Q4 2023 Global Business Travel Group Inc Earnings Call
Participants
Jennifer Thorington; Director, IR; Global Business Travel Group Inc
Paul Abbott; CEO & Director; Global Business Travel Group Inc
Karen Williams; Chief Financial Officer; Global Business Travel Group Inc
Duane Pfennigwerth; Analyst; Evercore ISI
Toni Kaplan; Analyst; Morgan Stanley & Co LLC
Peter Christiansen; Analyst; Citigroup Inc
Lee Horowitz; Analyst; Deutsche Bank Securities Inc
Presentation
Operator
Good morning, and welcome to the American Express Global Business Travel Fourth Quarter and Full Year 2023 earnings conference call. As a reminder, please note, today's call is being recorded. I'll now turn the call over to the Director of Investor Relations, Jennifer Thorington. Please go ahead.
Jennifer Thorington
Hello, and good morning, everyone, and thank you for joining us for our fourth quarter and full year 2023 earnings conference call. This morning, we issued an earnings press release, which is available on SEC.gov and our website at investors dot NA. global business, travel.com.
A slide presentation, which accompanies today's prepared remarks, is also available on Amex GBT Investor Relations webpage, who would like to advise you that our comments contain certain forward-looking statements that represent our beliefs or expectations about future events, including industry and macroeconomic trends, cost savings and acquisition synergies among others.
All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these and other risks and uncertainties is contained in our earnings release issued this morning. And our other SEC filings.
Throughout today's call, we will also be presenting certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, free cash flow and net debt. All references during today's call to such non-GAAP financial measures had been adjusted to exclude certain items. Definitions of these terms and the most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release.
Participating with me today are Paul Abbott, our Chief Executive Officer; and Karen Williams, our Chief Financial Officer. Also joining for the Q&A session today is Eric Bock, our Chief Legal Officer and Head of Global M&A.
With that, I will now turn the call over to Paul. Paul?
Paul Abbott
Thank you, Jennifer, and welcome to everyone, and thank you for joining our fourth quarter and full year 2023 earnings call. We once again delivered outstanding financial results driven by continued share gains and our focus on margin expansion. In the fourth quarter, we generated revenue of $549 million and adjusted EBITDA of $18 million, which nearly doubled year over year. Our strong full year results finished above the guidance we issued at the start of the year with revenue up 24% year over year and adjusted EBITDA up nearly four times year over year to a total of $380 million. Strong demand for our leading software and services resulted in continued share gains, we reported a record new wins value of $3.5 billion in 2023. This includes a record $2.2 billion of SME new wins, demonstrating continued progress with this large profitable customer segments. Our focus on driving operating leverage is clearly evidenced in our 2023 financial results. For the full year, adjusted operating expenses increased 9% compared to 24% revenue growth. And we drove significant adjusted EBITDA margin expansion of 11 percentage points year over year.
Finally, our evolution to positive free cash flow is an important milestone for the company that provides us with additional opportunities to invest in our growth and drive shareholder returns. We are rapidly deleveraging resulting in reduced interest expense and a two notch credit rating upgrade from S&P Global in 2023, we continued to execute our strategy and deliver outstanding financial results. Our strong momentum is clearly evidenced by our key operational and financial metrics, starting with transaction growth. Full year '23 transactions were up 19%, driven by increased demand for business travel and our share gains. Ttv grew by 23%, driven by the strong transaction growth and an increased mix of international bookings. Revenue was up 24% to reach $2.29 billion for the full year, driven by strong growth in transactions, TDV and increased demand for our products and professional services.
Finally, our focus on margin expansion and driving strong operating leverage resulted in adjusted EBITDA growth of 269% to $380 million.
So looking at our trends in more detail, we saw relatively faster growth from SME customers supporting our increased focus on this attractive customer segment. Full year '23 SME transactions were up 20%. Global multinational transactions were up 17%. Domestic transactions were up 13%, while international growth was even stronger at 21%. Growth in hotel transactions were up 20%, which outpaced the 16% growth in air transactions. This reflects industry trends as well as our intentional focus on increasing our volume of hotel bookings as we continue to strengthen our hotel content and display, providing customers with more value and more choice.
