right. [00:04:55][21.9]

Bryce: [00:04:55] So Webjet was founded in nineteen ninety eight and really pioneered the online travel industry here in Australia. You joined the business in 2003. Correct me if I'm wrong, but what are some of the, I guess, major changes that you've seen industry level and business level with? In that time, [00:05:13][18.2]

John: [00:05:14] you know, if I take five year blocks of time to try to put into context where we sit in the travel ecosystem, the first five years, Webjet was an undercapitalized shoestring operation that was trying to compete against a bunch of guys who had deep pockets. It was the dotcom boom and lots of people were investing in crazy ideas in the Internet. And the founder of Webjet, a guy called David Clark, who is truly an extraordinary individual and, you know, against all odds, built the most successful online travel agency business in Australasia, primarily because at that time he had a really clear identity about what was required to be successful. The first one is to have to solve a problem. The most basic, the most basic need of all, solve a problem for consumers. And he built that by building a really clever interface where you could combine one way fares. And we still do it to this day, many, many years later, better than anybody else. And so the first five years was trying to survive in the next five years with building on that concept. The second that was important to the evolution of the business, and this was let me think about this. If I go back 15 years, you guys are probably in primary school. So when you guys went and we were we were thinking about competition and you guys were thinking about going from short pants to long pants, we we we went we were kind of countercyclical to what the current orthodoxy is, the way people thought about winning consumers in the online world. The thinking at the time was you needed to own the last click, which is one of those stupid concepts of all time, which, you know, when when when the history of the world is written, it'll be in the top 10 dumb ideas, because what it does is basically makes you a hostage to what's become Google and and that and Internet marketing is exclusively the domain of search and paid advertising through through that particular channel. And Webjet, when a very different route, we we decide to build a brand and to build a brand. We need to think about ourselves as we're a online business and we operate on the Internet, but our consumers operate in the real world and we'll communicate to them in the real world. So we did that by doing the TV ads. We did some sports sponsorship for a period of time. We've done outdoor advertising in the like. So it's it's to communicate a message that enables people to continue to come back to us without having to repurchase their business every single time by using Google as the exclusive medium. And for many, many years, I'll say, the first 15 years of the online travel agency environment globally, everybody just jacked up the prices to Google, which is good for them, great business, and diminish the margin opportunity for them. And we didn't. And we went a different route. And as a consequence of all of that, we got to the market leading position and marketing costs compared to every other online travel agency in the world are lower than theirs. And our overall level of profitability for our business is is much higher than any other. So you mentioned earlier that we create a little bit of debate on your through your communication vehicle. We we do do that because we don't follow the norms of many of the other more established travel businesses. And we're not we're quite happy to flout convention because we can see the financial justification for going down the routes we have. And it may or may not be acceptable or popular with the various crowds. But that's never been our thinking. Our thinking has always been what is the best outcome for our shareholders? What is the best outcome for our stakeholders? What's the best outcome and environment we can provide our employee base? And if you combine all of that, you'll work out what is compelling and gives you a growth profile. And as much debate as they can be about Webjet, there's certainly no debate that we have haven't been able to deliver on a growth profile. With the exception of what's happened in the last 18 months. We've been one of the fastest growing stocks in the Australian Stock Exchange. And, you know, to put it into into context and this will really wind up some of your your people will view this. You could have bought us at four cents and you could have sold us seventeen Dollars. That's not a fair bit of a stretch [00:10:16][301.9]

Alec: [00:10:17] to know that that is not that at all. I mean, all people need to do is zoom out and look at the the the, you know, the historic chart for Webjet to say the pretty incredible journey it's been on. And I think when we talk about, you know, the controversy and the debate in the Equity Mates community, it's really all been centered around Covid. I think those that were bullish on reopening have spoken about three stocks more than anyone else, Sydney Airport, Qantas and Webjet. And, you know, your. Every plan that you had, everything that you were hoping to do, got really thrown out the window at the start of twenty twenty in a pretty unique Black Swan moment. Can you take us into the room in those early days of twenty twenty? What what was it like there with, I guess, a lot of uncertainty and probably incomplete information? And how did you try and manage your team through those early days of the pandemic? [00:11:18][60.9]

