Yatra Online Inc (YTRA) 2021 Q2 法說會逐字稿

Good day, and welcome to the Yatra Second Quarter 2021 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Manish Hemrajani. Please go ahead.

Thank you, Katie. Good morning, everyone. Welcome to Yatra's fiscal second quarter 2021 financial results for the period ended September 30, 2020. 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 reflect management views as of today, November 5, 2020. 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 our filings with the SEC and our press release filed 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 all safe and healthy as we navigate our way through this pandemic. While the global COVID-19 pandemic continues to have a significant impact on travel, India is seeing a gradual recovery after the reopening of domestic aviation at the end of May. On the consumer side, domestic October passenger traffic numbers were up 33% month-over-month, and now have climbed back to 42% of October 2019 levels.

In terms of capacity, we are back to between 55% to 60% of pre-COVID levels and passenger load factors continue to improve week-over-week.

We believe capacity could reach 80% of pre-COVID levels by the end of the calendar year. Since the lifting of the lockdown back in June, we are seeing a meaningful shift towards online from offline. This has resulted in our domestic air market share rising by approximately 20% from pre-COVID levels in a relatively short period of time. We believe some of this shift in buyer behavior may be permanent in nature.

On the international front, recovery has been a bit muted as airlines are operating under the air bubble agreements between countries. So far, we've seen approximately 10% capacity come back online. And this number as well continues to increase gradually, albeit slower than domestic. We expect the recovery in international to be more gradual since it's dependent on signing of international air bubble agreements. We anticipate approximately 20% of capacity to come online by the end of this calendar year.

Domestic hotels have started taking bookings in May on a limited basis. And since September, a number of bookings have been trickling through. We are seeing some improvement happening as different states are easing the quarantine norms as well. And we expect to see gradual recovery here as well in the next quarter as people begin to undertake short-haul and driving holidays. The first impact of this we've seen post quarter end in the month of October, where there were 2 long weekends, and we've seen a healthy trend emerging of short-haul domestic holiday brakes.

On the corporate travel side, where we are the leading provider in India, we expect travel to come back slower and will lag the recovery in consumer travel. That said, we believe we are well positioned to leverage our scalable SaaS technology platform and continue to take market share. I'm happy to report that we recently closed a significant customer who would rank amongst our top 20 customers and is one of the larger players in the retail sector.

Currently, the online penetration in the corporate travel market in India, we believe, is just under 10%. A large part of this market today, approximately 60%, is held by smaller offline players. As a result of the pandemic, we believe we are already starting to see evidence of that, as there is 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 any scale and type of customers.

Another source of optimism in India comes from the recent data that suggested the worst of the pandemic is behind us. The number of daily cases in India continued to decline since its peak on September 16 at about 98,000. Therefore, yesterday's count was 38,000, which is less than half of the peak. And unlike Europe or North America, we're not seeing a second wave at the moment. We believe this bodes well for India as a whole and especially for the travel sector if this trend continues.

Coming to our fiscal second quarter results. We saw some recovery sequentially this quarter, reflecting a gradual opening of the country since June of the year. This recovery in domestic travel led to a sequential quarterly growth of about 60% in adjusted revenue to INR 377 million or approximately USD 5.1 million versus $3.1 million in the June quarter. This growth in revenue, further combined with strong cost control, enabled us to reduce our adjusted EBITDA loss from about INR 309.4 million, which is approximately $4.1 million in the June quarter, to INR 125 million or about $1.7 million for the current quarter.

We continue to hold our cost to the minimum, and we believe we have 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 this unfolded. On top of the return to travel, we continue to be excited about our multi-pronged approach to increasing shareholder value as well.

Some of the other strategic growth drivers that we're looking at is expansion of our corporate platform as we continue to add non travel-related services as well to our corporate travel customer base. As the largest corporate travel service provider in the country, we have strong relationships with many of the biggest and best known enterprises in India, and we continue to make inroads into these organizations with our nontravel offering.

And now a quick update on our 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. While I'm not at liberty to give any further details on 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 operating planning on a favorable near-term outcome from the litigation.

As of September 30, 2020, the balance of cash and cash equivalents and term deposits on our balance sheet was INR 2.6 billion, which is approximately USD 36.2 million. As announced earlier, we settled our litigation with ATB and made the final payment towards the earn-out of the ATB acquisition to the tune of approximately $10.6 million in the September quarter. And our current cash balance reflects the balance post that payout. Given our reduced burn rate, 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 market and corporate travel market, in particular, was the fastest-growing travel market globally, pre pandemic, growing at about a 12% CAGR and expected to reach $32 billion by 2020. A large part of the corporate travel was offline pre pandemic, and we expect the shift from offline to online to accelerate, as a result of the pandemic benefiting online players like Yatra in the long term.

