Q3 2021 MakeMyTrip Ltd Earnings Call
Excuse me, ladies and gentlemen. This is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
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Thank you for standing by and welcome to the make my trip Ltd fiscal 'twenty 'twenty. One Q3 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I ask a question during the session you will need to press star one on your telephone if you require further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Mr. Jonathan Wang. Thank you. Please go ahead.
Thank you Paula and welcome everyone to make might shut Ltd Q.
Q3 fiscal 'twenty 'twenty, one earnings call I would like to remind everyone that certain statements made on today's call are considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act 1995. These statements are not guarantees of future performance are subject to inherent uncertainties.
Actual results may differ materially.
Any forward looking information relayed on this call speaks only as of the states and 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 day. All your reports our form 20-F filed with the SEC on August 17, 2020 copies of these filings are available from the S E C or from the company's Investor Relations Department.
I'm joined today by deep Kalra, our company's founder and group Executive Chairman Rodger, Shmatko Cofounder and group Chief Executive Officer, and multi Cobre group Chief Financial Officer I.
I like to turn the call over now true deep to begin today's discussion.
Yeah.
Thank you Jonathan.
Welcome everyone to our fiscal third quarter earnings call.
I'd like to wish all of this is not a happy and more importantly, a healthy new year.
As we begin 2021, the world continues to deal with the ongoing COVID-19, pandemic, which has impacted most industries and the travel industry in particular.
The good news is that since our last earnings call, we have seen vaccines being approved as well as the commencement of an effective phased rollout in India.
While the distribution is still in its early stages, we are optimistic that it will gather pace given India's strong mass vaccination history.
I'm also encouraged to see India as reported daily infection rates, which peaked in mid September has continued to decline steadily thereafter.
As the country continues to unlock all reopen normalization of economic activity is broadening.
As disruptive as this pandemic has been we believe it has accelerated and transformed the week almost will be conducted in India.
With social distancing needs greater than ever the use of E. Commerce has also been rapidly adopted by our country's half a billion plus digital citizen.
In fact, some analysts are forecasting a three X increase in online ecommerce transaction values to reach a $180 billion by fiscal year 2025.
While online travel as a category it's still on its journey of recovery. We believe it's only a matter of time before we also start to accrue the benefits of such structural changes in booking behavior.
Now I'd like to share the latest reopening trends for the domestic travel industry, which remains the primary focus.
Our ongoing recovery today.
We believe international outbound travel recovery will eventually gain momentum, but only once herd immunity takes hold across destination countries and the ease of cross border travel resumes in the meantime, we will keep focusing our efforts on driving full recovery of our domestic business and maintaining strict cost discipline.
Beginning with domestic air market has already recovered 65% of its capacity in December when compared to the same period a year ago.
Asphalt with debt as an alternative accommodation recovery of room nights stayed is close to 59% with about 70% of overall capacity across our domestic net book available for bookings down.
More encouragingly nearly all of the room capacity at our key chain and independent partners properties is also available to take bookings though.
Similarly, the Interstate bus market has also seen a steady resumption of service as privately operated partners have increased seats available to be sold to more than 75 per cent of pre pandemic levels. So far.
Now turning to our company's performance for Q3, we continue to not only participate in the ongoing recovery in travel, but have also been able to gain market share during this time.
Our gains during the market recovery, coupled with highly disciplined cost management to drive greater efficiencies has allowed us to achieve positive adjusted operating cash flow during the quarter.
During December overall traffic to our brands has also recovered to more than 65% of pre pandemic levels.
More encouragingly repeat customers made up more than three quarters of our transacting base, which is a testament to the effectiveness of our retention efforts and enduring that strength.
During Q3, we leveraged social networks and other channels to inspired travel and a shock after months of safety and hygiene protocols available.
And marketing campaigns that included short windows with food and travel Influencers to highlight alternative accommodations and other popular travel use cases for example, our cash that drive up get away campaign has helped nudge traveled to nearby drivable getaways.
Premium properties like the laws at home.
These outreach campaigns, coupled with terrific deal.
Help customers take a much needed break after a very stressful and cooped up yard at home.
To drive greater loyalty, we also relaunched our refreshed make my trip Black program in September, giving members greater value and reward while offering us the opportunity to directly reconnect in college travel with our loyal fans.
Hello, Lee Goldstrike, Bryan why be bold new loyalty program has also been offering members more rewards since its mid September launch.
Today, we have 920000 make my true Black and 580000 go tribe members.
