Q1 2022 Yatra Online Inc Earnings Call
Good day and welcome to the Yorkshire first quarter 'twenty 'twenty two financial results conference call.
The conference is being recorded at this time I would like to turn the conference over to Denise Kimberly Johnny. Please go ahead.
Thank you Katie.
Everyone welcome to address fiscal first quarter.
2020 to financial results for the period ended June 32021.
I am pleased to be joined on the call today by CEO and cofounder to shrinking.
The following discussion including responses to your questions reflects management's views as of today August 19.2021, we.
We do not undertake any obligation to update or revise the information.
Before we begin our formal remarks allow me to remind you that certain statements made during the course of the discussion may constitute forward looking statements, which are based on management's current expectations and beliefs and are subject to several risks and uncertainties that could cause.
<unk> results to differ materially, including factors that maybe beyond the companys control.
These include expectations and assumptions related to the impact of the COVID-19 pandemic.
For a description of these risks please refer to our filings with the SEC and our press release this morning copies.
Copies of this and other filings are available from the SEC and on the IR section of our website.
With that let me turn the call over to Stuart.
Thank you Ganesh.
Good morning, everyone and thank you for joining us.
Hope that you and your families are safe as we can.
Navigate our way through this pandemic.
As you're all aware, India was hit, particularly hard by the second wave of COVID-19.
Cases, reaching over 400000 ideas, it's heightened the quota.
This led to widespread localized lockdowns across the country significantly reducing a travel so not as severe as of yet.
The impact was widespread and touched most of us publicity with family friends and employees impacted.
Despite these challenging conditions, we continued our strong execution.
Adjusted revenue was <unk> 489 million, which is approximately $6.6 million U S dollars.
Down about 50% from the prior quarter due to the effect of the widespread lockdowns across India, but up 107% versus a year ago. My name that was supposed to based on the locked out. Despite the effects of this second wave I'm proud to report that stringent cost controls enabled us to deliver positive adjusted EBITDA of INR.
So the $9 million, which is approximately a half a million U S dollars.
As I've been telling our shareholders Yasir will exit the pandemic, a more financially stable and profitable company.
Was pre pandemic and as a result, we'll be in a much better position to maximize shareholder value going forward.
While they're not out of the woods, yet I'm guardedly optimistic that the worst of the Lockdown is now behind us.
And that we saw the trough in travel this June.
The combination of Lockdown and the vaccination drive has lowered guest counts to a level low enough right now to encourage you to come with a recovery in travel.
July industrial passenger numbers grew 56% and the strength has continued into August.
I'll go into more detail shortly but he also has seen a rapid recovery in consumer travel and hotel bookings in July and August.
Perhaps more importantly, corporate travel is finally, starting to come back and rapidly.
Recall that before the pandemic hit a b to be accounted for approximately 50% of the outsized gross bookings and greater than that of our profitability.
Why is corporate travel coming back now the reasons are many fold, but we believe the most significant factor in corporate travel recovery is the genuinely remarkable mass vaccination program, India has undertaken.
India is vaccinating nearly 5 million people per day.
To date 557 million plus doses of the vaccine has been administered with a 123 million people approximately 9% of the population getting fully vaccinated and another 434 million people, which is about 32% of the population having received at least one dose.
At the current pace, we anticipate close to half of India's population being fully vaccinated by the end of this year, which will reassure businesses that'd be a getting back to normal.
I'm very confident that the industry is well on its path to the coffee.
As we look forward to the end of this pandemic, which we believe will be driven by the pace of vaccination in the coming months travel should recover strongly as evidenced by the strong recovery post the first wave.
Now coming to our June quarter performance.
In the June quarter, we felt the brunt of the impact of the second wave in India adjusted revenue of $6.6 million was up 107% year over year, but down 50% sequentially. Despite the sequential revenue decline our tight cost management helped us achieve positive adjusted EBITDA of half a million dollars.
And we ended the quarter with a solid balance sheet with a cash balance of approximately $30 million.
As we look to the year ahead, we see travel rapidly recovering as vaccination accelerates and travel restrictions gradually lift with domestic in the near term and international towards the latter part of this year, we continue to hold our cost to the minimum and we believe we have adequate liquidity on the balance sheet to see us back to sustained profitability.
On the consumer side, we are beginning to see demand coming back in domestic travel on account of the low case counts and the vaccination valued in India in the month of July.
Passengers grew 56% from June and are currently trending at a growth rate of 39% for the month of August over July.