Finally, here on a regional basis, transaction growth was 16% in the Americas, 20% in EMEA, Asia Pacific growth was significantly higher at 29% as we saw the benefit from a delayed recovery in this region. And so MX GBT continues to grow and to gain share.
Our revenue performance versus our major business services and travel peers is very favorable. This is driven by two factors. First, our strong new wins performance, and second, the increased demand for business travel meetings and events from our diverse and premium customer base.
So turning to the commercial highlights, we continue to gain share and reported record total new wins of $3.5 billion in 2023. Importantly, our customer retention rate was 96%, one percentage point higher than the previous year. Our biggest growth opportunity remains in the SME customer segment, which represents approximately $950 billion of travel spend. We are already a leader in managed travel in this segment, but 70% of this opportunity is not currently in a managed travel program as our progress clearly demonstrates more and more SME customers are recognizing the value of our leading software and services and a professionally managed travel program. As a result, SME new wins for 2023 totaling $2.2 billion, a record for our business. That is up $100 million year over year. Of this, approximately 30% has come from previously unmanaged customers who were looking for the service savings and control that our solutions provide. This is five percentage points higher than our mix of unmanaged new wins in 2022.
Moving on to our product and technology highlights. Developing our own software platforms. The Genocea and NEO enables us to improve the end-to-end customer experience and to leverage automation, machine learning and AI to drive cost savings. We exited '23 with 78% of our transactions coming through digital channels. Over 60% of the digital bookings now come through our own software platforms, Neose at Agensys. In fact, in 2023, we had 40% transaction growth on NEO and 24% transaction growth on Agennix here, we firmly believe that companies like ours stand to create significant value through automation and AI as a leading software and services company for both travel and expense, we have the opportunity and we have the expertise to increase automation, improve the customer experience and reduce costs and to further accelerate our progress.
We recently announced the creation of a new AI initiative and dedicated team focused on increasing productivity through the adoption of next-generation AI focuses in four areas across our organization, customer service, finance, engineering and the broader workplace. This new team will play an important role, delivering cost savings and improving the customer experience.
And finally, yesterday, we announced an important new integration with American Express to help SME businesses control the indirect spend, manage their expenses and book travel. We are seamlessly integrating American Express's virtual cards into our near one spend management platform. We're combining procurement expense management, online travel and payments into a single software solution. And by combining these typically disconnected processes, we are delivering unique control and savings to businesses. And we're also extending our software and services beyond travel to include procurement, expense management and payments. We are excited about this opportunity to bring the value of Neo, one to more businesses through our partnership with American Express, a global leader in small business payments.
And now I'd like to hand it over to Karen to discuss the financial results in more detail before we move on to our 2024 outlook.
Karen Williams
Thank you, Paul, and hello, everyone. As previously talked about my focus on achieving outstanding financial performance by growing revenue and adjusted EBITDA. Specifically, this translates into three key priorities when it comes to managing our financial performance, which I'm focused on accelerating cash flow generation, driving operating leverage and continued margin expansion and importantly, creating capacity to invest and drive long-term sustained growth, both organically and through strategic M&A. I am really happy with the progress we made in Q4 and full year 2023 in all of these areas of strong revenue growth, substantially higher earnings, significant margin expansion and positive free cash flow. A testament to this. In addition to us covering $30 million of incremental investments as we focus on driving long-term sustained growth.
So now let's turn to our financial performance in more detail. We delivered strong results in the fourth quarter, revenue reached $549 million, which was at the top end of our guidance. Solid transaction growth and continued momentum on our yields drove our revenue growth. As a reminder, our revenue model was driven by volume sales and recurring revenue in Q4. Our revenue yield, which is measured as revenue over TTV., reached 8.7%. Fixed was up 70 basis points versus Q3 2023, driven by our continued focus on revenue optimization, the impact of our mix, specifically international growth and then the typical Q4 seasonality due to timing of annual performance incentives and triggers. We grew revenue by 4% year over year, but I encourage you to look at Q3 and Q4 together as we have different phasing of supplier revenue in 2022, H. to revenue growth was 10%.
