Q2 2022 Yatra Online Inc Earnings Call
Good day and welcome to the Yatra second quarter 2022 financial results Conference call. Today's conference is being recorded at this time I would like to turn the conference over to manage him Russia Honey. Please go ahead.
Well, thank you Cecilia and good morning, everyone welcome to our fiscal second quarter 2020 to financial results for the period ended September 32021.
I'm pleased to be joined on the call today by our CEO and cofounder drove shrinking.
The following discussion including responses to your questions reflects management's views as of today December 'twenty.
2021, 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 discussion.
May constitute forward looking statements, which are based on management's current expectations and beliefs.
And are subject to several risks and <unk>.
Uncertainties that could cause actual results could differ materially.
Factors that may be beyond the company's control.
These include expectations and assumptions related to the impact of the COVID-19.
For a description of these risks please refer to our filings with the SEC.
In our press release this morning.
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 drew so please go ahead.
Thank you Tony.
Good morning, everyone and thank you for joining us.
I Hope you and your families continue to stay safe as we navigate our way through them.
And it's no variance.
As we had shared with you in November will be working with bankers and lawyers in India to explore our options for an India IPO I'll get into more detail later, but falling this course of action I believe will greatly enhance strategic flexibility and.
<unk> as a catalyst to improve shareholder value.
Now onto our results. We are pleased to announce strong September quarter results with adjusted revenue.
$788 7 million.
This represents an increase of 61% Q on Q and 190% year over year.
This growth was faster than the Indian travel industry as a whole as we began recovering from the delta driven lockdowns in the summer months.
As Colin said you will recall during that period, we were hovering around the 400000 bulk and currently they have 7000, Mark in fact yesterday was less than 6000.
In Geismar vaccination program has truly been remarkable and as of last week away 220 million people or about 60% of the population had received at least one dose up the vaccine and about 500 million people or 40% of people are now fully vaccinated and have you seen both doses.
Air passengers book was up 93% year over year in the September quarter, and up 116% sequentially. This outpaced the industry's eventual growth of 74%.
More notably our hotel room nights were up more than six six year over year and up 313% sequentially weaker.
We continue to see low levels of competitive intensity on the hotel front during the quarter and our brand continues to resonate positively with Indian travelers.
Adjusted EBITDA was $23 3 million.
Despite the significant investments, we are making in the nascent but rapidly growing logistics in place to.
To give you a sense of how much we would have improved the profitability and the outside they're not being filled these investments in the plate business.
Adjusted EBITDA would have been almost 35 million better or INR $53 8 million.
For the quarter and this is despite us being in the midst of a pandemic.
As of September 32021, and the balance of cash and cash equivalents and term deposits on our balance sheet was about 1.855 billion.
On a U S dollar basis.
This translates into adjusted revenue for the quarter up about $10 $6 million and adjusted EBITDA of 314000 order.
Or about $725000, if you exclude the investments in the fleet business.
We ended the quarter with a solid balance sheet with a cash balance of approximately $25 million.
The strength that we saw in the September quarter carried forward into October and November in November industrial Air passenger numbers grew 19% from October and were up 69% year over year. These are the highest level since February 2020, and have recovered to about 82% of pre pandemic.
That said recovery in international travel has slowed down in the month of December due to the state of the Omicron obedient. However bookings for domestic travel have again picked up in the last few days after dropping almost 20% from November levels in the first two weeks of December.
Domestic travel in India is witnessing a strong resurgence as people realize that and shift focus towards domestic travel given the restrictions placed on international travel.
We believe this bodes well for you I'll try and given our industry, leading content of domestic hotels and strong brand recall amongst the Indian middle class.
Recovery in international travel, however will be a function of this that'll be omicron variant and based on POS trends. Following the outbreak of the Delta there should we expect a recovery in international travel towards the end of the first quarter early part of second quarter of calendar year 2022.
Yeah.
