Yatra Online Inc (YTRA) 2021 Q3 法說會逐字稿

Ladies and gentlemen, good day, and welcome to the Yatra Third Quarter 2021 Conference Call. Today's call is being recorded.

And at this time, I would like to turn the call over to Manish Hemrajani. Please go ahead, sir.

Thank you, Abby. Good morning, everyone. Wishing you all a happy New Year, and I hope everyone is safe and healthy. Welcome to Yatra's fiscal third quarter 2021 financial results for the period ended December 31, 2020. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi.

Following discussion, including responses to your questions, reflects management's views as of today, February 4, 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 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 the filings with the SEC and our press release 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?

Thank you, Manish. Good morning, everyone, and thank you for joining us this morning. Let me start by wishing everyone a safe and healthy New Year, and I hope that you and your families are safe as we continue to navigate our way to what we hope is the last leg of the pandemic.

While unfortunately much of North America and Europe is still facing a tough winter surge, recent data from India suggests that the worst of the pandemic is behind us. The number of daily cases in India continue to decline. And from a peak of about 98,000 back in the middle of September, they have come down to about 11,000 yesterday.

Additionally, an India-wide vaccine rollout has also started last month, and the daily vaccination count continues to rise gradually. We believe this bodes well for India as a whole and especially for the travel sector as this trend continues.

We finished 2020 on a strong note as our adjusted revenue increased 61% sequentially from the prior quarter, a clear indication that travel in India is well on its way to recovery. Although this is coming off a small base, hotel bookings were particularly strong with room nights growing over 400% sequentially.

This growth in revenue, further combined with strong cost controls, enabled us to reduce our adjusted EBITDA loss to INR 36 million, which is approximately USD 500,000, down from INR 125 million in the September quarter. So in USD terms, that's down from about $1.7 million in the previous quarter to about $0.5 million in the current quarter.

We exited the year with over $33 million in net cash and are well on our way to profitability, we believe, in 2021. As you look to the year ahead, we see 2021 as the year of recovery as vaccine distribution takes hold and travel restrictions lift gradually.

The domestic aviation market in India continues to be resilient and is well poised on its path to recovery. Q3 passenger traffic was up 113% on Q2 and December 2020 traffic now stands at about 56% of December 2019 levels.

In terms of capacity, we are back to approximately 80% of pre-COVID levels, and passenger load factors continue to improve gradually and are currently approximately 70%, 72%. We believe the capacity could reach close to 100% of pre-COVID levels by the middle of this calendar year.

On the international air front, however, recovery continues to be muted. This is impacted by border restrictions based on COVID case counts in various countries. Airlines continue to operate under air bubble agreements between countries.

So far, we've seen approximately 10% to 15% of the capacity come back online. This number continues to increase, albeit at a slower pace than the domestic aviation. We expect the recovery in international to continue to be more gradual and largely dependent on the rate of global vaccinations.

Domestic hotels started taking bookings, if you recall, in May on a very limited basis. However, since September, a number of hotels and -- a number of states in India, rather, have allowed hotels to start operating with limited quarantine restrictions, and we've seen demand recover strongly during the Diwali and Christmas holiday season.

As mentioned above, our hotel room nights booked grew over 400% Q-on-Q. We expect to see recovery to continue on the domestic hotel front as we head towards the summer travel period.

We continue to make solid progress on the corporate travel front as well and signed 10 notable customer contracts during this quarter. And do bear in mind that this is a period in which still a number of organizations were either shut or continued to work in a limited manner.

We believe we are well positioned to leverage our scalable SaaS platform and continue to take market share. We are the leading business travel providers in India.

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 large part of the market, approximately 60%, is served by smaller off-line players.

As a result of the pandemic, we are seeing evidence of an accelerated shift towards online fairs, especially as contracts come up to their end-of-life and rebidding. We remain confident in our platform's capabilities to serve any scale and type of customers.

Corporate travel recovery is expected to lag consumer, but please note that before COVID, corporate travel was going at a faster rate, and we expect this dynamic to turn post COVID.

Beyond such recovery from COVID, we believe the Indian travel market is back on its strong secular growth trend. Last week, IMF projected India to grow at 11.5% in 2021, the only economy globally with double-digit growth projections.

