Q3 2023 Mondee Holdings Inc Earnings Call
Hello, and thank you for your patience today's <unk> third quarter 2023 earnings Conference call. We'll begin in just a few moments.
Today's call will be hosted by Jeff Houston, Senior Vice President and if you would like to ask a question. Please press star followed by one on your telephone keypad. Once again today's call will begin in just a few moments of time. Thank you for your patience.
[music].
Okay.
Good day and welcome to the Monday third quarter 2023 earnings Conference call. Please note. This event is being recorded.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers.
And if you would like to ask a question. Please press star followed by one on your telephone keypad.
I'd now like to pass the call over to Jeff Houston Senior Vice President Jeff. Please go ahead.
Thank you Billy and good morning to everyone. Welcome to <unk> third quarter 2023 conference call with me today is founder Chairman and CEO precise <unk> and Chief Financial Officer <unk> <unk>.
<unk> Vice President Aristide's particulars.
<unk> Chief operating officer, Jim Dolan.
We will present, our results and be available for questions and answers.
Before we begin I'd like to remind everyone that this call may contain forward looking statements, including statements about revenue growth of our business, our management and government governance plans and other non historical statements. As further described in our press release. These forward looking statements are subject to certain risks uncertainties and assumptions, including those related to <unk>.
Growth.
The evolution of our industry, our product development and success, our management performance and general economic and business conditions.
We undertake no obligation to revise any statements to reflect changes that occur. After this call descriptions of these and other risks that could cause actual results to have a material difference from these forward looking statements are discussed in our reports filed with the SEC and in our press release that was issued this morning.
During the call. We also refer to non-GAAP financial measures reconciliations of the most comparable GAAP measures are also available in the press release, which is available at investors that <unk> Dot com.
With that it's my pleasure to turn it over to preside.
Thank you Jeff.
We are thrilled to welcome everyone <unk> third quarter 2023 earnings call to discuss our results and significant developments.
Our robust results have been driven by a reasonably strong leisure travel demand.
And with our market, leading technological accomplishments and market share gains as well as enhancements to our monetization studies.
As we get into the details of our results. It is important to note that at the start of the quarter, we divested <unk> and underperforming non core <unk> business unit.
Which we have owned since 2019.
This will be discussed more thoroughly throughout the presentation. As we provide comparisons are presented on a pro forma basis with this portion of our business fully executed.
Turning to slide four offload presentation bras bookings of $597 million grew.
Grew 15% year over year on a pro forma basis, excluding <unk> U S. Net revenue of 55 million represents growth of 66% over the pro forma of the same quarter last year.
This growth is driven by extraordinarily take rate expansion.
It has doubled since pre pandemic levels towards 90% this quarter the highest in the automotive market conditions.
Adjusted EBITDA for approximately $6 million was not only 54% higher than same period last year, but also the highest reported quarterly EBITDA in history.
We expect our EBITDA to continue to deploy in future quarters.
That increased profit of an exaggerated into a record operating cash flow generation of $6 million after adjusting for $7 million up one off transition outflows related to that would be if that is true.
Now that we ought to go through October and about halfway in November.
We're excited by what is looking to be an even stronger fourth quarter.
While these results are engraving, we had a motivated and focused on the near and long term prospects and targets for Monday.
This includes expanding our marketplace widening our technological lead, particularly when it comes to a fully integrated AI and materially enhancing profitability and free cash flow.
For the overall market, we continue to experience solid demand in most of our core business sectors and immense upside potentially in emerging sectors, but a new era of distributors experts and influences. This is where more of these best position with a fully integrated AI platform and global marketplace.
Sure.
Now I will hand, it over to Jim Deller Wallace Chief operating Officer Jim.
Good morning, and welcome everyone wherever you are.
Let me start with our market outlook and some external drivers to our gross bookings gross bookings growth.
Using slide five.
Across the globe many of them on these main markets, such as China, and India subcontinent continue to perform strongly with good upside.
There are early signs of some post recovery moderate.
Moderation of consumer travel demand in certain markets, such as North America and Europe.
In addition, some more specific markets are impacted by war and other conflicts in Ukraine, and the middle East.
Overall with Monday's agile business model adaptive AI platform and business position across the global markets. We expect to navigate these market conditions effectively and continue to enjoy an overall positive demand picture.