Before we talk about adjusted EBITDA, let's talk about expenses, which are a key area of focus for operational efficiencies, cost saving initiatives and lower incentive costs more than offset the investments we are making in our sales and marketing engine software platforms and AI This resulted in a net reduction of $15 million or 3% in adjusted operating expenses year over year and a reduction of $7 million quarter over quarter. This strong operating leverage translated into $18 billion of adjusted EBITDA in the fourth quarter, up $37 million or 83% year over year as adjusted EBITDA margin expanded by six percentage points to reach 15%. We achieved free cash flow generation of $32 million in the fourth quarter, continuing the momentum we have seen in 2023 on generating positive free cash flow. This was driven primarily by our working capital action, which I've discussed on previous calls. On a full year basis, transactions grew 19%, driven by strong travel demand and net new wins as we continue to gain market share.
Ttv grew 23%, aided by stronger international mix, which resulted in revenue of $2.3 billion up 24% year over year. And at the high end of our most recent guidance update and above the initial guidance provided coming in to 2023.
Our focus on driving operating leverage resulted in adjusted operating expense growth of 9%, well below our revenue growth. And to specifically call this out, we saw a 16 percentage point difference between our top line growth and expense growth in 2023, we increased our adjusted EBITDA margin 11 percentage points above the prior year to reach a 17% margin. And very importantly, on a full year basis, we generated positive full year free cash flow of $49 million. This evolution to positive free cash flow is a pivotal turning point for the company driven by adjusted EBITDA growth, improving working capital management, including our critical agenda, see our working capital initiatives, our leverage ratio or net debt divided by last 12 months adjusted EBITDA is now 2.3 times as of December 31st, 2023. This represents a very significant step down for us as a company in December 2022. This stood at 8.9 times.
As you can see from the chart on this slide, the momentum we saw in 2023 is a critical proof point that demonstrates our discipline on the balance sheet. And as you will hear from me later, very importantly, we are lowering our leverage ratio target range from two to three times down to 1.5 to 2.5 times. The reduction in our leverage ratio in Q4 drove 75 basis points of interest rate reduction on our outstanding term loan. And based upon our latest performance, we have now triggered a further step down, which drives an additional 75 basis points of interest rate reduction. And so in total, this 150 basis points production results in approximately $25 million of annual interest expense savings. And as our non-call option rolls off in July 2024, we have the opportunity to refinance our debt and further reduce our interest expense. This momentum was recognized recently by S&P Global Ratings who gave us a two notch credit upgrade rating to B plus based upon our rapid deleveraging and positive cash flow.
I am now going to turn back to Paul to speak to how this momentum is continuing into 2024. Before wrapping up with our 2024 guidance.
Paul Abbott
Thank you, Karen. And now I'd like to turn our attention to the year ahead. I want to start by sharing how we think about our financial model in 2024 and beyond how our financial model can deliver industry leading returns in a more stable growth environment.
You've already heard from the airlines hotels OTAs that the industry is now settling into a more stable level of growth. The powerful financial model that we have built positions us for industry-leading returns in this more stable growth environment in 2024 and beyond, we expect to deliver 18% to 32% adjusted EBITDA growth in this stable growth environment in 2024.
And let me take you through the bills first we expect business travel demand from our premium customer base to grow above GDP as it has done consistently for several decades prior to the pandemic.
Second, we have a significant runway for growth in a very large fragmented market, and we expect to continue to gain share and deliver revenue growth ahead of the industry.
Third, margin expansion operating leverage is expected to drive 18% to 32% adjusted EBITDA growth, benefiting from increased productivity and scale. We're focused on a disciplined cost structure and margin expansion. We continue to shift more and more transactions to digital channels, making further investments in automation and AI and delivering on the synergies from the Agensys acquisition.