We expect the recovery in international to continue to be more gradual and more likely towards the end of this calendar year and largely dependent on the case counts and the rate of global vaccination having.
Having said that off late a number of European countries, including Switzerland, and France, Spain have eased restrictions on travel hopefully vaccinated Indian citizens.
And the UAE also today announced further easing of travel restrictions this should give a boost to international travel in the short term as well.
Air passengers booked was up 170% year over year in the June quarter, but down 62% sequentially, reflecting the impact of the second wave.
Hotel room nights, almost quadrupled year over year, but was down 76% sequentially.
On both the air and hotel at a competitive level, we continue to see moderate to low levels of competitive intensity during this quarter.
We're also currently in the process of expanding payment options such as book now pay later solutions, which is similar to off to pay that some of you might be familiar with on a consumer platform to enable customers greater flexibility of payment timings on.
On the corporate side of things our corporate travel business is beginning to recover well we are seeing a strong recovery in business travel is more employee pension or to get fully vaccinated July gross bookings for Culp Europe grew 268% over June and August is trending at 316% growth over June.
And August it looks most likely to be the best months for corporate travel since March 2020.
We are optimistic about the growth in recovery based on the trends that we are witnessing in the months of July and August and believe that a healthy balance sheet puts us in a solid position to capitalize as the recovery continues to gain momentum.
Our pipeline of prospective new customers continues to grow as well as inbound interest has increased meaningfully post pandemic, we believe online penetration in the corporate travel market in India is approximately 10% to 15% a large part of the market today approximately 60% is held by smaller to mid tier offline.
As a result of the pandemic and.
We see evidence of an accelerated shift towards online players, especially as contracts come up to their end of life and rebuilding.
Once we get back to normal given our recent new customer signings in our ability to gain share in this highly fragmented market. We believe it is possible that corporate travel accelerates growth to levels higher than pre pandemic.
One of this strategic growth driver for US is the expansion of our corporate and digital platform as we continue to add non travel related services to our captive corporate customer base as the largest corporate travel service provider in the country. We have strong relationships with some of the biggest and best known enterprises in India. We continue to make inroads into these organized.
Patients with a non travel offerings, Brian, but he amongst which is freight.
So let me now give you an update on our fleet initiative as we look towards digitizing the logistics space, our corporate travel relationships with both airlines and enterprise Executive management together without technology capabilities give us a significant tight stock.
Despite the pandemic, we have rapidly scaled up this business over the past few months and we believe this business longer term has the potential to be even larger than our corporate travel business.
Now I would deem of almost 200 seasoned freight in industrial and logistics industry professionals, who we believe can help scale up this business, we expect 'twenty 'twenty two to be a Europe rapid expansion for this business.
The freight industries multiple times the size of the travel industry and exhibit similar attributes to what the business travel industry did about a decade ago. The industry is highly fragmented has very low levels of technology adoption. We are fortunate to be able to leverage the expertise we have built.
In our corporate travel platform over the past several years and.
And we can look at leveraging that strength for building out after a travel sarcoma zone.
Additionally, we are also looking to leverage our existing vendor and corporate relationships on both the supply side and demand demand side of upgrade business.
We remain confident in our platform capabilities to serve any scale and type of customer.
Corporate customer base is a great asset for us and is the platform that we intend to leverage to cross sell services as.
As of June 30th 2021, the balance of cash and cash equivalents and term deposits on our balance sheet was the piece to point to six 3 billion or approximately USD $31 million.
When we come out of this pandemic on the back of the secular growth in Indian travel the mid teen signing growth.
Made during the pandemic and new customers and in the growth of our hotel network a digital platform business.
Has the potential to grow to the size of a peep endemic corporate travel business in the coming years.
We should be on a significantly better revenue growth trajectory as we come out of the pandemic we.
We believe the opportunity of Hatefully outsize massive we believe Indian Internet travel will hit an inflection point in the coming years as we get past Covid and we believe corporate travel maybe other leaders will recover quickly and also adopt technology.
At a rapid pace.
In addition, the efforts we made during the pandemic to improve operational efficiency will lead to significantly higher levels of profitability and cash flow I want to thank our shareholders, who have stood by our trust through these trying times I'm hopeful and honestly believe it is only a matter of time before your patience and understanding as reported.
Finally, I would like to extend my appreciation to our employees, whose hard work and dedication is the ultimate driver of our success I also want to voice my sympathies to my friends and colleagues many of whom had lost near and Dear ones in this pandemic.
