Earnings Call Transcript - YTRA Q1 2024

Operator, Operator

Hello all and welcome to Yatra Online, Inc. 1Q Full Year ‘24 Earnings Conference Call. My name is Lydia and I'll be your operator today. It's my pleasure to now hand you over to your host, Manish Hemrajani, Head of Investor Relations. Please go ahead.

Manish Hemrajani, Head of Investor Relations

Thank you, Lydia. Good morning, everyone. Welcome to Yatra's fiscal first quarter 2024 financial results discussion. We have on the call today Yatra’s CEO and Co-Founder, Dhruv Shringi, and CFO, Rohan Mittal. Following discussion, including responses to your questions, reflects management views as of today, October 16th, 2023. We don't undertake any obligation to update or revise the information. Before we begin our formal remarks, let me remind you that certain statements made on today's call may constitute forward-looking statements which are based on management's current expectations and are subject to several risks and uncertainties that could cause actual results to differ materially. For a description of these risks, please refer to our filings with the SEC and our press release filed earlier this morning. These are also available on our Investor Relations site. With that, let me turn the call over to Dhruv. Dhruv, please go ahead.

Dhruv Shringi, CEO

Thank you, Manish. Good morning to all, and I appreciate your presence on our Q1 earnings call for fiscal ‘24. I am delighted to announce a significant milestone for Yatra Online Limited. We successfully concluded our Indian IPO of INR7.75 billion, which is approximately $93 million, and proudly made our debut on the Indian stock exchanges on the 28th of September. This achievement holds special significance for all of us at Yatra. The funds generated from the IPO are earmarked for strategic investments, acquisitions, inorganic growth, technology advancement, bolstering customer acquisition and retention, and other initiatives pivotal to our organic growth and corporate endeavors. Furthermore, Yatra Online, Inc. also benefited from an additional capital of approximately $21 million as the selling shareholder, THCL, which is a wholly owned subsidiary of Yatra Online, Inc. sold these many shares in the open market. The capital not only enables us to settle the MAK debt, but also provides us the flexibility to potentially allocate a part of the residual funds for future Yatra share buybacks. The recent IPO in tandem with these developments offers us strategic leverage, enhancing our market visibility, diversifying our shareholder base, and consequently strengthening the Yatra brand. The IPO was based on a pre-money valuation of INR16 billion which is approximately $193 million which equates to, again, approximately $3.03 per YTRA share that trades on NASDAQ. This is based on a share count of 63.6 million shares outstanding currently. The current market cap of the India entity is approximately INR23.15 billion, which is approximately $280 million. And post the IPO, Yatra Online, Inc. owned about 65% of its Indian subsidiary, which on a consolidated basis, as I mentioned above, equates to an approximate share price of YTRA shares of $3.03. Now moving on to the June quarter results. I'm pleased to report that we had our strongest quarter on the air front since the advent of COVID with the highest number of air passengers booked since pre-COVID in December 2019. This was up 41.5% year-over-year, far outpacing the domestic air passenger industry growth of 14.8%. Moreover, our sequential growth has been twice the pace of the industry, faster than our peers, demonstrating our ability to gain share and the inherent strength of the Yatra brand. International travel has also shown a steady improvement during the quarter, reaching approximately 90% of pre-COVID levels. As we move forward, we remain optimistic and committed to leveraging these positive trends to drive further growth and success. We further fortified our leadership in the corporate travel sector by signing 19 new corporate customers in the June quarter. These customers have an annual billing potential of INR1.5 billion, which is approximately $18.2 million. This underlines the capabilities and leadership of our Corporate Travel SaaS platform. As for the IMF, India's economic growth remains robust, given by a large public capital expenditure push and the resilient domestic demand. The economy is expected to grow by 6.3% in both 2023 and 2024. As it relates to Yatra, looking at how the travel industry has unfolded over the last several years, we see that travel trends to grow at a multiple of 1.5x to 2.0x of GDP. We believe that we should be able to achieve growth rates above market rates as we continue to take share in the corporate travel market and as the consumer market continues to remain robust. Both the expansion of the travel industry and the macro conditions continuing to be favorable allow us to do so. The Indian aviation industry is witnessing unprecedented expansion of its fleet. The fleet is expected to almost double over the next five years and the aviation ministry is forecasting more than doubling in air passengers to approximately 400 million annual air passengers in the next decade. Regarding inflation, again, India is faring relatively well. CPI-based inflation stood at 5.02% in September as compared with 6.83% in August, according to data from the Ministry of Statistics. Core inflation fell to 4.6% in September from 4.8% in August, and this was the lowest since April 2020. Now, let me provide you with some more details on our first quarter results. Our revenue for the quarter ended 30th of June, 2023, was reported at INR1.106 billion, which is approximately $13.5 million. This was up 23% year-over-year. Adjusted EBITDA for the quarter reached INR115.4 million, which is approximately $1.4 million, marginally lower versus the June '22 quarter at about $1.5 million. India's domestic passenger traffic saw a sequential growth of 3% in the quarter ended June 30, 2023. Compared to this, our domestic passenger traffic grew 6%, faster than peers, reflecting strong market share gains from both our consumer and corporate businesses. This positive momentum has carried over into subsequent months as well with the recently concluded September month up 18.3% year-over-year and up 7% versus pre-COVID, marking seven consecutive months of above pre-COVID levels on the domestic air passenger traffic front. So the market has firmly recovered from the pre-COVID levels. Year-to-date, from January to September 2023, Indian domestic market has registered a growth of 29.1% with 112.8 million passengers flying during this period. International travel has also continued to show resiliency and steady improvement during the quarter and has now surpassed 90% of its pre-COVID levels. As we move forward, we remain optimistic and committed to leveraging these positive trends to drive further growth and success. Moving on to further details of the quarter. Our consumer business gained further traction on the back of strong brand recall that the yatra.com brand continues to enjoy in the market. We launched our Yatra Prime offering during the quarter, and the initial sign-ups have been encouraging with positive response to this offering continuing in the subsequent months. During the quarter, we closed 19 new corporate consumer accounts. While the number is lower Q-on-Q, partly due to seasonality, what was encouraging was that the average billing potential of the customers that we closed during this quarter trended higher than in the past. International travel also continues to improve gradually, and we are optimistic in the outlook for a sustained recovery in near-shore international travel. On the hotels front, revenue from our hotels and packages business was INR452.6 million, which is approximately $5.5 million in the three months ended June 30, 2023, as compared to INR390.7 million or $4.8 million in the three months ended June 30, 2022, reflecting an increase of almost 16%. The increase in revenue is on account of recovery in domestic travel, along with additions of new distribution partners. From a competitive standpoint, the intensity has remained stable from last quarter and remains manageable overall. From a macro standpoint, the Indian government remains strongly committed to the growth of airport infrastructure in India, an investment of almost $12 billion has been earmarked for the enhancement of 41 existing airports in India. Additionally, under the greenfield airport policy, out of the 21 new airports that were sanctioned, 12 have already come online. So, with a positive macro backdrop and given the ongoing recovery in corporate and leisure travel, and our continued success in signing new large and medium-sized enterprise customers, and now a significantly bolstered balance sheet, we believe we are poised for a strong back half of FY '24. Aside from seasonality, we expect our results to benefit from accelerating growth in both our corporate business and consumer business as we continue to add to our formidable blue chip customer base and leverage the strength of our brand. Just to reiterate, today, Yatra India serves one out of every four of the top 100 listed companies in India. It also services three out of the big four accounting firms and three of the top five technology companies in India. Finally, I would like to express my deepest appreciation of our dedicated employees and the shareholders for their unwavering support. With that, let me hand it over to Rohan to walk you through the details of the financial performance. Rohan, over to you.