Now that we've reached a more stable growth environment, we can shift even more of our focus towards driving productivity and efficiency gains after two years of significant hiring and training in response to industry recovery.
Fourth is capital deployment. We have reached a pivotal moment in the business where our free cash flow can now fund incremental growth opportunities.
Our free cash flow is accelerating, thanks to our EBITDA growth, a significant reduction in restructuring expenses, lower interest expense from deleveraging and prudent working capital management. Now that we are firmly free cash flow positive and growing, we can shift more focus to organic and inorganic growth investments. And finally, as part of our financial model, we have a proven track record of accretive M&A and delivering on the synergies that can further accelerate our financial model. M&a remains a significant and attractive opportunity in a large fragmented market where scale is becoming even more important.
So looking to the year ahead, we feel the ground beneath us is more stable and the demand outlook is robust. There are a few external data points. I want to draw your attention to here that show our customers and industry experts also expect business travel demand to remain robust. First, our own most recent customer survey shows that our top 100 customers expect travel spend to be up approximately 4% in 2024.
Client sentiment has improved since the previous quarter survey with a six percentage point increase in positive sentiment and the percentage of clients expecting to spend more on travel has increased by three points with many organizations embracing hybrid and remote work, bringing distributed teams together regularly face-to-face interactions of meetings and events is a growing necessity. According to our meetings and events, 2024 global forecast that surveyed over 500 meetings and events professionals from around the world, 67% of respondents SE corporate meetings and events budgets are increasing through 2024 forward looking spend in our own meetings and events business supports this trend currently up 10% versus the same period in 2023. GBTA.'s most recent poll shows that 87% of travel buyers expect travel budgets to increase or hold steady in 2024. Morgan Stanley's corporate travel survey shows 8% expected growth in business travel in 2024.
Finally, here, one of the largest U.S. airlines issued guidance for 3% to 5% capacity growth in 2024. So in summary, I am more positive than ever for our future. We are confident that 2024 will be another year of share gains, strong growth in profits and cash flow and continued margin expansion I'll now turn it over once again to Karen to provide our 2024 guidance and our capital allocation framework.
Karen Williams
Thanks, Paul and say, let's turn to 2024 guidance we believe our operating leverage can accelerate above industry revenue growth into even higher adjusted EBITDA growth and free cash flow generation. We are guiding to full year revenue of $2.43 billion to $2.5 billion, which represents growth of 6% to 9%. As Paul described, the travel demand environment has reached a point of stability. As such, we expect same-store sales to contribute two to five percentage points of revenue growth in 2024. On top of this, as we continue to gain share, we expect our net new wins to contribute approximately four percentage points of additional growth. As discussed, we are very focused on driving operating leverage and margin expansion, which scales single digit revenue growth to significant adjusted EBITDA growth of 18% to 32% in our 2024 guidance to a range of $450 million to $500 million. This reflects expected margin expansion of 160 to 350 basis points to reach a full year 2024 adjusted EBITDA margin of 18% to 20%. And it is important to note, this strong margin expansion is net of significant investments in future growth, particularly in driving our sales and marketing engine of software platforms and AI. In 2024, we will benefit from the carryover of some of our cost transformation initiatives and will additionally realize incremental benefits from our continued focus on productivity within the enterprise.
Finally and critically, we expect our strong positive free cash flow generation to continue to accelerate in 2024, we are targeting free cash flow conversion of approximately 25% of adjusted EBITDA. This means we expect to generate more than $100 million of free cash flow in 2024 or more than double our 2023 free cash flow. This significant step-up is driven by strong adjusted EBITDA growth, the reduction of integration and restructuring costs, lower interest expense as we deleverage and the continued benefit from the agency working capital initiative.
One, I'm not going to walk through us on this call. I encourage you to review the free cash flow details provided in the appendix of our earnings presentation.
