eDreams ODIGEO S.A.

results presentation. My name is Daisy and I'll be the operator for this call. I will now hand over to your host, David de la Roze from eDreams to begin. So, David, please go ahead.

Thank you. Good afternoon, everyone, and thank you all for joining us for our Q3 fiscal year 2021 resource presentation for the three months ending 31st of December 2020. I am David de la Roze, the Director of Investor Relations at eDreams. As always, you can find resource materials including the presentation and our resource report on the Investor Relations section of our website. I will now pass you over to Dave Nadam, our CEO, who will take you through the first part of the presentation. Thank you.

Thank you, David. And good afternoon, everyone, and thank you for joining us. Today, I'll give you an overview of our Q3 FY21 results and current trading to date. Following this, David Elizaga, our CFO, will take you through our financial performance in more detail. I will then finish with some closing remarks. Please turn to slide four, which gives a summary of our performance during Q3 at Flight 21. During Q3, our short-term trading continued to be affected by travel restrictions. Despite this, we are pleased to report strong liquidity and improved strategic positioning. As you will see later, our trading has outperformed the airline industry, both regular and low-cost carriers, and most of our OTA peers. We have continued to gain market share. Our revenue margin in the third quarter FY21 was down 77% year-on-year, reaching 30 million euros. This was driven by travel restrictions and uncertainty due to COVID-19 situation, which resulted in a decrease in bookings of 65%. Also, revenue margin per booking reduced due to lower average basket value of bookings as a result of the COVID-19 situation, i.e., customers flying shorter distances, fewer passengers, et cetera. also marginal profit, which is revenue margin minus variable costs, with 6 million euros positive for third quarter FY21, despite us investing in the short term in higher call center costs to help our customers due to flight cancellations and uncertainties. And adjusted EBITDA was a loss of 10.4 million euros. Turning to liquidity, we have maintained strong liquidity despite short-term trading challenges. The main reasons for this are the high variability of our cost base, good cost management, and our unique business model. Also, the reduction of our average monthly cash burn, excluding working capital and tax, but adding the increase in prime deferred revenue from 13 million to 7 million euros. Also, working capital inflows due to higher volumes and gross sales, better cash collection from suppliers, and refunds collected. Lastly, we also benefited from lower income taxes paid. This has resulted in positive cash flows and strong liquidity. specifically net cash from operating activities improved by 31.4 million euros. We ended the quarter positively with cash flow before financing of 13 million. This is the first time since the fourth quarter of FY19 that we have achieved this. Remarkably, especially in a weak market with revenues down 77%. Also, we have managed our liquidity position well. It was 125 million euros in December and has remained stable since September 2020, despite short-term softening of trading. As we have highlighted in our July our August and our November results presentations, we are using this period under COVID-19 to improve our strategic positioning. This is demonstrated via Prime, our pioneering travel subscription program, which continues to shine during these tough times, with subscriptions continuing to grow. For example, Prime members, in the third quarter of FY21, we reached 758,000 members. That's a 55% increase versus the same period the previous year. Prime is proving to be a successful and attractive proposition to customers. Even in this current COVID-like market, we achieved an additional 94,000 new subscribers just in one quarter. Also, the prime share of our total bookings continues to expand and reached 37% in the third quarter of FY21 versus 9% the previous year. It is also important to highlight, as we do not believe the market is aware of it, is that prime deferred revenue has reached 20 million euros. That's an increase of 126% versus the third quarter of FY20. This revenue is the prime subscription fees not yet recognized into revenue until the prime customer makes another booking or the renewal date takes place. So, despite revenue margin per booking being impacted in the short term, If we would have included this revenue, revenue margin would have been higher than what we are currently reporting. Also, I'm very pleased to disclose that on Prime, despite all that has happened, we are absolutely on track to exceed 2 million subscribers by 2023. And secondly, in terms of strategic positioning, we continue to outperform the market as our booking performance at minus 65% in the third quarter FY21, continues to beat the overall European market, which is at minus 79%. In terms of current trading, our short-term outlook is largely outside our control and driven by travel restrictions caused by COVID-19. Our January and February are showing minus 76% to minus 73% bookings growth year on year. Due to the uncertainty around COVID-19 and travel restrictions, we continue to offer no guidance for this financial year. Now I will go through the points I have just mentioned in more detail in the following slides. Please turn to slide five in which we cover our diversification revenue KPIs. Overall, diversification revenue continues to improve and is the largest contributor to our revenues. Product diversification ratio and revenue diversification ratio have both improved. The product diversification ratio increased from 82 percent to 89 percent, a seven percentage point improvement in a single year. Similarly, the revenue diversification ratio increased from 51 to 55 percent in the third quarter FY21. That's a four percentage point improvement again in a single year. Please turn to slide six, which demonstrates the progress made against three other KPIs. We continue to lead the travel industry in mobile innovation and have again stood out in mobile, which bodes well for our future. In the last five years, bookings for mobile have risen exponentially from 18% of our total bookings to 58%. Mobile has always been a top priority for us and a major focus. The shift to online and specifically mobile accelerated by the pandemic leaves us in a very strong position to take advantage of future demand. Let's now look at the changes to the acquisition cost per booking index, which improved by 45 percentage points year on year. This is due to the adaptability and flexibility of our business. However, I want to make it clear that this very low level is not sustainable for the long term. As travel restrictions ease, we expect to spend more on online marketing, and therefore this ratio will trend back to more normalized levels. Lastly, on KPIs, I am delighted to talk to you about the success of Prime as a customer proposition. Prime is performing strongly in this weak market. As we have said, we want to transform the travel industry and the way in which consumers interact. We want to create unique relationships with consumers that, again, transform the way in which people think about travel, and travel providers. Prime is a good example of how we achieve this and how we continue to innovate within travel. Even in the pandemic, Prime is performing well. The number of subscribers has continued to improve and has risen by 94,000 in three months. That's from Q2 to Q3 of FY21. As you can see on the right-hand side of the chart, prime subscription rates and the share of prime continues to grow. Specifically, prime members in Q3 FY21 grew 55% versus the same period of last year, growing from 490,000 in Q3 FY20 to 758,000 in FY21. And the prime share of our total bookings quadrupled from 9% in Q3 FY20 to 37% in Q3 FY21. Also, we launched Prime in new markets, the UK, the US, and .com in November. We also launched new products, launching hotels in all of our Prime markets, such as France, Italy, Spain, Germany, UK, US, and .com. If you can now turn to slide eight, let me take you through our current trading. Current trading shows that the short-term outlook is impacted by travel restrictions. However, we continue to outperform the market. Current trading is affected by the wave of travel restrictions imposed due to an increase in COVID-19 cases and hospitalizations during the autumn to winter. After the initial lockdowns of last spring, once restrictions were lifted, consumers quickly came back into the market, and almost 50% of our bookings returned within two months. Now we see the latest wave of restrictions keeping our bookings at the low minus 70%. In comparison to the market, our trading suggested an outperformance against the airline industry, and that is both regular and low-cost carriers, meaning we're gaining market share versus the supplier direct due to better quality, more comprehensive content, and flexibility, and customer focus, unique innovative products and solutions, and of course, a focus on leisure travel. Please turn to slide nine. We are pleased to continue to report strong liquidity, a consequence of our strong business model, and active management of the situation. We have achieved this despite increasing travel restrictions, thus reducing the level of trade. This resulted in a liquidity position of $125 and $122 million at the end of December and January respectively. This is a level at which it has remained stable since September 2020 despite the short-term softening of trading. We have achieved this from three sources. First, working capital inflows, which were due to higher volumes in gross sales, better collection from suppliers, refunds collected, and prime deferred revenue increases. Secondly, lower income taxes paid. And then third, our active management of the situation, which resulted in higher variability of the majority of our costs, also fixed costs and capex reductions, and additional financial resources of $15 million from a government-sponsored loan due in 2023, and the reduction of average monthly cash burn, excluding working capital and taxes, but adding the increase in prime deferred revenue moved from $13 million to $7 million. I will now hand you over to David Elizaga, who will take you through our consolidated results.