Rohan Mittal, CFO

Thank you, Dhruv. I will now review our quarter one numbers for the quarter ended June 30, 2023. For the June quarter, we continue to witness strong tailwinds, and we were able to grow our gross bookings to INR19.8 billion, which is about $241 million in quarter one, registering a year-over-year growth of 11%. The revenue from Air Ticketing business increased by 30% year-on-year to INR490 million, which is about $6 million. The adjusted margin also increased by almost 46% year-on-year to INR1.2 billion, which is roughly $14 million. The strong growth was driven by sustained travel demand in the country as well as an accrual of special bonuses from previous contracts. Revenue from Hotel and Packages business increased by almost 16% year-on-year to INR452 million, which translates into about $5.5 million and the adjusted margin increased by 1.6% year-on-year to INR307 million, which is roughly $4.8 million. The increase in revenue and adjusted margin is on account of recovery in domestic travel as well as the addition of new distribution partners. Revenue from the Other Services decreased by 43.8% year-on-year to INR26.7 million. The decrease was primarily due to a relook at the freight business. The total adjusted margin from all segments combined increased by 30.5% year-on-year to INR1.5 billion, which is roughly $18.3 million, and the total income increased by 22.6% year-on-year to INR1.1 billion, approximately $13.5 million. Moving on to the expenses. Our quarter one marketing, sales promotion, consumer promotion, and loyalty program costs increased by 72% on a year-on-year basis to INR880 million, which is roughly $10.7 million. Our personnel expenses increased by 2.2% year-on-year to INR275 million. Excluding share-based expenses, the total expense cost increased by 11%, which is in line with the increase in head count as well as appraisals. Other operating expenses increased by 3.6% to INR396 million, which is roughly $4.8 million, primarily due to an increase in commission, legal, professional charges, payment gateway charges, etc. Due to all of the above factors, our adjusted EBITDA profit for the quarter ended June '23 stands at INR115.4 million, which translates into about $1.4 million as compared to INR123.5 million in the quarter ended June '22. Our gross debt increased by INR43 million from the March quarter to the June quarter and we ended the quarter at a gross debt of INR2.4 billion, which translates into about $29 million. Lastly, as of June 30, we were carrying cash and cash equivalents and term deposits on a balance sheet worth INR1.1 billion, which is $13.5 million. With this, we conclude our prepared remarks and hand it back to the moderator. Thank you.

Operator, Operator

Our first question today comes from Scott Buck of H.C. Wainwright. Your line is open.

