Yatra Online Inc (YTRA) 2019 Q4 法說會逐字稿

Good day, and welcome to the Yatra Fourth Quarter 2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Manish Hemrajani. Sir, please go ahead.

Thank you, Katie. Good morning, everyone. Welcome to Yatra's Fiscal Fourth Quarter and Full Year 2019 Financial Results for the period ended March 31, 2019. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi; and our CFO, Alok Vaish.

The following discussion, including responses to your questions, reflects management's views as of today, July 23, 2019. We do not undertake any obligation to update or revise the information. As always, some of the statements made on today's call are forward-looking, specifically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to company filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements. Additional information concerning these statements is contained in the Risk Factors section of the company's annual report on form 20-F filed with the SEC on July 31, 2018. Copies of this and other filings are available from the SEC and on the Investor Relations section of our website.

Please note that the purpose of this call is to discuss our fourth quarter results, and we are not answering any questions on the Ebix merger. We will file our proxy materials with additional information about the merger in due course. Thank you.

With that, let me turn the call over to Dhruv.

Thank you, Manish. Before we actually talk about the quarter, let me just quickly touch base on the pending merger with Ebix. As you know, on July 17, we announced that we have entered into a definitive agreement under which Ebix will acquire Yatra via merger. In connection with the merger, each share of Yatra will be entitled to the receive 0.005 shares of a new class of preferred stock of Ebix. Each share of Ebix Convertible Preferred Stock received for each Yatra ordinary share will, in turn, be convertible into 20 shares of common of Ebix. We will file our proxy material with additional information about the merger in due course.

I would say that they are quite excited about this transaction. This provides our shareholders the opportunity to participate in this significant upside potential of the combined entity. As part of Ebix's EbixCash travel business, we'll be a larger, more diversified organization with the necessary scale and resources to be a leader in today's dynamic travel market. We will provide more options and an enhanced experience for our joint customers and will be an even stronger partner to the airlines, hotels, car rental and other businesses we work with. We are confident that combining Yatra's loyal customer base, comprehensive service offering and multichannel platform with Ebix's complementary Via and Mercury businesses will create a leading online travel platform and India's largest corporate travel platform that will help capture growth opportunities and deliver enhanced value to shareholders.

That said, the purpose of today's call is to discuss Yatra's fourth quarter and full year results. We will file our proxy material, as I mentioned earlier, with additional information about the merger in due course.

But moving on to our results. In the last 12 months, we further consolidated our position as the leader in the large and growing business travel market in India. On the consumer front as well, we continue to grow our market position driven by the strength of our brand. A combination of these factors helped us deliver our annual adjusted revenue growth of 20.3%, coming in ahead of our guidance despite a very challenging macro environment towards the latter half of fiscal year 2019.

We were able to deliver solid growth in the March 2019 quarter as well despite a challenging aviation macro environment with Air Ticketing gross bookings up 17.6% against a backdrop of low single-digit domestic air passenger growth.

During the quarter, we also accrued certain charges, which adversely impacted our adjusted EBITDA for the quarter by 266.9 million. These challenges primarily relates to the bankruptcy proceedings of Jet Airways. Excluding the effect of these charges, our adjusted EBITDA loss for the quarter would have improved from a loss of 623.2 million to a loss of INR 166.3 million in the quarter. We believe that our unique approach to combining business travel and consumer travel in an emerging growth market like India positions us well to capitalize on the rapidly expanding travel industry in India.

We expect the macro environment to remain challenging on the aviation front for the next couple of quarters. However, despite this, we continue to make good progress towards our objective of achieving breakeven adjusted EBITDA in the near term. We expect the aviation sector to largely recover from Jet Airways headwinds in the second half of this fiscal year. From a longer-term perspective, industry experts have forecasted India to become the third-largest aviation market by 2022, and their outline should double the number of aircraft over the next 5 years and double the number of operational airports in India over the next 20 years.

