Q1 2021 MakeMyTrip Ltd Earnings Call
Ladies and gentlemen, thank you for standby and welcome to the make much for Q1 fiscal 2021 earnings call.
At this time, all participants all the smell remote.
After the speakers presentation they'll be a question answer session second question. During the session you need to press Star then one on your telephone.
Please be advised to today's call is being recorded.
Required additional so since my first start that's the most which not further.
I would like to hand, the call over to Jonathan way Vice President Investor Relations. Please go ahead.
Thank you welcome everyone should make my trip limited fiscal 2021 first quarter earnings call.
I would like to remind everyone that certain statements made on today's call are considered forward looking statements within the meeting of the safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.
These statements are not guarantees of future performance are subject to inherent uncertainties actual results may differ materially.
Any forward looking information released on this call speaks only as of the state. The company undertakes no obligation to update information to reflect changed circumstances. Additional information concerning these statements are contained in the risk factors and forward looking statements section of the company's annual report on form 20-F.
Files with the FCC on August seven 220 20.
Copies of these filings are available from the FCC or for the company's Investor Relations Department.
I'm joined today by deep, Colorado make my trips founder and group Executive Chairman, Rajasthan, Margo co founder and group CEO and know who kopra groups yet so.
Now, let me turn to covert a deep to begin todays discussion.
Thank you John welcome all I hope everyone listening is staying safe and healthy you already ongoing global pandemic.
Today I'd like to share some of the actions we continue to take during these difficult times to ensure we remain in a position of strength to weather the storm and begin not journey on recovery with a better financial trajectory that NBC and Fox.
Since our last earnings call, we have begun to see some early signs of recovery within our domestic travel business as a reminder, while domestic flights in India will allow give us your from may 25th.
Beat to a certain amount most although travel services significantly impacted throughout the fourth quarter.
The result of fiscal fourth quarter's performance reflected.
The bulk of the impact that the knockdown had on our business.
During the quarter, we took the in flu, but necessary fixed cost reductions and what do you flex debatable costs to ensure we have ample liquidity really much stronger competitive.
In addition, we have secured additional financing, which Mike will discuss later affordable stuff about sheet.
We've also maintained strong cost discipline to manage our quarterly cash flow usage going forward.
Actions will allow us to manage our quarterly cash fun. Despite the material to do our topline numbers lastly, we continue to invest and not technology platform for the long gone to ensure we have the opportunity to soak customized need via online channels, even better going forward and achieve operational cost stuff there.
Should fees through greater automation.
Recent developments of travel opening up gradually makes us believe that the worst effect that make in fact might be behind that and it should hopefully on we continue to recover more gradually get Oscar.
Domestic and all other modes of grown transport that his boss related cabs have resumed operations in lead me with some restrictions, we just slowly being used out ever since the first opening.
Mystic Airlines to be are allowed to fly up the capacity of 45% for domestic flight.
Similarly, intrastate and Interstate bus and God travel has been opened up in many states.
And then real this has been running a couple of hundred special trains and are likely to open up more so than.
Domestic hotels on the other had what also allowed to begin picking on essentially bookings in early June but many states had initially imposed in restrictions to control the rate of infection.
Since then most states have lifted that restrictions to a law with tends to facility open all with limited capacity and with a guildenstern local health and safety guidelines.
In fact, the state of Daily just gave the go head to reopen because two days ago last Wednesday.
So encouraged to see international air travelers restrictions being lifted by the government in mid July with the creation of country specific travel bubbles today commercial flights between India, and the U.S., Germany, France, Canada UK Cathar. The you 80 and more these are allowed with subcategory of because.
And subject to certain conditions imposed by the respective government.
That also negotiations to put even more air travel bubbles.
Currently underway with Australia, New Zealand, Japan, Italy, Nigeria, Bharti and.
Israel, India, Philippines, Russia, Singapore, South Korea, and pilot, which will only eat into for the recovery of cross border travel overtime.
Most locked down I'm encouraged by the level of customer activity and the interest for travel seen on our platform so far.
We've seen demand from certain travelers segments like small businesses from younger couples he can get a with and distribution of the leisure travel to nearby places after a prolonged low.
Not surprisingly we've also seen non metro markets recover in foster like covert 19 is less widespread adult metro locations.
As a result, our marketing team has begun implementing a highly targeted marketing plan.
Again, reaching out to customers I.
I shared on our last earnings call greet you leverage social media to address customer concerns as well as to keep customers highly engaged and inspired for future travel.
To help customers feel safe when traveling post locked down we had to nonstop 50 in hygiene certification initiatives called my safety and cost saves respectively on our last earnings call.
We are currently showing self certification program from the hotel backed hooked up photos videos and user generated content, which is showing good traction on the platforms around five and a half thousand hotels I like that subset of vacation and customers are showing clear preference for hotels with higher level of CSP.
