Travel software maker Serko has taken big profit and revenue hits for its pandemic-ravaged year to March 31, 2021 as expected - but also told investors it is on track for its medium-term goal of $100 million in annual revenue as passenger numbers start to recover.
Shares slipped 3.73 per cent to $5.45 in early trading, but are still up 133 per cent for the year.
The company made a net loss of $29.4m, versus a net loss of $9.3m in FY2020.
Total revenue was $12.4 million, down 52 per cent against $25.9 million in the prior year.
Cash stood at $80m at 31 March 2021, which included the net funds received from the 2020 capital raise of $65m. Cash burn for the year was $27.5m, equating to an average monthly cash burn of $2.3m - meaning Serko had enough cash on hand to comfortably see it through the rest of the pandemic, assuming no shocks, chief executive Darrin Grafton said.
No guidance was given for FY2022, amid lingering Covid uncertainty, but the company reiterated its medium-term $100m goal (Grafton has previously defined medium term as two to three years) and said that growth through acquisitions was possible in the new financial year.
Speaking to the Herald son after the release of today's results, Grafton said Serko had kicked the tires of around 40 companies, many cash-crunched by Covid. None were the right fit or "or up to our standard,"
Don't panic, spend
Grafton told the Herald he did not panic last March, as border closures kicked in. As a travel industry veteran, he'd seen the industry rebound from show-stoppers like 9/11, the GFC and SARS.
His experience had taught him there was opportunity in a crisis; a chance for a market-share grab as others retrenched - and he had the wherewithall because Serko was cash-rich and well-connected thanks to its raise shortly before the outbreak, and its new Booking.com partnership.
So while others were cutting back, Grafton was pulling out his chequebook.
The extra spending is evident in the acounts filed today.
Expenses increased by 21 per cent to $44.9 million from $37.1m in the prior year, "reflecting investment for our planned international expansion, including a net increase of 54 people to 287 full-time equivalent staff."
Whether it pays off, we'll find in the coming months. Grafton says one Serko's key markets, Australia, is "probably three or four months behind New Zealand," where a solid reebound is already evident.
Serko's April 2021 New Zealand bookings were 158 per cent up over 2019 even if, overall, the global recovery in travel is very much a work in progress.
Overall, Serko says while bookings processed through its system have increased each month since their April 2020 low, its recent peak day of 13,000 bookings in May 2021 was still some way off its peak of 24,000 daily bookings in February 2020.
Grafton said he had been picking a rebound in another key Serko market, the US, in September, but with vaccinations proceeding apace (the New York Times says 37 per cent of Americans 18+ are fully vaccinated, while 48 per cent have had their first jab), there could be a new travel boom from July.
And he says Canada has remained solid for Serko throughout, with energy and mining companies continuting to fly-in and fly-out workers.
'A new type of business travel
Grafton says pundits are probably right when they say Zoom calls will replace some traditional business travel.
But the Serko boss also sees "a new type of business travel" emerge For some companies, big conferences are out, and the likes of sending six staff to Queenstown for a smaller confab are in.
Although, smaller, such business trips can be more frequent, and shorter notice - all requiring more management of travel bookings and expenses via Serko's sotware.
And Grafton also thinks some commentators could be overdoing the "Zoom" era predictions.
"We're hard-wired to compete," he says, and if we see our competitors jumping on a flight to woo new customers face-to-face, we'll be itching to do the same.
And he maintains that instinct is often correct. "A Zoom call might last 30 minutes," he says, "But often you work out the deal over coffee or a two-hour lunch."
Shares already in recovery mode - and then some.
Few tech stocks fell harder than Serko as Covid closed borders. The maker of corporate travel-booking and expense-management software plunged from $5.78 to 89c between the first Covid-19 stories out of China in the New Year of 2020 and airports worldwide emptying out in March.
Grafton always argued his Auckland-based company could tough it out. Even as Serko nosedived to a $10 million full-year loss, the CEO argued it was cushioned by a $67m raise, wrapped up in September, and an earlier $17.5m cornerstone investment from US giant Booking.com that meant Serko had $90m cash on hand.
Grafton added that the Booking.com investment in Serko opened the door for the Kiwi company to partner with the US giant (the Nasdaq-listed Booking.com has a market cap of just over US$100 billion). Serko would look to leverage Booking.com's expertise in areas like hotel booking, and sell its service, on a white-label basis, to the Nasdaq giant's partners - which would represent a huge step to expanding Serko's northern hemisphere business (its traditional strength has been in the Australian fly-in, fly-out market or "fifo" market).
For the best part of a year, it seemed like a whiteboard goal, but in March, close to bang-on the first anniversary of his company's coronavirus nadir, Grafton could officially announce that his company's Zeno cloud platform will also be sold as Booking.com for business.
Australian domestic travel rebounded soon after. And, of course, we've just seen the transtasman bubble finally open.
The big question: even once the pandemic completely disappears, how many companies will be happy with the Zoom meeting lifestyle they've adopted during the pandemic?
A recent study of 1000 businesspeople, commissioned by 2degrees, found that 48 per cent of decision-makers thought their business had suffered from lack of face-to-face interaction over the past 12 months. But even in that boosterish environment (the telco was looking to promote a new transtasman roaming offer), that's still a minority.
Nevertheless, while videoconferencing can be good for maintaining or extending existing business, it's harder yakka for creating new contacts, and winning new contracts. The Herald has spoken to many businesspeople recently who have been itching to get back on international flights.
Investors agree. Serko shares have roared back since March to recently hit an all-time high of $7.01.
A nod from his peers
As well as its core travel business rebounding. Grafton says material benefits from the Booking.com deal will start to kick in during FY2022, too.
This time last year, with Serko shares languishing, it was fair to say many investor's were under-estimating Grafton.
Today, they might want to pay more heed to his predictions. In any regard, his peers have started to take night. Overnight, Grafton could celebrate winning the Caldwell Partners Leadership Award at the annual Institute of Finance Professionals (Infinz) Awards.