Collectively help contribute roughly a third of total bookings during the quarter.
Our marketing team also optimize and improve the organic online marketing efforts further during Q3 as.
As a result, we achieved all time high keyword share rankings and click through rates across all brands in India. We believe the comprehensive approach on optimizing and improving our organic traffic has allowed us to continue to recover faster than market, while maintaining high marketing speed efficiency.
Looking forward I'm very optimistic of a mid to longer term prospects as the online opportunity for travel remains large.
Our home markets I believe with the exploration of online adoption as a result of COVID-19, our structural cost optimization. They couldn't during the unprecedented lockdown last year, and our strong brand and financial positioning relative to peers will only further bolster our business going forward now I'd like to.
Our strategy is to share more color on the recovery, we've seen across our domestic business during the fourth day.
And go deep and happy new year to everyone.
So I'll go 'twenty, 'twenty, one which would be a much better year than 2020.
Before I get into our operating performance and recovery trends for the quarter I would like to congratulate our entire team who had worked relentlessly to achieve make more trips near term goal is day.
Industry convenience Gotta go low.
Daily new infection rates on a steady decline.
Since September.
Improving economic activity and now the rollout of effective vaccines in India, We hope to see 'twenty 'twenty, one be a much better yield for all of us and the industry.
In Q3, we were encouraged to see a steady recovery continuing with the non.
Domestic business.
Interest reopening in late May of last year. This trend has only increased our confidence level on domestic travel recovery.
They are gaining momentum in the coming quarters, while we wait for international travel to open up.
It's also a good reflection on the debt.
Millions shun by the industry and.
Non brand and we hope to emerge even stronger once the pandemic.
While much of the recovery has been led by domestic travel demand.
To see some strong demand for leisure travel to a cup of coffee and snacks in destinations like Maldives into body as well.
Have reopened its borders to.
The safety protocols, we continue to believe our Banca.
Travel will provide long term growth.
Given the high fragmentation and offline nature of its distribution.
It is expected to take a longer time to fully recover.
Few other countries are also opened the borders.
Since like.
I learned and free linker.
Rick.
I'm teasing Rick White winter at present, we look forward to these being introduced moving forward.
Now I would like to share and highlight that achievements in the fiscal third quarter operating couldn't do you want.
Which reflects.
The continued domestic travel industry recovery.
Market share gains and cost discipline.
The Liberty positive quarterly.
Operating profit.
Starting with the hotel business book.
At over 70% of over guidance.
Net book is now back on line.
More importantly, net all of the room capacity at key partners properties that are available to a football game.
During Q3, we saw pent up demand on the leisure segment.
Our total reported number of domestic room nights stayed and reached approximately 37 per cent.
The level achieved a year ago.
With the December ending at approximately 45 per cent recovery.
At the same period a year ago.
All of them all.
I've actually been able to deliver more volume across all premium hotel brands.
Think of surplus free pandemic volume living with multi play with multiple supply partner.
In addition, our hotel bookings in multiple leisure cities across India have also political was in December.
This idea of speed here with a few destination.
Seeing volume there was that you pre pandemic.
Big drives this demand recovery.
Desired by the customer.
To begin venturing out and driving to nearby locations for the holiday.
<unk>, which has continued from Q2.
During the quarter you also saw the return of travelers willing to drive a bit further away or even take a flight to leisure destinations like the war in the Maldives, indicating there is a strong pent up demand for leisure travel.
The mall. That's most have also discovered newly distribution destination in the north and the northern and eastern parts of the country.
Bohn International travel remain constrained.
Lastly, also helping drive the quarterly quarters hotels demand has been premium and ultra premium winter is providing great value for money.
They book to recover to pre pandemic occupancy rates.
Our alternative accommodation business has also seen rule book the company today over 60 per cent of the properties have now resumed operation and have been popular with travelers due to social distancing requirements.
During Q3, we launched our THAAD hooks program and the new people can chat function both of which are for the east to concerns all staying at alternative accommodation.
Now I would like to share the pace of recovery.
Air ticketing business.
Weighted capacity recovery within the domestic market.
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Nearly 55% on average for the quarter.
During Q3.
Domestic passenger.
Segment flow 100 covered to over 47 per cent of the levels achieved a year ago.
This has also led to our brands combined market share and moving incrementally.
Well it does since September and by 300 basis points since January 2020.
You don't need destinations had been one of the main drivers of the recovery.
