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spk05: Good day and welcome to the Monday fourth quarter 2023 earnings conference call. Please note this event is being recorded. I'd now like to turn the conference call over to Jeff Houston, Senior Vice President. Jeff, please go ahead.
spk07: Thank you, Elliot, and good morning to everyone. Welcome to Monday's fourth quarter and full year 2023 conference call. With me today is Founder, Chairman, and CEO Prasad Gundamundala and Chief Financial Officer Jesus Portillo. Executive Vice Chairman, Aristis Venticulus, and Chief Operating Officer, Jim Dunham, will present our preliminary, unaudited results and be available for questions and answers. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, including statements about revenue growth of our business, our management and governance plans, and other non-historical statements as further described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Maundy's growth, the evolution of our industry, our product development and success, our management performance, and general economic and business conditions. I would also like to point out that the fourth quarter and full year 2023 results are preliminary and subject to final audit. We undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to have a material difference from these forward-looking statements are discussed in our reports filed with the Securities and Exchange Commission and in our earnings press release that was issued this morning. Forward-looking statements are based on expectations that involve risk and uncertainties that could cause actual results to differ materially. Listeners are cautioned not to place undue reliance on any forward-looking statements. During the call, We also refer to non-GAAP financial measures. Reconciliations of the most comparable GAAP measures are also available in the press release, which is available at investors.mondi.com. With that, it's my pleasure to turn the call over to Prasad.
spk01: Thank you, Jeff. Good morning, good afternoon, and good evening, everyone, and welcome to Mondi's fourth quarter and full year 2023 earnings call to discuss our results and significant developments. We are pleased to report that net revenues and adjusted EBITDA for 2023 surpassed full year guidance with Q4 and full year 2023, the highest on record in the 13 year history of Monty for both metrics. 2023 gross bookings of 2.6 billion grew 19%. Net revenues of 222.3 million grew 39%. 2023 adjusted EBITDA was 21 million, another record and almost double 2022's level. This strong year-over-year growth was fueled by product and geographic expansion of our marketplace, industry-leading technology advancements, and sustained leisure travel demand. This translated into gross bookings growth and take rate expansion. which has doubled since pre-pandemic levels to 8.7% in 2023, up from 7.4% in 2022. In the fourth quarter, take rate was nearly 10%. Looking into the future, we are focused on achieving the following near and long-term goals. Enhance profitability and free cash flow. We will achieve this through sustained transaction volume growth, take rate improvements, and implementing cost control measures. Expand travel marketplace. Our marketplace is growing in terms of geography, products such as packages, hotels, events, and activities, as well as new distribution partners. Indicatively, Bondi's entire business pre-pandemic was air only. Whereas for 2023, air only represented only 57%, while hotel, packages, fintech and other represented 43%. In terms of origination geography during 2023, Mondi expanded within North America and into South America. Maintain technological leadership in AI. Mondi remains committed to being a leader in travel industry AI. Our significant investments in Abhi, the first AI-powered travel platform launched in mid-2023, have established a strong foundation. We are continuing to innovate and push the boundaries of AI in travel. Moreover, as Jesus will detail later, the company is focusing on optimizing its capital structure in the coming months with a new long-term loan facility. As an initial step, we have extended the maturity of our current term loan to March 31st, 2025. I now turn the floor over to Jim Dellum, MonDIS Chief Operating Officer, who will discuss market trends and MonDIS marketplace expansion. Jim, over to you. Thanks, Prasad.