John: [00:11:19] You know, I'll answer that. But I might just go to the first part of the introduction to the question, which is something that I do occasionally see, because obviously, you know, I'm not thinking about the share price on a daily basis. I look at it during the day. It's not important in the short term because there are there are much bigger structural and environmental elements at play that that we need to think about. So whether we reopen and we can discuss this and more detail later, whether we reopen and the market reopens in in July of twenty one, October of twenty one, April of twenty to November of twenty two, doesn't really matter. What does matter is what's the destiny of the business going to be when the world reverts to a more normalized environment and a normalized environment will be radically different to what existed in twenty nineteen. But there will be a more normalized environment. Travel will become mainstream, popular and compelling, as it's always been throughout history. It's not going to change as a consequence of what's happened in the last two years. But the shape and nature of travel will change dramatically. And we are spending a lot of time in our business, which I'm sure we'll discuss shortly, thinking about how we can make our business more compelling, more profitable, faster growing and bigger than than it is. And the occasional commentary I do see is, oh, my God, I'm lining up this stock. This is this stock. And this one's going to happen one week before this one. And I predict this one's going to do something five weeks before that one. It's all just noise in the echo chamber, because the reality is, and I'm assuming you're of your listenership are taking a view beyond trading on a daily basis and then trying to build financial wealth for the long term and buying a stock that you think has a viable future. And we'll cover that a second. But to go back to the moment of crisis, it was an extraordinary turnaround for us. And we were unfortunately probably more impacted than just about any other travel business in a while in Australia and one of the most impacted globally because we were caught in a in a trap that we would never have envisaged ourselves. We we would we would sit on and this is the irony of of listening to the crowd. We would sit on more than one hundred million dollars of cash, a free cash in our business. And we would have analysts and some of our investors that would say, you've got a lazy balance sheet, you're sitting on too much cash. You need to either give it back to investors through a special dividend or you need to continue to to make acquisitions and lower your cash reserves. We had one hundred dollars million. Now, the what happened when the pandemic hit is we had a cost base of nearly thirty five million dollars. And when your revenues go from, let's say we're making you know, we were turning over close to four billion and we're making proxy 10 per cent in revenues. And so you're going, OK, we're making a shitload more cash than sorry, should buy more revenue on a monthly basis than our cost. And then you see the that go to zero. So it only takes one or two months before you're technically running out of cash. But we had a compounding element to that, which was we had a working capital cycle where we pay people after we receive the money from our customers. And that was the reason we built up the banks. As that unwinds, the cash goes out of your business at an even faster rate. So we were we were caught in a trap and was one of the reasons that we were one of the first. And and and it was one of the reasons that our share price was savaged as as much as it was at the time. And it's one of the reasons that we went to the market and we recapitalize the business at a rate that you could never have envisaged in a million hypotheticals that we would run in business we never got. Will our revenues go to zero? Will I? Space remains the same, and will our working capital unwind happen, and will people who owe us money Stepha's to the tune of nearly 50 million, which is what happened. Would you put that scenario? You'd say you'd shoot yourself before you'd be for that possibility? Well, I'm still alive, but the gunshot, my adult something tells me it was it was a reality of what we found ourselves and what we did to. And it was remarkable because in February, late February of, let's say, the third week of February, I forget the date now of twenty twenty. We released our half year results, which were record results. And we were only just being asked some cursory questions around what do you think this Covid thing's going to do for your business? And four weeks later, we were in a full blown crisis of the nature I've just described for all the reasons I've just described. So what happened? Like, I can tell you that if you ever want to have if you ever need and see a justification for having a great relationship with your board and your chairman, that's when a crisis occurs like that. So in essence, I called up, as I mentioned to you guys off camera before we start a normally based in Parma, Majorca, where I have been for the last five years. And I call up my chairman and I say, Roger, we've got this this impending crisis. This is what's going to look like he's based in New Zealand. I'm in Parma. I'm getting on a plane tonight. You need to get on a plane. We need to go see some investment bankers. We need to talk about how we can restructure the business because we're going to run out of money. And the last twenty three years of phenomenal success is going to be wiped out in the next month if we don't do something. So I'll just say in the summarize position, what is it like for the organization? It's all about survival and survival is driven by the chairman, myself as CFO, and between the three of us probably doing something that you haven't done since university, which is pulling all nighters about, you know, for about ten days in a row to you literally working on fumes. Yet I was making calls and pitching, pitching the business to Americans and Europeans and the Asians and and the Australian investment community to to try and drum up support because we're in the middle of the start of a pandemic and people are thinking about what does what does what does Armageddon look like and is this business going to survive and is it worth saving? So you have to convince people that that's life. So it was all externally focused for that period, the last couple of weeks of of March of twenty twenty. And then we successfully raise capital roughly on the 1st of April, twenty twenty. And at that point I still remember it to this day. You know, we had the party of all parties to celebrate the fact that we survived and in lockdown, of course, appropriate party and lockdown. I don't know what that means, but look like an old fashioned party in my eyes. And then the next day called the senior management together. And and what's become I think, you know, I was suggesting we invented this, but we said, look, we've had a near-death experience. We now have enough cash that's going to enable us to survive. We can't waste the crisis. We need to we need to reconstruct the the business to ensure that in the recovery we can do more with less and we can improve our margins and continue the growth rate. And we're at the start of that journey, even though it's another fifteen months later. [00:19:31][492.4]

