Yatra Online Q2 2024 Earnings Call Transcript

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November 17, 2023

There are 5 speakers on the call.

Operator

Everyone and thank you for joining the Asiatra Fiscal Second Quarter 2024 Earnings Call. We are currently just pausing for a couple of minutes to allow a few more participants to connect, but we will be getting underway shortly. And thank you again for your patience and for standing by. We will be getting underway shortly. Hello, everyone, and welcome to today's call titled the Yatra Fiscal Second Quarter 2024 Earnings Call.

Operator

My name is Ellen, and I'll be the call operator for today. During the presentation, all participants will be on mute. However, at the end of today's presentation, there will be an opportunity to ask a question. I would now like to turn the call over to Manish Hermann Raji, Vice President of Corporate Development and IR to begin. Please go ahead whenever you are ready.

Speaker 1

Thank you, Ellen. Good morning, everyone. Welcome to Yatra's fiscal Q2 2024 financial results for the period ended September 30, 2023. I'm pleased to be joined on the call today by Yatra's CEO and Co Founder, Jhooshringi and Group CFO, Rohan Mittal. The following discussion, including responses to your questions, reflects management views as of today, November 17, 2023.

Speaker 1

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

Speaker 1

Dhruv, please go ahead.

Speaker 2

Thank you, Manish, and good morning, everyone. Thank you for joining us for our Q2 earnings call. It is my pleasure to share that for the 3rd consecutive quarter, We have expanded our market share in the air travel sector. In the Q2 of 2024, our air passenger bookings surged by 31.2% year over year, Far outpacing the industry's growth rate of 22.7%. This not only underscores the Yatra brand's resilience, but also highlights our competitive edge in capturing market share.

Speaker 2

International travel has also shown a steady improvement during the quarter ended September 30, 2023, reaching approximately 90% of the pre COVID levels. As we move forward, we remain optimistic and committed to leveraging these positive trends to drive further growth and success. In the corporate travel sector, we further strengthened our position by securing 13 new corporate accounts in the quarter. These accounts carry a potential annual billing of about INR 813,000,000, which is roughly USD 10,000,000, reflecting our platforms capability and leadership in the market. Beyond the quarter, we have continued our momentum in closing deals with significant clients like Wealthfront And a major multinational corporation, wherein we will manage their travel needs across various regions in Africa in Asia, further expanding our influence and operational footprint.

Speaker 2

Additionally, as some of you may have seen in our press release this morning, I would also like to share that the Board has authorized a share repurchase of up to USD 5,000,000,000 of our NASDAQ listed YTRA shares, Underscoring our confidence in Yahtzra's future and our steadfast commitment to delivering shareholder value. This authorization represents approximately 5% of Yatra Online Inc. Market capitalization based on the current share price. Now let me provide some more color on the macro picture. According to the International Monetary Fund, global inflation is projected to gradually decrease from 8.7% in 2022 to 6.9% in 2023 and further to 5.8% in 2024.

Speaker 2

This trend is attributed to the implementation of tighter monetary policies and the stabilization of international commodity prices. Amidst this backdrop of softening inflation, India's economic landscape remains particularly robust, buoyed by a significant public capital expenditure initiative And a strong domestic economy. The Indian economy is poised for consistent growth with projections estimating 6.3% increase over 2023 2024. This positive trajectory underscores the resilience and dynamic nature of our economy. Travel does tend to be closely linked to the growth in GDP.

Speaker 2

And over the past decade, we have seen travel growing anywhere between 1.5x to 2x of GDP growth. India's per capita GDP has also witnessed an extraordinary growth trajectory. Increase in GDP per capita has required 4 decades from 1960 to 2000 to achieve a fivefold increase, but the same fivefold increase has been achieved In just the last 2 decades, this is growing at a compounded annual growth rate of 25%. This surge in per capita income Is a key driver for heightened discretionary spend with travel and dining out emerging as the primary beneficiaries. Amidst this landscape of an accelerating rise in discretionary income, we are confident in our potential to surpass market growth rates.

Speaker 2

Our strategy to capture a greater share in the corporate travel market, coupled with the sustained strength of our consumer brand, positions us well for continued expansion and success. Now let me provide you with some more details on our Q2. Our revenue for the quarter ended September 30, 2023 Was reported at INR947.6 million, approximately US11.4 million dollars up 14% year over year. Adjusted margins from air ticketing of USD12.3 million were down by 4.8% year over year, largely on account of Almost 15% decline in air ticket prices year over year. Adjusted EBITDA for the quarter reached INR 35,000,000, Approximately USD 400,000.