This concludes our prepared remarks, and let me now open the call up for Q&A.

Katie, please open up.

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

I guess, firstly, can you share any more color about the new corporate contract you referenced in the prepared remarks. Was that a competitive win? How did it come to be? If you could say anything about duration or sort of what got you over the hump to sign it now? And what was your experience trying to sign that sort of contract in this environment where corporate travel has been sort of limited?

Sure. And good morning to you as well, Matt. in terms of this particular contract, this contract will now come in and fit in amongst one of our top 20 customers. It's been a lengthy engagement, as you would recall. Some of the corporate contracts can take anywhere between 3 to 6 months, even that time slightly longer for the contract itself to close and the company to go through a thorough evaluation process.

At this point in time, the technology seems to have played an even more important role than earlier. The customer was very focused around digital solutions. They were also looking at the kind of disruption our business faced, and we were comparing that to the kind of disruption other offline players in the industry have faced. And I think that's something, at least in our reading of the situation is that bode really well for us. But given the online nature of the product and service that we are delivering, we were able to minimize the disruption for our customers when the pandemic hit. And even the refund claim processes, et cetera, subsequent to that had been fairly streamlined. So I think the technology played a very important role in their evaluation process. It was obviously a competitive bidding scenario, and I think that's been the differentiator for us.

This same trend we are witnessing in some other discussions also which are going along at the moment. This customer had some travel needs, which are going to come up in the near term. Hence, we saw them pulling the trigger and firming up the contract. In some other cases, the conversations have been of a similar nature. However, given that there isn't really any immediate travel which is there, those contracts are still lying open. But we feel as corporate travel opens up, we will have a strong pipeline, which has already been built up closing pretty quickly.

Got it. I appreciate that. And then maybe just as a follow-up or maybe going towards, I guess, leisure travel. Does the quicker recovery on that side -- on the consumer side change your spending or marketing plans at all to try to maybe capture some of those transitions to online travel? Or do you go more into customer acquisition mode? Or do you feel that your brand and position in the market means that you're just kind of going to net some of -- or a decent portion of those customers that are now moving online?

I think the brand that we have is a very strong and powerful one in the country, and we've already begun to see the impact of this. If you look at the numbers, you will see that there isn't really a meaningful step-up in marketing spend. And yet over the last few months, we've gained significant market share on the consumer side as well. We think this consumer market share gain is coming largely at the expense of the offline players, as customers move more towards adoption of digital versus offline. So I think our guide is strong enough for us not needing to get into a large-scale customer acquisition and marketing spend, and we should be able to form on the basis of the strength of the brand itself.

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

First one, I was hoping to get a little bit more color on bookings. I'm curious on the leisure side, if folks are booking for trips that are 2 weeks out or 6 months out? Trying to figure out how customers are viewing that?

Scott, at this point in time, the bookings, which are happening are largely for near-term travel. And within that, also it's skewed within the next fortnight and then some spilling over into the subsequent fortnight or at the end of the month, but it's largely near-term travel. We've seen the odd bookings happening for people booking holidays for next summer, but those are still more the exception as opposed to the norm. The norm is still largely near-term travel within the next 30 days.

Okay. Great. That's very helpful. And two, I'm curious what you make of the argument that a lot of this corporate travel just won't come back. It's been permanently replaced by the Zoom calls and that sort of video conferencing. Just hoping to get your thoughts around that.

Sure. So when we've had conversations, and we've had numerous such discussions with the CEOs and CFOs of our large corporate customers. There is, at this point in time, a question mark over a certain amount of corporate travel. And then we've indexed it, this is ranging between 10% to 20% of the total travel undertaken by companies. This is largely the travel, which is for internal reasons. So when you're going for an internal meeting, you're flying from Delhi to Mumbai for a 2-hour meeting, those kind of travel trips might, in the near term, happen digitally.

So that risk is there when we are having these conversations. But what is also evident is that as India begins to open up and companies need to start growing their business again, business development trips will not be scaled back. So there will be a meaningful amount of travel, which will happen, maybe not to the same level because the internal trips will get pertained. The positive side for us, however, is that while on the per customer spend, we think the spend per customer might go down between 10% to 20%, depending on the nature of the customer. The new wins that we are looking at, and the pipeline that we are looking at building up right now. And I think, trend towards digitization and the move away from offline players is a very strong, and I believe, a permanent one. So on the whole, we feel over the next 12 months, while we might lose a bit on a per customer spend basis, we should be able to more than make up for it on new customer wins.

That will conclude our question-and-answer session. At this time, I'd like to turn the call back over to your speakers for any additional or closing remarks.

Thank you, Katie, for that. With this, we end our call for the day. Thanks for joining and stay safe out there.

Thank you, everyone.

That concludes today's call. We appreciate your participation.