The growth projections come on the back of an estimated 8% contraction in the economy in 2020. The IMF stated that India had taken very decisive action, very decisive step during the pandemic and to deal with the economic consequences of it.

Travel typically tends to grow at about 2.5 to 1.7x GDP growth and the IMF stated India will get back to these levels of growth as vaccination becomes more prevalent. If India follows the path of what many developed countries have done, we can expect to see growth to inflect for travel at the levels even beyond pre-COVID.

Coming to our third fiscal quarter results, we saw meaningful sequential recovery this quarter, reflecting a gradual opening of the country and rise in air passenger traffic as capacity continues to be added. This recovery in domestic travel led to a sequential quarterly growth of 61% in adjusted revenue to INR 607 million, which is approximately $8.3 million versus $5.1 million in the previous quarter.

This growth in revenue, further combined with strong cost control, enabled us to reduce our adjusted EBITDA loss from INR 125 million, which was approximately $1.7 million, in the September quarter to about INR 36 million or approximately USD 0.5 million for the current quarter.

We continue to hold our cost to the minimum, and we believe we've got adequate liquidity on the balance sheet to see us back to profitability. We now look forward to resuming the same growth and profitability trajectory we were on before all of this unfolded.

One other strategic growth driver is the expansion of our corporate digital platform as we continue to add non-travel-related digital offerings to our attractive corporate customer base. As the largest corporate travel service provider in the country, we have strong relationships with some of the biggest and best known enterprises in India. We continue to make inroads into these organizations with our non-travel offerings of expense management, edtech and others.

And now a quick update on the litigation against Ebix. On September 30, 2020, Yatra filed an amended complaint expanding its claim against certain banks of Ebix, while also expanding the claims alleged against Ebix to include a claim for fraud. Our hearing for arguments concerning the motion to dismiss filed by the other party have been set for March 22, 2021.

While I'm not at liberty to give any further details of the litigation, I would just like to point out here that a large part of our legal cost for the litigation is linked to the outcome of the case and not a direct cash outflow for us. Additionally, neither are we dependent nor have we based our operational planning on a favorable near-term outcome from the litigation.

As of December 31, 2020, the balance of cash and cash equivalents and term deposits on our balance sheet was approximately $33.7 million. This was after us having paid down about $2.27 million of our debt during the current quarter. And our outstanding debt as of December 31, 2020, now stands at only USD 110,000. Given our continually reducing burn, we believe we have sufficient liquidity on our balance sheet to return to profitability.

Lastly, I would like to remind everyone that India's travel and corporate travel market, in particular, was the fastest-growing travel market globally pre-pandemic with a 12% CAGR and was expected to reach $32 billion by 2022. A large part of the travel market, corporate travel in particular, was off-line pre-COVID. We expect to see an accelerating shift from off-line to online travel bookings, and we believe we're already seeing that in our numbers.

When we come out of this pandemic, we believe we should be on a significantly better revenue growth trajectory and will leverage our improved operational efficiency to drive higher profitability and cash flow. I want to thank all our shareholders who stood by Yatra through these trying times. I'm hopeful and, honestly, believe it is only a matter of time before your patience and understanding is rewarded.

This concludes our prepared remarks. I'm going to now hand it back to Manish to take forward the Q&A. Manish, over to you.

Thanks, Dhruv. Operator, please open up the call for Q&A.

(Operator Instructions) We will take our first question from Matthew Galinko with Sidoti.

Sorry, I had myself on mute. So a couple of questions for you and then I will jump back in the queue. First is, I think you mentioned 10 new corporate customers signed this quarter. Can you give a sense of maybe what the size distribution there was? Were there any sort of flagship type or blue-chip type companies? Is it predominantly smaller? What are we looking at there?

So in terms of the customer distribution, these are all reasonably large organizations. There is one which would stand out and be in the top 15 customers of ours, but the others would all be reasonably large midsized corporations, and they would include some blue-chip international MNCs as well.

Got it. And -- again, I think we talked about this last quarter, but what was the #1 feature that sort of came up or if there was one that got new wins?