Speaker 2

This is lower versus the September 2022 quarter At INR77.7 million or approximately USP900000, we incurred IPO related listing fees during the quarter of INR68.2 million or USD800,000 which are one time in nature. Moving on to further details of the quarter. The corporate segment was somewhat impacted in the September quarter with softness in the IT and ITES sectors. We are confident however of the recovery in the near term from our largest contributing sector. We expect that the new business that we have won is likely to offset the drop that we have seen on account of the softness in the IT ITA segment by the Q1 of calendar year 2024.

Speaker 2

On the hotel front, revenue from our hotel and packages business Was INR 366 1,000,000 which is approximately USD4,400,000 in the 3 months ended September 30, 2023 As compared to INR 267 million or USD3.2 million in the 3 months ended September 30, 2022, This reflects a 37% increase year over year. The increase in revenue is attributable to recovery in domestic travel Along with the addition of new distribution partners and the focus on selling better quality hotels aimed at business travelers. From a competitive standpoint, the intensity has remained stable from the last quarter and remains manageable overall. With the positive macro backdrop and given the ongoing recovery in corporate and leisure travel and the rise in discretionary spend And now a significantly bolstered balance sheet. We believe we are poised for a strong FY 2024 and FY 2025.

Speaker 2

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 1 out of every 4 of the top 100 listed companies in India, 3 out of the big 4 accounting firms and 3 of the top 5 technology companies in India. In addition, as part of the IPO, We have also earmarked INR 1,500,000,000, USD approximately 19,000,000 towards M and A And now evaluating opportunities in the B2B space that allow us to expand our product platform for our business travel customers. Given our stronger balance sheet following the IPO, we've already begun to see early signs of improving supplier margins in the current quarter and expect this to gain further momentum in the quarters ahead and have a meaningful positive impact on our operating performance going forward. In addition, we have also seen the positive impact from the IPO and a stronger balance sheet in one of our large corporate customer contract discussions, which has had a favorable outcome for Yatra and we expect to see more of these in the quarter to come.

Speaker 2

With these positive tailwinds, We expect our operating performance to continue to improve quarter on quarter in the near term. With that, Let me hand it over to Rohan to walk you through the details of the financial performance. Rohan?

Speaker 3

Thank you, Dhruv. I will now review our quarter two numbers for the quarter ended September 30, 2023. Our gross booking for quarter 2 Was INR 17,500,000,000 which is roughly US211 million dollars This was up by 10% on a Y o Y basis. Our 2 main segments, Air and Hotels and Packages, both grew by 12% on a VYOI basis during this period. For this quarter, our revenue grew by 14% to INR948 million, which is about USD11.4 million on account of sustained elevated travel demand.

Speaker 3

Our adjusted margin from the air ticket business reduced by 5% YOY to INR 1,000,000,000 due to limited access to airline deals in quarter 2. The adjusted margin from hotel and package business increased by 16% y1 To INR 278 million, which is about US3.3 million dollars The increase is on account of recovery in the domestic travel along with addition of new distribution partners. Adjusted margin from other services increased by 21% on a YY basis to INR50 1,000,000. This increase in adjusted margin is due to the increase in revenue from our other B2C services. The total adjusted margin for all the 3 segments put together remained flattish.

Speaker 3

Our other revenue increased by 43% on a YY basis To INR144 1,000,000, primarily on account of increase in advertisement revenue. Moving to the expenses. Our quarter 2 marketing and sales promotion expenses, including the consumer promotion loyalty program costs, Increased by 4% on a y y basis to earn out $832,000,000 which is about $10,000,000 This marketing increase lagged the overall gross booking growth of 10%, which is a positive sign. Our personal expenses, Excluding the share based payment expenses increased by 11% YOY to INR279 1,000,000 which is roughly US3.4 million dollars primarily on account of the annual appraisal cycle. Payment gateway costs as a percentage of the total gross bookings remain range 1.

Speaker 3

Other expenses excluding payment gateway reduced by 16% on a YY basis. In quarter 2, we have completed the cost accounting of IPO expenses and taken a one time charge of INR68 million, which is a little below $1,000,000 Adjusted EBITDA profit stands at INR35 million as compared to INR78 million in the quarter ended September 2022. Lastly, as of September 30, the balance of cash and cash equivalents and term deposits on our balance sheet Was INR 7,100,000,000 which is roughly USD 86,400,000. This reflects the proceeds from our recently concluded IQ, while our gross debt was INR 1,740,000,000. With this, we come to the closure of our prepared remarks.