Our pipeline of prospective new customers continues to grow as inbound interest has become meaningfully has grown meaningfully we're spot.
On the corporate side of things Ross bookings for corporates grew 61% in November as compared to September 21, corporate revenue in November was approximately 50% of pre COVID-19 levels.
Despite corporate travel being relatively dormant for the past year, we continued to see inbound interest in signing new customers onto our capex cycle, increasing our market share.
We believe online penetration in the corporate travel market in India is approximately 10% to 15%.
A large part of the market approximately 60% it still sells by smaller offline players.
Given the highly fragmented nature of the market. We believe we will continue to take market share going forward and that our corporate business should accelerate go to levels higher than where we were pre pandemic as we see an ex later shift towards online bookings, especially as contracts come up for renewal at the end of their life and re bidding.
Okay.
The strength of the Calvin business like we saw in the month of October and November. It gives us reason to believe that corporate travel in India will also recover slowly as economic growth continues to happen in the country. They.
There might be a slight lag however.
In terms of recovery of corporate travel compared to consumer travel, but we believe that a technology enabled corporate travel solution will continue to thrive in the post COVID-19 world as companies adapt to a more hybrid approach to loyalty, which will be difficult for them to do without the use of technology.
And this is something that we continue to.
Witness underground in terms of the new conversations that we have with prospective customers.
Really as well we are seeing the success of tech enabled corporate travel platforms like <unk> action, and we don't think India would be any different.
We have multiple levers of growing our corporate travel business and we believe that the digital platform approach that they've adopted as the right quality of any success in the trade business also lends more supported the validity of this approach.
Let me now give you an update on the plate initiative.
As we look towards digitizing the logistics space, our corporate travel relationships with both airlines and enterprise Executive management together without technology capabilities has given us a significant head start.
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.
We expect 2020 to be a Europe rapid expansion for this business and believe that we should be able to achieve revenues of between $4 million to $5 million from this business in 2022.
The page industrial as you would recall is multiple times the size of the travel industry and they exhibit similar attributes to what the business travel industry did about a decade ago. The industry is highly fragmented and is very low levels of technology adoption.
We're fortunate to be able to leverage the expertise we have acquired in building our corporate travel platform over the past several years in building up trade platform.
Additionally, we're also looking to leverage our existing vendor and corporate relationships on both the supply side and demand side for our trade business.
We remain confident in our black plums capabilities to serve any scale and type of customers. Our corporate customer base is a great asset for us and as a black problem that we continue to leverage to cross sell services.
Okay.
We are optimistic about yaacov continued growth and recovery based on the trends that we witnessed in October and November and believe that a well recognized brand and healthy balance sheet.
In a strong position to capitalize on the recovery continues to gain momentum.
As I've been telling our shareholders Jethro and exited the bank makes a more financially stable and profitable company than it was pre pandemic and as a result, we'll be in a much better position to capitalize shareholder value.
We are not out of the woods, yet I'm guardedly optimistic that despite the omicron Beijing the worst of the Lockdowns in all behind us and that we saw the trough in travel in June 2021.
And the levels of vaccination now in India has no what case counts to a level or in the afternoon cottage a strong recovery in domestic travel.
When we come out of the pandemic on the back of the secular growth in the Indian travel.
The mid teen signing growth, we've seen during the pandemic and new corporate customers and then the growth of our hotel network, our digital platform business that it's completely additive and has the potential to grow to the size of our pre pandemic corporate travel with both of them becoming is we believe we should be on a significantly better revenue trajectory.
We believe the opportunity ahead for you all players muscle.
We believe Indian Internet travel is at an inflection point.
As we recover post Covid, we believe corporate travel maybe other leaders will also recover quickly.
In addition, the efforts that we've made during the pandemic to improve operational efficiency will lead to significantly higher levels of profitability and cash flow.
I Wonder tank, our shareholders, who have stood by our third through these trying times I am hopeful and honestly believe it's only a matter of time before your patience and understanding our reported.
