eDreams ODIGEO S.A.

Good morning, everyone, and thank you all for joining us today for our first quarter fiscal year 2024 results presentation for the three months ending 30th of June, 2023. I'm David Anarod, the Director of Investor Relations at the Green Solidio. As always, you can find the results materials, including the presentation and our results report, on the Investor Relations section of our website. I will now pass you over to Dana Dunn, our CEO, who will take you through the first part of the presentation. Thank you.

Thank you, David. Good morning, everyone.

and thank you for joining us. The key takeaways from today's results presentation is that Edo continues to show strong growth in subscribers, revenues, and profits. In fact, our cash EBITDA more than doubled in just one year, and cash EBITDA margin improved nine percentage points versus the first quarter of FY23. This means our cash EBITDA margin improved from 9% in Q1 23 to 18% in Q1 24. And we added 1.5 million subscribers in the last 12 months and 375,000 in Q1 24.

In total, we are on target to meet or exceed our self-set targets for FY25. Today we'll take you through the key points of our strong performance.

This will include, one, EDU results highlights. Two, the prime model proven to be a success. We'll review our excellent first quarter FY24 results. Three, we will then explain the improvements on disclosure we have implemented so there is a better understanding of our subscription model. Four, we'll cover our investment highlights. we'll conclude today's presentation with some closing remarks about our long-term fundamental growth potential well beyond FY25. Please turn to slide four, which is a summary of our performance for the first quarter of the fiscal year 2024. As mentioned, our profit margins have increased significantly due to the strength of our prime model and the maturity of prime members. This also has resulted in cash EBITDA more than doubling year on year. Most importantly, we are on track to meet or exceed our self-set target for FY25. Some of the key highlights for today's presentation are, first, in the first quarter of FY24, the strength of the Edo Prime model continues to drive significant improvements in profitability. Cash EBITDA stood at 29.4 million, more than double the 14 million reported in the first quarter of FY23. And cash EBITDA margin had nine percentage point improvement year on year. Cash marginal profit stood at 52 million euros. That's up 55% year on year. And the margin had a 10 percentage point improvement in just one year as well. Prime share of the cash marginal profit reached 65% of the group's total already, and now our results are largely driven by subscription. This has led us to change the way we report internally as a subscription-led business.

And going forward, prime and non-prime will be our reporting segment. Second highlight.

Edo prime model is firmly established as a success. In the first quarter of FY24, we reached 4.7 million subscribers. That's a 48% increase versus the same period last year. Despite the industry moving to more normalized seasonality patterns since the first quarter of FY23, Customers booked closer to departure gates due to the Omnicom catch-up effect, which is no longer happening in the first quarter of FY24. Post the period end, we have added another 200,000 members and have 4.9 million subscribers.

Prime cash revenue margin.

This is a new quarterly reporting KPI. It also showed very significant improvement up 46% versus the first quarter of FY23. And this is in line with the growth in prime members. Also prime share of total cash revenue margin for the first time surpassed 50% in one quarter since we lost prime in 2017. Prime share of cash revenue margin was up from 41% in the first quarter of FY23 to 57%. in the first quarter of FY24. Third highlight, EDU is well on track to meet or exceed its self-imposed FY25 target. That's because on the prime numbers, our quarterly net ad run rate is ahead of the implied run rate needed to achieve FY25 target. The prime ARPU as guide is trending towards the mid-70s to euros, and then we'll converge with our FY25 guide to around 80 euros per user. In the first quarter of FY24, prime our crew stood at 75.5 euros per user and the cash EBITDA. Our first quarter FY24 results demonstrated that an increase in share of year two plus prime members has a very positive impact on margin, doubling year on year. Today's numbers reaffirm we continue to be well on track to meet our self-imposed target of over 180 million

euros in FY25. Fourth highlight.

Longer term and beyond 2025, EDU has strong fundamental growth potential. This is due to the attractiveness of our area of travel. We will continue to benefit from the strong online consumer leisure travel in which there's a structural shift from offline to online and convenience and desire to travel. Also, we will benefit from EDU's ability to further increase household penetration in the market in which we currently offer Prime, given the current low penetration level. Also, we will expand Prime into new markets, moving from 10 markets to many more markets.

We will enter new customer segments, and we will further launch products and services under Prime. In sum, Prime has proven to be a success. and is now firmly established.