Thank you, Dana, and good afternoon, everyone. If you could all please turn to slide 11 of the presentation, I will take you through the financial results in more detail. Clearly, the pandemic had a significant impact in the last quarter of last year, and this has continued into the first nine months of the current fiscal year. But let's outline the financial performance during the third quarter of fiscal 21. Looking at the income statement for the third quarter of fiscal 21 on slide 11, revenue margin decreased by 77%. This was due to a decrease in bookings of 65% and lower revenue margin for bookings. driven by lower average basket value of bookings due to COVID-19. Customers are booking on average with fewer passengers per trip and to destinations closer to home. As a result, the revenue we get from providers is smaller, and the classic and diversification revenue we get from customers is also lower. When travel patterns return to normal, we expect revenue margin for booking to increase from its current level. On the cost side, variable costs decreased by 70%, which is the result of the adaptability of our business model to the new mix of bookings made by customers during COVID-19 in spite of higher short-term call center costs. As guided in the second quarter of fiscal 21, We invested to significantly increase our contact center capacity and thus better serve our customers. We estimate we have expensed around 1.3 million euros of additional cost in our call center to help our customers over and above that already expensed in the previous quarter, the second of fiscal 21. Again, when travel patterns normalize, we expect variable cost per booking to increase from its current level. These dynamics resulted in a marginal profit of 6 million euros positive. So reminder, marginal profit is revenue margin minus variable cost. Fixed costs decreased by 22%, driven by a decrease in personal costs, taking advantage of the government HR support programs, as well as IT and external fee savings. despite an increase during the quarter of the negative foreign exchange impact by 1.5 million versus the third quarter of fiscal 20. As a result, third quarter of fiscal 21 adjusted EBITDA amounted to a loss of 10.4 million euros. If we continue down the income statement, you will note that the EBITDA loss was 12 million euros, the difference being adjusted items which decreased by 2.2 million euros versus the same period of last year. Full details of adjusted items can be found in a condensed consolidated interim financial statement and in the Excel file. DNAN impairment increased by 29% relating to the increase of the capitalized software finalized in March 2020. Our overall financial loss increased by 4% mainly due to the use of the revolving credit facility and the new government-sponsored loan due 2023. The income tax amounts to 3.7 million euro in the third quarter of fiscal 21, which compares with an income of 5.9 million in the third quarter of fiscal 20, largely because of lower tax expenses due to group tax losses for which a deferred tax asset has been recognized and the reduction in provision for group tax contingencies. This was offset by higher tax expenses due to the absence of a one-off revival of US foreign tax credits in fiscal 21, an increase of the tax rate applicable to deferred tax liabilities, the write-off of tax attributes in the UK, and other minor differences. Finally, adjusted net income stood at a loss of 23.4 million euros. We believe that adjusted net income better reflects the real ongoing operational performance of the business. Full disclosure of the adjusted net income can be found in Section 7 within the condensed consolidated interim financial statements and notes. Turning now to slide 12, I will take you through the cash flow statement. In the third quarter of fiscal 21, despite increasing travel restrictions, Net cash from operating activities improved by 31.4 million euros, and we ended the quarter with cash flow before financing positive of 13 million euros for the first time since the fourth quarter of fiscal 19. This is primarily due to a working capital inflow of 29.9 million euros in the third quarter of fiscal 21. And we also benefited from lower income tax pay. The group continues to have a strong balance sheet, maintaining in the third quarter a solid liquidity position of $125 million at the end of December, including $107 million undrawn from our super senior revolving credit facility. This will place us in a position of strength when normal trading conditions return. Past position net of overdrafts stood at $18 million at the close of December. The cash performance during the third quarter of fiscal 21 was driven by, firstly, the net cash from operating activities improved by 31.4 million euros. This is reflecting mostly a working capital inflow of 29.9 million due to higher volumes in December versus September, which is worth 10 million euros. Higher gross sales for booking worth 5 million euros, better collection from suppliers, worth 5 million euros, refunds collected for another 5 million, and the prime deferred revenue increase for 3 million euros. Income tax paid decreased by 7.3 million from 7.6 to 0.3 million euros, mainly due to lower Spanish taxable profits. The fact that there were no advance payments of Italian income tax in fiscal 21 the refund of advanced payments of Spanish income tax, and other minor differences. There has been a decrease in adjusted EBITDA by 40 million, following the decrease in bookings, and there are non-cash items, items accrued but not yet paid, increased by 3.5, mainly due to the variation of provisions. Cash used for investments is 6.5 million euros, in line with the same quarter of the previous year. However, please note that for fiscal 21, we estimate to finish at around 21 million euros, which is a 30% reduction versus the same period of last year due to the implementation of cost-saving measures to minimize the temporary impact of COVID-19. This is ahead of the decrease of 25% versus a third quarter of fiscal 20 in fixed costs plus capex, which we guided the market to in April of last year. If we were to run the same scenario today, we would be at minus 28% with annual cash flow savings of 33 million, which is 5 million ahead of what we got. We have used in financing 1.5 million of cash in line with the same quarter of the previous year. And before I hand it over to Dana, I would like to flag again the impact of prime in our financial magnitudes. especially regarding our profitability. As we have pointed out, there is cash inflow through the incremental deferred revenues generated from the subscriptions at the time of subscription or renewal, depending on the case. Currently, the increase in the deferred revenue from crime is included within the working capital movement, but it does not have the same dynamics as the rest of the working capital. Our working capital presents an inflow or outflow mainly due to an increase or decrease in bookings from one period to another. On the other hand, the increase in deferred revenue from prime reflects a cash-in which will not blow up, and it's just a matter of time that it is recognized as revenue and profits in the P&L, as there is no additional cost associated to that new revenue in the data. I will now turn the presentation back to Dana to do the closing remarks.