Stay safe and healthy operations overdue.
Before I open the call for questions I would like to make a few additional comments.
You may have seen our recent filing by one of our shareholders, commenting on our business and strategy.
This morning, we have issued an open letter to all of our shareholders articulating to our perspective on the opportunities that the altra has to succeed as the travel market recovers from the pandemic.
As I have discussed on today's call. We are well positioned and we are now excited about the initiatives you have underway to create shareholder value.
We'd be happy to take any questions you have about our business and outlook moniz or would you.
Thank you drew operator, please open up the call for Q&A.
Sir if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again, Please press star one to ask a question, we'll pause for just a moment to allow everyone the opportunity to settle for questions.
Thank you. Our first question comes from Scott Buck with H C. Wainwright.
Hi, good morning, guys.
Good morning, Scott.
On a score.
It looks like the corporate travel group has been pretty impressive only off of June but could you help us.
Can you give us an idea of frame that in terms of what it looks like versus pre pandemic level.
So on a pre pandemic level Scott in corporate.
Corporate travel revenue right now all of this would be trending somewhere close to about 25% all three pending pre pandemic levels, maybe even slightly north of 25, you know late twenties.
Okay perfect. That's helpful. And then do you have a sense of you know.
How many of these new corporate travel bookings are coming from customers that maybe you've signed over the past 18 months or so.
I don't have that number handy right now in terms of how much of it is new customers and how much of it is existing customers, but there is recovery, which is happening right now on a fairly broad base.
The lead in the recovery is happening by the big consulting firms. So the you know.
He buys bcg's pwc's of the world. They are the ones who are driving the large part of the recovery and maybe some of the more industrial and manufacturing businesses are recovering more gradually.
Okay. That's helpful. And then last one for me it looks like you guys have still been fairly conservative on our marketing and sales spend I'm curious when you know when we started to see that ramp given the.
Demand for travel.
See I think the competitive landscape right now is fairly benign as I mentioned, Scott I don't see us needing to ramp up tremendously on the marketing we are seeing.
Members in July and August as well, which are fairly encouraging from an overall competitive landscape perspective. So my sense is that while there will be a little bit of ramp up which will happen, it's not going to be a very significant as we go forward. The ramp up doble also been linked to into the recovery of the B to C business.
Which now is.
He is happening quite strongly at the moment, but from an overall percentage point of view, we should see some operating leverage on the marketing and sales spend.
For the next few months at least tried.
The advantage that the Altra has when it comes to this Scott is that we've got a very strong and well recognized brand in the country and that higher brand recall allows us to be a allows us to get a meaningful amount of direct traffic.
So we should not see spends recovering in line with revenue, we should be seeing some operating leverage on the spins.
Okay perfect. Thanks, a lot guys.
Sure. Thank you.
Thank you. Our next question comes from Tim Moore with Zacks.
Thanks, and good work on cost savings shining through.
Just to see the air ticketing margin so high and.
I was kind of curious about your book now pay later option getting added sorry, I just have three sets of questions to ask you know the first one is on the hotel side.
I read that 70% of India's domestic hotel capacity was operational by the end of June and that the premium hotel side was leading the hotel recovery keep you know I know you just mentioned that's weird.
Scott asked about this in operating leverage, but if you kind of share your approach.
If you're willing to maybe increased marketing on the hotel side to gain market share. If you know if the discounting behaviors staying rational in kind of benign lately.
And just what is kind of your thinking of a trade off between maybe <unk>.
Spending for our repeat customers versus acquiring new customers on the hotel side.
Sure.
So onto the hotel side there are two factors at play for US one which is happening is on the corporate travel side are we beginning to see hotels gained meaningfully on the corporate travel side and the reason behind that is that a number of companies are now being much more stringent about they'll manage.
Hotel stay programs, so as a company Europe, obviously, it'll only as strong as your weakest link C O. If your employees in our country markets.
Going and staying at smaller places bases, which might not be as hygienic. They run the risk of getting infected and then bringing that infection back into the main office keeping that in mind and.
An increasing number of companies are now looking at their hotel programs to become much more structured and their employees staying at properties, which may be at home.
<unk> standard and they are working with Yatra in terms of identifying those properties, which would mean those kinds of standards. So we have a process called clean boss, whereas our hotels have to meet a certain amount of auto certain criteria for the kind of stuff that they're doing to maintain COVID-19 protocols.