Bryce: [00:19:32] Pretty fascinating insight there. There, John. I just want to comment on something you mentioned right at the top there, which was the fact that you're not too concerned and looking at the share price day in and day out and you've got that long term view and I guess confidence that what you're doing, the share price will play out over a long period of time. It's just a good reminder for our audience as well that when know companies that you're invested in, the stock price is moving up and down day to day. You just got to remember that the CEOs of these companies are really having that long term view. And I guess you should equally have that long term view when it comes to investing in companies like this. So just a nice reminder for our audience before we move on. Ren and I are both working in retail at the time of Covid. And of course, that drastically changed the businesses and brought forward a lot of parts of the business that perhaps weren't going to come to fruition sort of until five years down the track sort of thing. E-commerce, particularly as there anything has anything within Webjet drastically changed that you weren't anticipating to change at this point in time? And have you taken the opportunity to, I guess, try things that you otherwise probably wouldn't have? [00:20:43][71.1]

John: [00:20:44] So we will on the on the Webjet. Business, the competitive landscape has changed dramatically, so you make the appropriate point that in the retail, in the physical retail environment, the travel industry has been decimated. So you've got a largest competitor who's shut and has signaled to the market and flight center that that half their stores that they've had open will no longer be open under any circumstance. So that's a dramatic shift in the the competitive nature of our industry. And the second largest group, the Helliwell Group, which is primarily a franchise model, we know that many of them have and they sell international travel. So in an environment where international travel is against the law in Australia, so you you don't have that market opportunity. So you can imagine that many of those competitors have been substantially weakened in the either the physical presence that they have or their ability to to invest in their businesses. So if you ask me quite, quite appropriately up front, you know, the first question you have described your business where digital travel business, what have we done? We've invested in in the continued evolution of our digital transformation as an organization. So our focus has been on on the consumer side, the Webjet side, of ensuring that we have the most compelling content and fulfills our premise, which has always been convenience and choice work. That's why consumers come to Webjet as the idea. And we continue to work on that and on our whippets B2B business. Our focus has been and life was all about having a great slogan yours Equity Mates mine. Mine is your mine's a little bit more a little bit more academic minds using Charles Darwin. So we've got a Darwin esque approach around survival of the fittest. And in that in our in our project, Darwin, the process is how do I take a third of my cost base out and not have to ever replace it based on scale and our thinking, which I won't get too technical for your guys. But the way out the way we record our financials are as follows. We have something called TV, which is total transaction value, and that's the total cost of the total element that we sell. And the vast majority of that is not ours because we we we only have the revenue component. So if we sell a hotel room, we don't own all the revenue of the hotel room. Roughly 92 cents in the 100th sense goes back to to to the hotel person that we bought the hotel. So we get eight cents in the dollar of of every dollar. And that's been our you know, when I started the weapons business back in 2013, I used to tell investors that the magic is eight five three eight percent revenue, five percent costs three percent a bit of margin. That that's the the business. And then we exceeded that in two. We're getting trajectory in that twenty eighteen. So we changed the numbers to eight. So again, to run around eight percent of our revenue and four percent of our cost gives you four percent Deep Dive, which is still a great business. It's a 50 percent Deep Dive margin business at that level. So our new edict and the new and everything we've worked on the last 15 months has been around eight three five eight percent revenue three percent costs five percent, EBIT margin, five percent above. And that gives you a sixty two percent, even a margin. That's a great business if we can get to that. So that's that's what we've been working towards. And we're well on the way to to to being able to when the business gets to scale to be able to deliver. [00:24:58][254.2]

