Yatra Online Inc (YTRA) 2021 Q4 法說會逐字稿

Good day, and welcome to the Yatra Fourth Quarter and Full Year 2021 Financial Results Conference Call.

Today's conference is being recorded. At this time, I would like to turn the conference over to Manish Hemrajani. Please go ahead.

Thank you, Shelby. Good morning, everyone. I hope everyone and their families is safe and healthy.

Welcome to Yatra's fiscal fourth quarter and full year 2021 financial results for the period ended March 31, 2021.

I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi. The following discussion, including responses to your questions, reflects management's views as of today, June 8, 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 course of the discussion today may constitute forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond the company's 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 from this morning.

Copies of this and other filings are available from the SEC and on the Investor Relations section of our website. With that, let me turn the call over to Dhruv.

Dhruv, please go ahead.

Thank you, Manish. Good morning, everyone, and thank you for joining us. I hope that you and your families are safe as we continue to navigate our way through what we hope is going to be the last significant wave of the pandemic, especially in India.

As you are all well aware, subsequent to the closing of a March quarter, India suffered a severe setback as the second far worse COVID wave hit the country with case count peaking in the 400,000 a day range, and many regions, once again, began to curb travel.

Many of our friends and colleagues have been unfortunately impacted by the second wave, and our thoughts and prayers are with them and their families.

Thankfully, since speaking on May 6, case counts have sharply declined, and India yesterday reported 86,000 cases. That's a significant drop from the peak. Our number of states and cities have started easing restrictions with effect on first of June and more are expected to do so by the middle of this month. This easing of the cubes combined with the vaccination program has begun to show some early green shoots of recovery in travel with our domestic travel bookings almost doubling between last week of May and first week of June.

India has managed to administer over 230 million vaccine doses till date, and the government has committed to fully vaccinating old citizens before the end of 2021. In fact, the Prime Minister yesterday laid out a new road map for a more streamlined and accelerated vaccination program starting June 21.

We expect the vaccination drive to gain even more traction in July and August as more vaccines become available and expect travel to recover long sighted.

As part of our helping the community initiative, you would recall that last year, we had arranged to fly thousands of standard migrant laborers back to their hometowns across India during the lockdown.

This time around, we launched a COVID Connect platform on our site. This platform supported by a number of volunteers, including our employees, enabled people to get verified information on COVID-19 resources such as availability for oxygen, hospital beds, ambulances, medics, test centers, et cetera. And all these things are in extremely short supply during the peak of the pandemic in the month of May.

As we continue to navigate our way through this pandemic, I'm very proud of the dedication and efforts executed by my Yatra colleagues both internally and towards the larger community during these challenges time.

While travel demand was subdued due to higher case counts and partial lockdown across the country, I'm very confident that the industry will inevitably recover, and we have begun to see early signs of that in the past few days.

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, we believe travel should recover strongly as evidenced by the strong recovery post the first wave.

Now coming to our March quarter performance. I'm pleased to report Yatra had a robust March quarter driven by the recovery in domestic flight travel, where we saw passenger traffic recovering to about 20% of pre-COVID levels for the quarter. Adjusted revenue of $13.3 million was up 60% sequentially and a combination of revenue growth and tight cost management helped us achieve positive EBITDA, adjusted EBITDA of $1.3 million. This was well ahead of plan, and we ended the quarter with a strong balance sheet as well with a cash balance of approximately $31 million.

As we look to the year ahead, we see travel recovering towards the back half of calendar 2021 as vaccination accelerates and travel restrictions gradually lift with domestic first in the near-term and international travel towards the latter part of the year.

On the consumer side, despite the second wave hitting us towards the end of the quarter, passenger traffic in the March quarter was up 21% sequentially, averaging over 60% of pre-COVID levels. On the international air front, our recovery continues to be muted and it's now being further impacted by the second wave.

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 rate of global vaccinations.

Our hotel room nights book saw healthy rebound has domestic hotels saw recovery led by pent-up demand on the consumer side prior to the second wave. Our hotel room nights grew over 48% Q-on-Q and even exceeded prior year numbers by growing 23% year-over-year led by a rebound in the consumer demand, the strength of our brand and our industry-leading hotel inventory, along with lower competitive intensity in the quarter.

We continue to make strong progress in the corporate segment and signed 21 new notable contracts in the March quarter alone to further solidify our position as the leading corporate travel service provider.

These new customer signings in a challenging quarter further underscore Yatra's leadership position in the corporate segment in India and our ability to extend our platform to cross-sell other products and services.

Our prospective -- our pipeline of prospective new customers continues to grow 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 larger part of the market today, about 60%, we believe is still underserved or served by smaller offline players.