Now that we have reached a stabilized level of travel demand growth in the industry, we will no longer be providing quarterly guidance. However, we have also provided historical quarterly seasonality details in the appendix of our earnings presentation. To help you with your models, we expect the seasonality of revenue and adjusted EBITDA this year to be similar to last year.
And so thinking about capital allocation, 2023 was a pivotal moment for us as a company as we turned free cash flow positive and this accelerates in 2024. Our capital allocation framework is now very much focused on growth, cash generation and reinvestment to drive shareholder returns.
Our first priority is accelerating cash generation with a longer-term free cash flow target of 45% to 50% of adjusted EBITDA. Second, we continue to deleverage now targeting a range of 1.5 to 2.5 times net debt to adjusted EBITDA over the long term. And as I said, earlier, this new target leverage is lower than our previous range, reflecting our strong focus on the balance sheet and said, we will look to invest in high-return organic growth and accretive M&A.
So to wrap things up, why should investors be excited about MX GBT. in 2024 and beyond, as we expect revenue outperformance as business travel stabilizes at or above GDP growth and MX GBT continues to win and gain share.
Second, operating leverage focus on productivity and leveraging AI and automation is expected to deliver 18% to 32% adjusted EBITDA growth in 2024. And as we look over the medium to long term, we expect further opportunity to expand our margins.
Third, we are generating free cash flow after last year's positive inflection. On top of this, we have an opportunity to refinance our debt to even more interest expense savings.
Finally, our evolution to positive and accelerating cash flow supports investment in long-term sustained growth organically and through accretive M&A.
So we can now move into Q&A. Paul and I am joined by Eric Bob, who is our Chief Legal Officer and Global Head of M&A. Operator, please go ahead and open the line.
Question and Answer Session
Operator
(Operator Instructions) Duane Pfennigwerth, Evercore ISI.
Duane Pfennigwerth
Thank you. Maybe first, just on the business travel recovery, can you please speak to the geographies and industry verticals that showed the biggest sequential improvement. And maybe since we're sitting here in early March, could you touch on trends into the first quarter? I mean the airlines that remain our fully committed to business travel have noted the continued pickup or continued building here into into the March quarter?
Paul Abbott
Yes, sure. Thanks, Duane. The trends actually remain pretty consistent with what we've shared before, you know, where still seeing an outpacing hotel, we're still seeing a practice of region outpace the US and Europe. So I would say those are the the two main trends we have is continuing to see SME growth outpace multinational and global. But I think as I look ahead to 2024, which was the second part of your question down, I think we will see a continuation of some of the trends. I think we'll continue to see hotel outpace there. I think we are going to continue to see A-Pac outpace the US and Europe.
And I do think we're going to see our growth in global multinational and SME start to become more consistent because we certainly to your last point have seen a pickup in the global multinational segment, certainly in December and into the first quarter and notice as referenced in some of the airline presentations, we've also seen a pickup, particularly in the technology sector and professional services. And I think we will see a narrowing of the gap, if you like, between s and a lot of multinationals as we go through 2024. But I think the other trend is going to remain pretty consistent.
And then the other one that I would just call out as we look ahead to 2024, 2023, we saw much more, I think, significant increases in average daily rate and average ticket price. We do think that's going to moderate in 2024. And so we're expecting sales to be one to two points ahead of our transaction growth in the year ahead. So those are the key trends I take outline.
Duane Pfennigwerth
Thanks. And then maybe maybe just for a follow-up. You touched on it with AI and productivity, but maybe on the supplier integration side, can you talk maybe about your top priorities, maybe one or top2 development priorities into 2024. And maybe the reality is there's nothing there, but I'd be curious on the supplier integration side, if you feel like there's anything strategic.