It delivered significant uplift in profit margins, which will continue. We believe we have the right model, right people, right structure to seize and deliver on the exciting shareholder value, creating opportunities that are well, well, well ahead of us.

If you could all please now turn to slide six of the presentation, I will take you through the prime model. In 2017, we launched our Prime subscription program.

Until then, we were like all other travel companies. We were a transaction-based company, having a transaction-based relationship with our customers. In fact, the subscription model has been proven to be highly successful in other industries, such as Coxo for supermarkets or Netflix for video streaming, and many other companies in many other industries as well.

However, In travel, no one had done it until us. Today we have proven it is successful.

With us having almost 5 million subscribers and adding around 1.7 million subscribers every year and with good healthy margins. Thus the company we were back in 2017 is not the company we are today. No longer are we a transaction company like all other travel companies. Instead, today we stand at over 50% of the company's top line and profit margin being driven by subscription with all of the benefits of a subscription company. This means much more certainty in the predictability of results, lower susceptibility to external impacts, higher customer loyalty, et cetera, et cetera. Already the subscription part is over 50% of the company's results, and that is only getting bigger and bigger every day, every month, and every year that goes by. Thus today, we are really a subscription company, and that is the way in which we manage and run the business.

Please turn to slide seven.

Related to us being a subscription-based company is the rapid growth in subscribers. In fact, Prime members are on track to meet or exceed our guidance to reach 7.25 million members by the end of March 2025.

On a run rate basis, we are ahead of the required pace to achieve our target of Prime members. Please note, net ads of Prime members are influenced by seasonality,

and in particular in the first quarter of FY24 because of the industry moving to more normalized seasonality patterns. For example, the net ads of prime members in the first quarter of FY23 were positively influenced by the Omicron catch-up effect as more people were looking to book their travel closer to summer departure dates. Net ads increased because of that. But overall, in higher volume seasonality periods, we should have higher net ads. such as the fourth quarter. Coming back now to our target of prime members for FY25. We continue to be on track to meet or exceed our target of 7.25 million prime members by the end of March 2025. With the excellent progress made, the target is absolutely achievable. Together with our existing plans, we will continue to grow our prime addressable market. launching Prime in new countries to accelerate our run rate further.

This gives us full confidence in meeting or exceeding our FY25 target. Please turn to slide eight.

Cash EBITDA is on track to meet our target of over 180 million euros in FY25. The growing maturity of Prime members has resulted in strong improvements in profitability during the last fiscal year. In the first quarter of FY24, cash marginal profit margin continued to improve.

It increased to 31% from 21% in the first quarter of FY23.

That's a 10 percentage point improvement. Cash EBITDA also improved substantially. In the first quarter of FY24, cash EBITDA margin more than doubled at 18% versus 8.8% in the first quarter of FY23. This is an improvement of nine percentage points, well above first quarter, second quarter, third quarter, and fourth quarter FY23 margin.

Turn now to slide nine.

Let me remind you that when looking at prime versus non-prime, we still think it makes more sense to look at our business on a last 12-month basis, as Prime is an annual subscription business, and the non-prime part is quite influenced by seasonality patterns. Our KPIs reported today show strong growth and significant marginal profit uplift as maturity of Prime members increase. Another proof point that we are really a subscription company is our strong growth in cash revenue margin and cash marginal profit has led to a 50% cash revenue margin and 59% cash marginal profit in the last 12 months to June 2024 being delivered from prime members. And that was versus 41% and 53% just a year ago. As we now have a much larger portion of prime members in the second year and subsequent years of the membership cohort, The level of profitability of Prime continually improves. Now let me pass it over to David, who will take you through our excellent first quarter FY24 results and the improvements in disclosure.