spk04: Good day, everyone. Turning to our market outlook and external drivers to our gross bookings growth, For the industry overall, 2023 was a very mixed bag of robust post-pandemic recovery, but also headwinds from regional armed conflicts and a great deal of economic uncertainty. It is worth emphasizing that MONDI's business model flourishes in such conditions of volatility. On the demand side, travelers seeking cost-effective options align nicely with MONDI's offerings. On the supply side, uncertain economic conditions lead to more potential excess capacity, motivating suppliers to offer better deals through opaque channels like Mondi. This enables us to target our marketing to specific consumer groups while providing travelers with enhanced customized itineraries, trends that are perfectly suited to Mondi's AI capabilities and leadership. Furthermore, a substantial majority of our business caters to international leisure travel, which continues to benefit from recovery and growth in certain markets like Latin America, China, and the Middle East. Looking more to our own business, we continue enhancing our marketplace where Mondi is steadily increasing its market share within the 1.1 trillion assisted affiliated travel market through focus on adding content and distribution expansion. In terms of content diversification, you may recall pre-pandemic, as Prasad mentioned, MONDI was almost exclusively offering discounted airfares. In 2023, air-only net revenues accounted for 57%, while packages were now up to 21%, hotel-only at 11%, FinTech at 6 percent, and the other category, including SAS, insurance, ground transportation, and other ancillaries, was at 5 percent. These adjacent products and markets not only significantly expand MONDI's total addressable market, or TAM, but also contribute to the impressive rise in our take rate. Moving on to distribution expansion, We leveraged our AI technology platform to continue growing our robust marketplace of 65,000 travel experts and new era distribution partners, such as local community and social media influencers, and to provide their travelers with access to personalized content and localized experiences. As we interact with these cohorts, we continuously gain valuable feedback, allowing us to refine our platform, our monetization, and our content localization strategies. In the area of B2B partnerships, beyond our expert-led distribution, our B2E or business-to-enterprise partnerships have witnessed a net revenue surge year over year. As a reminder, MONDI targets enterprises and membership organizations by providing its unique technology platform and inventory access to these closed user groups. I now turn it over to Orestis Sintiklis, MONDI's Executive Vice Chairman, to discuss our widening technological leadership and focus on increased profitability and cash flows. Orestis?
spk00: Thank you, Jim, and good morning, everyone. As Jim mentioned, we have been widening our technological product lead and further AI integration. Mondi remains a leader in travel innovation through pioneering AI solutions like ABI, our unique platform that combines expert trained generative AI with conversational interfaces and comprehensive booking and itinerary management. Upon its launch in the summer of 2023, ABI established itself as the first fully integrated AI travel assistant. This groundbreaking technology can explore trip ideas, take real-time traveler input, create itineraries, book travel, manage itinerary changes, and even generate customized travel guides for both travel experts and their clients. By introducing ABI, Mondi created a new category. Going forward, we remain committed to not only enhancing the capabilities of our proprietary large language model, LLM, which continuously learns from our unique travel expert data and millions of daily searches, but also to pushing the boundaries of the entire field. We will unveil more details about these advancements in the coming quarters. Turning to our heightened focus on profitability and cash flow generation, Monty is not merely disrupting the travel market, it is achieving this while maintaining and enhancing strong profitability. Committed to long-term shareholder value, we are redoubling our efforts to boost adjusted EBITDA and free cash flow in 2024. Year over year, the company has nearly doubled its reported EBITDA from 12 million in 2022 to 21 million in 2023. During the past year, we also completed five acquisitions. Going forward, we are focusing on realizing further organic growth and synergies through seamless integration and lucrative cross-selling opportunities. I now give the floor to Jesus, our CFO, on this day of his birthday, for a review of Mondi's outlook. Jesus?
spk03: Thank you, Ernestes, and hello, everyone. As I go over our Q4 and 2023 results, I would like to point out that all growth rates for 2023 are on a year-over-year basis, unless otherwise indicated, and the results are subject to final review by our auditors. Let me please start with our financial highlights. We continue to generate strong performance throughout this fourth quarter, producing record quarterly and annual net revenue and adjusted dividends, evidence that our efforts for sustained growth and improved profitability are producing results. Our gross bookings were $619 million in this quarter, up 24%. This growth was driven by a 56% increase in the number of transactions. For the full year 2023, gross bookings of $2.6 billion grew 19%. Our net revenue increased 78% to reach $61 million. This growth in net revenue is the result of higher growth bookings combined with our continued improvement in tech rate. Our tech rate of 9.9% was ahead of our expectations and up 44%. As with prior quarters, this improvement in tech rate was driven mostly by the growth of higher margin products and the diversification of revenue streams. including FinTech and auxiliary services. Full-year 2023 net revenues of $222 million grew 39 percent, while take rate of 8.7 percent grew 17 percent. Turning now to expenses, our operating expenses increased 49 percent, compared to our net revenue growth of 78 percent. Sales and marketing, as a percentage of net revenue, decreased from 75 to 62 percent. The main reasons for this improvement are the AI-driven optimization of marketing credits to our B2B distribution network, as