Paul Abbott
Yes. I mean, certainly, one of the key areas of focus for us in '24 on the supply side is to continue to invest in our marketplace. And continue to make sure we've got the most comprehensive and the most competitive content and really leveraging the investments we've made in our supply management platform, which enables us to bring in content from multiple different sources and display that content to all of our channels. And so yes, access to content and integration of content is a key priority for 2024, as you would expect, NDC is part of that. We're now working with 10 airlines on NDC and airlines that are either rolling out or piloting NDC. I say each airline is at a different stage of development, but we are now live with NDC content in both our software platforms, Neo managers here. As you know, we continue to integrate hotel content through our supply management platform, around 37 hotel transactions actually come from third party API integrations and not through the GDS on the hotel side. So yes, we'll continue to be an important area of investment for us to ensure that we're offering the most comprehensive, the most competitive content, and we continue to deliver the most valuable marketplace and drove.
Duane Pfennigwerth
Okay. Thank you.
Operator
Toni Kaplan, Morgan Stanley.
Toni Kaplan
Thanks so much. I wanted to ask about the products and professional services and how that performed during the quarter, I think went into that bluntly normally do. And so if you could just give some of the drivers and why you decided to take that and thanks for the question.
Karen Williams
We we see it from a currency perspective. It was very much in line with the trends that we have been seeing through the year have continued strong performance in terms of our meetings and events business, we will take an action in terms of your question in terms of not not breaking that out, I'll come back.
Toni Kaplan
Okay, great. And then just to follow up on the geography question. Have you seen any impact from the slowdown in China and how that is how you're thinking about it? And how it impacted you're at '24 hours?
Paul Abbott
Yes, the China market tell you that a joint venture market for us, we actually don't consolidate the volume. So you won't see an impact from from back in our numbers from our domestic business in China. That actually remains pretty robust, but it is a small part of our business that we don't consolidate it. So you're not going to see and an impact from from that in our 2024 outlook.
Jennifer Thorington
Okay, terrific. Thank you.
Operator
Peter Christiansen, Citigroup.
Peter Christiansen
Thank you. Good morning. Nice trends here. Paul, I was wondering if you could, in any way, if you could if you could frame the opportunity on the B2B payments launch with MX. I guess as it relates to your current base of clients, potential uptake there, and I'm also curious this solution can can help improve working capital management as it relates some of your SMB clients?
Paul Abbott
Yes. Look, we're very excited about the launch with with MX that we announced yesterday that Nirvana is a product that we've launched in the UK and the US, and we've been very, very pleased with the acquisition results, but we have been working in parallel with payment integration with Amex because it's a really important feature of the platform, and it brings a lot of the functionality to life, but just stepping back for those who aren't aware of that. And the other one is an all-in-one spend management platform. So it enables businesses to manage their indirect procurement. It also enables them to book travel through on the travel platform and enables them to manage all of the expenses.
And now we've added payments. So for companies that really don't want to have multiple SaaS solutions to manage procurement and indirect spend and travel and expenses, you have it all in one place as a turnkey solution. And we know that that's very attractive to SME customers. But the integration of payment is really, really important because what customers can now do in near one is they can simply as they're eligible for American Express business or corporate card account into the platform, and then they can use that to set budgets and to issue issue virtual payment cards to employees across the company. And then they can do that also at the same time, setting controls and policy in the platform. So it's a very powerful solution for businesses that are really looking for that turnkey. All in One spend management platform. We are looking forward to working with American Express to increase our sales and marketing spend on near one, both through our own channels and of course, through the Onex partner channels as well.
And to your point on working capital, yes, this also helps because of all the ability to essentially just implement customers immediately with authorized payment on card is our preferred payment method and definitely is one of the things that we've been doing across the business to improve our working capital performance. So the more that we can scale near one and the more that we scale our software solutions with payments and bill them all improved working capital.
Peter Christiansen
Thank you, Paul. I'd imagine it also helps the client stickiness as well. I just have a quick follow-up back to vertical exposure. Just curious specifically as it relates to some of your technology clients. I know that that's been an area that saw some of the the deepest contraction during the pandemic. Just curious if you could talk about some of the underlying trends with that particular vertical and how you see that evolving over the next year? Thank you.