I don't think it's one feature, Matt. I think now it's a comprehensive solution that we are offering to customers, and it's the combined offering of the products and the service delivery, which is getting us these customer wins.

There is a more secular trend about customers wanting to adopt digitization and we are the leading player when it comes to a digital platform for business travel management in India. So that definitely gives us an edge. But over and above that, it's now the comprehensive product solution that we've built.

It's a fairly integrated solution. It's got the ability to handle complex workflows. It's got the ability to manage approval process mechanisms, make sure all billing reconciliation is done seamlessly in a digitized manner. So all of these automated workflows which have been built together and then combined with the rates that we are getting and the off-line service and exception handling that we are providing is what's getting us these customers. So it's a complete package as opposed to just one element of it which is driving new customer wins.

(Operator Instructions) We will take our next question from Scott Buck with H.C. Wainwright.

I'm curious if you've seen any meaningful changes in the way people are booking? Are you seeing more close in travel or people booking further out in the future, anticipating vaccination rollout? And any expectation around kind of permanency around any of these changes?

Scott, one of the changes that we are seeing in terms of trends is we are seeing more shorter, higher frequency holiday travel, especially when it comes to near-term destination. So people aren't taking long-haul breaks. So they're traveling near to their destination, near to their home town, but there is a higher frequency.

The durations have come down. We aren't seeing that many 7 days and above kind of breaks happening. So we are seeing more like 3, 4 night kind of breaks, but we are seeing it happening at a much higher frequency.

The other trend which is also there is that -- and this is maybe still a bit more limited, is people working from these kind of leisure destinations. So people renting out home space, renting out alternative hotel accommodations for an extended period of time and working from there. So that's a more newer trend.

But the more general trend that we are seeing is shorter frequency and -- sorry, shorter duration and higher frequency. And the category of hotels also that people are preferring, it's more 4 and 5 stars. So we've seen people upselling in terms of their preferences and going towards higher category hotels.

That's helpful. Also hoping maybe you could provide a little bit more color around what you're seeing in corporate travel market in terms of activity and potential time line to recovery. Should we think about corporate travel as being 3 months, 6 months behind leisure? Or do you think the Zoom calls and then videoconferencing is going to last meaningfully longer than that?

See, at this point in time, we've begun to see some early traction on the recovery on the corporate travel side. A number of customers have opened up in January. We've got feedback from some of the other large ones opening up in Feb. And then the next batch is scheduled for April.

So my sense is that you're looking somewhere between that 3- to 6-month kind of time frame, where corporate travel will lag leisure travel. But by the middle of this year, given what's playing out in India, at least I feel on the domestic travel front, corporate travel should be between 65% to about 75% of pre-COVID levels, at least on the domestic travel front.

Yes. That's great. Last one for me. I'm curious, these potential air bridges or travel bubbles, how useful have you guys seen them to be in driving some at least regional international traffic? And would you expect to see more of these kind of travel arrangements between countries here over the next 6 to 12 months?

Sure. I think that's a very -- that's something that we are watching very closely, Scott. And I think when these travel bubble agreements come into play, we do see a spurt of traffic. Dubai -- so India and Dubai is an example of that, where we've seen a fair degree of traffic happening over the past few months between India and Dubai on account of the travel bubble that's been operating over there. We have seen a similar trend now for Maldives. We expect Sri Lanka in the near-term to also go through a similar process.

But having said that, a word of caution on this is also necessary given that the new strain of the virus seems to be appearing in some of the countries. So India, U.K., for example, was a fairly high-traffic corridor, but come early January, there have been significant restrictions which have come into play given the new variant of the virus in the U.K.

So I think the bubbles are definitely very helpful, but we need the bubbles to last consistently. In India, there is talk of herd immunity coming out, and that definitely bodes fairly well for India. So I think domestic will recover and continue to recover at a faster pace. International, unfortunately, will have these fits and spurts, given what's happening in different countries.

And there are no additional questions. So I would like to turn the call back to Manish Hemrajani for any additional or closing remarks.

Thank you, Abby, and thanks, everyone, for joining the call today. We look forward to speaking to you during the course of the quarter. Thank you, guys.

Thank you.

Ladies and gentlemen, this concludes today's call, we thank you for your participation. You may now disconnect.