well as reductions in performance marketing spent in our B2C business. As a result of our strong net revenue growth and our efficiencies in sales and marketing, adjusted EBITDA grew 338% from 2 million to 7 million. Adjusted EBITDA margin was also up 146% and reached 11.4% in this quarter. as we continue to put more emphasis on operating efficiencies and profitability. For the full year, adjusted EBITDA was 21 million, up 77 percent, with an adjusted EBITDA margin of 9.5 percent. On a gap basis, our net loss was 13 million, which included 11 million of non-cash and or non-recurring items, including 3 million of stock-based compensation, 3 million of intangible asset amortization, and $3 million of change in fair value of acquisition earnouts, among others. For the full year, gap net loss was $60 million, a year-over-year improvement of $30 million. Looking now at our balance sheet, at the end of this quarter, we had $34 million in cash and cash equivalents, and $162 million of total debt, compared to $48 million and $155 million, respectively, at the end of September 2023. The reduction in cash reserves was primarily due to debt surveys and changes in net working capital in line with revenue growth. We are advancing on the refinance of our term loan to increase duration and improve terms. We expect these to optimize our capital structure, adding value to our shareholders. In the meantime, we have executed an amendment with our current lenders, extending the existing loan's maturity to March 31st, 2025. During the quarter, the company raised $11.3 million in preferred stock. 10 million of which was used to repurchase monthly common shares as part of our inaugural share buyback program. In terms of cash flow, operating cash flow was negative 10.6 million compared to a negative 9.9 million in Q4 of 2022. For the full year, operating cash flow was negative 24 million compared to negative 10.6 million in 2022. This lower cash flow was primarily driven by a higher interest payment $5.7 million, mainly due to conversion from peak to cash interest, a change in net working capital of $6.3 million, and payments related to the LBF divestiture of $7.7 million. Adjusting for these, operating cash flow would have improved by $6.3 million year-over-year. Turning now to our 2024 guidance, we're forecasting net revenues of $250 to $255 million. representing growth of 14% versus 2023 expected net revenues, measured at the midpoint, and adjusted EBITDA of 30 to 35 million, representing growth of 24% versus 2023 expected adjusted EBITDA, measured at the midpoint. In closing, we're excited about our year-end results and the momentum in the business. Let me now turn it back to Jeff for Q&A. Jeff?
spk07: Hey, thanks, Jesus. Elliot, we are ready for questions now.
spk05: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Darren Aftey with Roth. Your line is open. Please go ahead.
spk02: Hi, this is Dylan on for Darren. Thanks for taking my questions. I wanted to sort of start with the increase in intake rate has gone up quite steadily, and it seems like it's going to keep going that way. Could you sort of talk about what percentage of transactions, whether you define that as a transaction or a user, are actually taking advantage of sort of multiple products, whether that be, you know, air or hotel with other sort of FinTech or ancillary services?
spk03: Yeah, I mean, Maybe looking at the percentages that Jim mentioned before in terms of our revenue schemes, right, you saw that around right now 20% of those revenues come from packages. Those obviously come with a higher rate, and that might give you maybe an idea of, you know, I don't know if that addresses your answer, but usually those will come with a higher percent, and that represents around 20% of our revenues.
spk02: So do you sort of expect a trend line in gross revenue per transaction to continue down, but that's offset by more transactions and a higher take rate?
spk03: Yeah, I mean, in this case, transactions grow faster than gross booking because we saw an increase in short haul flights. We don't see that materially increasing in 2024. So I think that Any improvements in tech rate will definitely come from the continued diversification of our revenue stream, but not necessarily seeing a change in terms of growth between transaction and growth bookings.
spk02: Got it. Appreciate it. And if I could ask one more, on the social slash AI influencer side, is there anything you can quantify on how big of a driver that's been towards the increase in transactions or just maybe even just initial visitors to some of your sites?
spk00: Yes. I mean, we mentioned before that we have added a few thousand of this new era distribution, which includes not only social media, but also localized influencers of communities, right? We also mentioned that we are in the process of launching and developing a more exciting AI power platform. So in the meantime, what we're doing, we're taking the feedback of these new cohorts in not only optimizing and refining the monetization model, but also incorporating their needs and feedback into the enhanced version of the platform that we're working. And that's an exciting development. We'll be providing more details in the next few quarters.
spk02: I appreciate it. I'll pass that.
spk05: Thank you. We now turn to Nick Jones with Citizens GMP. Your line is open. Please go ahead.
spk09: Great. Thanks for taking the questions. I guess as we think about 2024 guidance as kind of the midpoint of net revenue, if we assume kind of flat take rate, I guess that kind of suggests no growth in gross revenue for 2024. And I think there's some expectations that take rate will expand due to mix. Arrestee, as you pointed out, so does that maybe suggest that gross revenue might actually be down year over year in 2024?
spk03: No, I mean, I think, uh, you know, to your question in terms of a tech rate, um, we, we definitely long-term, we continue to see evolution of these. And as, as we always mentioned, we expect that to be meetings, uh, in the short term that we might see maybe some fluctuations. Some of these, as I said before, there is an increase in your whole flights, uh, take rate on those usually are a little bit smaller. Uh, so that's probably why, you know, in terms of, um, the 2024 model, you might be having that question.