Before I open the call for questions I would like to make a few additional comments.
You may have seen our recent press release on the potential listing in India, a few outside India subsidiary.
As we continue to execute our strategy, our board and management team regularly consider opportunities to enhance value play out to shareholders as part of these ongoing efforts. We are working towards an additional listing in India to support our ongoing strategy accelerate our growth efforts and strengthen our offerings.
We believe potential benefits of this listing.
Which would support <unk> ongoing strategy and value creation opportunities include access to an additional pool of capital, including retail and institutional investors in India, who are already familiar with the upsell business in Thailand, which was currently restricted from participating in the U S capital market.
It will unlock we believe additional value for U S shareholders provider liquid stock that can be used for local M&A in India.
Further capital to strengthen the balance sheet and provide additional sell side research coverage.
The company has engaged leading financial advisers in connection with its evaluation. There is however, no assurance that the auto will proceed with the lifting of the D exchanges would approve a listing application buyouts.
But having said that we are.
Optimistic about the future and we believe there is a tremendous amount of growth potential for this business and the strength that we've seen in the recovery of travel in the months of October and November.
Give us that confidence give us that belief that travel will come back strongly we will obviously go through these cycles, where your ratings are likely to emerge and could impact business in the short term.
But we've seen the strength of the Indian market and we believe that the domestic Indian travel market is quite resilient and we will continue to grow strongly. Despite all these hiccups that happened for shorter periods of time.
Having said that I would now like to hand, it over to Malaysia. So that we can take any questions that you might have.
So Sidney if I could.
To open up the call for Q&A.
Thank you.
Wish to ask a question at this time, please press star one on your telephone keypad.
Star one on your telephone keypad, we will now take our first question from Scott <unk> from H C. Wainwright. Please go ahead.
Hi, Good morning, guys. Thank you for the time.
I'm curious can.
Can you can you remind us what international travel was as a percentage of revenue pre pandemic.
Sure. So the international travel was approximately 30%.
To 35% of people with revenue.
Okay. That's helpful. And then is there I guess just the slow recovery in international is that because of certain restrictions that are in place or is that just driven by consumer demand at the moment.
No, it's driven largely by the restrictions so in the theater, where the restrictions have eased.
We saw in the months of October and November International demand picked up quite strongly.
It's only in the month of December where again this news up omicron came out in the countries start replacing that additional restrictions on international travel that international demand has slowed down a bit.
The domestic market. However continues to be very resilient and we are seeing strong growth happening on the domestic side. So we feel while there might be some drop which will happen in international.
I feel.
And that in a relatively short period of time, the domestic demand should be able to offset the drop in international at least for the time being the market's fully open up internationally.
Alright, that's very helpful. And then turning to freight I'm curious what additional investment do you guys need to make it at this point to really position that business to scale or have you kind of completed that process at this time.
So the investment which has been made is largely in terms of resources, which is ranging from technology to sales and marketing and operational risk.
I'll be have ramped up the team quite significantly now onwards, you will start seeing incremental investment happening at a more gradual level.
So the initial ramp that needed to happen has happened and the cost of that has come in and from here, you'll see a more gradual increase in costs as opposed to sharp increase that we've seen in the last quarter.
Okay. That's very helpful Drew and then last one for me you guys have been pretty disciplined around marketing spend I'm curious you know when we may see.
You know some some real investment there.
Kind of back to pre pandemic levels.
I think today, we are seeing.
The strength of the brand truly come to the forefront and we are seeing higher degree of traffic coming in without needing to invest incrementally.
We've also come up with some very creative ways of working with micro influencers on platforms like Instagram and that's working out really well for us So I think.
We are still maybe another couple of quarters away from doing large scale investment in consumer marketing.
My sense is that you would first want to tap out the kind of growth that we can see organically, which is what we are benefiting from right now.
That's very helpful. I appreciate the time guys and congrats on all the progress.