We're also highlighting the hygiene programs and practices or the premium chance.
We have further strengthening this program put all the go partners for the third party check to verify the for stripe list of hygiene and safety protocols in partnership with good Lord <unk>.
<unk> Independent Hotel partners have shown key interest to participate in this program for 2000 hotels signed up for this already.
During the quarter, we have increased efforts on revamping our loyalty programs on both brands and expect to reintroduce them in the final second the fiscal Saudi the fiscal second quarter.
We've also extended the membership expiration dates for the make Patrick Black program to the end of July reflecting the time value lost due to lock though.
In addition, our marketing team has been leveraging key insights on travel patterns post locked down to help with cross and Upselling communications.
We believe these marketing efforts will allow us to drive reengagement about loyal customer base to eat in our recovery, while maintaining a disciplined approach to marketing and customer acquisition spend.
We're also encouraged by the ongoing positive dwell front on the vaccines and effective treatments front globally as well as that relatively low mortality and I had a company rate in India compared to the rest of the word despite rising infection rates.
Believe positive developments on vaccines would be ultimate key to instilling confidence in caffrey leisure travel and providing increasing tailwinds for up business recovery going forward.
During this time of great uncertainty I'm also happy to share that our team has continued to maintain steady high mode. All engagement, even as we continue to operate partially to more fleet today to ensure the health and safety a Buck on me.
What's more encouraging is that productivity remains high and I've team has not not lost sight of the longer don't vision of the company.
I want to take this opportunity tank every one of my colleagues for their patients dedication and commitment to our mission. Despite having to supplement many inconveniences antics sharpton sacrifices to ensure we have a strong balance sheet to allow us to really much stronger than before.
Lastly, I wanted to remind everyone that in guest traveled market still offers many compelling growth segments, which are largely book offline.
According to a recent research report from Goldman Sachs. India's online travel market is expected to grow at a kid of 14% of each $31 billion in bookings by fiscal year 2025.
Online hotels growth is expected to reach 20%, but given its relatively low penetration. Furthermore growth in online and boss is forecasted to reach me beans play.
With a continuously rising number of internet use those plus the drive towards contact list travel engagement forced by the spend that make you believe online booking adoption should accelerate even foster going forward.
As a company will continue to prudently invest for the long term to make sure offline technology and service platforms are ready to scale and support the unit.
Rebound in demand.
We firmly believe are we now own level of service and customer trust within the industry will allow us to rebound quicker in further market share and strengthen our market leadership position.
Now I'd like to turn the call over to Rogers to shed more detail on what we're seeing and because early days or recovery in travel as well as more color on actions, we've been taking to manage through this crisis as a company.
Thank you.
Thank you Hello, everyone.
I sincerely hope you are on staying at the end when doing this spend to me I.
I would like to start by sharing the quick overview.
The first fiscal quarter of 20 to 21, which reflected the bulk of the impact.
The nationwide go over 19 locked down and going on and on traveling and our business specifically.
As we had shared on the last earnings call. The logged on spending all of it proved and most don't me odd business only it really is you and has been done a very restricted manner for the month of June.
Why is video segments are private.
Resumed in lead me Andone doing their travel industry was still.
The immediate off capacity limitations and travel restrictions imposed on a state by state level.
Looking good assumption of travel initially challenging.
As it has done well the topline was impacted.
Are you able to control not operating cash flow and.
Timely and aggressive efforts to manage the costs.
Good news, though that is that we do not anticipate another prolong the nationwide locked down and expect the business to continue on its fokko gradual recovery.
Good volumes, improving quarterly as demand improves.
Now I would like to share color on trends.
We have been seen within each of our main lines of business.
And then shared some details of the video technology projects accomplished during the quarter.
Which are aimed at helping us reduced fixed costs going forward.
In our domestic what turns business more than a quarter off the 77000 total available properties on our platform are now currently open to take bookings while domestic hotel bookings were allowed in early June the Lou availability is tied to the fact that local.
Each node and stayed where it lockdowns what implemented.
Looking at heart or off Hoteliers. This won't leave them pump did operations and hampering travel demand.
As such many of the open properties, but initially running at a very low occupancy dates and would primarily taking bookings are litter took over 19 needs for quarantine on medical stuff needs.
Since then as deep said.
Most students every moves such restrictions as it is there to be an awful lot more supply opening up in the near future. We've also started to see demand coming back for a certain traveled use cases.
Example, we've recently seen demand for we can get to me at premium content.
Art started properties and premium realize.
Many of which added within driving distance is augment or locations.
While our aggregate room nights during June was single digit person.
Corporate level I shared on our last earnings call. We have seen seemed month on month room nights growth in July for the momentum that continuing into all of this month to date.
The mall most of the bookings taking place today.
Booked with a very NATO advanced purchase window.