In addition, we see more significant upside based on our increasing pace of market share penetration of the emerging social media experience driven sectors.
With more than 80% of our business related to international leisure travel, we continue to benefit from tailwind from the recovery of certain geographies.
For example, travel from North America to China, which was approximately 10% of our business in 2019 has recovered meaningfully during 2023 from its extended Covid lockdowns in 2022, when it was minimal.
Year to date in U S dollars, our China business was back to 90% of 2019 levels.
Along similar lines, the Latin American market in which <unk> has increased its presence with recent acquisitions and organic growth remains very resilient.
On the other hand as mentioned before geopolitical tensions driven by the continued Ukraine War the Middle East. This score have a dampening impact on outbound travel from North America to these regions. We continue to monitor these events and take steps to mitigate any overall negative impact.
Furthermore, there have been macro concerns about potential softening of the largely recovered north American travel in Q4 and into 2024.
It is important to note that <unk> agile business model is resilient during such periods because on the demand side and travelers tend to search for more cost effective travel experiences.
As what <unk> provides.
And on the supply side during certain during uncertain economic times suppliers tend to improve the conditions and pricing for content. They provide through opaque privately negotiated channels like Monday.
In summary, travel suppliers value even more.
Diluted to target certain consumer cohorts with precision.
And travelers seek more customized itineraries.
Both trends that play well with monday's AI technological capabilities and leadership.
Okay.
Moving forward, we continue enhancing our marketplace.
<unk> already leased a segment of the one trillion assisted and affiliated travel market and we are confident that our continued growth will establish model. These leadership over more parts of the entire market.
The newest version of our fully integrated platform is now available to all of our existing 65000 travel experts and new ear of travel intermediaries.
As discussed before we are leveraging our technology to expand distribution to more new new era intermediaries, such as social media Influencers freelancers and concierge service providers.
A few thousands of these nuclear experts have already signed up and we're engaging with them one on one to receive feedback on the product and monetization model.
So far feedback has been enthusiastic and we're making a few refinements before fully investing in sales and marketing in this distribution channel.
Moreover, because we are pioneering this new era of distribution networks, we will be monitoring the relevant metrics over the next few quarters and report more details later.
To capitalize on evolving market conditions, we are focused our deep marketing capabilities on brand development and product positioning this year.
As a result, laundry successfully released and established a cohesive brand position and launched RB.
Our end to end AI integrated offering.
With these accomplishments in hand, we have pivoted to more cost effective and scalable grassroots marketing activities and campaigns. These.
These campaigns are expected to accelerate penetration of targeted market regions and emerging new euro experts and influencer sectors and.
Table in R&D to continue to increase transactions and revenue in additional ways.
Using this more variable cost approach, we are optimizing our market spend while achieving substantial upside business expansion.
In addition to new era travel experts, we have been expanding our <unk> distribution by signing up more small and mid size mid size mid sized businesses and membership organizations as well as partnering with platforms that provide products and services to these closed groups.
Net revenue from this expanded DTE distribution has increased 149% year to date compared to the same period last year.
Another reason for Monday sustainable growth is the use of our technology and distribution ecosystem to provide an ever expanding range of travel content through a uniformed global content hub.
Prior to the pandemic, we only sold there.
We have since added hotels, where gross bookings grew year to date, 74% compared with the same period last year.
Hotels packages and other content, which enjoy a higher take rate and are continued to grow rapidly.
Recently, we launched cruise content to a small portion of our distribution for further user input and product fine tuning.
We anticipate that cruises and activities will be a growth driver in late 2024.
At the same time, we have been enhancing our monetization tools by expanding ancillary areas and fintech offerings, such as payment platforms, wallets and fraud protection tools.
Now I pass to arrest these monday's executive Vice chairman.
Thank you very much Jim.
As I had mentioned in his highlights would have been widening our technological product lead and further advancing our <unk> integration.
In addition to enhancing the marketplace.
We continue to improve our technology and product are remaining at the forefront of innovation and product.
It'd be our AI AI powered private platform is the only fully integrated solution on the market and compassion conversational and extra trained generative AI curated experiences booking NIH, adding management and this is just the beginning as we continue to integrate AI beyond the direct customer interface.
And that in Q4.
We enjoy a first mover advantage and we will continue to build and train AI models that cater to our 65000 travel experts we had access to unique content data and distribution. Therefore, we are confident in our ability to stay ahead as we continue to evolve and enhance our AI markets.