As a result of the pandemic, we are seeing evidence of an accelerated shift towards online players, especially as contracts come up to their end-of-life and rebidding.

We remain confident in our platform's capabilities to serve and scale any type of customer. Corporate travel recovery is expected to lag consumer. But please do note that before COVID, corporate was growing at a faster rate, and we expect this dynamic to return post pandemic.

Coming to our fiscal fourth quarter results. We saw meaningful sequential recovery this quarter, reflecting a recovery led by pent-up consumer demand. This recovery in domestic travel led to a sequential quarterly growth of 60% in adjusted revenue to INR 983 million, which is approximately USD 13.3 million versus about $8.3 million in the December quarter. This growth in revenue, further combined with strong cost controls, enabled us to achieve positive EBITDA in the March quarter, well ahead of plan.

Our adjusted EBITDA in the March quarter was INR 97.4 million, which is approximately USD 1.33 million. This was a vast improvement from a loss of INR 36 million in the December quarter. We continue to hold our cost to the minimum, and we believe we have adequate liquidity on the balance sheet to weather this second wave and see us back to sustained profitability.

One other strategic growth driver for us is the expansion of our corporate digital platform as we continue to add nontravel-related digital offerings 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, and we continue to make inroads into these organizations with our nontravel offerings.

One of our nontravel offerings, which has met with a great initial response is our solution for freight management. We are currently offering ocean and airfreight booking services to our customers, and we'll be expanding it to include surface transport later in the year. We are seeing very strong demand for this service offering. The freight industry, as some of you might know, is 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 extremely fragmented and has very low levels of technology adoption. We are fortunate to be able to leverage the expertise we have acquired in building our own SaaS platform for popular travel over the years and the same is being leveraged to build out our freight platform.

We believe we have a great opportunity to create a SaaS platform for freight bookings along the line of our corporate travel platform.

Additionally, we are also looking to leverage our existing vendor and corporate relationships on both the supply and demand side for our freight business.

Based on our current revenue run rate, we expect our freight business to generate between USD 1.5 million to USD 2 million of revenue in fiscal year '22, which we believe should grow to between $4 million to $5 million in fiscal year '23.

Given the size and scale of the freight industry and its current dynamics, we believe that this is a business which could potentially grow to a similar size and scale of our corporate travel business pre-COVID over the next few years. We currently have a team of over 100 people focused on this, and we will continue to grow this further.

We are very excited about this and believe this is a great complementary addition to our platform. As of March 31, 2021, the balance of cash and cash equivalents and term deposits on our balance sheet was INR 2.26 billion or approximately USD 31 million.

When we come out of this pandemic, on the back of the secular growth in Indian travel, the acquisition of new corporate customers that we made during the pandemic, our digital platform business that is completely accretive and has the potential to grow to the size of our pre-pandemic corporate travel business in the coming years, we believe we should be at a significantly better revenue growth trajectory. This growth in revenue, combined with the efforts we made during the pandemic to improve operational efficiency, will, we believe, lead to significantly higher levels of profitability and cash flow.

I want to thank our shareholders who have stood by Yatra through these trying times. I'm hopeful and honestly believe it's only a matter of time before your patience and understanding is rewarded.

I think this concludes our prepared remarks. Let me now hand it back to Manish for Q&A.

Thank you.

Thank you, Dhruv. Shelby, can you please open up the call for Q&A?

(Operator Instructions)

We'll take our first question from Scott Buck with H.C. Wainwright.

I jumped on the call a little bit late. I was hoping maybe you could provide a little bit of color around bookings in terms of -- are we back to booking habits that look pre-pandemic or are we still looking at a lot of kind of closer in type of bookings?

So in terms of bookings, Scott, during the fourth quarter, obviously, saw a very strong recovery in the bookings. We were sequentially up 62% in terms of our revenue Q-on-Q. So we saw good revenue growth quarter-on-quarter. But with the second wave of the pandemic, which began towards the last 2 weeks of March and then continued into April and May, we saw a meaningful slowdown. But in the last 2 weeks, ever since lockdown restrictions have begun to get eased and case counts have come down. We've seen very steady recovery, in fact, very good recovery in the number of bookings. So our sense is that as vaccination continues to take a stronger foothold across the country and the case count continues to come down, we should see travel recovering quite strongly in the coming quarters.

And I guess in terms of that visibility, what's your level of confidence as you look out the first couple of quarters of the fiscal year versus the back end at this point?

Yes. I think I look at how things panned out in the first wave. So after the first wave, the recovery on the domestic side in Q3 and Q4 of the fiscal year was quite strong, and we think the similar story is going to play out this time around as well with the added advantage that a number of people are beginning to get vaccinated.