Not at all thank you.
We will now take our next question from Anja Soderstrom.
Hum.
Please go ahead.
Hi, Thank you for taking my question and congratulations you're saying it sounds like things are trending in the right direction for Europe and India.
Just call that person about that corporate travel how many of your customers.
Customers did you sign and can you talk to sort of the size of them and have you seen any churn on the corporate traveller.
Sure so in there.
Or is this from new customers, we signed approximately.
20 odd new customers.
And these new customers that we've signed these are largely people who are coming in for corporate travel and a few of which are also cross sell incorporate in terms of churn.
I think our churn rate is less than 2% at this point in time per annum.
Okay and then it just typically.
I love the concept.
Very sticky business like you'll also find that they stick with you.
Yeah, so on the corporate travel side, where we implement the technology platform. It does tend to be a very sticky business and hence the 98% plus kind of retention rates that we see.
Because we are also making the upfront investment along with the customer to deeply integrate into the customers their ERP systems AHRI as systems and put their workflows on our platform. So it becomes the tightly coupled solution, which makes it more sticky from a customer's perspective anchor models.
Okay.
And lastly, Dan you corporate customers coming on board.
But its travel business are and that's a great business right then and your customers.
So the freight is also driving new customers, but today it.
It would be like almost a 70 525 kind of split that 75% coming in on account of travel.
25 coming in on account of rate.
Okay. Thank you.
And then just on the marketing spend and ER and then need you don't really see a need to ramp that up right now because you see the organic growth coming back.
But what do you see in terms of competition.
In terms of the competitive landscape also we think the competitive landscape is.
Is a lot more benign than what it's been historically.
It seems like a rational market at this point in time to that extent and hence we don't really see the need for any large scale marketing investment for.
What's also there is because we've historically spent.
A fair bit on maintaining the blind the boundary call today as high and as travelers percolating into tier two tier three markets, where our brand recall has been high we are getting the organic benefit off of that.
But overall from a competitive landscape perspective, I think until till now it is really seeing the markets remain clearly.
Sensible from a competitive landscape point of view.
Okay. Thank you.
It's also good for instance, most of that I think you said you were exactly.
Why not planning on building that out.
One of the two ball team, how how's that going and how do you see are there any challenges in hiring right now because the vaccination rates you think misnomer.
How is that trending.
Sure. So the hiring process has definitely picked up and we are pretty much as I mentioned, we've done bulk of the heavy lifting that we needed to do from a hiring point of view, we've got the teams to this.
And scale that we need them and from here, it's going to be a more gradual ramp up so the big effort that needed to be done has been done in the last four odd months now.
In terms of the hiring process as you rightly pointed out given that more and more people are now vaccinated.
The market has opened up and it has eased out our ability to hire people who are able to physically interview them as well. So all of those things are making it easier to ramp up faster.
Okay. Thank you and I'll tell you you gave an overview of the India listing, but is there any sort of timeframe on that timeline for any news that we should be looking out for.
So we are looking at.
Filing at least in the near term over the coming few weeks is what we expect to file and then it has to go through a regulatory process like it does in the U S where the SEC reviews it.
And typically in India, <unk>, which is the regulator.
Between 10 to 12 weeks to review and clear documents.
So that's the kind of timeline that we're broadly looking at so subject to all regulatory clearance is we're looking at maybe towards the end of the first quarter or early part of the second quarter.
Okay.
Well that was all from me. Thank you so much.
Thank you thank.
Thank you.
As a reminder to ask a question. Please press star one we will now take our next question from Tim Morris from Fox. Please go ahead.
Hi, Thanks, a few of my questions have already been addressed but I know it was nice topline growth be and nice to see the vaccinations keep rising.
And I'm just wondering you know you were nice enough to kind of put in the press release and mentioned that 20% bookings.
Booking drops and domestic travel the first week of December, but then you start seeing and maybe an uptick the past week is that uptick.