spk00: So the short answer is that we're not necessarily projecting a reduction in the growth, right? I mean, we're being conservative because that's driven not only by our own growth, but also by the market. And as you know, there is in the market, you know, a general expectation of some softening. But to Jesus's point, the take rate in the medium term is very likely to continue growing, but in the very short term, you may see some fluctuations from these dynamics that Jesus mentioned. We have our technology, for example, being used now widely within short-haul flights in Asia, right? So if you have a big growth within those components of our mix, then it doesn't necessarily mean that the take rate will follow a linear growth quarter over quarter.
spk03: something else maybe need to add to that also when you compare to 2023 remember that we still had six months of um our lbf business b2c right so you know maybe on a year-over-year basis uh you know it would be also relevant to discount that when you think about the growth of the close bookings in 24. okay so so i guess just to be clear i guess for 24 it sounds like the expectation is gross revenue will grow which suggests take rate compression
spk09: next year versus this year, and this is driven by flights?
spk03: Yes. I mean, you know, we see definitely the Q, our Q4 take rate, as you saw, was higher than we anticipated, 9.9. On a yearly basis of 8.7, that's what we see our take rate going into 2024. As I said before, you know, the guidance that we provide in terms of revenues, when you apply that, still shows a growth on gross booking, but you also need to discount the gross bookings in 2023 coming out of our LBF business.
spk00: Yeah, I would add that compression is kind of a strong word here, right? So what I'm saying is that, you know, it will continue to grow in the medium term, but you may have a few quarters that is not 9.9%, right? So as simple as that.
spk09: Got it. Got it. And then I guess just to follow up on gross revenue per transaction, where should we expect that to kind of trough or balance out? Could there still be downward pressure through 24 and kind of higher? I guess, how do we think about the mix of transaction growth versus gross revenue per transaction? That's kind of the key inputs to gross revenue for 2024.
spk00: Yeah, there are two components to it, right? The first one is the reduction in the airfares in general, right, which is beyond our control. In 23, even though the market was expecting a reduction in the airfare, for most of the year, you didn't see that dynamic, right? So depending on how the airlines and supply and demand shape, you may see a reduction in the airfares. which, like Jim explained, that may translate into less gross volume, but from Mondes' perspective, a softened market means enhanced economics, right? So that's the first element of the equation, which is beyond our control and is more of a prediction about future supply and demand in the air industry. The second element, which is the one that we have mentioned, is that we are seeing growth of the use of our technology in certain parts of the world, which are more short-haul flights, right? That one is a dynamic that we have identified and is the one for which we can give an estimate. And given the strong growth of that business, that is may what affect in the next few quarters to show on a per booking basis lower dollar amounts, right? It's not that we're making less profit. It's not that we are, you know, the business fundamentally changing. It's that we have this very strong growth from short haul flights in geographies like Asia, for example.
spk09: Got it. Thanks, guys.
spk05: We now turn to Brett Knopfloch with Cancer Fitzgerald. Your line is open. Please go ahead.
spk08: Hi, guys. Thanks for taking my question. I guess maybe could you help, you know, break out for 2024 growth from inorganic means from the, I think, five acquisitions you did in 2023 and how much of that's going to be contributing to your 2024 growth guidance?
spk03: Yeah, I mean, as we've mentioned in prior calls, usually, you know, it's hard for us to look at that on a separate basis because we integrate platforms and bookings and alike. You're going to see, again, on our 10K, a table that's going to provide you with a pro forma growth of our companies as if we had made the acquisitions as of January 2022. In that case, you're going to see that the growth is consistent. You know, what you could call maybe organic growth is consistent, with the prior quarter so close to 20 percent and right now the way we think about our growth in 2024 is 100 organic you know at this point i think that thinking of growth of companies acquired you know some of the largest one at the beginning of 2023 does not make a lot of sense got it and then on i guess just just profitability and looking at your right cash position um
spk08: I guess, what should we be expecting from the operating cash flow for this year? I know you guys don't guide to it, but that, I guess, cash balance continues to dwindle down. And what are you guys thinking there in terms of maybe reducing the interest burden? I know you guys are talking about refinancing your term loan and extend maturities out. But how should we be expecting maybe just the cash use of the company to perform this year?