Thank you, David. Please turn to slide 14. Let me conclude by giving you an update on how I see the leisure travel industry based on the recent news flow about the vaccines et cetera. Overall, I believe we're ahead of predictions on the vaccine. Prior to the vaccine entering stage three trials, predictions were that the average efficacy of the vaccine would be between 50 and 70%, and more towards the 50%, and that the likelihood of rollout of a vaccine would be second half of 2021, but with scenarios that very plausible would be rolled out in 2022 with some skeptical if there would be a vaccine or reasonable efficacy rolled out in two to three years. The reality, thankfully, is that we are ahead of schedule. Vaccines have shown up to 95% efficacy, not 50 to 70%. and are being rolled out in the first half of 2021, not the second half, and certainly not in 2022. While mutations and new variants have occurred, we are likely to see others. Current vaccines still provide good level of protection, and booster shots can be administered to protect against new variants. In some industries, They say COVID accelerated progress online three years in just three months. The leisure travel industry has to a large extent been or moved online, but COVID is deepening the penetration in online, especially with certain segments, such as, for example, the older demographics. who will have become more Internet savvy during lockdowns to communicate with their relatives and to shop online. There are many people who have found a whole new world online and a whole new level of confidence in purchasing online. The biggest barrier to this type of customer does face a trust issue, which is where well-known brands and market leadership undoubtedly benefit. At eDreams of Digio, our brands are market leading. We are number one or number two in all main European countries in flights and number one in Europe with over 30% market share. Mobile is the other major digital trend and is increasingly important. Consumers are more accustomed to using this platform for e-commerce purchases. eDreams of Digio has led the travel industry and, in fact, all e-commerce industries in Europe in mobile. We are getting close to 60% of our bookings being actually made on a mobile device, and this will continue to grow. I strongly believe the leisure travel industry has a bright future, and all the evidence is that it will rebound quickly. We are a leisure-only focused business. a leader in our market, and that's why we think a rebound of online leisure travel is likely to be ahead of the initial predictions. Turning to slide 15, let me share with you what we have seen from our latest training, which highlights a strong pent-up demand for leisure travel and that travelers want to return as soon as practical. With news of approved COVID-19 vaccines, European sentiment towards travel has improved. The European Travel Commission has been monitoring sentiment for domestic and intra-European travel. Highlights from the most recent survey are that 52% of respondents intend to travel in the next six months, 52%. significantly 20% increase in the proportion of Europeans willing to take a trip during April to June 2021. The 50% will change plans to ensure their trip still goes ahead. Also, 40% of respondents said that they plan to visit another European country and the intention to travel by air improves as 52% of respondents now intend to fly to their next destination. and that leisure is still the primary travel purpose. So we see leisure travelers do want to return as soon as possible. This is also evidenced in our own evolution of searches on long-advanced trips. That means departures more than 90 days from the search of booking, right, which in the last four months has improved materially. 1.7 times versus the searches done in October 2020. Turning to slide 16, let me conclude by giving you a quick recap of our overall view. We believe we are positioning ourselves for real success in the post-COVID-19 world. The strength of our finances, the adaptability of our business model, the vast majority of costs being variable. And the mitigating actions taken during the pandemic allow us to emerge strongly and well positioned from this crisis. Also, we have a good liquidity position of 122 million euros at the end of January, excluding no short-term financial, sorry, including no short-term financial debt payments and our secure notes. New government sponsored loans and bank facilities are all due in over two and a half years' time from now, meaning the second half of 2023. Also, our prime subscription program is going from strength to strength. Even in the pandemic, we have added in this last quarter 94,000 new subscribers. And the share of total bookings is rapidly increasing. So our business remains financially strong. We remain marginal profit positive. And we have kept our teams intact and motivated so we can take maximum advantage when restrictions are lifted as we are building for the future. eDreams of Digital is agile, nimble, and this allows us to adapt quickly as necessary. We continue to pride ourselves and lead through product development and innovation, such as Prime, mobile, customer management, et cetera, and are leading the transformation of the leisure travel industries and how consumers interact with providers in this industry. We continue to build and offer innovative solutions, take care of our customers, and are optimally positioned and ready to see the market growth as travel restrictions are lifted. Thus, we clearly believe our future is bright. We will emerge a winner from these unprecedented times. Thank you. With that, let's turn it over to questions. We will answer the questions sent to us in writing in the webcast. We will take questions on a first-come, first-served basis, but we will also try to group questions of similar nature. Should we not have time to respond to all the questions from the webcast, the investor relations team will make sure those are answered afterwards.