Thank you, Dana. If you could all please turn to slide 10 of the presentation, I will take you through the financial results in more detail. In the first quarter of fiscal 24, we have delivered strong growth cash EBITDA and substantial improvement in margin as the maturity of prime numbers increases. The first quarter of fiscal 24, cash revenue margin is 5% higher than in the first quarter of the previous year. Cash margin of profit and cash EBITDA improved 55% and 110% respectively between the first quarter of last year and the quarter that we just published. Over the past year, our subscribers grew by 47% to 4.7 million. In addition, 57% and 65% of our cash revenue margin and cash margin of profit in the quarter, respectively, are now from Prime Members. As guided, the maturity of Prime Members is the most important driver for profitability, and this has resulted in a strong improvement in profitability as we have more Prime Members renewing their membership. Cash margin or profit margin increased to 31% for the first quarter of 24, from 21% in the first quarter of 23, 10 percentage points in total. Cash EBITDA margin in the first quarter of 24, more than doubled, and stood at 18% versus 9% in the first quarter of fiscal year. Cash EBITDA stood at 29.4 million euros in the first quarter of 24, up 110% during the year. Please turn to slide 11 of the presentation. Revenue margin excluding adjusted revenue items was 157.5 million euros. The application of a new estimate for revenue recognition of prime subscription fee, which we will explain in detail in the next section of this presentation, has a catch-up effect from the past. This is why we have adjusted the revenue margin down by 7.9 million euros as this amount is not reflective of the current period's prime revenue. Adjusted revenue margin increased by 8% to 167.5 million euros, mostly driven by an increase in prime revenue margin of 65%, following the successful expansion of the prime number base. Prime revenue margin growth rates were offset by the non-prime revenue margin, which decreased 23% versus the first quarter of 2023. That quarter, first quarter of 23, was positively impacted by a catch-up of only Chromebooking. Variable costs increased by 8% on lower variable costs on prime members, driven by a more mature prime member base. Overall, the first quarter of 24 has seen the improving trend we saw in fiscal 23 continue, and significant improvements in profitability as we have more prime members renewing their membership. Fixed costs increased by 3 million, mainly driven by higher personal costs. As a result, adjusted EBITDA was 20 million in material increase. Adjusted net income to the 1.1 million euros in the first quarter of fiscal 24. Turning now to slide 12, I will take you through the cash flow statement. In the first quarter of fiscal 24, despite moving to more normalized personality patterns, we end the first quarter with a positive cash flow from operations of 18.3 million euros. mainly due to the successful expansion of the premium bid, which resulted in higher income. In the first quarter of 24, we had a working capital outflow of 9.3 million euros, again mainly driven by the business moving to more normalized seasonality patterns. In the first quarter of 23, the higher working capital inflow was positively impacted by a catch-up effect from Omicron bookings, which resulted in increasing volumes between March and June 22, which was larger than the interest in volumes between March and June of 2013. We have managed our liquidity position well, consequence of our strong business model and active plans. Liquidity has remained more than sufficient and stable throughout the pandemic. At the end of June 23, the liquidity position was strong at 198 million euros. We have invested 10.8 million euros in the first quarter of 24 an increase of 3.9 million as we capitalized our software. Cash used in financing amounted to 5.2 million euros compared to 34.8 in the first quarter of 23. The variation mainly relates to the payment made in June 23 of the government-sponsored loan for 3.8 million, the repayment of the super senior CF by 30 million in the first quarter of 23, and the payment of the cost associated with the refinancing for 3.4 million in the first quarter of 23 as well. If you could please turn to slide 14, let me run you through the rationale and further improvements we have made for disclosure for you to be able to measure us and our subscription law. As the majority of EDUS performance results is driven by subscription, we have decided to change the reporting breakdown to better reflect a subscription-led business. As you can see, over the past four years, the evolution from transaction to subscription business is clear. Prime revenue margin went from 4% to 55% in the first quarter of 24 over overall revenue, and marginal profit went from 2% to 67%. From the first quarter of 24, the group will disclose prime versus non-prime, at revenue margin, variable costs, marginal profit, and adjusted EBITDA levels with quarterly figures and not only last 12 months. The group will also start reporting revenue by timing of recognition alongside the prime, non-prime dimension to align with the new reportable segment. And three, in order to align the financial data with the evolution of the subscription service, the group has also decided to change the prime base of revenue recognition from revenue recognition based on usage to revenue recognition based on a graduate loan. If you could please now turn to slide 15, I will go into a bit more detail about each of the changes in disclosure and rationale behind them. Before the change, as you know, the group identified a segment that's different market in which it operated. since it was the basis on which the information was reported internally and strategic decisions were made, such as the launch of new services, pricing strategies, or investment . But with the shift in the group's majority revenue and profits coming from subscription, this is no longer the way we look at information in order to evaluate performance and make operating decisions. The group considers prime versus non-prime in segments as a better reflection of how the leadership team evaluates operating performance. And from the first quarter of fiscal 24, segment information is presented with prime and non-prime as the new segment. Comparative disclosure has been restated to reflect this change in segment. So what does this mean? For the prime segment, it means the profit and loss measure generated from prime use. In the case of cash revenue margin for prime, It includes elements such as, but not limited to, prime fees collected, the GDS incentives and commissions derived from bookings of prime users, ancillary services purchased by prime members, et cetera. And for non-prime segment, it means the profit and loss measure generated from non-prime. If you could please now turn to slide 16. The change in the segment reporting makes a new revenue breakdown based on revenue recognition more appropriate. Before the change, up until the fourth quarter of fiscal 23, the group disaggregated revenue from contracts with customers by stores of revenue, as in, desertification revenue, classic customer revenue, classic supplier revenue, and advertising amendment. Following the group's change in its operating segment and the expected evolution of the product, management has considered that the previous revenue segregation was no longer relevant. Instead, a revenue disclosure based on the uniqueness of the revenue recognition method alongside the prime, non-prime dimension is more appropriate. Revenue has been aggregated based on the similarity of economic factors and the similarity in the timing of revenue recognition and makes it easier to link revenue to operating KPIs, being the three new parts of the breakdown. First, gradual. which represent revenue which is recognized gradually over the period of the service degree and mostly relates to recognized subscription fees, the service of cancellation for a reason and flexi-ticket, and airline overcompensations.