Now on to some additional data points that reflect the strength of our business during the quarter. Revenue from our Air Ticketing business grew 17.5% in the fourth quarter largely driven by gross bookings growth of 12.4%. Our air business continues to outpace the growth of the overall market on both domestic and international travel. Closer into our goal of attaining the EBITDA or adjusted EBITDA breakeven in the near term, we made a conscious decision to lower our marketing spend on the loss-making consumer hotel business. As a result, our Hotels and Packages business declined during the quarter with adjusted revenue down 12.1% year-over-year, with gross bookings down 18.2%. Our net revenue margin, however, improved by 100 basis points year-over-year to 14.3%.

On the corporate travel business where we believe we are firmly entrenched as the largest corporate travel provider in India in terms of gross bookings, corporate travel opportunity in India, to our mind, is more exciting and larger opportunity in India with regards to the travel industry and is projected to grow at over 12% per annum through 2020, making India the fastest-growing corporate travel market in the world according to KPMG research.

We continue to win new business and migrate new customers onto our corporate platform. Not too long ago, we signed on Sony Pictures on our corporate platform, which suggests our other example of the kind of marquee customers that we are able to attract to a mature and featured corporate platform. We are also making good enrolls into cross-selling our hotel product to our existing corporate travel customers.

Our online sales booking platform adoption continues to grow strongly with about 54% of Yatra's organic corporate travel business transactions now being done on the self-book platform. Also we continue to migrate customers from being business travelers to personal travelers on the outside platform.

We've mentioned this in the past that I, again, wanted to just reiterate that in an emerging market with limited disposable income, business travel is generally the first form of travel undertaken by customers. As such, by being the leader in business travel, we believe that we are in a position to capture some of the most attractive consumers in India as they make their first online travel purchase. We believe that there is tremendous opportunity to cross-sell Yatra's hotel inventory to the 861 strong corporate customer base.

On the cross-sell front, we are beginning to see some traction on Yatra SMART as well, which is in curated lodging service for corporate customers as standardized pricing and standardized service backed by our own quality assurance.

On the mobile traffic front, mobile traffic continues to garner the larger share of our overall traffic with 82% of our traffic during the quarter coming from mobile devices. We expect to see this trend continue as the cost of mobile data continues to drop in India.

And I'm pleased to announce that our organic mobile app downloads have now crossed the 17.4 million mark as well as we added 0.6 million new installs in the last quarter.

Additionally, I would like to point that our app had been -- our apps had been the highest approval ratings on the Play Store. We continue to focus more on the quality of our downloads versus the quantity as evident by our gross bookings for download, which continue to lead our peers by a wide margin.

We think that on the back of our high brand recall and deep distribution network across India and now our leadership position in corporate travel, we are well positioned to strongly capitalize on the next wave of growth.

I'm now going to hand it over to Alok to walk you through the details of the financial performance. Alok?

Thank you, Dhruv. On the key financial highlights for the year, on an overall basis, our adjusted revenue grew by 20.3% year-over-year to INR 8.9 billion. We are slightly ahead of our guidance of at least 20% growth. Gross air passengers booked were 10.2 million, representing year-over-year growth of 14.5% with a favorable mix towards international travel. Standalone hotel room nights booked were 2.3 million, representing an increase of 11.6% year-over-year.

Coming to our quarter results for the year ending March 31, 2019. On an overall basis, our adjusted revenue grew by 17.5% year-over-year to INR 2.44 billion. Gross air passengers booked were 2.64 million, representing year-over-year growth of 5.3%. Standalone hotel room nights booked were 586,000, representing a decrease of 14.1% year-over-year.

Adjusted revenue from our Air Ticketing business increased by 18.4% to INR 1.6 billion in the current quarter. The growth was driven by an increase in gross bookings of 17.6% to INR 26.1 billion in the current quarter. Our net revenue margins improved by 10 basis points year-over-year to 6.3%.