Thank you, Dana. Let me proceed then to the questions and to read them and answer them. So the first question that we have is from Lenny Sienkowski from Eaton Banks. Can you provide a cash flow bridge from the 125 million euros of cash at December to the 122 million euros of cash at January? Bookings declined significantly from the third quarter. Was there a working capital outflow in the month? Thank you for your question, Lenny. It is true that if you look at the whole aggregate of the month, like you point out, there were less bookings in January than there were in December. However, I want to remind you and everyone else that our average period of payments to providers, to the airlines, which are the most important ones, is a period of about two weeks. So, in terms of working capital movement, it is more relevant to comparison of, now you mentioned month to month, the second half of December against the second half of January. Now, those two periods of time, we had a very, very similar amount of bookings because The December bookings, which had a good run of new leisure bookings triggered by last-minute Christmas trips of people, those bookings happened much more during the first half of December than during the second half. And the second half of December looks a lot in terms of bookings like the second half of January. So from a working capital movement generated by volume, it's more or less neutral, actually, the two periods of time that you're comparing. So, from the 125 to the 122, you have our average cash burn, including the prime deferred revenue, which is around 7 million. And you probably have some other movements in that, which are of minor importance, because you can see that the delta between one and another month is just 3 million euros. The next question comes from Kenny McNeil, Kenny Neal, sorry, of Credit Sites. And it says, can you remind us of the covenants on your revolving credit facility and any discussion you've had with your lenders in relation to these? We have the privilege of having a very good and strong relationship with our banks who have been banks of the company for an extended period of time and then have a relationship with us that goes beyond lending. They also participate on the asset side of the business and help us to move the payments, get cash from our customers, and a number of other things. So they know really well the insights of the company. You will have noted, and I think we've discussed that about a year ago now, that when we had to renegotiate our covenants back in the spring of 2020, we actually received better terms than just about every company in our universe. We didn't have to raise additional liquidity and we didn't have to accept an alternative covenant or any other, let's say, prejudices to our business. What we continue to have is a very fluid dialogue with our banks. There is a monthly communication related to not only our historical liquidity but also our forecast liquidity. And therefore, our banks have a very, very good visibility. of what is going to happen ahead. And we continue to meet or exceed every projection that we have given to our banks, which creates an enormous amount of trust. They really know what is going on inside the company and with our trading. Having said that, ours is a single covenant of six times gross leverage, and it is a springing covenant, which means that the covenant is actually only measured when we are drawing more than 52.5 million euros in the way of cash in the revolving credit facility. You will see in our results that as of December, we had 55 million euros drawn and we had still 18 million euros available in cash. So, at that point in time, if we just wanted to give back 3 million, we would be in a position of not springing. And ever since then, we're keeping a strong equality like you all have seen. So, the dialogue with the banks is in no particular rush right now, and we are confident that we're going to have a very productive dialogue with them going forward like we have had in the past. Let me go to the next question, which is a question from of Oak Tree. How should we look at working capital going forward? And there is a second question saying, what proportion of refunds are still outstanding? So, we look at working capital going forward. If you exclude the increase in the prime deferred revenue, which is constant and will continue to be an inflow going forward, we believe, given the success of our prime program, is really driven by the amount of volume that we trade, like you all know. So, it's going to depend on the gradual recovery of the volume as the vaccination increases. On the one hand, as the level of occupation of beds in hospitals and ICUs in hospitals allows the governments to lift a portion of the travel restrictions, and what we are very certain as we have shown as well in the presentation, is that there is a very high level of pent-up demand in the market as manifested by the increase in the amount of searches that we see for travel. People are just waiting for the travel restrictions to be lifted to be able to go ahead and make their bookings. Once the volume comes, the working capital in a positive way will come. And you even saw that in the Q3 that we have reported that the end of the period was better than the end of the period in the Q2 when we already have a very good working capital inflow. On your second question, what proportion of refunds are still outstanding, the refunds is actually a Unfortunately, it is a dynamic that goes on because in Europe, the airlines have been exempt and continue to be exempt of the 80-20 rule of usage of the slots in the routes. So, they are consistently canceling around 50% of the scheduled flights on an ongoing basis in Europe, which means there is continued high level of cancellations. There was a very, very big level of cancellations, which was about 95% of the flights back in the first wave of the virus. That is not something that has disappeared since then. It's something that is continuing at a lower level because you have lower number of scheduled flights, but still 50% of them are getting canceled. So the dynamic of refunds is permanent. We continue to receive refunds from the airlines and we continue to pass on those refunds to our customers. It is a permanent flow and I'm afraid that until Europe changes that regulation and continues to and goes back to enforcing the 80-20 rule, we will continue to see this flow of cancellations. The next question comes from Wolfland Felix of Sarria Limited. It says, working capital, would you please break out the 140 million of payables? Which components are remaining elevated relative to your bookings turnover and for how long? Thank you. The broad distribution of those 140 million euros of payables is you would have, first of all, the prime deferred revenue, which we cannot stress enough, or 20 million. This is not really a payable. I would characterize this much more as a parking slot of cash until it is recognized as revenues in the P&L. You have around $40 million for the payable to Erlang, and that would be for the bookings of the last two weeks. You would have a proportion of payables for marketing, which is our biggest provider from the point of view of the costs in the P&L. And the rest would be other trade payables. And within that, you have the refunds, which are payable to our customers. And it would reflect the amount of money that we have already received from the airlines, that we are in the process of reconciling and matching booking by booking with the customers that are due those refunds. And then we go over and refund to the customers. And that's the one that, as I was responding in the previous question, it is a permanent flow of it. So, which one is elevated or elevated to your bookings turnover? That is certainly on the refunds portion because all of the rest are correlated to the amount of volumes that we have, whereas the refunds are really correlated with the amount of cancellations in the market, not with the level of our bookings. The next question comes from John Garcia from Schwartz Investments. It says, can you discuss why the prime program continues to grow? How is the launch of prime in the UK going?

