Navan's AI Travel-Booking Tools Displace Legacy Providers

0:00Is your multi-entity management creating more confusion than clarity? You need the Intuit ERP. Intuit Enterprise Suite. It's the AI-native ERP solution that's powerful, painless, and proven. Learn more at Intuit.com slash ERP. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Shares of Navon surged more than 43 % on March 26th. It was the day that the company, a day after the business travel platform, reported fourth quarter results that beat expectations. They gave an outlook that analysts saw as both positive but also conservative.

0:45Shares also rose as much as 11 % yesterday. Before they pulled back, they closed higher by 4%. Analysts at Morgan Stanley said the business travel platform is their top pick and as Delta Air management sees demand for travel growing through the year. Ariel Cohen is the CEO and co-founder of Navon. He's back with us. It handles travel, corporate cards, expense management, and more for companies. They IPO'd back in October. They've got a market cap around$3.1 billion. Shares down just about 28 % so far this year. Yeah, about 18 % of the float is short, which we like to just remind everyone. Earl Cohen is with us.

1:18He is the CEO and co-founder of Navon, and he's here in studio. So I want to just go there because it's one metric of a business. But before we got going, we were talking about we've seen a lot of volatility in your shares. That's a pretty negative tone, though, the percentage of the float that is short. What do you hear from investors and institutional or otherwise about what's going on and what do they want to know? Yeah. You know, first of all, happy to be here again. Sorry to come out of that. It's good. And I think, you know, share price go up and down. We are fairly new in the market, so we will take the time for investors to get to know us.

1:56to have the trust in us, and they will see us deliver time and again. And I think the share price will do its thing and actually will be in the right place. I think what's important is where the business is, and the business is doing amazingly. We reported the quarter, but the important thing that we said there, that we are growing our net new business. So we said that we signed, we grew net new customers by 50 % in Q4. Where are those customers coming from? Because you compete with some of the big players. you're seen as sort of this still, you know, don't want to call it an upstart because you're a public company, but you're trying to disrupt a space that has been controlled by a handful of companies for many years.

2:33Where do the businesses come from? If you are a serious company today, you are either already an Avant customer or you're talking with us or you're at the beginning of the process with us. If you're growing, if you're in a kind of, you have employees that are in the ages of 25 to 55, you're going to talk with us. So we see customers coming from everywhere, from kind of the traditional travel management companies. But we also see a lot in a new segment in this industry, which is what we are calling the non-managed, or employees that are saying, I don't like the system that I'm using, and I'm going to find a good excuse to book outside.

3:09And they will come and book with us. So it's companies like real companies, like companies like Unilever, Netflix, Heineken, like pretty big names. So they're taking all of their travel business and they're on your platform. Exactly. So they're telling their employees, when you're booking your trip, when you're expensing your trip, when you're using a corporate card, you're using Navan. And the very unique thing about Navan, the employees love to use us. So you don't have this ongoing fight between the... But why do they love to use you? So first of all, ease of use. Super, super easy to use. The entire platform is powered by AI.

3:45So it means that I know you. and I know what you like. I know that you are likely to book this hotel. You are likely to book this flight. There is no reason to show all of the flights in front of you if you are very loyal to a certain airline. There is no reason I can point you to the kind of seat, the type of things that you will want. And that's really, really important. I know what she wants. You want a window seat. Yeah. And a hotel room on a high floor. Right. Away from the elevators. And I want light. Oh, light too. Okay. And you know the light use case? It's so interesting. We travel a lot together.

4:21He knows you. Can AI do that? Yes. The answer is yes. All right. Well, sorry, Carol. But I'm like, I'm not one of those people. I don't know. You don't care about the points. I don't. I mean, I accumulate points, but I look at times and different things. We look at planes. Like, that matters. The kind of plane that we're flying in. But, Ariel, like, when you were here last time, I don't remember if this was on air or off air, You explained to us there are these incentives for us that sort of like puts it in our best interest. To save money. To save money for the company. So what could you then give Carol to push her toward a certain option that saves the company money?

4:56What she just said is so important. There is an audience. There is an audience. Everything for them is points and loyalty. And we are really tuning the system to them. Right? That's why I said it's very personalized. But if we see that you are not, that's not what drives you. and maybe the curtains in the hotel. We actually, we're going to show you stuff that our system knows based on reviews that will be relevant for you. Now, you may be more relevant to save company money because you're going to say, you know, I'm actually okay on staying in the hotel across the street or some boutique hotel and so on.