Having brought to market, which considered to be only the first step in integrating AI to travel we are now, creating a nexgen AI platform and finalizing key our monetization plan for AI, we expect to further strengthen our AI capabilities with the acquisition of paper grades and all share trends.
Action Douglas closed yesterday.
<unk> was founded in 2017 by Joseph John and she'd be tobacco should be able to carry them.
Mr. John was a leader in the Apple music and itunes team for 12 years Mitra.
Mr stuck around and boasts over two decades of expertise in AI ml technologies and has served in multiple leadership positions at Paypal and Sun Microsystems.
<unk> quarter in Silicon Valley platform creates has a team of cutting edge AI professionals, who have previously worked with some of the most innovative enterprise companies, including Google.
Medpac Paypal in RF.
Paper grades stats as a leading provider of cutting edge AI technologies.
<unk> enterprise AI platform empowers businesses to build robust next generation AI applications. This platform uniquely integrated so the advantages of generative NII with diverse data sources seamlessly blending them with native enterprise integration and business intelligence capabilities.
Adding on a no code low code platform facilitates.
<unk> facilitates rapid deployment and development, ensuring a dynamic and efficient approach to leveraging AI capabilities.
In addition to enhancing our AI powered marketplace, we recently announced a transformative rebranding designed to connect with travelers in travel products on a deeper more authentic level reflect the company's adventure spirit capitalized on our significant investment in technological innovation and offer an unparalleled travel experiences.
On site the striking new brand identity, we released a new logo Cup sharing among these dynamic persona in part from website with improved user experience and advanced technological features the website started the highlights abbvie, our evolutionary AI pre planning tool and Providence experienced companion, the most powerful and the only fully integrated medicine.
On AI powered platform on the market.
Turning to our heightened focus on profitability and cash flow generation.
Innovation is sustainable growth are only one part of the equation Monte prides itself on being a high growth disruptive player as well as an EBITDA profit overtime, given the company's commitment to cash flow generation and generating long term profitability for our shareholders. We are focusing on enhancing our EBITDA and improving free cash flow.
<unk> into and through 2024.
In our ongoing forgot to strengthen profitability as Chris had mentioned, we divested <unk> and underperforming non core beat to see air business you need to its original majority of the O&M for the consideration of 200000 Mondi shares.
The transaction is part of our strategy to transform <unk> business model to one centered around AI lab solutions and experiences rather than selling travel booking services biogenerative direct consumer cards or nine.
Furthermore, lbs net revenue has been declining and adjusted EBITDA losses have been increasing in recent quarters. As a result of both inflationary pressure on the labor cost of these operations and incompatibility with certain supplier trends the effect of the divestiture is to improve adjusted EBITDA while.
<unk> net roaming as soon as we will address that in more detail in his section.
In addition to the divestiture of noncore underperforming unit, we have put in place a plan to optimize our business and cost structure to further strengthen profitability for Q4 of this year and even more importantly into 2024.
Having completed five acquisitions. During 2023, we are now focused on final implementation of that integration capitalize even further on cross selling opportunities and synergies as well as strengthening our core business and Nexgen AI platform.
I will now pass the call over to Chris who is our CFO for a review of <unk> financial performance and outlook.
Thank you Rasmus and Hello, everyone.
As I go over our Q2 results I would like to point out the old growth rates for 2023 are on a year over year basis, unless otherwise indicated.
Let me start with our operational and financial highlights on slide number six.
We continue to generate outstanding results, Claudia third quarter, producing a strong revenue growth and a record adjusted EBITDA.
Dividends, our efforts for long term growth and improved operational efficiencies are producing results.
Our gross bookings previously referred to US gross revenues were $597 million in this quarter up 2%.
If we pro forma EBITDA for the third quarter of 2022.
No it was actually 15%.
This growth was driven by an 18% increase in the number of transactions.
Up 47%, if we pro forma for LDF divestiture.
Which more than offset a reduction in effort by airlines.
Our net revenue increased 35% to reach $54 5 million.
If we pro forma for <unk> for Q3 of 2022.
Our revenue grew 66%.
Net revenue growth is the result of higher gross bookings as well as our continued improvement integrate.
Our take rate of 19, 1% was ahead of our expectations and absolute 1%.