Absolutely. So let me take that, David. And hi, Chad. So I think you have two questions. Let me address first your question about prime overall and why it's growing. I think there are two big macro things that we're doing that enable it to grow. And I'm doing this also in order of importance. So the first one is around the customer proposition has improved during – we've continued to improve it really during the course of this year. And by the way, I have to say it's not about price changes, which I think someone else is asking as well. But really, in terms of the customer proposition improving, I would break that out to two elements as well. And the first part of the improvement of the customer proposition is around just simply experimenting in how to really convey this to customers. and to get them to both understand the proposition and then to not only once they do understand it also get them to repeat and these are just simply some insights that we've continued to iterate on and they do take time because while other industries have a subscription product right like Netflix You know for streaming like Spotify for music Amazon in consumer goods and delivery. In travel, no one has done this before. And so we continue to run experiments, run interviews with customers, and we really understand all these individual, if I can call them moments, moments of truths and how customers really perceive things. And some of these, you know, AEBs or experiments, have really given us unique insights to this and how we position our proposition with customers. And so that is probably the biggest driver of this one. The second, I said there was two part in the customer proposition improvement, and the second is we've added more value. to the customers. So if I jump back a year ago, you know, if a customer would take Prime, they would get really amazing proposition for flights, right, price and non-price elements in there. Over the past year, we have rolled out Prime to hotels. So now for the exact same subscription fee, i.e. no increase, you not only still get the same flights proposition, but you now also get the hotels proposition as well. And so we've added more value within the proposition of customers. So that will be the second part of the first one about improving the customer proposition. I did say that there was a second big bucket, which is really just expansion to new geographies, right? So over the course of the past year, and particularly in the quarter, we have rolled it out to a number of new markets, including the UK, which was one of your questions. And we rolled out to a couple of other markets as well. So that also has added as well to this. Now, in terms of your second question, where you said, you know, prime in the UK, is it going well? And the answer is absolutely yes. We see roughly the same type of customer satisfaction, customer interest, customer take-up of this, of Prime, as we do in other markets. You know, clearly it's only been several months as opposed to in some markets we even have, you know, several years on that. And all of the indicators, though, of what we see, you know, indicates that this is roughly the same as any of our other core markets or core geographies. David?