Alec: [00:24:58] That is that's pretty incredible. I think a lot of your fellow CEOs would kill for a sixty two percent, a better margin. Bryce and I came from Coles and Woolies respectively, where we lived on three percent profit margins in the retail game. So you've done well there. I guess this will this will probably be the last question about share price. When we're having a look at Webjet, we did notice that it's one of the most shorted shares on the ASX. I think 11 percent of the float is short. And, you know, there's obviously a lot of Covid related reasons to that, I guess. How do you think about that? And do you have a message for the short sellers? This is you can't [00:25:39][40.8]

Bryce: [00:25:43] short squeeze the [00:25:44][1.5]

John: [00:25:44] short sellers. Good luck. But that's the first point is I will say this as as if I know this for a fact, but I would say this with 99 percent confidence, ninety nine point nine percent confidence, the short the for Webjet was substantially greater 15 months ago than it is today for the following reasons, even though the number at a high level doesn't look dramatically different because we were a lot higher 15 months ago. We were around the mid teens at one point and we're now, let's call it 10 percent. For the sake of simplicity, we raised a convertible note, and when we raise the convertible note, a significant number of those investors hedged their position in Webjet. So they take out a short contract for Webjet. So even though that the number looks disproportionately high when the top five or 10, I don't check that again, none more than once a month basis because I don't care. So let's say we're in the top five of shorted stocks. Around about half of them are technical shorts. They're not betting on us declining in shareholder value. They're betting on us because they've got a convertible note as part of the way that they operate that convertible note and roughly one third of the convertible note holders hedged their position and they take out a short. So if you eliminate that element of the short, the underlying short is close to five or six or seven percent, which is doesn't put us in the top five. And we wouldn't be in the spotlight for that particular reason. But, you know, again, I'll use this as as as a way we think about our business. And I'll come back to your question in a second. But the convertible note for us, we thought was an innovative solution of a stock that we knew had plenty of upside and we didn't want to give it away by diluting it even further, by putting out notes, which we had. Twenty five, 30 percent conversion premiums higher than the than the existing share price at the time. And we were the first of the Australian Stock Exchange. Two hundred that you're going to talk to to to do that. And and then we're the first convertible note issuance in about four or five years or six or seven years. I forget what it is, but the first one for a long time. And since we've done it, I think three or four other ASX 200 companies have also put in place convertible notes. So we were happy to be innovative, but we knew there would be an increase in shorts as a consequence of all of that. So the overall true shorting of our position is substantially less than what it was. I'm saying it's about a third of what it was 15 months ago. And, you know, if you don't have a short, then nobody's interested. So in the words of whoever it was, I don't know, John. That's better for them to be talking about you than not talking about you, honey. So good luck. I wake up every morning thinking of how I can crash and destroy them, and we will. This takes time. It's time solves all of these issues for us because we've got and we have had and we will have a continued record of superior performance. I have undoubted faith in the team that we've got, the business models we've got and the economics that we've got. And time will take care of these guys, feel sorry for them. But, you know, that's why that's why they don't live in the big houses on the big streets. That's why they love it. [00:29:23][218.4]

Bryce: [00:29:23] So, John, before we move to talking about growth and competition, just a final one that's really come through when we asked our community if they had any questions. So we've got it all wrapped up into one here where objets fortunes are obviously tied to a lot of factors outside your control board, a closure's vaccine rollout, you know, a lot of those, I guess, factors that lead to travel. So how do you actually plan for the future and manage through such uncertainty? I mean, at the time of recording now late July, Sydney's obviously going into a lock down other parts of Australia as well. So how do you manage this uncertainty? [00:30:00][37.3]