Transaction data.

Second type of revenue which represents the revenue which is recognized at booking date and mostly relates to service fees, ancillary, insurance, incentives other than airline commissions and other fees, and other which is a residual category and mainly related to advertising, metasource revenue, tax refunds, and others. If you could please turn to slide 17, we have also made a further change in estimates regarding the recognition of subscription fees, which aligns with the evolution of the prime product and relevance of service for subscribers. This has resulted in the accounting estimates regarding the recognition of subscription fees changing from revenue recognition based on usage to revenue recognition based on gradual more. The change implemented aligns with the standards of other subscription businesses and helps investors and sales side analysts to better understand the business as a subscription company. The change in revenue recognition does not affect any of the cash metrics. not any of the cash metrics, but does affect the recognition for the P&L of subscription fees, revenue margin, and adjusted EBITDA. We continue to believe that the best way to understand our subscription business is through the cash metrics, and the cash metrics are unaffected by this change. We have been communicating on cash metrics for some time, and we'll continue to do so, like other subscription business. If you look at the chart on the left hand side, you can see a material increase in adjusted EBITDA, even using the former accounting. The chart shows pro forma of the first quarter fiscal 24 adjusted EBITDA. The reported figure is 20 million euros, and the figure if we have not changed the estimation of revenue recognition subscription fee is 16.2 million. The increase from previous year is very material in any case. In the following two slides, 18 and 19, we will show you how our figures look like on a quarterly basis with a new accounting decision. Please turn to slide 18. On the left-hand side, cash revenue margin growth was driven by the successful expansion of the prime member base and partially offset by the decrease of non-prime, which last year was positively impacted by the catch-up of Omicron disease. On the right-hand side, if we look at cash revenue margin by timing, the increase in gradual revenue margin at 34% follows a strong growth of the prime business, as the subscription fees are a substantial part of the gradual revenue margin. And the decrease in transaction date revenue margin is due to the decrease in non-prime bookings, as the first quarter of fiscal 23 was positively impacted by a catch-up of Omicron. Please turn to slide 19. Cash marginal profit continues to show rapid growth with significant improvements in profitability. In the first quarter of fiscal 24, cash marginal profits for prime increased to 35% from 27% in the first quarter of fiscal 23. That's a 9 percentage points improvement in just one year, and the cash marginal profit for prime weight of a total expanded by 13 percentage points. from 52% in the first quarter of 23 to 65% in the first quarter of 24. Cash margin or profit margin for non-prime also expanded some percentage points from 17% in the first quarter of 23 to 25% in the first quarter of 24, as continue to focus on the most value added non-prime. As you can see, our business has evolved tremendously from a transaction business to a subscription business. As a result, it is appropriate that our reporting evolves from one typical of a transaction company to one more suited to a subscription business. I will now turn the presentation back to Dana to go through our investment highlights and some closing remarks about ambitions from fiscal 25 onwards.

Thank you, David.

In the next eight slides, I'm gonna share some additional data and edu, and to try to summarize why we are an attractive company for investors, and we believe that we have ample room for valuation expansion.

Please turn to slide 21. First reason, subscription is a superior business model, as proven by other companies like Costco and Netflix.