Thank you, Dana. And then we move to the next question. It comes from Manuya Shawi of RLAM. Hi. Thank you for all the details. Could you please clarify the way deferred revenues work for prime? Is the subscription paid yearly? And how gradually will the deferred revenues be recognized over the coming quarters? There are a few questions linked, so rather than reading all of them and responding, I'm going to read one, respond one. I think it will be clear for everyone on the call. Let me just address this one first. If we take a single customer, you pay, it depends on the country, but let's say that on average you pay about 65 euros for the subscription. And with that subscription, you make a first booking, okay? We will be recognizing as revenue a proportion of the 55 with that booking linked to the specific savings that you obtain for being a prime customer on that booking in particular. Then the remaining, let's just choose for the argument 20 euros, okay? So there was a discount of 20 euros. We recognize 20 euros as revenue. We have 35 remaining. Let's say you do a second booking a few months later and you get another 20 euros of savings. We will recognize another 20 euros of subscription revenue. You have 15 remaining over the original 55. Let's say you make no more bookings during the 12 months. The 15 euro will be recognized at the end of the 12-month period, okay? Let's say you are that same customer, and you are very satisfied with your two bookings and the level of service and discounts that you received with Prime, and you renew. You pay another €65. Because that renewal doesn't come with a booking on the date of renewal, our recognition of the revenue will be zero at first. And then as you make bookings, you would follow the same dynamic that I've described for your first year of membership. That is how it works. Second question from the same investor. Could you please give some color on working capital change in January 21? This has been already answered. Liquidity is flat despite further drop in bookings in January versus December. Could you please give some color on that? I also did. Could you also speak of the ongoing customer refunds? Is DREAMS still advancing refunds for airlines, and how much refunds are currently outstanding to be collected from the airlines? So I think I've responded partially to this on how the dynamic works and how, unfortunately, it is not a permanent stock of cancellations, but rather there is – new flow of cancellations and therefore new necessity for the airlines to refund our customers via us. So we continue to pay all cancellations and refunds. We continue to receive new funds of cancellations and refunds from the airlines. It is a permanent flow. On the advancing refunds, this is a reference to the comment that we made in the second quarter that during the quarter we had paid $40 million more than we had received from the airlines during the quarter. You will have seen in my comments during today that in the third quarter, it was the opposite. We refunded $5 million less than we received from the airlines during the third quarter. The next group of questions comes from the analyst Carlos Serena from Santander. The first one is, I'm going to take them one by one again, like I did with the previous investor. Could you update us on your booking performance of last days following recent announcement from the UK's government? We can give a specific numbers because it's not what we do usually, but I would say that The dynamic that we have seen is one that mimics what we have seen in the past in the sense that when customers have visibility for the future or increased freedom to be able to travel, they go ahead and start making bookings. So, we have seen an improvement in the last few days of the booking performance generally versus what we were seeing at the beginning of February in the absence of those news. The countries like the UK, where it has been very, I would say, detailed in terms of the visibility going forward on a month-by-month basis of what people are going to be able to do. And what we've seen there is spike, for instance, in the bookings for departure over 100 days. which is a segment of bookings that we have not been seeing for some time because customers are afraid to book with that much length in general. So, we have seen that spike in the UK for the segment in particular of bookings over 100 days to departure. The next question from Carlos Ferreiro is looking at your acquisition cost per booking, even being at historical low levels, it has increased in the last two quarters from 48 in the first quarter to 52 in the second quarter and to 55 in the third quarter. Could you explain the reasons for that increase? Well, the reason for the increase is that at the very beginning of the pandemic, there was a very radical change of the amount of the investment in general. because the expected revenue from the searches was very low at that point in time and it didn't make economic sense for us to invest. We are seeing now that there are opportunities in which we can deploy marketing money that have a return on the investment for us. And what has happened as well ever since the Q1 is that, as we will have seen as well, there is a very high level of success of prime within our customers. And like we have said and explained many times, the lifetime value of an average prime customer is much higher than the one of a non-prime customer. So it gives us the ability as well to invest additionally in marketing because we know that on a lifetime value basis, we're going to recover more and more of that investment. Actually, yes, the follow-up, I thought it was a different question, but it is a follow-up of Carlos, which applies to the previous question as well, especially considering bookings from prime subscribers have increased to 37% from 18% in that period, which should have a positive effect on acquisition costs. That positive effect happens, so the second and subsequent bookings from a prime subscriber come from two channels with an overwhelming majority of the bookings come from two channels. But at the same time, it is true that we are, as I said previously, investing additionally because there is more visibility on the revenue that we can get. And on a lifetime value basis, the investment makes a lot of sense. The next set of questions says, Could you please spend a bit more time on Prime? Did you do any incremental marketing to drive the product on your website? Have you reduced prices? Has anything else changed? Could you remind us, is a Prime customer profitable on the second booking, or does it take longer to reach break-even? And how do you view what your U.S. competition is doing with a similar subscription product? So it's kind of like several questions amalgamated around the topic of Prime. And I think probably Dana's going to take this one.

Yeah. Thanks, David. So I think the first part of your question about Prime was around marketing and asking something to the effect like did we, have we been spending money on marketing to drive the product onto our website? And the answer is no in the sense, and let me give you the kind of clarifications around that, no. We have not spent any money offline. to bring people to our sites for Prime. We don't do any visual-based advertising, and visual can be offline, so you can imagine a billboard or TV. But similarly, you can imagine a YouTube commercial or even a display ad banner, and we haven't done any of that for Prime whatsoever. We do, as you've seen in our P&L, we do spend some money on marketing, such as like in, you know, search engine marketing that would be on Google and stuff like that, but none of that is specific to Prime per se. So the answer would be no for that. We really have focused on building a great product for Prime and we continue to, you know, really invest our time, effort and energy really on that. Clearly, you know, as the market would return to more normal levels there is an opportunity for us to potentially spend some money on let's say on more visual based types of advertising but we have not to date spent any money on that. The second part of your prime questions was about prices and saying, did we reduce our prices or has anything else changed? And so I think I've answered most of this in the question that Chad had answered before. But just to reiterate, the answer is we haven't reduced our prices, meaning I think what you're asking is, you know, did we really drop our prices below the market, below our competitors? in our prime product and versus what we were doing, let's say, six months or a year ago. And so, therefore, could that have driven more bookings? And the answer is absolutely 100% no. It is not that at all, nothing, zero. Now, let me be just very clear about prices. Prices in the market move up and down all the time. So, while a ticket, you know, from, let's say, London to Barcelona may have cost, let's say, you know, 400 euros at one point in time, and maybe the prices dropped in an absurd example, to 100, of clearly we follow the market, right? But we would be following the market, and it's our machines, because our pricing is not done by people, but by machines, and our on our AI in terms of really driving and making sure our prices are always competitive. But we have not put in anything specifically to drive down our prices versus what we were doing before and know to try to attract more customers and pick up. All of the reasons that we've seen in terms of our, let's say, take-up of subscription has been in the answer that I gave to Chad's question about it. The next part of the question was about profitability of prime on the second booking or does it take longer to reach break even. We do not price prime, price to make losses on it, be it the first or the 21st booking of that. So we do make money on all of that for it. what else you had on this. How do you view what your US competition is doing with similar subscription product? Let me say several things. First of all is that we have been working at Prime for a number of years. And there, you know, we have run, you know, a good let's say at least 50,000 if not more individual customer interviews. You know, this is not one survey sent out to 50,000 people. This is really in-depth, you know, interviews with individual customers and not just one point in time, but we're constantly gaining customer insights and doing customer research every month actually on this. And those are unique insights that help us really build our product in there. And then we run tests and A-B tests and we've run in the thousands of A-B tests around Prime on this to really understand customer behavior and insights. So I would actually say looking at this competitor or this company that offers it, their product is different in a number of important ways from ours. But I would also similarly say is that, you know, when someone does something really good and shows real potential, likely others will come in and copy it. You know, we have that advantage and that legacy of all of the institutional knowledge learning of it, plus we continue to expand it, meaning we have it in, you know, many, many countries. We have it not just in one product but in multiple products. We have it not just a price proposition, but there's non-price elements as well in that. There's quite a lot of things. And we have, as you can see, even in the pandemic, every three months I get on here, there have been a number of new updates that we have. And we continue to progress forward and forward and build Prime into an even more robust proposition than what it was three months ago. And if you can imagine, even three months from now and six to nine months, it'll be even more robust than what you see today. David, let me pass it over to you to handle the other questions.