Good continuing to embrace our free cancellation and book now pay later option.
That's what our alternatives business. It also encouraged to see if he sends pickup in bookings in places like the way and I wouldn't be as international flights gradually the June for certain visa holder.
And entries actions are indexed.
From a supply standpoint, we continue to work very closely with partners front on network as they gradually reopened inverted and seek to drive new bookings.
Next I would like to shed some color on our domestic air ticketing business sincere driven was it loud and clear to me.
In June the industry operated or to roughly a quarter off pretty equal that seat capacity.
Only 16% off pretty covert total person just plain, indicating that load factors, whether it relatively little that's it it has seen.
Improving trends continuing into the current quarter. In addition, the July undertones. So suggests that there had been immaterial acceleration toward.
Online booking as good a company if again.
Our non ticket sales gain 10 percentage points of share since February and as a result, we continue to gain share in this business.
Them all with the establishment of their bubbles international flights have also find leaders you.
In mid July as well.
In fact, most and then carriers have opened up that international routes to the you eat region, along with a resumption of service by regional International Inc. ideas in bone into India. Other carriers for long order traveling to and from North America Europe have all sort of assumed operations.
During the quarter. Prior team has stayed focused on meeting the immediate need of the customers into highly dynamic environment or frequent changes in travel guidelines, we have implemented simplified yet comprehensive.
Step by step.
Instructions on how to navigate the multitude of travel requirements now in place.
Lock down.
This concludes rear time updated content on stage and country level traveling trade lanes simplified auctions for mandatory live check ins and baggage restrictions et cetera.
Now moving onto our bus business.
During the quarter.
The business was also affected by the for prolonged locked down to help customers award booking and canceling their travel plans due to uncertainty or when restrictions will will be lifted we launched a feature to our local stood at just the desired bus stroke.
One scrabble was allowed our systems proactively informed those who registered their bookings can to simply take place.
During the locked down period.
We have also improved rate but.
So customer support platform by introducing candy and timing in addition to English to better serve this segment's user base.
Today, we are seeing early signs of recovery in the business as about a quarter robust supplies and services unknown back online.
In June we have seen roughly mid single digit recovery in daily seats sold as compared to February of this year.
However, starting in August we have seen daily see sort of continue to trend higher reaching nearly 10% or frequently levels. During the second put it be cope August driven by demand for festival to travel and a gradual increase in migration from smaller towns into bigger Metro locations. In addition.
As index exits the lock down you have seen many consumers.
Referring to use intercity caps at the field that this model travel is relatively safe.
Customers that hailing caps, but essentially one bit trips as well as road trip holidays. In fact, we have been witnessing very strong demand in current quarter when compared to the reported first quarter as bookings for intercity cafs have grown three or six month on month.
I would also like to shed some color on corporate business, which is seeing some green shoots of recovery from small business travellers. In fact, we've seen immaterial month on month improvement from June into July from on my this brand, though total booking.
Level remain less than 10% of equal with Lewis.
With small business travel leading the recovery in travel we anticipated that out my but should be well position to continue to capture new accounts going forward. Furthermore, we have no began offering charter flights to our corporate clients.
We've seen strong flow upgrades for charter flights once we made it available and have already sold a handful of dedicated plays to our corporate life.
During Q1, well suited us off launch of make my trip brand in the.
GCC market. We are currently live in the with relevant good offerings across our mobile and online China's why to travel has been impacted by covert 19 in the region.
Encouraged to see some green shoots of growth, we the hotel staycations as I travel preference going forward as travel restrictions for the relax, we do anticipate increases in cross border leisure travel for short order destinations and have already begun to position our offerings to capture this demand our team.
He has also started building support for the rhetoric language to cater to local demand.
And to help support our expansion.
Efforts further in the region into Saudi Arabia.
Lastly, doing the lock down we continue to invest behind our tech platforms aimed at continuous improvement in end to end use a journey across all brands and all platforms.
Well its invested in automation to drive greater cost efficiencies. These drugs it projects should allow our business to return to scale.
Don't having to significantly ramp up our costs and further drive digital adoption in driving.
Some of these projects also low more seamless integration of our call Center operations helped reduce platform development and roller time, making us more nimble and cost efficient for changes in updates going forward.
As you can see we've continued to make the right investments for our brands and our platform with a continued focus.
Focus on making customers' lives easier.
Looking with us.
We believe these investments are focused on continuous improvement and customer experience.
The strong brands and our cash resources, including the latest financing arrangement for to strengthen our competitive positioning exiting the log though.
At the same time, we have just stuck restructured our costs such that we will be able to continue on our desired auto achieving operating breakeven.
Now, let me hand, it over to Mohit will share more financial details of the quarter.
Thank reddish and Hello, everyone.
I hope everyone is doing really interesting Andy.
As deepen. The addition of booked already provided a quick or you owe us first fiscal quarter transpire.