Paul Abbott
Yes, I was pleased to see the pickup and we had double-digit growth within the technology vertical in Q4 and into Q1. So I think that's a positive sign, and it just reflects the higher level of confidence in that sector. And with many of the large technology clients that we have, and we do see that trend continuing through the balance of '24.
Peter Christiansen
Thank you.
Operator
(Operator Instructions) Lee Horowitz, Deutsche Bank.
Lee Horowitz
Hi guys. I mean, you've obviously on the full-year guidance more so seems to suggest that there's sort of no more recovery tailwinds left for business travel broadly, and you're settling back into sort of the GBP perhaps GDP-plus type growth.
Transaction recovery relative to 19 is probably sub 80%. So while we expect the industry to not benefit from some ongoing recovery dynamics and craft, can you comment why the industry is now, let's say, fully recovered at something below sort of 2019 levels?
Paul Abbott
Yes. I mean, I think I said this last quarter when we did earnings that the way that we are looking at the industry going forward is that we will now see growth that is above GDP plus our new wins trying to frankly identify what relates to a recovery from events that are now four years old is just more of an art than a science, quite frankly. So what we've tried to do is be transparent around the level of growth that we think the industry will see some over the next 12 months. And again, we've been pretty consistent in saying, I think what we will see is the industry will grow somewhere between three to five points, and then we'll put four points of share gains on top of that.
So that's how we think about it. What I would also say is that I think one of the exciting things, frankly, about 2024 is that, you know, it is a year of, I think, normalized growth more stabilized growth. And what that will do is highlight how successful our model is in that environment because even in an environment where we have higher inflation, where there is lower GDP growth, we're able to deliver 18% to 32% adjusted EBITDA growth. And I think that we're excited about 2024 because I think it will highlight the advantages of our model, we will deliver 18% to 32% adjusted EBITDA growth. Our forecast for underlying EBITDA to grow around 69%, with $90 million of adjustments coming from reducing restructuring integration and interest expense?
Yes, we're going to more than double the free cash flow generation of the business, and we're going to continue to expand margins by 150 to 350 basis points and on. So I think we should look at 2024 as an opportunity to really demonstrate how our model can deliver above industry returns in a more stable growth environment.
Lee Horowitz
Great, great. Thanks. And then maybe is there to remake both your cost base and perhaps customer-facing products?
And can you maybe talk to some of the early wins you've seen on either side of that coin. Is that maybe transforming your business and perhaps, you know the timeline to which you expect to see meaningful returns in the next year or so on either the customer experience or sort of taking cost out of your and of your business as you lean more aggressively into January and the technologies.
Paul Abbott
Yes, thank you. I mean the key point for me here is that we have both the expertise and the opportunity to make a significant difference through AI and automation. And what I mean by those, we have the expertise because 78% of our transactions come through digital channels. We own our own software platforms in NEO and Agensys. We've been using machine learning and AI for several years to deliver our strong results in terms of our drive to automate our business and our drive to generate efficiencies and margin expansion. So we've got the expertise here, but we also got the opportunity to hit 40% of our costs. Our still people in servicing organization.
We have significant amount of costs in our finance organization and also in our product and platform engineering teams. And those are the areas that we've identified where we see proven use cases for AI and generated a eye in order to take out significant cost and really improve productivity that we have a three year plan for our cost reduction efforts and our margin expansion efforts our AI. initiative is an important part of that. So you're going to see the results from those initiatives show in the margin expansion of the business as we go through '24, '25, and '26.
Operator
This concludes our Q&A. I'll now hand back to Paul Abbott, CEO for final remarks.
Paul Abbott
Okay. Well, thank you. Thank you for the questions and closing, I would just like to thank our team for the dedication to our customers, the strong results they delivered in 2023. We are very confident that '24 is going to be another year of share gains, strong growth in profits and cash flow and continued margin expansion.
Thank you very much for joining us today and your continued interest in American Express Global Business Travel. Thank you.