Yeah. The next one says, in your current internal estimates, looking at a few years, when can eDreams again reach the revenue levels generated in fiscal 20? What a great question, but... We're not giving guidance for the short term or for the longer term. I can remind you of the dynamics that represent a difference between us and the rest of the market because what we are confident of is that we will regain our level of activity prior to the rest of the industry. If you look at the data that we have given, on our level of volumes versus the level of volumes of the industry, you will have seen that broadly there is between 10 and 20 points of difference depending on the month that you look at in terms of performance between us and the industry. And in there you have many elements in it now. You have elements like the fact that we are 100% leisure. like we are 100% online, like we have a very clear leadership on mobile, which we have demonstrated with 58% of our bookings now being on mobile. At the same time, we have, I think, a way of treating customers and being customer-centric that makes a difference versus the rest of the people. And within that, you have in a very protagonistic role our Prime subscription program, which essentially allows us to increase over time the share of wallet that we have from our customers. So I think those dynamics are going to continue because the underlying reasons, I think, are going to continue as well. The next question is, in a typical year, how does Easter impact bookings and what are we likely to see this year? The first part of your question is very different from the second part of your question. The first part of the question, how does Easter impact bookings? There is a general rule in our industry that when people are on vacation, they don't book vacation. So Easter in Europe is, depending on the country that you look at, is a week of vacation that happens either the week before Easter Sunday or the week after Easter Sunday, depending on if it is an northern country or a more southern country. So those two weeks are two weeks in which our booking performance is muted because the customers are actually on vacation. They're still not booking their next one. And you will see in the run-up to Easter, usually there are some latecomers in the two weeks prior to Easter or so in which you have a little bit of a bump in bookings. That is a normal year. And that is the first part of the question. On what are we likely to see this year, it's very difficult to predict, frankly. In terms of the tier seasonality, Easter Sunday in 2020 was on the 12th of April. Easter Sunday this year is on the 4th of April, so it's approximately one week prior. However, in the last Easter, hardly anyone was allowed to travel in many of the markets that we were operating in. And this year, I think there will be some travel allowed on a domestic basis, relatively similar to what we saw in Christmas. We are seeing now some advanced bookings, like we have mentioned answering to the question of some other investors before about the spike that we've seen in the UK for advanced bookings after the announcements of the government for what is likely to happen in the de-escalation for the next few months. We don't know really what's going to happen over the next, you know, five, six weeks until we get to Easter in the rest of the markets in which we operate. So it would be a little bit adventurous. for us to tell you what are we likely to see this year exactly. And then the last question from this investor is, could fixed costs be at the similar fiscal 21 annual levels even in fiscal 22? Well, there are several parts into the fixed costs. The bigger one, but it's not the only one, The bigger one is the personal costs. And one differentiating factor in fiscal 22 versus fiscal 21 is that we are not going to benefit, which we did this year for a period of about six months, of the government support HR programs, mostly in Spain, which is where we have the majority of our employees, but also a few of them in other markets. So at least that will be one difference. We will strive to be efficient in fixed costs like we have done in the past, but the exact number, I don't think we're in a position right now to give you guidance on that. Let me go to the next set of questions that come from Guillermo Macias de Santallo from CaixaBank DPI. How do you explain such an increase in prime membership in a pandemic scenario in which customer visibility on the payoff of subscribing is so limited? Let me take that, David.

Yeah, let me take that. So, Guillermo, first of all, I think everything I've said from the previous two questions I think really applies to this. Let me add some additional thoughts on it. The first is that when a customer takes Prime, you know, for let's say just the Peloponne country average of let's say it's 55 euros for a subscription for a year, they get within that not just a flight, but also now they get hotels as well, right? You know, and so the important thing is the hotels and within the pandemic, right? You know, hotels are becoming more important, plus then you just get more value for it. And I'll come back to that. in a moment. What you also get is as long as the person is traveling with it, you can add many more additional people on that, right, and family members and friends and stuff like that. So you actually have a benefit so that, you know, family can use it. It's not just your own individual travel, but there's benefits of others, and so we see that as well. And then the third element that's, I think, particularly important during a pandemic right now context is that we offer, you know, kind of let's say VIP premium customer service to prime customers. So it means that if I can say it in essence just to give the sense of it, they jump the queue, right? So if they want to contact us by email, by chat, by voice, they would go to the front of the queue. They would also have our best agents attending them. And you really get good customer service. And within the uncertainty that has been going on, out there about, you know, am I going to get refunded or not? You know, when will I get? That's important. And when you look at many of our competitors that are simply not contactable at all, and I'm talking about not just meaning competitor OTAs, but even airlines where you can't get contact, you know, there also is a value of this premium customer service as well. So that bringing it down to a real example where, you know, let's just say two people were traveling. for let's say, again, four days, right, because, you know, in the pandemic, we're less likely doing, let's say, two weeks, so four days, you can easily save 100 euros, right? Remember, two people for two flights return, plus also three nights in a hotel for two people, you can easily find 100 euro savings in there on Prime. So I think that shows you a little bit about, you know, what's going through the psyche of some of the customers in terms of taking prime in this. And that's why I am truly looking forward to this when the market really returns, really opens up, you know, the travel restrictions. And if this is how we're performing in a market that is so diminished, I'm very positive, you know, about how Prime will really be performing in a more normalized market. I think, David, was there another question about call center costs?