And our prime members are on track to reach or exceed the $7.25 million

members by FY25. Please turn to slide 22. Second reason. EDU has demonstrated the ability to grow its membership base, penetrate markets, and capture new customers. And we expect that to continue as the market recovers. Please turn to slide 23 of the presentation. Third reason.

Within travel, EDU is the global flight leader, including China. We leverage this for our success in providing the competitors and interest with others. Please turn to slide 24. Fourth reason.

We are a pole position in an attractive market and a first mover in advantage. Please turn to slide 25 of the presentation. Fifth reason. EDU is unique in terms of profitability and growth.

This subscription model has been proven in other industries to generate both long-term high growth and good profitability. This is the case for subscription companies such as Netflix and Costco, among the others.

At the same time, we are not just copying, but innovating, taking the model to new heights, and doing things that no one else has done. Please turn to slide 26 of the presentation. Six reasons.

Since very early days, EDU has been recognized as a leader in AI in Europe, always being a step ahead.

Please turn to slide 27 of presentation.

Seventh reason, we are very well-positioned, well-financed, and well on our way to meeting our self-imposed FY25 targets, which to remind you are prime numbers over 7.25 million numbers, prime ARPU around 80 euros, and cash even in excess of 180 million euros.

If you could please turn to slide 28.

I would like to conclude by highlighting the strong fundamental growth potential we have beyond FY25.

The longer-term potential beyond FY25 is huge.

Prime is only currently in 10 countries, yet as a transactional model, we are in 44 countries.

Thus, over time, we will continue to expand Prime to many more countries.

Also, within each country where Prime is currently offered, we are nowhere near the normalized household penetration of Prime. This will provide large growth. In other product categories that have much longer tenure of introduction of subscriptions, European household penetration is 20% to 60%, depending on the product. Our current average penetration of our top six markets is only 2.7%. Third, many successful subscription programs evolved into more segmented offers by customer and product segments.

This also provides significant market growth opportunities for us as well. Overall, Edo is now a much higher quality business with a pivot to our subscription model.

This delivers loyalty and repeating customers resulting in more and more profitable and predictable business. We are delivering high underlying profitability and have huge growth potential. All of this will drive superior returns for shareholders, excellent service for customers, while at the same time transforming revenue.

Thank you, Dana. With that,

We would now like to take your questions. We will answer the questions sent to us in writing in the webcast. We will take questions in our first campus surveys. We're also trying to group questions of similar nature. Should we not have time to respond to questions from the webcast, the investor relations team will take sure that those are answered afterwards. I'm going to see the list of questions now. The first set of questions comes from from Deutsche Bank. The first one says, on the competitive environment, any of your larger global peers going down the subscription path, how do you view the recent news around Google Flight highlighting when it would be the best time to book flights on a certain route? Does this take away some traffic that may have directly come to your website? Daniel, you want to take this one?

Sure. Yep, absolutely. So let me do the two parts to this first question. Part one was about just global competitors going down the subscription path. And again, it depends on what we mean by global competitors, but just for purpose. Apparently, some of you know there was TripAdvisor, that did launch a subscription program several years ago. And I think they did it for probably around two years. And that's very public and made disclosure about it. And then it's pulled back since after about two years. And I think that's a paraphrase. And they said that they like the subscription page. They think it's a good opportunity. But it wasn't working in the way in which they wanted it to work for them. I think that's the end of it. So there has not been any further pursuers from them. And I don't think that we see material pursuit from any of the other global competitors. The subscription model is very difficult to replicate. We have now six years, and actually I would say actually we've been working on this for over six years, subscription. It requires an awful lot of effort, lots of insights, and some prerequisites as well to be able to really do it and do it extremely well. We started in flight. We now actually have flights, hotels. We have cars that have packages, et cetera. And so we've come a long way in that period of time. And so it's very difficult, and it's a huge undertaking for anyone else to actually try to overcome. In terms of the second part of Nisa's question, I think it was about Google and Google Flights in terms of they have a new feature that highlights the best time to book in certain routes. And I think the question says, does it take away traffic from us coming directly to our website? The answer is word, no, it doesn't. It is not one of the key drivers of customer choice at all. And furthermore, let me link it specifically to our business. We're more of a subscription than a transaction business. And that's our dependence on these types of channels is less on average than other companies. And I think, in fact, you've seen, you know, that we have experienced material reduction on marketing costs once the customer becomes a prime customer. And so you see, as we get into the year two plus, you know, having more and more prime customers, and subscribers moving close to that first booking, the margins are extremely attractive for us in that. And then lastly is we have an awful lot of our first-time subscribers coming from pure referrals and word of mouth. And I think we've also shared with investors that the customer satisfaction, the net promoter score is extremely high for Prime, and therefore we benefit from that as well.