spk03: Yeah, I think that, you know, First of all, you need to consider in 2023, we had the divestiture of LBF, which incurred close to $8 million of extraordinary cash payments. That will not be anymore. We had an increase or change in networking capital of more than 6 million. When you look at our growth of close to 40% right now, the growth is still strong, but not to that level. So we don't think we'll need so much cash to support our networking capital. And last but not least, you mentioned it before, right? We're working on this refinancing and we're aiming to actually obtain better terms and better economics that will allow us to, you know, have to reduce the payment of our interest.
spk00: Yeah. And to add to that, I mean, if you were going to adjust for the interest debt service, that outcome would have been a positive number, right? And there are two ways to reduce that burden. The first one is to reduce the actual interest rate, right? And then the second one is to convert a portion of the service to PIC, which now almost the entire term loan debt service is in cash, right? So there are two levers in that regard. The second element of the equation is the operating cash flow increase before debt service, which if you take the 21 million EBITDA for 23 and you project the guidance for 24, it changes fundamentally the net effect on the positive cash flows.
spk05: Perfect. Thank you. Cool. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We now turn to Mike Grondahl with Northland Security. Your line is open. Please go ahead.
spk06: Hey, thanks. Guys, how would you handicap the launch of ABBYY? And kind of what was the rough marketing spend on kind of promoting that during the year? And what do you think it'll be in 24?
spk00: Yes, so we mentioned before in Q3 that when we launched, you know, we launched the ABI that we are marked a fairly large amount that we have spent the bulk of that for, you know, for 23. And we also mentioned that we move forward a figure of four or five million into the next year, right? So that's how I would quantify it. Also bear in mind what I said before in the first question that we are working on a new version of the AI, right? So we will be cautious because we believe that is going to be much more suitable and addressing the specific needs and feedback that we got from this new distribution. So in the first few quarters, we're going to be a bit more cautious. on the market expense there as it's much more efficient to launch, you know, to incur enhanced marketing expenses when you have a newer and more efficient and more suitable technology launched, right?
spk06: Got it. So, Orestis, I sort of heard 4 to 5 million probably later in 24. Did you give a number for 23?
spk03: Mike, spend was around, you know, $3 million to $4 million that was spent on the launch.
spk06: Got it. And what would you guys describe as sort of how you're incenting the travel agents today? I know in quarters past and years past, you know, there's been some discounting and I'll call it couponing. What is sort of the strategy to push and motivate agents in 24?
spk04: Hey, Mike, it's Jim. I think one of the things that we're benefiting from going into 24 is with the deployment of our AI and all of the data analytics that come off of that, we've been able to a lot more efficiently target the different segments of our distribution and target them with programs where we can better manage the, if you'll call it discounting, the incentives that are deployed. And we're getting much better results from that. So I think as we go through 24, what you will see is a continued increase in efficiency in that marketing spend. And it's going to be almost segment by segment. So rather than a broader, just putting out one big program with a set of incentives or discounts against the market generally, or even a particular O&D mix, you'll see us be a lot more clinical or surgical in how that's done. And the nature of the you know, the nature of the programs that we'll launch, that's not something that we necessarily disclose because clearly that's part of competitive advantage, right, is how we work with our distribution network and how we make our most effective, but just presume that it will continue to get more efficient.
spk00: Yeah, and just to add to that, I mean, we mentioned Sorry to interrupt you, Mike. We mentioned a few quarters ago that we're working on implementing AI not just only on the front end, but on many other aspects of our business, right? This is a perfect example on how AI can improve the marketing spend, and we've seen that already in that for the last quarter, it dropped from, you know, 75 to 62% of the net revenue, but how with less spend, you can have a more positive outcome And this is precisely because of customization, right? So in the absence of technology, you give the same incentives to everybody, while certain user cohorts may value a different type of incentive or may produce the business without getting the incentive, right? So this is a big part of how AI can influence also the elements of the business, like marketing.
spk06: Got it. And hey, lastly, do you have a rough date on when you're going to file the 10-K?
spk03: Yeah, right now, I mean, we're closing the audit as we speak. The line for us is tomorrow. We're working towards that day. You know, so far, that's our objective.
spk06: Got it. Okay. Thank you.
spk05: You're welcome. This concludes our Q&A. I want to hand back to Jeff Houston for final remarks.
spk07: Hey, thanks, Elliot, and thank you to everyone who tuned in for a fourth quarter 2023 earnings call, whether it was live on the call, the replay, or the transcript. If you do have any questions or would like to learn more about Mondi, don't hesitate to schedule a call with us. You can get more information on our IR site, which is investors.mondi.com, or send an email to us at ir.mondi.com. Thank you.
spk05: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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