No, I think the next question comes to me. I think how should we expect call center costs to evolve going forward? And we said that in the third quarter, we've had, let's say, excess over the normal of cost center investment for about 1.3 million euros. We would expect that to continue and increase a little bit more, maybe reaching 1.5 million euros or so in the fourth quarter. And from then, I think we will see it gradually decrease to return to more normal levels of cost per booking for us. Your next question is actually connected to this one. Can you provide more details regarding your strategy in this regard and target efficiency gains? Like we said, one of the three areas in which we are deploying our product and IT resources is in automating a lot of our customer service interactions. So we are making very good progress on that, and we think there are very few months left for us to finish that endeavor. But in order to see the, let's say, the full benefit of it, we actually need to have the volume of return because that's when we will be able to, let's say, service those contacts without additional costs because they will be handled by self-service tools and machines rather than by physical agents helping our customers. So I would expect that to happen much more getting more towards the summer than in the next few months. And the last, last part, to what extent are you concerned with your reward recovery facility debt covenant? I think I have answered that already. The next set of questions, I start to see some repetition here. from OWHP, good afternoon. Can you give an update on the accelerated refunds in Q3? I already talked about the refunds. Did the outflow in Q2 increase or decrease during the quarter? Decrease by 5 million, I already said. What is the year-to-date cash movement with proactive refunds? Can you give a direction? Well, that's more of the same. Can you give a direction for working capital in the fourth quarter? Well, the direction for working capital in the fourth quarter is going to rely, I think, entirely on what happens with the travel restrictions. If the travel restrictions and the visibility improve, and it could be for, the next month or it could be for the months going forward, we could see increases in bookings. And in that case, you will have a positive working capital performance. And if it doesn't, you will see a more muted type of working capital performance. There is another question from spread research which has also been covered. Another question on working capital performance that has also been covered. Okay. We have fresh new questions from from Robles Capital Management. Have you been aware of any competitor groping out of the business, for instance, the smaller OTAs? I think this is for you, Ben.

Yeah. Let me qualify. dropping out. What we see is that some OTAs may have gone into a more, let's say, dormant mode, because depending upon the geographic location of that OTA, they may have been able to get access to some form of government support on there and may have, let's say, reduced their operations significantly. But dropping out, you know, I would more consider to be, let's say, bankruptcy. And I don't know of necessarily OTAs that have gone bankrupt, although there probably very well are many of them. Because if you remember, we faced probably about throughout the entire European market about 100 OTAs, albeit not in every geography, but just across the map. And most of them are actually private. And so we would not know, you know, whether or not they have, you know, let's say ceased and desist, you know, entirely trading operations. But I think it would be fair to assume that, you know, from what we see, a number of competitors are struggling, right? I think where we really would see the answer to your question is once we get out of the pandemic and government support, you know, in those certain geographies is really withdrawn from those companies and then they need to survive and thrive on their own.

David? Yeah, I think that's a complete answer. Has there been the second part of the questions from Timo is, has there been any significant booking pickup, e.g., from summer holidays or the last February days after the positive news on the COVID vaccine reliability? I think I have answered this one already from a question of a previous investor. There is A follow-up from Walden Felix of Sanria Limited. Thank you for answering my first question. How large is your penance of refunds payables? How large is your penance of refunds receivables? Thank you. First, let me clarify when is a payable registered in our financial statements and when is a receivable registered in the financial statements which correspond to two very different dynamics. When a customer asks us to process a request for a refund, we do so, but that has no trace in our financial statements. When we actually receive the money from the airline, that's the moment that we register a payable. Then there is a time of processing, which is between, I would say, two to three weeks. of the information that needs to come. You need to reconcile it to be able to know which customers need to refund for what amount, et cetera, et cetera. And then we proceed to that cash out, and then the liability disappears. The receivable appears only when the customer performs a chargeback on his credit card. That's when we register a receivable. And it could correspond to a requests that we have already done to another line or it could correspond to another booking in which we have not done the request because the customer has not asked us to process the refund on their behalf. In terms of volumes, our payable is right now on the order of magnitude of 50 million and on the receivables, it is an order of magnitude of at least 10 million euros or so. But those numbers move on a daily basis, I would say. And then the very last questions for this good and enriching set of questions that we've received in this quarter from our investors is from . It says, one more, in light of your success of growing prime in this challenging environment, is your goal for total prime members too conservative?

I look, I think Debbie tried to say before that we don't have a guidance out there for, you know, the next quarter for the next year. And it's clearly because of the macro economic environment, meaning the pandemic, you know, this is a once in a lifetime type of event that makes it difficult to put out a formal guidance and, and particularly with us where we pride ourselves in always having exceeded or delivered a net on our guidances that we've given out since I've been the CEO of the company. You know, I think it would be fair the sentiment of your your comment, Chad, is fair. And similarly, if you do the numbers where you just simply say, You know, if the market's at minus 65 and we're doing, again, just round numbers, almost 100,000, you know, you multiply that by three and you get to, you know, a significantly bigger number. Depending upon when the market would really return to a more normal size, you can just add it up and exceed many scenarios that get to a path well over 2 million for that. But, again, we will update you more fully in the end of night. on our results in prime. And I think that as you start to see the market return, I think then you'll see on an absolute level as well the total numbers growing quite significantly in prime also. David?

Okay. So those are the questions that we have for today. And thank you everybody for joining the webcast and conference call today. And before we conclude the call, I would like to inform you that on Thursday, the 27th of May, we will be hosting our conference call for the fourth quarter of fiscal 21. And in the meantime, we will be very happy to receive your questions via our investor relations team or the investor email address, which is investors at eDreamsRegio.com. Thank you very much.

Thank you.

Bye.