John: [00:30:01] Well, the lockdown situation, as difficult as it is and as late as it is in this cycle for Sydney, is is, relatively speaking, a light touch. I mentioned earlier that I'm normally based in America and the guys in our Spanish office were in lockdown for five months. The guys in our UK office were in lockdown, various states of lockdown for the whole of winter. So it's a little bit and you can imagine. Right, painting the picture of a little poky flat in in London in the middle of winter being locked down as opposed to glorious Sydney, where even in the middle of winter, it's a benign. Lovely environment to be living in, so relatively speaking, we've had lots of experience in in our business and, you know, we have even today, after all the cost takeout and that we've had in our business, we still have six hundred employees globally and fourteen hundred and fifty of them are not in Australia. So we think about it obviously, and manage it on a very localized basis. And what's been an incredibly difficult 15 months, getting people engaged and keeping people engaged and getting them to to to view the longer term is been a significant challenge and ensuring that you're providing the right level of messaging, which is a little bit different to what I'm providing for you guys. But at the end of the day, you've got to give people a reason to believe and they're going to want to come into work. And I'm I believe with every fiber of my body that if you communicate appropriately and give people the right motivations and they give that extra 10 per cent, that that's that's the difference between success and failure. If everyone can turn up to work and collect a paycheck, but turning up to work, collecting a check and committing and wanting to to to drive an outcome that you're part of. And we're not so self-absorbed at the management team to think that this is exclusively our doing. So, you know, when I when I do town halls where I talk to the various parts of our business, in particular in the days when I could do it face to face, you know, I would randomly certainly. Is anyone a shareholder? What's your views on where we're going? How do you think we're traveling? What what else can we do better? And it's remarkable that the feedback that you get, but also it's remarkable the engagement that we've had over that that period of time. And, you know, there's some people who have been with us on the B2C business for 20 years. And there's some people in the B2B business that have been with us for seven or eight years. And they're remarkably invested and they become shareholders and they see they see the value in what we're trying to do. And they're committed. And, you know, there's there's plenty of people who come to get the check as well. But we certainly value and encourage people to to contribute with everything they've got. So they've got a sense of meaning. It's not just coming here to to make money. It's coming here to take the business from an organization through to to an execution and and the journey along the way and the cut and thrust of competition, which we love. I love rubbing up and smacking into smacking into our competitors, metaphorically smacking into a football field, sort of just barging through sort of thing. [00:33:55][233.9]

Alec: [00:33:56] Well, it's good that you've mentioned your competitors there, John, because I feel like we've asked you enough about covid. We'd love to talk about, you know, Webjet beyond covid, including how you think you bump up against your competitors. But before we do, we're just going to take a quick break to hear from our sponsors. So, John, I mentioned before the break that we want to now talk beyond covid, and you mentioned the competitive landscape and there's a lot out there, you know, the the flight centers in Australia, but there's a lot of sort of global online players, Expedia, Skyscanner, booking, dotcom. How do you think about Webjet in the competitive landscape and what do you think your competitive advantages are [00:34:44][47.9]

John: [00:34:45] of all the questions you try to distill to a pithy answer? This is the most difficult because my natural inclination would be bleeped out on your on your kid friendly. [00:34:57][11.4]

Alec: [00:34:59] We've got a good producer if you want to stay a week. [00:35:01][1.9]