Okay, the second question from Nisla is, can you give us some color on prime churn? Has it changed or stayed stable over the last 12 months? Does it arrive at market? Well, as I've said multiple times, we only disclosed the churn one time to give comfort to people. We don't see the vast majority of other B2C subscription programs doing this. However, on a more qualitative basis, we have seen churn slightly improving. As you know, we monitor continuously customer satisfaction and net promoter score, which are two very important variables for us. And at the moment, these KPIs are truly remarkable. And although we can still get better, of course, according to these figures, we are not worried about an increase in churn in the short term. The third question would be, I understand the subscription TVOT results in the new reporting structure, but could you please give us some color on how overall looking performance you want? Well, let me remind everyone that the things that we have this time period are things that are not relevant for us anymore. In fact, they have the risk to confuse people regarding what really drives our numbers. because we are a subscription company and therefore we're adding other disclosure that's much more relevant for a subscription company. For instance, we do not give the bookings for prime because it will just confuse people as they're not a driver of our results. Addressing your question on a more broad level, we continue to have gains in market share and we continue to trade in a very positive way, but we're not going to close the number of aggregate bookings or the number of prime bookings on an ongoing basis. The next set of questions come from Francisco Ruiz from . The first one says, once the seasonality has returned to a normality, how do you expect working capital to perform within the year? Let me take that one. I'd say directionally. we should see an inflow because the gross sales are growing as expected. And we keep having more volume than we used to have in the past. That's for the aggregate of the year. However, this can be, as you know, impacted by seasonality from quarter to quarter. And there's one other thing for the aggregate of the year, particularly with the March year end that we have for our fiscal year. and where the seasonality of Easter has changed somewhat versus the previous year. In 2023, the Easter was in the first week of April. And this time, it will be on the last week of March. Therefore, we have one more week of vacation period within the quarter, that last quarter. And like we have explained, I'm happy to repeat, when people are on vacation, they're not booking vacation. They're just on vacation. So periods of vacation, like the week of Easter, tend to be low booking periods.

That one fell to April of 2023, and the next cycle is going to fall into March of 2024.

The second question is, about the Prime subscription. It says, could you give an idea if new Prime members are in new geographies, or you see also nice growth in geographies where the product will be more mature, like France? Actually, we see a relatively similar performance across geographies. The biggest driver for the total amount of members is the size of the country and the date of the launch of Prime. But I think people should keep in mind, and we've disclosed these figures in the past, that still the relative penetration of prime members versus the amount of households in one country is quite low compared with other subscription products. We disclosed the last time that France, which was our oldest market, is under 5% of penetration. And that compares with ranges of, depending which subscription product you look at, for a B2C between 20 and 50%. So it's still very early days. So we continue to see nice growth of subscribers across both old markets and new markets. The third question is, with the new segment reporting, the revenue margin for prime members would be just average prime members in the period multiplied by ARPU. That's actually not that way for two changes versus your question. First, ARPU is based on cash revenue margin and not revenue margin. So ARPU has inside the full amount of subscription fee regardless of the element of accrual in the P&L. And the other thing is that it is based on the last 12 months reporting. So it's not primarily the period.

You need to take a period of four quarters. So that would be correct. The next set of questions is from Andrew Ross of Barclays.