As with prior quarters. This improvement in take rate was driven mostly by the uptake of higher margin hotel content and the diversification of revenue streams, including Fintech and ancillary services.
We expect this important metric to continue expanding into the double digits with the addition of cruises and a road it mix of non air content.
Turning now to expenses, our operating expenses declined 41%.
However, when we exclude stock based compensation on our operating expenses increased 29%.
Compared to our net revenue growth of 35%.
Sales and marketing as a percentage of net revenues decreased from 71% to 66%.
A real signal dollar silicone marketing efforts are having a positive long term effect and we're becoming more efficient at managing this very important cost component.
As a result of our strong net revenue growth and our efficiencies and social marketing adjusted EBITDA grew 54%.
$3 6 million to $5 5 million.
Adjusted EBITDA margin was also up 15% and reached 10, 1% in this quarter.
As we continue to put more emphasis on operating efficiencies and profitability.
On a GAAP basis, our net loss was $20 million, which included $15 4 million of noncash or nonrecurring items.
<unk> $9 3 million of net cost associated with Lps divestiture.
$3 million of our stock based compensation.
$2 5 million of intangible assets amortization among others.
I'm, turning now to slide seven to address the impact of Lps divestiture, when our 2022 and 2023 financials.
During the fiscal year ended December 31, 2022, Lps had net revenue of $32 8 million and an adjusted EBITDA loss of $5 3 million.
For the six months ended June 32023 lbs had net revenue of $6 7 million and an adjusted EBITDA loss of $5 3 million.
Therefore.
If we were to pro forma for the nine months ended September 32023 to exclude lbs. The company's net revenue would be 150 to $4 5 million and adjusted EBITDA will be $19 3 million.
Yes.
Looking now at our balance sheet on slide eight at the end of this quarter, we had $48 million in cash and cash equivalents.
$155 million of total debt.
<unk> to $58 million and $154 million, respectively. At the end of June 2023.
The decrease in cash reserves was primarily due to cash used to complete our <unk> acquisition and one off albeit divestiture costs.
In terms of our operating cash flow, we continue making improvements.
After adjusting $7 4 million of one off cash outflows related to our recent divestiture, we generated a positive operating cash flow of $6 4 million.
Improved to a negative $1 million in Q3 of 2022.
In addition to our cash and debt position I would like to provide some background on the increase of accounts receivable versus prior year.
Which is primarily due to the consolidation of our newly acquired businesses in Brazil.
We're providing payment plans to traveler is a customary practice.
It is important to point out that these payment plans are fully secured by banks and credit card companies, eliminating any potential risk of non collection for the company.
Another notable development in our old share buyback program approved by our board of directors for up to $40 million and launched at the end of September.
As of the end of Q3, we repurchased less than $1 million of our shares.
Also.
And in relation to our stock after.
After our inclusion in June to the Russell 2000 Index Monte joined the S&P total market index in September.
This milestone underscores <unk> strong fundamentals and business performance.
We expect these new addition to raise awareness among the investment community increased volume and liquidity diversified the company shareholder base and enhanced long term value.
Now turning to our guidance on slide number nine.
For our 2023 guidance, excluding Lps divestiture on a pro forma basis from January 2023.
We expect our net revenue to be approximately $210 million.
Representing a 32% growth versus 2022.
If we pro forma EBITDA for 2022 us well this revenue growth could be 66%.
Likewise, and excluding Lps divestiture on a pro forma basis from January 2023.
We expect our adjusted EBITDA to be approximately $25 million.
Representing a 110% growth versus 2022.
If we pro forma EBITDA for 2022 as well this adjusted EBITDA growth could be 45%.
In closing, we're excited about our year to date results and the momentum in the business as we move into the end of the year and beyond.
With this let me now turn it back to Jeff for Q&A, Jeff.
Thanks, <unk> operator, we're ready for questions now.
Thank you. Thank you I would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to meet that question. Please press star followed by Chase again to ask a question. Please press star followed by one.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question I'm pleased to ensure that you have unmeet you'd like.
Our first question today comes from the line.
Darren <unk> from Roth and Tan. Please go ahead. Your line is now open.
Yeah.
Hey, guys. Good morning, Thanks for taking my questions. A couple if I may so with the divestiture of lbs I'm curious what your vertical mix is now.
