Frankfurt The German mobility start-up Flix – known for its two brands Flixbus and Flixtrain – wants to finally break even after strong growth in recent years. “In the short term, the integration of Greyhound and the issue of profitability have priority,” said boss and co-founder André Schwämmlein the Handelsblatt.
Only in the medium term will it be about global expansion again. Flix will then look at all major bus markets worldwide, said Schwämmlein. “But after Brazil there is currently no decision on where we will go next.”
Because the company is currently continuing to invest in existing markets such as Brazil, Great Britain or Portugal, Flix will not generate any operating profit in 2022 either, said Schwämmlein. However, he added: “Planning for 2023 and beyond is ongoing and we are on a clear path towards profitability.”
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Flix does not publish any current business figures. Nevertheless, there are indications that the company, which was last valued at three billion dollars, may actually break even soon. The number of passengers on the company’s buses and trains soared by 130 percent to 34 million between April and September.
Flix recently announced that the second and third quarters were profitable across the entire group. The number of passengers has also increased at Greyhound, and the integration is progressing well, Schwämmlein explained.
Success has its price. With the purchase of Greyhound, the company acquired around 1000 buses and also took over the drivers. Actually, the start-up sees itself as a technology platform that optimally markets offers. Flix lets partner companies drive the buses and trains.
But after Greyhound, Flix obviously also wants to invest in equipment on the rails, where partner companies have previously also operated. According to information from financial circles, the management is considering the purchase of trains, financed by external investors. Schwämmlein did not want to comment on this.
Flix investors see the purchase of “hardware” critically
The purchase of the trains would take place via investors outside the Flix balance sheet. Nevertheless, the project is met with skepticism among investors, as can be heard in financial circles. “According to some investors, Flix should stick with the asset-light model, they’re not a big fan of buying hardware in bulk,” said a person familiar with the situation.
Investors such as General Atlantic, Permira and Blackrock are involved in Flix. According to the latest information, the three founders Schwämmlein, Jochen Engert and Daniel Krauss still hold just over 25 percent of the shares. Even when the Greyhound buses were taken over, some financiers are said to have expressed concerns.
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Flix boss Schwämmlein has high hopes for the train business. “We are very happy with what we have achieved with Flixtrain out of the pandemic,” he said. There is now a uniform product, and the development of a network has made significant progress. “We believe in rail.”
Flixtrain is very close to the core business, but of course there are a few challenges, the co-founder admits. Access to the network is necessary, and the train is a major investment. “The issue of rolling stock is a bottleneck, but we are in regular contact with our investors about this,” says Schwämmlein confidently.
The co-founder and CEO of the mobility service provider wants to focus more on being in the black in the short term.
(Photo: imago/Reiner Zensen)
Those are all solvable issues. “And we have shown that we have the business under control operationally,” said the Flix boss. “We see a very large European market.” A separate sub-fleet also ensures the safety of operations: “Greyhound will keep its own buses. We need the capacity to have an attractive offer for our customers nationwide,” explained Schwämmlein.
But unlike the bus, the procurement of materials on the rail is not so easy – especially in Germany. If the modernization of the fleet is pending after a few years, it will be difficult. Because there is no real second-hand market in long-distance transport because there is hardly any competition apart from Deutsche Bahn. The investors who are supposed to finance the rolling stock in the first round therefore lack the prospect of a good second use.
Investors are concerned about the expensive expansion in the railway business.
(Photo: imago images/Rüdiger Wölk)
Nevertheless, Schwämmlein also sees growth potential for Flixtrain in Germany. The recently decided relief in the so-called route prices – a fee that has to be paid for using the tracks – is positive.
Even the fact that the Flix offers should not benefit from the nationwide 49-euro ticket according to the previous plans does not deter the manager: “We are promoting the inclusion of the long-distance bus. We believe that we can contribute a lot to the success of the 49-euro ticket.”
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Flixbus connects the rural regions and brings young and low-income target groups with them for the ticket. “So we don’t want any of the cake, we’ll bring cake,” said Schwämmlein. “It’s about additional revenue for the state in the millions, which can be generated by integrating the long-distance bus into the 49-euro ticket.”
The stock exchange is the “natural home” for Flix
There is definitely positive feedback from politicians here, and the discussions about the ticket are still going on, says Schwämmlein. But of course the question of where to invest in Europe always depends on the framework conditions.
The question of how much future growth will be driven by own devices is also crucial for an IPO. On the trading floor, technology platforms do better than bus and train operators. Flix’s last round of financing for $650 million was around a year and a half ago.
Schwämmlein himself sees the company’s home on the stock market at some point: “For a company like Flix with such a long-term perspective, the stock market is a natural home.”
But apart from the currently poor general conditions for IPOs in general, Flix does not need any money either, according to the co-founder: “We are fully financed until the point at which Flix generates cash itself.”
This does not mean that there will be no rounds of financing. There can always be good opportunities, and it could also happen that the capital structure changes, said Schwämmlein. “But there will be no corporate actions because we absolutely need money.”
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