John: [00:35:01] And I'd like to think that I still even at my ripe old age, I've got the ability to learn new tricks. And one of them is not to swear as much as I have historically. So I'm not going to start today. If I do, it's a bad day. So I think about it into context. I think about it in the landscapes in which we compete rather than broadly. And then I'll come back to a thematic that we have in our investment thesis. So in the first one in the Australian environment, I think about what our competitors have been able to do historically, which is try to compete on price. And and then I think about what we can do to combat that. And for us and you raise the specter of the the oligopoly power of bookings and Expedia. So it makes it a very difficult environment when you've got such a structural advantage and you've been able to put in lock step the hotel ecosystem of distribution to consumers on a global basis. And it's become very heavily concentrated in the hands of of two players. So as a consequence, we we we try to avoid from a front on collision with with something that's an immovable object. And look at how do we compete without engaging in in a war where they've got substantial more resources than us or sorry, in a battle, rather, where they've got substantial more resources than US and Canada. So to that extent, where we view our competitive scenario in the business, primarily a flight space business and primarily about convenience and choice, and how do we extend our lead in that context that that's as broad base as as I'd like to describe the B2C business. The B2B business is a different one. We specifically went into the B2B business because we thought who what who are the businesses that we don't want to to compete with Expedia or bookings? And yet we know the hotel business is a huge global opportunity and there needs to be pockets or niches that we can compete, which are still massive by global standards and massive by Australian standards. And yet we don't run into them. And that's that's the that was one of the I still remember pitching the story back to the board in 2012 to say hotels are more profitable than selling air. Hotels on a global basis is about 50 trillion times bigger than the Australian domestic air market. And bookings in Expedia were when the the direct to consumer battle. We need to find an opportunity in a new home in which we can compete effectively and have a chance to win. And then we established the media business in Storm in February of 2013 and we sold thirteen thousand dollars of hotel rooms in February 2013. And by November 2013, that business was already breaking even and we were on track to do north of a couple of billion prepaid pandemic. So it's been an incredible growth journey that we were on. And what we did do is, is this incredible thing happened when we entered the space and it changed our thinking. We we went in there knowing that was it was a competitive environment. That was about ten people that were quite large in the space, but there were three very large players. And so what happened is the number one guy got the number three guy, then the combined guys bought the number two guy, and then they elevated themselves from a roughly acerca three billion each Aussie Dollars. And then I became a ten billion dollar business. And then the next level down was a guy who was around about five hundred million. So there's a huge gap between one and number two. And we were fast growing at the time. And then our strategy was, well, if they can do that, we can do that on a smaller scale and that will propel us into the number two. And then if you're in the number two position, we think we can take margin as a consequence of all that, we can take costs out, we can simplify tech, we can have a unified platform. We can compete more aggressively if we get scale. And that's what we did. And so as we thought about competition, we thought we want to be number two and we got there. So we were the fastest growing B2B business in the world. And we're the number two player in the world. And as I said, we're turning over circa two billion pre pandemic roll forward to late July twenty twenty one. Our ambition is to be number one in the B2B business and everything that we've been focused on is number one. It's all about getting scale. It's all about taking costs out. It's all about for every dollar of bookings that we get is being able to do it as efficiently and effectively as possible and yet do it with a lower cost base as we've done historically. So that's how we think about competition. And the reason we like that industry is we don't run into anyone who's more powerful than us in the sense that they may be bigger than us today. The number one player might be bigger than us today, but we have access to capital markets. We've had a great track record of delivery when we've gone to our investors, when we've gone to the broadest investment community, even the middle of a pandemic, they have supported us. So we've had a great track record and we feel confident that if strategic opportunities come along in this particular part of the of our ecosystem that we compete in, that we could take advantage of them and close the gap to number one. So to your investors and I'll come back. Obviously, there's a there's a thematic around. Is this a good business to invest in? I used to I used to pre pandemic say the following to to, you know, probably the pointy end of town, the big end of town when we would pitch our story of business. You're investing primarily in a B2B business that in Asia we can be the number one player. Well, of of expanded the thematic to you. If you're investing in Webjet, there's an element of our share price. That's the webjet. And that will always be important, especially in the recovery has seen that we can go back to a profitable business, even on a domestic business in Australia, which is great. And there's value there, which is reflected in the share price. But the upside value is reflected in can we grow the B2B business? Can we be the biggest player in this market? Can we go from where we were to roughly three times larger than that at the margins that we spoke about? And if we did that, then the upside to to us is is is is phenomenal. But that's a factor of time. That's not going to happen this year. And that's why I'm not focused on whether. Do did you did you sell your competitor by one one shekel more than them in the month of June of twenty? Twenty? Doesn't really matter. That's where we're going to get to. That's going to drive value in the in the medium to long term. And just as we think about share price movement and short term volatility, I'll never forget when I when I first started, the share price was roughly two bucks and then we started the market really liked my appointment. So we started trading at about a dollar eighty a couple of weeks later and then four in that dollar eighty dollars ninety been. And then one day we went to a dollar fifty and I remember being in the office and talking to the chief commercial officer and saying to her, what do they know that I don't know what what do they know? We've just had the record day of sales that we've ever had. We made more money today than we have ever made in Webjet. And what does the market know that we don't know that we've all of a sudden lost 20 percent of our value in one day. What do they know that we got? Well, that's right. They don't know anything. So keep calm, Sir John. [00:43:21][500.0]

Alec: [00:43:22] Every time we get to speak to a CEO or a managing director, we love to ask a question about people and culture. So many of the expert investors that we've spoken to talk about how important it is. But yet, as retail investors, it's the most difficult thing to gauge. You can't say it in an annual report. You can't say it in the financial statement. So while we've got you, you've got a massive company spans the globe. How do you think about leading such a big organization and so many people? Do you have a particular leadership philosophy? [00:43:55][33.0]