In terms of air versus non Air I think you had referenced 80% in the past now with Lvs kind of out of the picture is that number a lot lower and is that going to mean increased take rates going forward just given the mix.
Yes. Thank you.
And then.
So the the mix would be in Austin.
Still be 82.
75% to 80% of an.
And the rest of that and on non air including hotels and packages.
Although that we have.
And component and between David's team.
But at the same time that we have other businesses that these clients, which has more than mix.
Hence that that mix would be between.
72018.
And on the list of nominees.
Perfect.
That's helpful. Thank you.
And then maybe one for <unk>.
So based on your sort of pro forma model going forward should we expect a similar level of operating leverage.
Kind of keeping your sales growth I think sales were up $14 million a year on year on a pro forma basis EBITDA was about $2 million better is that a good run rate to think about as we kind of model. This going forward or do you feel like you have.
Enhanced.
Operating leverage based on Youre, making.
Yeah. So darrin. Thank you for your question I'm going to refer it actually.
To a table that we've included on the 10-Q, where we're doing a pro forma excluding the lbs business from January 2022, and including also the acquisitions that we've been doing during 2023 I think that will give you a reference of what <unk> has been performing in 2023, excluding lbs.
And just as a reference when you look at the top line growth.
<unk> growth was around 18% for the nine months ended September 30 of 2023.
That's helpful. Thank you.
And then just took the last one for me.
Last quarter you mentioned.
Some some ambitious kind of marketing plans with your AI marketplace.
Are you still on track for that spend level or have you kind of pulled back just given the dynamic nature of some things in the economy.
Thank you I'll take that one as Jim mentioned.
What we have done in addition to signing a few thousand of these new year of travel intermediaries.
We are taking the time to communicate directly with most of them in order to make.
And refinements to the monetization model and improvements to the platform. So certain components of that 20 million on such as the $6 million approximated that was going in marketing and payroll and team expenses 2 million that got to the rebranding we will continue and implement that part, but the remaining 12 or so million we will implement it.
Part of that in 2023, but there may be some spillover in 2024, especially as we integrate some of these changes to the monetization model and waiting for that to be implemented before we go full on speed with more marketing campaigns.
That's helpful. Thanks, Scott.
Thank you.
The next question today comes from the line of Nick Jones from JMP Securities. Please go ahead. Your line is now open.
Okay.
Hey, guys, it's Tim on for Nick here.
Just two if we could thanks for taking the questions.
A lot of focus has been on the consumer here recently durability of trends and things that could you just talk a little bit about what youre seeing in terms of consumer resilience within the travel space.
And just one follow up after that if I may.
Yeah.
Yes, Hey, Tim.
It's Jim here.
Basically what we're seeing is that.
Continued.
The trend of leisure personal travel staying fairly steady.
The mix is changing somewhat based on different things that are going on in different parts of the world.
Patterns are changing a little bit.
Consistent with sort of industry trends and industry patterns such as.
More travel now in urban environments as opposed to beach environments.
That's part of the whole move towards the millennial Gen Z. So we see those trends across the industry and we're seeing some of that ourselves.
The general trend of the consumer remains pretty steady.
The nice thing is some of where our acquisitions have been we're seeing as I mentioned in the comments that.
Latin America as an example remains very strong.
Which is which is good it plays into the sweet spot that we acquired there.
We're building on that so even as we will see a little moderation in other parts.
Other parts of the World and maybe North Americas.
Softened a little bit as I think we've seen across the industry.
It's being balanced out nicely by the Asia market by the law, the Latin American market et.
Et cetera, So I think that trend is fairly solid.
<unk>.
Implied in the question is if things soften going forward.
Again, as we mentioned our platform is agile enough we're able to.
<unk> distribution to where the markets are more strong.
And be able to.
Sort of smooth out.
Hello.
See in certain parts of the World is that does that answer your question.
Okay.
Yes, very helpful really appreciate that and then just one follow up if I could.
Just kind of curious what kind of attach rates, you're kind of seeing with your fintech and ancillary offerings as well. Thanks.
We are seeing around 15% attachment rate today.
Today.
And certain businesses, we have a higher attachment rate in these businesses such as new businesses has some good school, which we are working and we are seeing increased and then.
As an island.
And also if you have it on 15% attachment rate with it.
Yeah.
Great. Thanks, so much guys.
Thank you.
The next question today comes from the line of.