Business volumes actually surpassed pre pandemic levels in places like Golar Undergrown unseasonable.
Business and leisure.
It sounds like some of the spend was there.
Everything has also been Swift and it has continued to grow well into January.
Lastly, you didn't necessarily destinations like the ultimate cause of the aluminum body Hunan C zone as also in the Covenant EBITDA.
Let's say, it's good recoveries of 260 per cent.
Great.
The recovery to date has been continued.
Customer centric investments and enhancement.
But we do buy them.
He ran the flow starting with a panel on app to give.
Book Oh.
Foster check check out experience and added several add ons to better upsell and cross sell until reported.
So launch double eastern students really weird and social distancing as well as offer.
Better pricing flexibility.
In addition, we offer the best sign there too.
Shoppers achieve the best possible by leveraging our multiple supply sources lost me.
Introduction of a price lock me true has helped drive greater advanced bookings and customer retention.
Now I would like to share a quick update on our Red bus isn't it.
Just in seat capacity recovery in the flavored bus operator market.
Getting up to about 75% of pre Covid days for the third.
Third quarter the number of seats sold on our platform was just boats per cent versus the same period a year ago that income.
<unk> seen part so far has been mixed by region as the demand for the book.
Was positively impacted due to continued rail service disruptions as an example in December regions like Eastern India audit Nobody has actually exceeded pre pandemic levels by 25 per site.
And then from there we have been able to achieve a near full recovery of seat bookings.
They were a year ago into simple in Q3.
They are highly targeted marketing campaign in select geographies to help drive around download from users who had previously only book sales drove it.
Now I would like to share a quick update on our other ground transportation business.
Which includes gobs and metro or train ticketing.
You may recall.
This business was launched during the beginning of the pandemic last spring.
It came to travelers, who wanted to travel, but what video a crowded buses.
James R plane during Q3, our drone business continued to just put a very strong quarter on quarter.
Growth as we meet the mobile web experience, even better for users with loading and flow speed devices. We believe this segment of the travel market should help us gain more users over time in fact users from this segment is also contributing nearly a quarter of all new users.
Loans up from almost philosophical on.
Only a quarter ago.
As your demand has been leading the recovery.
Also encouraged to see our corporate business has shown early signs of recovery exiting December the overall air and hotel volume book throughout SME focused program and exceeded 40% versus pre COVID-19 levels are enterprise grade can go deep isn't it is also witnessed them low levels of the company during the quarter.
The mall traffic across alcohol free platforms ended up quarter with 36% of January 26 level.
In Q3, you also saw a significant jump in new traffic coming to platform.
We on boarded more than 250, new midsize accounts.
And lastly, I would like to share a quick update on our UCC automatically present, which is ramping up gradually as well in the quarter, We launched a rabbit language for flight searches for the Saudi market and plan to launch their average language, what our hotel product in the coming quarter.
The region continued to open its borders to US citizens traveling we believe we are well placed to capture this increased average demand going forward.
I would like to hand, the call over to Mohit to share more color on our financial recovery and performance in Q3.
Thanks, Andrew.
Happy new year everyone.
Since the outbreak of Covid pandemic, followed by complete Lockdown in India until late 2020.
Focus has been to optimize costs.
The objective of minimizing losses during this fiscal year, which has seen business has been very significantly impacted by the pandemic.
Our relentless focus on cost optimization, coupled with continued recovery in the day.
Strict travel demand has helped us achieve adjusted operating profits during the reported quarter, which is ahead of our expectations. We had when we entered this fiscal year.
But overall business recovery compared to the same quarter last year.
Which was pre pandemic in terms of gross bookings in constant currency terms excuse me only 37%.
Answering that this number was about 15% in the last reported quarter. It is also reflective of the gradual pace of quarter on quarter business recovery that we are seeing led by.
Learned by the exploration of domestic travel demand.
Moving on to the main business segments.
Ticketing adjusted margin stood at $26 million, which is over 38% recovery in constant currency terms versus pre COVID-19 levels. During the same quarter of last fiscal year and more than double just started margin of 11 $9 million.
In Q2.
Adjusted margin in our hotels and packages business stood at $25 $2 million, which is about 25% recovery in constant currency comps versus pre COVID-19 levels. During the same quarter of last fiscal year and about four and a half times, they're just didn't margin of $5 $6 million achieved.
In the previous quarter.
That's what our bus ticketing business Theyre, just took margin stood at about $9 million and represented over 45 per cent per year on year recovery in constant currency terms and was about clear enough times.