Speaker 3

I'd like to hand it back to the moderator for opening the questions now. Thank you.

Operator

Thank Our first question today comes from Scott Buck from H. C. Wainwright. Scott, your line is open. Please go ahead.

Speaker 4

Hi, good morning everyone. Thank you for taking my questions. Dhruv, can you give us a little bit more color on what's Driving the softening in air ticket prices, and it sounds like that's kind of dragged a little bit here through the fiscal Q3 as well, correct?

Speaker 2

Hi, Scott. Good morning. Yes, you're right that air ticket prices have softened significantly, Especially on the international travel front, here we've seen a lot more deployment of capacity. So last year as we were coming out of COVID, capacity was really limited In terms of airlines deploying aircrafts on the India route, we've seen a significant expansion of that playing out during the last 12 months. And that incremental supply is what's resulting in prices rationalizing and coming closer and closer towards where they were in the pre COVID environment.

Speaker 2

On the domestic front as well, we've seen supply expansion play out. In fact, even going forward, It's expected that over the next 6 months Air India will add more than an aircraft a week, right? So we will continue to see more capacity expansion happening. The good thing about that is that while on the one hand it does depress air ticket prices, it does stimulate demand. So If you look at it from an overall perspective, the industry grew almost 23% year over year.

Speaker 2

We grew 31%. So from a volume growth perspective, this is actually a great sign that prices are rationalizing. Going forward, We expect prices to remain range bound because the vast majority of the incremental capacity that had to be deployed on the international routes Is already in place. And from here on, it's going to be a more gradual expansion of capacity as opposed to the large scale expansion In supply that we saw over the last 12 months.

Speaker 4

Great. That's really helpful color. And then I want to dig in a little bit on The M and A strategy, are you looking to do one large deal, multiple small deals? I mean, could Could you give us just a little bit more color on that? And what does the timing look like there?

Speaker 2

Sure. So as we've So I called it out in our own IPO prospectus as well in India. Our endeavor would be to look at opportunities which allow us to expand The products and services that we can cross sell into our corporate customer base, these could be anything ranging from Multiple other products and services related to travel or other ancillary travel and technology related offerings that organizations use. So from that perspective, it could be either, right? So it could be one Which has a meaningful size and scale or it could be technologies and products that could dovetail into our offering.

Speaker 2

The latter would be the more likely route that we will adopt, right? But I can't rule out the former either. The strategy would be to look at things which can Into our platform and then help scale up the revenue from those incremental services within our existing corporate customer base.

Speaker 4

Great. I appreciate that. And then last one for me, just on OpEx. I'm curious, given the growth projections over the next 12 months or so, how do you feel or are you comfortable with the current cost basis? Or do you have to do a fair amount of Hiring or additional investment in OpEx to support that growth?

Speaker 2

See, on the OpEx side, we've pretty much got all the main ingredients in place. There might be a little bit of incremental investment that comes in on the But it's going to be fairly marginal in the overall scheme of things. So we don't expect Our cost structure to change significantly, especially if you were to look at this as a percentage of total transaction value, We don't see that changing much.

Speaker 4

Great. Appreciate the time guys. Thank you again.

Speaker 2

Sure. Thank you. Thanks, Scott.

Operator

Thank you. Okay. Currently no further questions on the line. So I'd like to hand back to the management team for any closing remarks.

Speaker 1

Thank you, Ellen. Thank you everyone for joining the call today. As always, we are available for follow ups. Please feel free to reach out to us And wish you all a Happy Thanksgiving.

Operator

That concludes today's conference call everybody. Thanks very much for joining. You may now disconnect your lines. Have a great rest of your day.

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Key Takeaways

  • Air passenger bookings rose 31.2% YoY in Q2, outpacing the industry’s 22.7% and driving market share expansion for a third straight quarter.
  • The board approved a share repurchase program of up to US$5 billion (approximately 5% of market cap), highlighting management’s confidence in future growth and shareholder value.
  • Yatra secured 13 new corporate accounts in Q2, representing potential annual billing of ~INR 813 million (US$10 million), and closed deals with clients like Wealthfront and a major multinational spanning Africa and Asia.
  • Q2 revenue grew 14% YoY to INR 947.6 million (US$11.4 million), while adjusted EBITDA declined to INR 35 million (US$0.4 million) due to one-time IPO listing fees, and hotel & packages revenue climbed 37% YoY.
  • The company has earmarked INR 1.5 billion (US$19 million) for M&A to enhance its B2B travel platform and expand cross-selling opportunities within its corporate customer base.
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Earnings Conference Call
Yatra Online Q2 2024
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