I would like to share more details on cost optimization initiatives and steps being taken to ensure that we have sufficient liquidity to see is emerged stronger to this spending.
As we begin this new fiscal year.
2021.
Electrical load from changes in our segment reporting metrics or key performance indicators.
The keeps Evans services that the company offers.
Booking of indicates hotels and packages and bus ticket income from the sale of airline tickets Hotel room nights and bus ticket is recognized as an agent on end net commission basis as a company does not assume any performance obligation relating to the service.
Packages business the company actually the primary obligor forces packages since the group controls. These services divorces services are transferred to the traveler and accordingly, the revenue for the packages business is accounted for on a gross basis.
As you can see certain parts of a the renewal recognize on admitted basis and other parts of our revenue recognized on a gross basis, therefore to better reflect devaluation of the travel services, we provide to customers. We've historically evaluated a financial performance in each of our reportable segments based on existing revenue.
What we used to call revenue less service cost until fiscal year 2018.
With a view to providing a more accurately presentation of the margins achieved in each of US segment from our suppliers. This segment profitability measure.
I'll be called a district wanted him.
Created there is no change in the V. The metric is calculated and this change is only two.
Reflecting a better way the baby view our topline.
As mentioned earlier focus during the reported quarter wants to optimize cost with a view to minimize losses and I'm pleased to share their dad anticipated operating losses at $21.3 million well.
Quite low compared to the same quarter last year's loss of $29.3 million.
Adding back for non cash expenses like depreciation and amortization did just to cash loss for the quarter stood at about $16.3 million compared to $24.7 million in the same quarter last year.
To begin with initiatives on the video because this largely include marketing and sales promotion expenses, along with even get because this is significantly pruned down to about 3.2% of gross bookings compared to being at 8.1% of gross bookings in the previous quarter and 10.5%.
Gross bookings in the same quarter last year. This is a reflection of school flexing, though our variable cost of marketing and sales promotions during the quarter as we remained at a nationwide locked up.
As we've shared on our last earnings call in late June we've also taken cost actions on a fixed costs.
Which include companywide salary reductions and headcount rightsizing in some of the offline channels.
These actions taken early on during the fiscal quarter enabled us to reduce our absolute personnel expense by almost $6 million compared to the previous quarter.
As we had indicated earlier, we have begun distorting salary reductions or the frontline stuff and are planning to this to the reductions for the middle management stuff starting in September in line with our plans to do so once the business gradually start with resuming and its momentum is assured.
Right and restorations will increase our quarterly personal expense from fiscal quarter. One levels. We do anticipate some savings will fiscal year Twentytwenty Q4 levels as we have right say the headcount in a few offline channels.
We have also significantly reduced.
Selling general and administrative expenses by nearly $17 million on a quarter on quarter basis. Do you have achieved much of this interaction be optimizing very significantly on New York source calls into stuff.
Staying out of the nationwide log, though we anticipate the businesses cleans up there'll be some increases in the also call center expense. However, the technology and automation initiatives as I later debate I dish.
Will help us little longer term cost efficiencies in this area going forward as well.
Sure Twoq savings in our technology related expense, including site hosting charges.
We've also been able to further reduce fixed cost by shutting down.
Our company retail office expenses and move them over to franchisee network, we have altered opted work from home or remote working as a longer term measure. So there's a certain percentage of of workforce convert gonna be aboard bases and accordingly have any shuttered steps to reduce the overall trade off our office facilities, particularly in go to them.
Lastly, with focused cash management, despite the cash burn during the quarter, we have been able to improve.
Cash and cash equivalents, which is 200 approximately $874 million at the end of June compared to nearly $168 million and at the end of March 20, factoring in the restructured costs that I've just talked about our current cash position gives us ample runway for at least six too.
Good quarters based on the reported quarterly run rate. We have also been working towards establishing additional lines of credit considering that we have zero debt. We believe it is prudent in current times to have additional facilities to dipping due particularly to capitalize on me.
Growth opportunities that might come RFP and to avoid the stronger for the current crisis. The dispute we have secured multiple credit didn't guarantee facilities to the tune up approximately $200 million.
This concludes the revolving credit facility from an affiliate of our largest shareholder to the tune our $70 million.
These facilities.
Over and above our cash and cash equivalence off hundred $74 million.
At the end of June 20.
I'd also like to the iterate that we do not anticipate any need to utilize.
Any of these credit facility that PC stage and this is to substantially enhance liquidity profile for any unforeseen contingencies or investment in potential opportunities that that I'd like to turn the call over to the operator for Q any.
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Thank you everyone for joining our fiscal 2021 first quarter earnings call fuel.
We look forward to speak with you very soon and have a nice day.
Ladies and gentlemen.
This concludes today's conference call. Thank you folks. Since then you may now disconnect everyone have a great day.
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