<unk> <unk> from Cantor Fitzgerald. Please go ahead. Your line is now open.
Hi, guys. Thanks for taking my question.
If we can start on that.
Kind of a downward revision to the full year net revenue guidance.
I guess you last gave guidance on August 15th which was a month and a half after you divested lbs.
So I guess what happened after that point to kind of at this point that kind of resulted in the guidance revision.
Okay.
Yes, so Brian let me clarify when we're revising our guidance were retroactively assuming that we are excluding Lps from the beginning of the year.
So basically the new guidance, we have gaming is not a reported number panel pro forma numbers. So despite the divestiture. During Q3, we are basically in the guidance. We are removing the net revenues of <unk> during the first half of the year as well. So if you look at it from that perspective lbs effectively.
Last year had almost.
40 million of net revenues. So as you make this adjustment 200, plus that is basically very much in line with the guidance that we provided in the previous quarter and of course, we couldnt have.
That adjustment prior.
To completing that acquisition. Therefore this is just a mathematical calculation on points is not a change to our guidance and then again along similar lines. We are guiding on a pro forma of $25 million.
So that's basically the mathematical explanation to your question.
Well I guess all through the first half of this year the net revenue.
Okay that makes sense and then maybe on the gross bookings gross revenue it looks like we've kind of changed that methodology thats what has gone into that change.
It's just a definitional thing I mean.
Basically quite comment where do you see from our account on our newer cognizant and new teams. So.
The industry and the relevant terming in <unk> gross bookings as opposed to gross revenue. So it's not a change in methodologies just a change in the label.
It is in line with their piece, you'll be accounting rules.
Yeah.
But that did result in some kind of a corresponding changes to your historical numbers, if I'm comparing year no no no no no.
No no.
No change.
Mr. <unk> is exactly the same number it would be exactly the same we just change the label and to say it has to be a little bit more consistent with the methodology used in terms of terminology in our calculation, but the industry.
Okay got it.
And then maybe just on the take rate and maybe transaction I guess, how should we think about transaction growth and kind of.
RPT growth.
Into the fourth quarter and into next year, maybe on a pro forma basis.
So I mean, when you look at our transaction growth, it's being quite as strong rate when you pro forma for <unk>, we're talking about a 47%.
<unk>.
We expect this growth to continue happening in terms of the take rate of that because some of these transactions are starting to be more linked to hotels and other type of non air products.
Take rate, we expect that as I said before to get into the double digits.
But.
And Brett.
Yes.
Just.
The AARP question.
Obviously, we've seen air fares come down, but we are seeing.
Hotel ADR and that stay stayed up much better.
And Thats also an industry trend. So Prasad mentioned, our mix continues to improve in those areas and again some of the recent additions to our portfolio of businesses.
Helping to.
Provide more more support on the transition.
The move to the.
The ancillary areas.
The hotel and other cruises et cetera, so as that happens then were seeing AARP.
It's there's a decline because of the impact on air side, but a lot of that's made up so that number is it's down a little bit, but not not nearly as much as <unk>.
Just is happening on the air side, yes, and to add to that I mean, we have seen the dynamic in their pattern vastly is a bit of a normalization. After the post pandemic boom and on top of that you have to factor the declining in airfares right. So despite those two trends on a pro forma basis. We grew 66% of net revenue. This is basically extraordinary and you said it.
Salt of increased market penetration and also these other performance on the take rate, which more than offset this.
Two opposite dynamics in the industry, which underlying basically why our business model and our growth is sustainable going forward into the future.
Got it appreciate it thank you guys.
Okay.
Thank you.
Our next question today comes from the line of Mike.
Mike Grondahl from Northland Securities. Please go ahead. Your line is now open.
Hey, guys.
Purple grid that acquisition for $1 9 million shares does it what kind of revenue or adjusted EBITDA is it generating.
Yes, so I'll take that thank you Mike.
For your question, so the logic behind that.
The acquisition is not.
In the short term <unk> that acquired EBITDA or revenue by the Sui integrate a full AI platform into traffic in a private solution, which is another pioneering step by Monday, I mean, effectively mondi travel company buying generic full complete AI platform now they impact the impact on the revenues and the.
And the cost in the short term is going to be non material because on then on the revenue side. It will take some time.