So when we've spoken to customers and anecdotally, the feedback that we have from people who've been vaccinated, right? It seems those people are willing to travel a lot more. There is internal talk, I was part of a task force discussion with the government as well, and there is talk that people who are fully vaccinated might be allowed to travel freely within the country as well.

If that comes through over the next couple of weeks, that should definitely lead to a significant uptake in the number of people who are traveling.

Yes. That's very helpful. And then last, on the corporate travel side, I'm curious what the competitive landscape looks today versus what it maybe looked like 6 months ago at the height of the pandemic? Are you starting to see some of your competitors in the space get more aggressive in the way they're pricing or anything along those lines? That kind of color would be helpful.

I think on the corporate travel side, we think the competitive landscape actually is tilting even more in our favor. The more this has dragged out, the harder it's become for the smaller and mid-tier players to operate in the segment. It just continues to put additional pressure on them. Even some of our larger competitors have been fairly quiet over the last quarter or so. So I think from that perspective, we are very well placed to take advantage of the situation, and it's reflecting in the number of new customer wins that we've had in the last quarter.

(Operator Instructions)

We'll take our next question from Matthew Galinko with Sidoti.

I apologize, I dialed in late, so I apologize if this already covered in the prepared remarks. But I'm curious how the changes we saw appreciably the fare bands, I think the lower point of the fare bands might impact demand for air travel. And if that will have any influence over the next few quarters for you?

Sorry, Matt, I was struggling to hear the question, the voice was getting a bit distorted. Manish, were you able to get the question?

No. Matt, can you please repeat that?

All right. So we saw some changes to fare bands. I think for air travel in India announced in the past week. So I'm curious if you see those impacting demand for air travel as the COVID wave kind of wanes and air travel starts to recover. Is that going to shift more demand back towards rail or how do you see that shaping up?

Sure. Got it, Matt. So in terms of the fare band change, which is there. Now those are threshold limits, which are recommended by the government, but the airlines continue to price, right, in line with where the market demand is. And today, what we've seen is that the market demand has largely shifted from being traveled between the metro cities to travel between metros and Tier 2, Tier 3 towns. And the airlines are very aware of this change in buying pattern, and we haven't really seen any significant price changes being affected by the airlines.

If anything, I feel prices and we've looked at this data continue to remain soft. And to that extent, we expect demand to recover quickly. Even from a customers' point of view, who's traveling from a Tier 2 town, even if rail travel is slightly cheaper, those who can afford air, even if it means stretching a little bit, are doing so. Because, a, the availability of trains is also limited; and b, air is viewed as a much more safer means of travel than rail transportation.

So given that, I think this trend, which we've witnessed over the last year or so of increasing amount of traffic originating from Tier 2, Tier 3 towns. I think that's here to say. We don't see that reversing anytime in the near future.

Got it. And then in terms of the freight strategy, I think you mentioned you have about 100 people working on that strategy today. And I think you flashed out some expectations around revenue in the near term. At what point do you think that strategy hits an accretive level? Or do you expect it to be profitable? What's the breakeven point for that service?

So actually, interestingly enough, even the last month that business managed to get to breakeven in the last month itself, so we expect it to be accretive in the very near term. We don't expect that business to be a drag on earnings in, let's say, for an extended period of time. There might be a quarter or so impact where we are ramping up the teams. But what we've seen in terms of results on this have been very encouraging. Our customer wins have been pretty rapid on this, and we expect that trend to continue. So we might see some ramp-up costs coming in, which might impact us for a quarter because typically, it's taking maybe about 2 to 3 months for new sales teams to come in and get fully productive. But that's about it. So I don't see a long gestation period for this.

Got it. And last question for me. Just, I guess, big picture around the -- at least what you saw in Q4 in terms of offline versus online bookings in the market. Do you think that's heavily skewed online to this point? Or how much mix shift is left in the Indian market?

Again, this is based on discussions with the airlines but the airlines have seen very significant shift in their booking patterns towards the online players versus the offline players. Obviously, corporate travel is at a very low end, right? So that is contributing to a part of that reason. But stripping aside the corporate travel as well, the airlines have seen a very meaningful and more than a double-digit shift towards the online players.

We have no more questions in the queue at this time. That concludes today's question-and-answer session. Speakers, at this time, I will turn the conference back over to you for any additional or closing remarks.

Thanks, Shelby. Thank you, everyone, for joining the call today. We are, as always, available over the phone and e-mail. Please feel free to reach out to us. Thank you.

Thank you. Stay safe everyone.

Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.