5:29We're going to actually give you a reward and you're going to end up choosing that hotel that may end up save money for Bloomberg. and in total, of course, all of our customers are actually saving 15 % of the entire budget. So it's a pretty big amount of money. So let's say one of your competitors sees that this is successful in getting companies to adopt your platform. What's to stop them from offering those same incentives? The incentive is one part. I really need to know you. If I will just tell you, hey, take some incentive that you don't really care about. I will send you to the wrong hotel.

6:05If I will send you to stay in some hotel that you will never want to stay in a business travel, you'll never use us again. Our knowledge of you that we've gathered in the last, you know, since we started the company is 11 years ago. But not just you. People like you. Employees, you know, your co-workers. We know where your offices are. We collect all of these things together. And this is why it takes an average seven minutes to book your entire business trip through us. And these trips are complex. It takes seconds to change them. When there is a storm, you go to our platform, you start to talk with our AI chatbot, Ava, and she will change the stuff for you instantly.

6:44So think about all of the situations that you have in business travel. So that's why people like us. They like the experience. They like the rewards. They like the UI is super, super friendly, unlike the systems that are out there today. People today don't like to call a travel agent, to send an email. They like to do stuff instantly, and that's what we are providing to them. How do you make money? So we have a booking fee that we charge the company every time that you use us. And we are also a travel agency. So in the travel agency model, we are basically making money from airlines, hotels, any partners of Navan.

7:19What's the best? Where do you make the best margins in terms of that? So in this industry, hotels will give you more margins. But generally, you know, across the board, We see part of the money comes from our customers and part from our kind of partners. You know, last time you were on the program was only a couple of weeks into this war. You hadn't reported your most recent results. You do have this real-time view into what companies are doing, how they're spending. The fuel costs have gone up so much, especially for international travel. How are companies spending right now at this very moment versus how they spent at this time last year?

7:57How has it changed during the war? So interesting. So we saw like, if you think about Q1, obviously we're in the Middle East and Dubai is a very important airport. You have the storms in the eastern part of the US and the TSA interruption. And we didn't see any spike in cancellations of business trips. And actually we saw records of bookings. So it actually tells us that business travel is fairly resilient. We thought that that would be the case. But since there were so many things, to your point, whoa, TSA and weather, we were looking at this very, very closely. And it was very surprising. Now, we also have real data of what's going on.

8:45So let's take the TSA. You'd open the news and you'd see these huge lines in JFK. We actually had the data across the board. And there were airports that for a certain period of time kind of got out of control. But generally, it was way more calm than what people were kind of reporting. And sometimes the reasons were different. Like JFK, it was actually a real ID issue. But, you know, people thought it's something else. So I think that business travelers are smart enough to know what's going on. But our system also tells them, you can go to our system and ask right now, what's the TSA line in New York?

9:16And then you can decide, hey, I don't want to go to this journey. You asked that question to Eva, the chatbot? Yeah, you can ask Eva. You can ask Navan Edge, which is a product that kind of designed for the frequent traveler. So you ask these kind of questions. You ask any type of questions that you care about in the context of travel. Where is the lounge? Can I get to the lounge? Is that AI powered by, like, ChatGPT? Is it powered by Anthropics? Cloud, what's it powered by? So we have our own AI platform. We call it Navan Cognition. We have our own trained model that part of the calls will go there.

9:48But we are also using external models, some open source, some of the names that you've mentioned, but I will not say, yeah. Where's your data coming from? It's got to be coming from the airlines, the airport? Everything. So for our own model, that would be the type of discussions that we are doing with you. So we know how to talk with you. That would be our own model. But the rest would come from everywhere, like every type of source that is relevant for travel, for trips. And that data, does it cost you? No, that's part of kind of how models are providing data to you. One thing I want to ask you, right now it looks like just about 9 % of your revenue is based on subscriptions.

10:27Yeah. And then the majority, the bulk, you know, more than 90 % is usage-based. Is that going to be what the model is going forward? Yeah, and it's kind of interesting because if you think about the AI world, everybody is actually going to more usage-based model and the agent is doing something for me. And in a very interesting way, a travel agency had this model for years. We have agents, human agents, that are doing something for you. We're actually orchestrating perfectly AI agents and human agents to provide something to you, and we're getting paid for this. So in a very interesting way, we actually had that model that now you see across the industry, this business model, working for us extremely well.

11:05But the more employees use it and so on and so forth, that's where you guys are making money. It's volume, right? Ultimately? Yeah. Or activity? Good stuff. I'm so glad we were able to do a longer dive here. Thank you so much. Thank you. Really appreciate it. Errol Cohen, he's the CEO and co-founder of Navon. Joining us, as we mentioned, he handles travel, corporate cards, expense management, more for companies. And yeah, just reported earnings. We saw investors certainly kick up the share price in a big way on that.