To basically implement a clear monetization tools into AI and like we mentioned the objective of this acquisition is not only to enhance our front office integration of AI, but effectively used is very powerful and leading platform to implement AI in all parts of our business, including the middle and the back office, including sales and marketing and.
We will elaborate more on that in Q4 now on the cost side, even though we are taking a substantial number of highly skilled employees by acquiring this company. We have been working with them very closely for a long period of time, so effectively on the cash flow side, we are substituting.
Consulting fees.
We've paid on fees. So overall, we believe it was not only a very cost efficient solution, but it underscores our commitment to these AI driven growth.
And our basically.
Our roadmap to implement AI in all parts of our business.
Got it and then.
With lbs, the divestiture I think I heard that you gave the original owner of 200000 shares.
But what was he looses comment about seven 4 million of cash outflows could you just explain that.
Yes, so I mean, the curious where the payment on from there.
The acquired in this case in this case to Mondi.
He happened to own your stock is this was an acquisition that we did back in 2019, so that might be the confusion right. So it's not that one debate, let's talk on Monday, we received stock on Monday as part of the payment. So thats number one also.
Part of the agreement we helped during the transition and primarily this Q3.
As we transition out of the business and that's what we mentioned when we talk about around $7 million of cash related to that divestiture.
So Mike just to clarify on some things you didn't pay 200000 shares we received 200000 shares and we also agreed during the quarterly periods too bad a certain transition costs, which was a very big number which basically validates our decision to dispose. This business at this point in time, we mentioned that in the positive territory.
Actually we kind of try to resize it.
Any cap.
Increasing actually the losses and actually.
The fact that the traditional cost which are basically coming to an hour. So high validates again wide was all important to the profitability and also the new transformation of the business model.
Transfer between the business in order to dispose of this business unit.
Got it what did you pay for it in 2019.
So this is it's a difficult.
A question to answer where it wasn't.
Sure component, but in 2019, we bought a number of business unit in a number of businesses. So we basically bought three different businesses. The first one was the hotel pack you may recall in 2019, we were only selling app. So basically during the pandemic, we use the content or business acquired together with this transaction.
To basically move.
Moving to the adjacent space, which is very important to our strategy that business. We're not disposing then there was a second part.
Neither business unit within the same transaction that was call center is used for servicing customers that business again, we are keeping what we are disposing is a very specific business unit.
Which relates to selling directly to the consumer at a b to C.
Travel through leads generated online and complete that through call centers. So this is as I said.
Segment of the market, which is really really well.
Which is receiving a lot of pressure because on the one hand, there is inflation in the biggest inflation is in personnel and <unk>.
And human resource Ed. So this is a very labor intensive business with a focus on selling through call centers right. So you have this dynamic on the one hand and then on the other have you have suppliers being much more strict in the trends and the way. We are looking at this part of the business, which created outstanding compatibility.
<unk> relationships. So this is basically the unit.
That we have disposed thats part of this adventure and also to add on that Mike. When you think about the consideration that we got for the sale of this business unit and.
The reduction that we had on our intangibles and goodwill.
Goodwill, we actually got a profit right.
The cost that you see here, it's more linked to.
The agreement on financing and supporting during the transition with the networking capital of this business unit.
Okay. Okay. Thanks.
Sure.
As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
Our next question is a follow up question.
<unk> <unk> from Roth MKS. Please go ahead. Your line is now open.
Yes dilemma, a broad question about AI in general as it relates to your business.
With triple grids.
So there's a lot of development costs.
Raining. These models so I'm curious on two things one in your round.
Organic marketplace have you spent the R&D dollars to kind of get that trending up and running if not kind of when is that going to hit the P&L and then for peripheral grids on there.
Customer experience platform.
Is that R&D investments been made for the most part in the company. It is the product sort of fully up and running and then as a subsequent question to that.
Will the CX platform helps offset any costs or kind of call centers.
That you guys may incur today said another way will benefit your P&L, maybe adding some more costs here and there. Thanks.
Thank you for the I'll take I'll take a first step in <unk>. So the first part is that we have been already training.
The models for a long period of time and they are included.
In our.
In our Capex now a big part of that training automatic because we have already linked.
Our AI so the bigger part of the cost is developing it and integrating it with the operations and then over time.
Mining cost to the actual training and again here we are benefiting from two dynamics first we have a lot of data a $50 million searches are done on our platform every day, which are basically integrated to the AI that keeps learning and then on top of that we are training effectively the AI through connecting it with 65000 experts.