John: [00:43:56] Well, of course. And that's it's partly driven by myself. So I'll tell you the things that are driven by me and then the things that the guys in my in my management team and leadership team do an exceptional job at. Number one is the structure of our business. I am. Firm believer and as and I'll say, as supported by empirical evidence, I'm not doing it as a matter of faith, but everything I see about a decentralized organization, this a centralized organization suggests a decentralized organization where decision making is devolved as low as you possibly can into the organization is going to be more successful than a centralized organization. I've had prior to to work in Webjet had the opportunity to work for lots of large businesses predominately in trouble. And I took a view that I saw what I thought were the inefficiencies of a head office mentality, where the joke is where from head office. From head office. We need help and and no good deed goes unpunished because that's what the head office is for. So, you know, I was part of that culture and I was part of that structure, rather, that drives culture. And and and I and I said if I ever had the chance to to run my own organization, I would to do an entirely differently. So the structure is we have no head office. The only head office we have is where Melbourne registered ASX listed companies, a company secretary and our finance, our centralized finance operations is based there. The Webjet business is headquartered out of Melbourne. The the online Republik business is headquartered out of Auckland. The Web business is is based out of Dubai, but it has substantial presence in Spain, UK, Romania, Singapore and Americas. And each of those guys have their own country management. And what we've always encouraged is that people in market make decisions about the market because they know their customers and their suppliers better than a centralized approach. So if if you reflect back when I talked about a little bit earlier about the competitive environment, how when everyone went the Google way we went the building, the brand Branwhite, we do that contrary to most travel businesses, most travel business, a centralized headquarters in a hub and spoke kind of a model where the spike follows instructions and executes against the hub. That's not how we operate. We try to give people Devall sense of responsibility. So what do we do? We provide rigorous budgeting and forecasting tools and then the execution of that becomes localized and people explain what they're doing, but so that they don't go completely crazy. But they certainly need to to to to have an ability to make decisions on the fly. And we devolve as much responsibility as possible. You know, in an environment like that, we try to encourage an element and we touched on this earlier where we're the underdog punching above our weight. I do the the joking reference. We're just humble travel agents who want to rule the world. It tries to to engender the sense that this fun you come to work to enjoy yourself. You come to work to have a sense of camaraderie with your colleagues and you come to work to win. So the the the basis and then, as I said, the management team and the rest of the leadership take on the characteristics of, you know, compliance and characteristics of all the things you need to do to run to to to have an effective cooperation and ensure that we do it. Yet we do it in hopefully as light a touch as as possible without abrogating our responsibilities as good corporate citizens. And in general, we've tried to be innovative and leaders in all of those things. But what we don't do is follow suit with the exception of talking to investors as I am through your vehicle, we don't create a platform for ourselves. We don't project the CEO is the hero. We don't go on panels. We don't make statements around politics and policy. We are focused on our business and we think we know it better than most. And we encourage everybody to to to to participate to the full extent that they can [00:48:44][287.9]

Alec: [00:48:46] love that, love that. Just humble travel agents trying to take over the world. Maybe that's what we'll call this episode Tree. [00:48:53][6.7]

Bryce: [00:48:53] My son, [00:48:53][0.2]

Alec: [00:48:56] Sir John, just like we like to start with a the same question every time we do like to finish with the same three questions before we get stuck into them. I just want to say a massive thank you for giving us your time. You know, I'm sure the Equity Mates community will have loved listening to you, learning from you and hearing more about the business. So, yeah. A massive thank you, but we are talking to these final three questions, the first one is, what does the next 12 months hold for Webjet? What's what's in the product pipeline? Yeah, what, 12 months look like? [00:49:29][32.7]

John: [00:49:30] Again, we sort of you know, I think that might be the first time or one of the few times we've mentioned the word Covid, but it's going to be Covid dependent, what, 12 months looks like. We are more at the mercy than anyone else. The that and I imagine that ninety nine percent of your of your audience is is Australian. So the world is very different outside of Australia. And I don't want to I don't want to talk down to the audience. But the way that the rest of the world is planning to progress is substantially different to how Australia is planning to progress. So I'm in the Northern Hemisphere now, I, I travel regularly. In the last eight weeks. I have been to Dubai twice. I've been to Istanbul once, and I've been to Parma once. I will be going on holiday to Sicily in two weeks and I can travel because whilst Covid is significantly more prevalent in the community, the political aspirations in this part of the world is that we need to get on with our life, accepting that we we have we have gone down this path. And it's been a horrific impact to many people. And I spend most of my time in Europe. Many lives have been lost and it's and it's been devastating for communities. But having said that, the overwhelming sense of the majority of people in this part of the world is that they want to get on and live their life to the full extent they can. And travel is a vital component of that. Being able to to spend time, especially in this context with your loved ones, spend time with your friends, do things that are fun and and obviously have business meetings where you integrate faith based as that continues to as those restrictions continue to loosen in this part of the world, it augurs well for our B2B business and we think there will be obviously substantial growth. As that happens, we will have an update at our annual general meeting on the 31st of August. We recently changed financial year end to thirty first of March as opposed to June 30 to more align ourselves to what is probably and we've touched on this many times, a Northern Hemisphere based business. And we don't want to interrupt the middle of our busiest period by focusing on audit requirements and closing out the year. So we specifically did that to enhance the growth prospects of the business. I think the next 12 months will be very positive for the B2B business. I think the next 12 months for the business will be positive. But we're in the middle of a lockdown. So it's pretty hard to to to focus on anything about over the next 30 days. But if we roll forward 12 months and the country becomes vaccinated and people accept that this is not going to go away and it's going to be part of our lives for the next 10 years. So what are we going to do about it? I would anticipate that the international borders would open and there'll be a high degree of international travel. Domestic travel will come back as it was coming back until about six weeks ago, four weeks ago, full, full, full throttle. And you've got a a vibrant, competitive landscape. You've got three viable competitors in the domestic marketplace. So all of that gives consumers choice, which keeps prices down, which makes travel more affordable, which gives people the motivation, incentive to continue to to do that. And the fact that the vast majority of the globe has been denied that opportunity for the last 18 months, we suggest there will be a really significant rebound when markets do open up. And the timing of that is outside of my control. But we are well positioned that when it does occur, that we're appropriately resourced to ensure that we maximize our share of that marketplace when it does come to fruition. [00:53:36][246.0]