On Hotels and Packages, our adjusted revenue for the segment declined 12.1% year-over-year to INR 441 million in the current quarter. This decline was due to a conscious effort on our part to reduce marketing spend on the loss-making consumer hotel business and also decision to shut down of our physical retail stores in a drive towards profitability. Our other revenue grew by 86% to INR 317 million.

On the expenses front, marketing and sales promotion expenses decreased by 86% to INR 159 million in the current quarter post adoption of IFRS 15 on April 1, 2018. Adding back the expenses for consumer promotions and loyalty program costs, our marketing and sales promotion expenses for the quarter ended March 31, 2019, would have been INR 1.2 billion, which would be 2.9% higher from a year-over-year prior quarter. This was lower than the growth in adjusted revenue for the 3 months ended March 31, 2019, of 17.5%.

Our personnel expenses decreased by 31% to INR 509 million in the current quarter from INR 743 million in the 3 months ended March 31, 2018. The decrease was primarily due to a decrease in employee share-based payment expense to INR 4.9 million in the 3 months ended March 31, 2019, from INR 142 million in the prior year quarter. The outsourcing were customer contact centers and also certain rationalization of head count.

Other operating expenses decreased by 4.5% to INR 1.2 billion in the current quarter from INR 1.25 billion in the prior year quarter primarily due to decrease in rates and taxes, traveling and conveyance and remeasurement of contingent consideration in the quarter ending March 31, 2019. This was partially offset by increase in payment gateway expenses, legal and professional expenses, call center outsourcing expenses and provision for doubtful debts due to cessation of operations and subsequent and solvency proceedings for Jet Airways and technology supported by GDS resulting in a charge of INR 202 million.

As a result of the foregoing factors, our loss for the quarter was INR 859 million. Adjusted EBITDA loss for this quarter was INR 433 million as compared to adjusted EBITDA loss of INR 623 million in the year-ago quarter. Taking into account the certain charges related to Jet Airways being referred to solvency process and the reservation content moment on GDS, which adversely impacted our adjusted EBITDA for the quarter by INR 267 million. And the projected reduction of brand marketing expense for the current year and beyond, we should see reduction in adjusted EBITDA losses going forward.

As of March 31, 2019, the balance of cash and cash equivalents and term deposits on our balance sheet was INR 3.2 billion or approximately $46.1 million as compared to INR 3.47 billion as of March 31, 2018.

This concludes our prepared remarks. Let me now turn it over to Katie for the Q&A.

(Operator Instructions) Our first question comes from Jed Kelly with Oppenheimer.

Just one quick question for me. Is there any way you can break out the percentage of revenue from the corporate business versus what was generated from the consumer segment for this year?

Jed, historically, we haven't broken that out and, unfortunately, we won't be able to share that in today's call either. That's a decision I get that we need to decide in terms of corporate segment breakout, which we're not doing at the moment and I won't be able to share that on the call.

And due to the pending acquisition, you will not be giving any more guidance, correct?

That is right. Yes.

All right. And then what's the -- can you sort of bridge what's the difference between your net cash balance on the March 2019 balance sheet and the -- and how the enterprise value is calculated for the Ebix acquisition because it seems like you went from like a net cash balance to net debt of about 100 million?

And Jed, we'll be sharing that as part of the proxy. But as we mentioned in our opening comments in terms of how the price works over there or how the fully diluted share count is calculated on the Ebix transaction, those are things that we'll have to file as part of the proxy, and we will request a little bit of patience on that. All this information should get covered in that.

Okay. And then just one more. Once you're able to work, once -- I guess or once the industry is able to work out all these Jet Airways headwinds, I mean when do you think the industry returns to normalized growth?

At this point in time, based on conversations with the airlines, it looks that it will take them the best part of this fiscal year to get to a more normalized growth rate. So you're looking at maybe the latter half of this fiscal year or early part of calendar year 2020 to start seeing growth coming back to more normal levels.