So this is more this is a more of direct connectivity in the San is that.
Consumer.
He is likely to give less feedback and integrate any pay an interaction with the platform advance an expert that by definition has a two way exchange of information with a provider of the service. So that's on the on the on your first question.
So on the second question the impact of this platform to our operating and our business.
The efficiencies in our operations.
So we have big plans.
Not only applying this AI platform and are out of that.
Overall.
Yeah.
No.
Businesses.
On.
Call Center business and but also in every part of the business. So we are transforming.
Yeah.
We as of Monday, we launder transform.
The AG business.
Inside and outside.
Outside of that we are giving the information then.
The models that we've now lapped and that creation that we are planning to work on.
B.
Trenton and encore almost at all.
Application, but also on the back side that we are expecting too.
Transform our current business in every aspect of it including the call centers, how that actually takes the benefit of that.
<unk> driven platforms and as well as the marketing.
In operations.
And.
No.
Many other aspects of the business, but example on operations.
Any I'll give you an example.
If that is a.
It is a small piece of cost of sales that we have it is with the debit meant was that chargeback from non <unk>.
So the Dci platform, we wanted to predict before it happens.
Dror.
Analyzing the whole funnel of the transactions and be able to stop it and be able to improve it for the future transactions.
<unk>.
The fact that we are currently doing and be able to save a lot of cost ups in dollars.
Darrin I'll just related follow.
A follow up as well just to summarize it.
Basically on the front end.
So for the consumer interface and things like that a lot of that investment already made.
There's obviously ongoing enhancements in tuning, but lot of that part of the investments already made relative to putting it across the entire infrastructure.
We're expecting the cost savings to cover most of any further and ongoing investment there. So.
We won't quite use the terminology neutral, but I think that.
The returns from implementation of this.
Particularly example, Prasad just gave.
We'll support most of that investment and I think the only part of the question, we haven't answered that equities with regard to the platform cost of perfectly themselves.
Pepper places is a complete AI platform is not is not necessarily a travel platform is a genetic eye apart from any has been completed and evolving since 2019. So so with regards to having the platform in place.
Those costs have already been span since it's been in development for the last four years.
What we have been doing already is integrating parts of this platform into our own AI right. So those costs are already also a big part of those costs are already in place of course, there will be more cars going forward and further enhancing and providing new tools and new features to the AI utilizing.
Very powerful platform, which again to highlight it's really unique for a private company to buy a complete AI generic platform. So.
That's all really helpful arrest is maybe if I can just ask one follow up.
Have you been paying prior to the acquisition purple grid.
Salting.
Fees and if so just any sort of sense on quantifying that to understand what you are paying them and how that changes once the acquisition is.
Got it.
Yes that is precisely how the relationship didn't start this company hasnt been on <unk> or anything I'm not nave activities start the relationship is exploring a purchase the relationships as part of a year ago as working with them integrating pieces of that technology in our own AI right. So along the way it became abundantly clear.
To us that is much more cost efficient and much more powerful to actually own one this platform van van basically.
Keep working on a consulting basis number two it became abundantly clear to them.
Why you of accessing.
<unk> unique data because there are a bunch of AI platforms out there that people have created and spend a lot of money on but the differentiating factor in AI is using actual data to train. These models. So along the way of working with third parties for a period of time it became clear to them that there was a lot of value in being connected to our ecosystem and he paid came.
Very clear to us that was a lot of value in owning and that is why they have agreed to an all cash im sorry, im not sure transaction, because they're not really selling anything they actually.
Buying a piece of Monday, and helping Mondi fair there on its path of AI integration.
That's helpful. Thank you.
Thank you there are no additional questions waiting at this time, so I'd like to pass the call back over to Jeff Houston for any closing remarks.
Thank you Bailey and thanks to all who tuned in for our third quarter 2020 earnings earnings call, whether it was here live on the call a replay or reading the transcript we really appreciate your interest in <unk>.
And welcome the opportunity to further connect with you.
If you have any questions or would like to learn more about <unk>. Please don't hesitate to schedule a call with US you can get more information at our IR site, which is investors <unk> dot com or send us an E mail at IR at <unk> Dot com. Thank you.
Yes.
This concludes today's conference call. Thank you for your participation you may now disconnect your lines.
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Okay.
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