PAUL MCBETH: Serko’s sneaky growth

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years.

It’s easy to take online travel software firm Serko’s revenue growth for granted when the share price continues to languish at the bottom of the NZX’s leaderboard.

Serko’s shares have felt the grip of an existential AI threat squeeze the global software-as-a-service sector, putting the former market darlings on notice that an agentic workforce is primed to come in and steal their thunder. At Friday’s close of $1.45, there were down 52% so far this year on top of the 21% slide of 2025.

Throw in rocketing jet fuel prices and an unpredictable White House and the Kiwi software firm has been facing some Wellington-like headwinds in its bid to more than double annual revenue by 2030.

If you only dip into the fortunes of Serko every now and then, the big picture crowds out some phenomenal work that’s been going on below the surface.

Sure the 34% annual growth in revenue to $120.9 million might be par for the course when it comes to a software firm in expansion mode. And you might well quibble that it’s the slowest pace since the covid double-dip, when things understandably went backwards for the firm.

I need someone to show me

But that $30.4 million uplift in the latest financial year trumped the $24.6 million of revenue reported in the pre-covid March 2019 year when Serko’s bottom line was in the black.

And if you hark back to its first year as a listed company, the $11.8 million of revenue in March 2015 was less than a tenth of what it delivered in 2026.

Yes, the $132.4 million operating cost line has grown with revenue, but at a flattening rate over the past four years, which has seen the rapid incursion in North America with the acquisition of Sabre’s GetThere booking platform. And it’s only 7.3 times the $18.1 million Serko was spending when it first listed.

Free cash flow is expected to run positive in the current financial year, a feat Serko hasn’t achieved since the March 2018 year when it turned its first profit of $1.8 million.

And then you get options on whether to invest and where if you do.

I can’t see the things that make

Serko has been able to burn through cash in recent years because it raised $200 million between 2018 and 2022 at an average price of $4.99 – with $85 million of that at $7.85 to push the Booking.com for Business product the board sees as underpinning its revenue goal.

The board hasn’t been afraid to call it when it’s got something wrong either.

Serko sold its first US acquisition, InterpIX, last year at a small loss, deciding to partner with a group of US payment and expense providers rather than try to go it alone.

And with the nascent threat of AI, Serko needed to protect its proprietary data built up over the past 20 years and work out how it could tap into the powerful tools without losing its edge.

That meant investing in building up the team’s own AI capability without getting into a bidding war for the small number of true AI experts, who command eye-watering salaries in a world where everyone seems to be rushing to be first.

Nothing seems to satisfy

As chair Claudia Batten told shareholders at their annual meeting last week, she thought Serko was doing a really good job of being paranoid that it’s lagging behind those early starters.

The board reckons it can turn AI into an opportunity as it started embedding the tools into how it builds products and runs the business, and it’s currently testing its Serko.ai product with US customers before a beta launch in the last three months of this calendar year.

Serko’s cautious about how much the AI product will deliver to its $250 million revenue target, but as with everything ascribed to AI at the moment, it probably offers the biggest potential for upside.

The real question is how credible is the claim?

Forsyth Barr analysts James Lindsay and Georgio Toulis tend to believe what Serko’s saying, with some scepticism about its ability to achieve the big revenue gains without more proof of delivery.

Can you help me

That said, the recent result from US travel tech firm Navan, formerly known as TripActions, showed a growing appetite among corporate customers to try out new platforms.

And much like Navan, Serko clips the ticket at the time a booking’s made rather than when someone checks in, which has been one of the major fears of AI agents replacing people as it undermines the per-seat licensing models of software companies.

Getting the US market right would mark a sea change for Serko, which was very much focused on Australia, New Zealand and the Asia Pacific when it went public in 2013.

That’s seen a quiet shift in the executive team in recent years, with co-founders and executive directors Darrin Grafton and Bob Shaw supported by a senior leadership team heavy on experience working in the US.

It’s also behind what some might see as a slow-moving board succession process, as Serko hunts for two non-executive directors with tech, innovation and US operating experience – of whom one will replace Batten as chair.

The things in life that I can’t find

As Batten said, it’s a small pool of people with the right skills to support a tech company with big international growth goals, so probably best not to be in a rush.

All of which brings us back to that languishing share price that’s dropped to such a point that Serko will have to ask shareholders to approve share payments for staff, which are set to cross the 3% cap set by NZX listing rules, at a special meeting later this year.

Batten noted the souring animal spirits against software companies in the US, Australia and New Zealand as a headwind and acknowledged the need to demonstrate real gains from growth programmes put in place.

And she admitted that Serko could do a better job in communicating that to the market.

All day long I think of things

Because it’s a tricky business to understand. As Milford portfolio manager Sam Trethewey pointed out a few years back, wrapping your head around Serko’s position as a niche operator sitting between corporate travellers, travel companies and aggregators like Expedia takes some time.

No surprise really that retail investors haven’t been grabbed by the Serko story. Iress data shows Sharesies and ASB Securities clients have accounted for between 3% and 6% of the annual value traded since 2019 and tended to be net sellers of the stock.

Serko’s technology is really good at matching supply and demand for travellers – an obvious missed opportunity to avoid the farce that was the managed isolation and quarantine of the covid era.

Let’s hope Serko can take some of that nous and paint a compelling picture for the local investment community, because if it notches up runs on the board, you can be sure a cashed-up buyer will keep its nose ready for a bargain.

Image from Henry Deng on Unsplash.