And we are seeing good traction on that and the adoption is also extremely good product on the corporate travel side. So that's one thing which is driving and for that we don't really need to get into discounting and marketing right. That's inorganic share that we're gaining from our own corporate customers, who earlier might not part of the restructure.
And managed corporate travel program, but in the post Covid environment are looking at formalizing and putting more structure around the state programs as well.
The other part of your question, which is on the consumer side.
On the consumer side today for sure. There is there's good growth that we are witnessing.
But also given that.
The market is relatively stable.
We are seeing an accelerated shift towards us because of the strength of the brand.
In the past, especially and now I'm going back to late pre pandemic levels of 2019 and maybe.
Even 2018, when the competitive intensity on the hotel side was extremely high.
Did lose a little bit of market share, but that share we seem to now be gaining back in a much more stabilized environment.
Having said that I think there are opportunities to accelerate revenue growth and we are looking at those opportunities closely so wherever it makes rational chains, we all going to take on those opportunities to continue to scale up the revenue growth on the hotel side.
But the good thing for us as I said just to reiterate is that we've got to leave those working at the moment. One is on the corporate travel side, where the cost incremental cost of acquisition is quite low and the others on the consumer side, where we are evaluating the the risk reward and get on the cost benefit analysis off the incremental sale.
Looking at that judiciously.
No. That's helpful. My next question as you just kind of help to answer some of it with the cleaning standards in the clean pass.
I'm just wondering.
If you could maybe elaborate or add more specific actions.
Wariness that you might be doing proactively on the corporate travel side to stay in front of corporate clients.
Now as the snap up recovery, starting and I'm wondering if you're focusing a bit more on medium size ones. You know you mentioned consulting I'm just wondering if you're really focusing more on certain end markets like construction farmer consulting tech outsourcing as those start to come back and they bring employees and then maybe on the earlier compared to other end markets.
Sure. So if you look at from a strategy point of view our market share has historically been higher in sectors like consulting where all three out of the big four.
Look with US then we will have banks, where we will have a strong presence as Glen then with this large big tech campaigns in India like an eight CLO. The D. C S right, which imply a hundreds of thousands of people we have a strong presence with them.
The area, where historically, we've got lesser penetration is more on the Indian large corporations.
These are the ones who were historically serviced by mid tier organizations out of India.
That's the segment today, which I think is ripe for disruption. So we have a two pronged approach for our current installed customer base with the big consulting firms. The big banks are focuses on cross sell of hotels and other services.
Whereas in terms of new customer wins, we have today now looking much more closely at the large Indian collaborations, which he though to being serviced by the mid tier organizations and a number of these Indian collaborations also have shown a higher degree of interest in terms of adopting technology.
So that's the idea and avenue for growth with asbestos at 60% and fragmented market that we've been wrestling to buy it in this pandemic is actually helping us accelerate penetration in that sector. So that's the two pronged approach on the existing customers. The focus is going to be more cross sell to them and getting more and more products sold and then.
On the new cost of wind site, it's despite maintain market that we're going after.
Great that's helpful and I'm just wondering.
Yeah, just the air ticketing margins were quite high and you know that they've gone up nicely I'm. Just wondering with you know low low load factors and less discounting and incentives for airlines.
Which seems to be also the case in the U S. They're pretty expensive actually been airfares here how.
How many more quarters do you think you can keep the air ticketing net margins up you know until maybe corporate picks up.
And maybe brings that down a little bit which would still be get out for operating leverage I'm. Just wondering maybe how you're thinking about the margins. When you look out a couple of corners shop.
So margins in quarters like these which have high degree of cancellation also right do it get.
In a way.
A bit.
Trying to look for the right one but maybe.
They don't really give you a sense of what is the ongoing margin right. So if I was to look at the ongoing margin. The underlying ongoing margins, we think will be closer to the 10% Mark at this point in time right with these kinds of aberrations happening on account of high degree of cancellation, playing out and as corporate.
Travel begins to pick up more on the mix. The weighted average will then blend towards the 6% to 7% mark or would it be sort of 12 to 18 months that's.
That's the way we would look at this I didn't get on.
The 16% that you see right now in the air margins is more of an aberration.
An aberration that is laid on account of the higher cancellations in the quarter.
Right.
Helpful explanation and that was my last question. So thanks for giving light on that.
Sure. Thank.
Thank you.
Thank you I'm showing no further questions I'll now turn the call back over for closing remarks.
Thank you everyone for joining the call today as always we are available for any follow up questions. You may have.
Stay safe thanks.
Thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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