The margin of $2.5 million.
Achieved in the previous quarter.
Lastly on our other businesses there just didn't margin of four $1 million.
During the quarter represented and you don't get recovery of about 50% in constant currency terms.
I'll share some details around the operating cost during the quarter, which continue to be an area of sharp focus and rationalization beginning with variable expenses, which are largely comprised of marketing and sales promotional expenses, we continued with significantly year on year improvement and as a percentage of gross bookings.
These expenses stood at three eight per cent of gross bookings compared to eight 9% in the same quarter last year.
Our adjusted personnel and <unk> expenses.
Expenses came in at about $27 $7 million compared to about $45 $6 million in the same quarter last year.
Is that a slightly higher from the $24 $4 million reported in the previous quarter on account of restoration of salary reductions during the quarter as well as some incremental overhead costs, which have been incurred in line with increasing business volume.
Really the highlight for the quarter has been the achievement of adjusted operating profit of about $5 $2 million, which is an improvement of over $16 million on a year on year basis, and an improvement of over $18 million on a quarter on quarter basis adjusted.
It further.
Other non cash depreciation and amortization expenses.
Adjusted operating cash profit stood at about $95 million compared to a loss of $7 $6 million in debt.
Our reported quarter of Q2, and a loss of $6 $2 million reported in the same quarter a year ago.
Just on our own and the bottom line reinforces our belief in continuing to pursue the strategy of cost rationalization in comparison with pre pandemic levels, along with a plethora of an initiative to air business recovery, particularly in the domestic market or the next few quarters.
Lastly, we continue to focus on operational cash management, we started the quarter with cash and cash it himself about $198 million and aided by the positive operating cash flow of about $9 $5 million during the quarter we ended.
At about $228 million of cash and cash equivalents.
Obviously reported in addition to the cash balances. We also have because I didn't get into facilities of approximately $100 million.
Facilities remain undrawn at the end of the reported quarter.
With that I'd like to turn the call over to the operator for Q&A.
Operator please.
Thank you.
I would like to ask a question simply press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
And again, if you would like to ask a question simply press Star then the number one on your telephone keypad.
And at this time, we do have a question from the line of Manish <unk> with Goldman Sachs.
Yes, hi.
Thank you so much for taking my question is when you hit a debt from Goldman Sachs.
One question from mind when people you don't get your fans and congratulations on achieving.
Cash EBITDA breakeven.
How sustainable is that number going public do you believe that demand recovery happens.
Should it need to be able to sustain this positive cash flow number, but general demand recovery and there might be a need for highest spend in selling and marketing.
Again, our book being a big that number back in debt, so any thoughts around that guidance.
Yeah.
Hi, My name is Mohit here and there.
Pretax debt.
Like we have been mentioning over the last few quarters. The intent has been to keep the operating losses zone and pretty much kind of you know getting back to the another plus or minus $10 million kind of an operating.
Cash profit and loss situation, you know, what we call as the breakeven range, one off sales and it could be in that range.
Our next table on a stable basis, I think the last quarter saw us being in that range, but with some losses and we have seen this quarter with you know some incremental business recovery with kind of being able to breakeven and then also pose some.
Positive operating income.
Numbers over debt, we believe as the business because we kind of think it needs to keep happening.
Will it be to kind of make sure there'd be kind of entered to remain around the breakeven levels are in the breakeven range that we've called out as I started you know.
We see quarter on quarter seasonality changing in India and all.
So I was kind of largely in a competitive situation, where most players' R&D in the private domain.
Therefore, we would want to add in a highly growth market. So their book would want to kind of keep that flexibility going of being in debt and our operating range of plus or minus $10 million.
But the fact that.
Significantly rationalized, our fixed cost structure as you know, particularly around people expenses, particularly around six general and administrative expenses gives us an additional come.
<unk> debt.
<unk> business recovery, even if you're out of variable expenses go up a bit in.
In line with volume recovery.
The significant pruning in this fixed cost should really help us kind of keep under breakeven book.
Thank you that's helpful. Thank you and I'll do it.
Yeah.
Well it's been.
And again, if he would like to ask a question simply press Star then the number one on your telephone keypad.
And at this time there are no further audio questions.
Are there any closing remarks.
Yes. Thank you so much for joining our call today.
Certainly wish you all good health and look forward to speaking to you soon.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect.
Thank you everyone.
Thank you.
Yeah.
Okay.
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