And then can you talk about sort of anything that's developed competitively with your largest competitor acquiring a corporate travel provider and then how your expansion is progressing in the Middle East?

Sure. So with regards to -- on the combination and the acquisition that we made, it's a fairly small asset that they have acquired. And as we've seen and said in the past, the corporate travel acquisition process for customers is quite different from a normal B2C consumer. That process goes to a much longer and larger technical evaluation process. It goes through a much more detailed RFP process. Customers look at not just the technology, but they look at your servicing strength as well. It's a full comprehensive offering. So well, I understand that competition has made a small acquisition. We haven't really seen any impact of that in the market at this point in time. We remain very confident that the kind of comprehensive product that we have created and the self-book implementation that we've done, which deeply integrate within our customers, creates a very sound barrier from entire new customer -- sorry, new competitor entrant's point of view. So we are very secure in the position that we have on the corporate travel fund.

(Operator Instructions) Our next question comes from Andrew Curran with the University of Notre Dame.

So I was hoping maybe you could give an update on the Agoda partnership and how that has progressed? I know it's fairly early innings for that now, but hopefully get an update on how that's going.

Sure. So we've been expanding the number of properties that Agoda is live, and they initially went live with a set of about 5,000 properties. That's now almost doubled in terms of the number of properties that we've got live on Agoda right now. So we are seeing good progress over there. In the overall scheme of things, it's still relatively small. But given that the current portfolio of 100,000-plus properties in India as you start scaling up towards that number, we should see good traction out of that. So Agoda, we continue to be very positive about that partnership, and we think there's a good opportunity for us to expand and use that to get inbound customers.

Great. And then on the corporate travel front, I know for a while now with kind of benchmark top of the KPMG kind of 12% growth in the sector and with Yatra being plus or minus that over the past several years. What -- I'm just trying to understand because it seems like adjusting for the PL Worldways acquisition, the total large corporate customer count hasn't seem to have changed very much. How much of the growth, whether it'd be 12% or more or less, would you expect to come from net new large corporate customers versus winning business within the existing customer base?

In the quarter that ended March, we've seen some slowdown in terms of organic growth on the same customer base. That number has been more in the mid-single-digits number as opposed to the high double-digit number. So that's on the count of Jet Airways' capacity going out and the amount of disruption that got crossed in that quarter. And plus we had elections, which were coming up in the subsequent month. So on the back of that corporate, houses had been a bit circumspect with regards to the expense. But post the elections, which happened in the middle of May, we've seen net number rebounding quite frankly. So overall, we think it's a sum of growth's point of view. We should again look at trending that 12-plus percent of that growth with that coming in as organic and then another 3% to 4% of new customer acquisition, adding to north of 15% growth for the corporate business.

Great. That's really helpful. And then one last, maybe somewhat nuance question. The Ebix Travelution product that they entered with Zillious, and I noticed that in their deck, they referenced Yatra as a customer. Can you help me understand how Yatra uses that product?

Sure. So that product was being used by ATB. That was the legacy system that ATB was using. And over the course of the last few months now, we've migrated some of those customers onto the newer Yatra platform. In the new environment, all other, the combined environment with Zillious and Ebix are there to create a best-in-class travel product, which will combine the features from the Yatra product and the Zillious product. So that's where the 2 synergies will come from by combining and creating one best-in-class product.

Thank you. At this time, we have no further questions in the queue. I would now like to turn it back over to Dhruv for closing remarks.

Sure. Thank you, Katie. Just again to summarize, we're very excited about the merger opportunity that we see ahead with Ebix. I think there is tremendous amount of synergy opportunities, which exist on the ground between their businesses and ours, and it also creates a platform for us to be able to take our products like corporate travel to other emerging and high growth markets. So we're very excited about that opportunity, and we look forward to interacting with all of you in the near future once we file the proxy statement.

Thank you. Thank you, everyone.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.