Alec: [00:53:38] Yeah, I can I can definitely attest that there's a lot of people itching to start traveling again. So you better have your website infrastructure up and running when we can. It'll be like Black Friday in the travel industry. [00:53:53][15.4]

John: [00:53:54] I'll do it. I'll ramp up our infrastructure, our cloud investment just the year. [00:53:59][4.5]

Alec: [00:54:02] So, John, this second question I might specify are outside of covid because I feel like we've spoken about covid enough. So outside of covid, what is the biggest risk for your. Business right now or [00:54:17][14.3]

John: [00:54:19] the risk and you sort of accidentally touched on it in your last sentence, the last comment? The biggest risk is always tech. We are a digital business where where we we have millions of searches a day. Tens of millions of searches a day thing, I'm always the one that keeps me up at night is is ensuring the tech works. And that that that's that's fundamental to the premise of what we had. And the second one is what we already touched on as well. Is, is the team motivated? Are our employees. You know, I line up my team. I've got my my in the old days, I'm a Thursday night. The footy teams were selected and my team and I compare against their players on their team. Have I got the better players in my team? And I fine using the sporting analogy of a good form. Are they fit? Are they raring to go? And will our class prevail? And making sure that we have everybody aligned around our goals is is is is important. And and, you know, in an environment which I described to you, which is not the the antithesis of command and control, which is decentralized, having faith that the management team to two us into the organization can see the same objectives that you have, so that making sure that that stays on track there, the two things people and take that that I focus on the most. [00:55:50][91.9]

Alec: [00:55:51] And then final question, John, if you think about Webjet in 10 years, what does success look like? [00:55:57][6.3]

John: [00:55:59] That'll be me still running the place on a walking frame as I come into the office on a daily basis. That that that that would be that would be a good, good pollinator success for us in ten years. Time would be as follows. We will have three successful travel divisions at the moment. We have to we have obviously our consumer facing division with the both the online republic and which we have our B2B division and we'll have another one. And in B2B division will be the biggest players in in in the world. In our B2C division. We will be we'll have extended our lead. And in our New Zealand based businesses of online republic, we will have substantially increased our niche motorhomes and car operations to be global players. And that that would be what success with. That's what that's that's how I envision the next 10 years, that there will be another arm or another leg to the to the base at it. And the two businesses that we've had, which have got incredible blue sky opportunities, will be able to fully capitalize on those and execute and and in particular be the number one in the B2B world. That that means that we go from Cerca three billion to 10 billion in TV. So that would be what success looks like in ten years time. [00:57:30][91.2]

Bryce: [00:57:32] We'll have it. John, will, we have run out of time, but it's been an absolutely fascinating and enjoyable conversation with you today. So certainly appreciate your time. And I know that so many in the audience will have taken so much value from everything that we discussed there. So always a pleasure to be able to access, you know, managing directors and CEOs. And we do very much appreciate your time. So thank you very much. [00:57:55][23.5]

John: [00:57:57] Look, delighted and thank you for the opportunity, and it's great to see two young punks trying to make a name for themselves, and I wish you every success and you're providing a valuable service. Keep it up. [00:58:12][15.0]

Bryce: [00:58:12] Thank you very much. Thanks, John. [00:58:12][0.0]

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