Scott Buck, Analyst

Hi, everybody. Thank you for taking my question and congratulations on the IPO. Dhruv, my first question, could you give us a little more information on the acquisition environment and maybe what could potentially make sense for you guys from a strategic perspective?

Dhruv Shringi, CEO

Sure. Hi, good morning, Scott. In terms of the acquisitions, we've looked at a couple of areas in the past. And I think those areas will continue to remain areas of interest for us. One is offline businesses on the corporate travel side, where we can acquire entities at a reasonably low price and then take out costs from those businesses by implementing our technology solutions and significantly improve the operating margin. So that would be one area that we would look at. The other area is also, again, in the corporate space where we would look at other products and services, especially SaaS-based technology solutions like expense management for example, that can be cross-sold to our existing large corporate customer base. So it's about how do we either grow our base on the corporate side or add more products and services to leverage the existing base. So those would be the key areas that we would look at.

Scott Buck, Analyst

Great. That's helpful. And second, can you give us an indication of where your market share position is today in corporate travel versus where it was pre-COVID?

Dhruv Shringi, CEO

So, versus pre-COVID, we've expanded our customer base by about close to 15%. My sense is that in terms of market share, because the number of companies in that top segment would not have grown by 15% but a much smaller number, we will only have gained market share over the course of the last 1.5 years.

Scott Buck, Analyst

Yeah. That's helpful. And then last one for me. Just on how we should be thinking about operating expenses moving forward. Do you have a meaningful amount of catch-up that you need to do on OpEx now that you have some additional cash to play with? Or should we expect OpEx levels to remain largely consistent with what we've seen in the past few quarters?

Dhruv Shringi, CEO

Yeah. So, OpEx levels will not change very significantly. We would see maybe low single-digit to mid-single-digit kind of increase, but nothing significantly beyond that, at least on the fixed cost.

Scott Buck, Analyst

Right. That’s perfect. Well, I appreciate the time guys. Thank you very much.

Dhruv Shringi, CEO

Not at all. Thank you, Scott.

Operator, Operator

Thank you. We have a question from Cobb Sadler of Catamount. Your line is open.

Cobb Sadler, Analyst

Thank you for taking my question. I would like to ask about the new corporate customers. I understand you mentioned there is an incremental benefit from those accounts. When do you anticipate reaching that run rate with those customers? Additionally, they seem to be larger than the traditional customers you’ve added. Is that correct? If so, why? Also, when do you expect to reach the $18 million target, if that's accurate? Thank you. I have one more question.

Dhruv Shringi, CEO

Sure. Sorry, Cobb. In terms of getting to that run rate cost, we're looking at a six-month kind of timeline to get to that full run rate by the time the new customers get implemented. So if you look at from where we were, this is numbers as of 30th of June, so we would expect full implementation by the Jan to March quarter of 2024. So that's what we are looking at with regards to these customers. They should all be live in that timeframe. In terms of whether they are larger, yes, we've had some good wins in this quarter, which have pulled up the average. There are a couple of customers who are larger than the traditional average customer that we would sign. That's part of the reason why the average has gone up per customer. There are some other conversations ongoing, and we remain very positive about the strength of our value proposition to our large corporate customers.

Rohan Mittal, CFO

And, Cobb, the number is 19, not...

Cobb Sadler, Analyst

Okay. So roughly, yes, 19. So $4.5 million to $5 million a quarter, and I'm sorry, Manish, go ahead.

Manish Hemrajani, Head of Investor Relations

No, I was just saying that number was 19 customers signed.

Cobb Sadler, Analyst

Okay, I understand. You mentioned 19 customers signed. Did you provide an estimate of the revenue associated with those 19 customers?

Dhruv Shringi, CEO

Yeah. So, Cobb, the $18 million number that you were referring to, it's 19 customers with an annual billing potential of $18 million. So which is the $4.5 million a quarter that you were referring to.

Cobb Sadler, Analyst

Got it. So you believe that this might occur in about six months, maybe taking longer, possibly around six to nine months. That $4.5 million is additional to the existing revenue, amounting to $4.5 million each quarter. Now, regarding your stock buybacks, what are the criteria for that? Is there a specific valuation threshold? Currently, shares are trading at roughly a 50% discount. When do you anticipate starting the buybacks? What steps need to be taken? Do you need a Board meeting, or could you initiate it immediately if you chose to? I'm interested in the timing and the factors involved.

Dhruv Shringi, CEO

So, Cobb, this is something that the Board is carefully considering with counsel, and we'll go through this process, and in the relatively near term, we'll come back and update our shareholders with our thought process around this.

Cobb Sadler, Analyst

Okay. All right, sounds good. Thank you. Congrats on the IPO.

Dhruv Shringi, CEO

Thank you so much. Thank you.

Operator, Operator

We have no further questions in the queue. So I'll turn the call back to Manish Hemrajani for any closing remarks.

Manish Hemrajani, Head of Investor Relations

Thank you, Lydia. Thank you all for joining the call today. As always, we are available for follow-up. Please feel free to reach out to us. Thank you. Thanks, everyone.

Operator, Operator

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