Because the faced a year ago kind of easy to year comparable or do you think thats kind of most most of recovery.
<unk> driven.
In the past week, yes, its a competitive that I was drawing the comparator that I was doing was entitled doses in November so not really Italy.
Because year over year comps become hard in this environment to two compared to compared to November itself. There was a drop of 20% all.
In the last few days, we've seen recovery happening on the domestic travel front, while we are still not back really to the November levels, but we're getting pretty close to that level.
That's good to hear.
I just want I'm just it was nice to hear you know corporate bookings the wins and you know that's still at only half the pre COVID-19 level and youre not by yourself on that I mean, all the otas are in the kind of the same camp.
You know how many you know how much of a lag do you think that might be compared to like domestic leisure travel for kind of corporate recovery is it really.
Folks have to stop working from home and get back to the office and you might be looking at kind of another year to get back to maybe J.
80% of kind of pre COVID-19 level for corporate bookings.
See what we saw in October and November of this year was very encouraging.
Kind of quick ramp that happened in corporate travel was a pleasant surprise and as I mentioned, we were back to almost 50% of pre COVID-19 numbers in November and hydraulic Ron not happened at least the indications we had from some of our largest customers was that in Q1, there would have been.
Somewhere between 75% to 90% of the pre Covid levels. So we were seeing and are expecting a fairly quick ramp happening on the corporate travel side as well my sense is the lag between consumer and corporate should not be more than a quarter or two at their Max the only difference which is that.
I think corporate travel.
On a per customer spend basis.
Might recover only two between let's say, 85% to 90% of pre COVID-19 levels. If I look at total weighted average point of view right.
Oh, okay.
You will have new customer wins that we've been seeing and those as they come in should help us offset the drop in per customer spend.
And you know maybe that 85% level.
You know estimate does that include freight cross selling or is that separate.
No. That's the upgrade is complete.
Completely incremental to this this is just on a like for like basis, comparing traveled to treat COVID-19 travel yeah.
No no that's wonderful to hear.
And you know it was nice to kind of hear the.
Revenue possible guidance for Crane, I think I heard maybe $4 million to $5 million for next year.
Do you think.
This year is already trending at least 2 million and you know you think it could double it each year going forward.
Beyond beyond next year, maybe it's $10 million of following here.
So I think we are trending at those kinds of numbers. We are comfortable with this projection that we are sharing the guidance EBITDA sharing.
And yes in terms of seeing a doubling year over year from there at all as well I think that pumping there'll be a definitely aiming towards.
Did I just I just have one more question on service costs as the it's been quite low and we know it's tied to packages hotel packages travel packages.
When do you think that'll start coming back and I, probably shouldn't go back to the same level. It was pre COVID-19 right because you probably negotiated things in there.
Put some things in place to keep that down.
Yes, it's still over there. There is also a change in consumer behavior that we're seeing right now people are traveling and closed family groups. You don't see large groups of people, who don't know each other traveling together and package groups. So that part of the business is actually getting to unbundle and.
Baking into smaller groups that people are booking flights and hotels with us rather than taking.
A large package along with others, who are traveling with them.
And this is maybe to do more with the pandemic.
Although people don't want to travel with people that they don't know.
Okay.
That's that's really helpful and if so if that behavior continues for the next year or maybe longer than that service cost percentage of revenues I should stay pretty low and help with the operating leverage right.
That's right and alternative packages is one part of the business, which is still not fully online and needs more manual intervention. So the actual unbundling of that where customers are booking the flight and hotel.
Online itself is providing even greater operating leverage.
No that's very helpful and thanks for the color on that that's it for my questions.
Thank you.
As there are no further questions at this time I would like to turn the call back to your speakers for any additional or closing remarks.
Well. Thank you Cecilia thanks, everyone for joining the call today, and we look forward to speaking to you in the near term.
Thank you stay safe everyone. Thank you.
Thank you Kash, we'll conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
Hum.
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