First one says, who related to removal of disclosure of gross bookings? What is the best way to model your working capital if you don't disclose the gross bookings? Actually, we do disclose the gross bookings. You can still find them in the notes to the financial statements. The second one says, isn't the number of bookings for prime member an important metric to understand the sustained value of the proposition and to drive your output? Remind us why you believe the subscription income is a relevant metric when you're factoring discounts on flights and then still making markup and with Prime. How do we build confidence that the value of Prime is sustainable without knowing the frequency? OK. That's a very valid question. And I'm very happy that it has come up. But the most important thing to retain is that we are definitely a subscription company now. the number of transactions do not determine the profitability of the subscription model. And we've explained this multiple times, but I'm delighted to explain it again. Yes, new transactions will increase the ARPU, but we have also said that that's only the revenue. It's not the profit. We have also said that we do not make much more profit or a meaningful amount of additional profit of a prime member that makes three bookings versus one that makes two bookings, or one that makes four bookings versus another one that makes three bookings. So at the profit level, we tend to equate, right? We want it to be a really great deal for the prime members. And therefore, beyond the second booking, we're not making additional money because the customer makes more bookings. The engagement of the subscribers with the subscription service, which is what I think you're getting to, is perfectly observable in two metrics. One is the evolution of the prime members, and two is the profitability. A decline in engagement or an increase in churn would result in either a decline in members or a decline in margins or a decline of both. But you will be able to observe it from those two metrics. We have decided to just continue providing the prime bookings as it is a KPI which anchors investors on the transactional business mentality. And I think we need to really move away from that mentality because that's not what explains our business. We keep, on the other hand, providing bookings for the non-prime business. which is the residual transactional business that we have. From a customer point of view, we have occasionally share, not every quarter, but regularly, customer satisfaction numbers, NPS, Net Promoter scores, which have shown that customers are very satisfied with Prime and have high level of promoting Prime to their friends and family. Going forward, we will continue to periodically share that as we have done in the past. The third question from Andrew is, any commentary on how you would expect trends to go through Q2, Q3, Q4, still expecting an acceleration in the back half of the fiscal year as comes normalized?

Well, I would say a couple things about this.

We're giving a hugely detailed 18-month title that no one else in the market is giving, right? And I think that gives you a north star that is very interesting. The other thing that I would say, and let me here, for instance, point to the new disclosure that we're starting to get. And in particular, to the revenue breakdown, we have the one in which we break down the revenue between gradual revenue, transaction-backed revenue, and other, being the first two categories, the really important one. If you look at the data that we have disclosed for the last year, you will see that gradual revenue increases every quarter. And that is because that's the one that is driven mostly by the number of prime numbers, and prime numbers increase every quarter. You will see, on the other hand, that the transaction date revenue is one that has more variability because it's the one that depends on . You should expect that pattern of behavior to continue going forward. You should expect the revenue to increase every quarter, agnostic of it is a Q2 or a Q3 or a Q1, and you should expect the transaction-day revenue to have more variability, right? To remind everyone, Q3 is the lowest seasonal period of the year. So from now to then, we go into quarters in which the transaction-day revenue only will be going downwards.

And then Q4 will pick up again from a seasonality perspective. The next set of questions come from Carlos Treviño of Banco Santander.

The first one, could you elaborate on the reason for your working capital outflow in the Q1? It was fully driven by lower bookings at the end of the quarter versus the beginning, or are there any other reasons? No, it's really mostly driven by that. The comparable quarter of the previous year, so March to June of 22, you will remember that it was an upward analysis because the Omicron wave affected the population mostly between December of 21 and February of 22. And therefore, in the following period, Bookings that people would have normally done in January and February for the summer departures didn't happen. And those happened in the quarter from April to June of 22. This year, we had a return to more normal seasonality patterns because, thank God, there was not a new strain of COVID that was affecting people's behavior. And people in January and February were making normal for the summer and therefore you didn't have that surplus of booking into the month of April to June that would normally not be done in that period of time by capital that's the one that is fully fully effective the second quarter is could you elaborate on recent business dynamics in July and August should we expect normal seasonality in the second quarter of 2021.

Does anyone want to take that one? Sure. So overall, Q2 would be the summer, right? So July and August. And I think it's been a very good July and August, quite frankly. For not just us, but also for the industry, quite frankly. I think we see a couple of important things. that I can highlight. The first is that we see the importance, from a leisure customer point of view, that leisure travel is even under the suboptimal economic or macroeconomic environment. They're clearly over the past 12 months having concerns about inflation and other macroeconomic-like issues. And yet we have seen that, from a leisure point of view, travelers have continued to travel. Now, this is actually not a surprise to us, and I think we've tried to share data in the past where if you look at it over, let's say, from 1980 to 2020, just prior to COVID hitting, there's been many macroeconomic shocks as well, yet still leisure customers have traveled and really want to travel. That and what they try to do with discretionary income is actually reduce other categories of discretionary income before travel. So we do see a definite good one. The second thing we also see is that a return to seasonality. And so we do now see seasonality coming in. So we would expect, as David has said, is, for example, as we go forward in Q3, it would be the normal seasonality, which in Q3 is not as strong on an absolute level than a Q2. Whereas the Q4 is absolutely much stronger than a Q3 on an absolute level. And that's the normal part of seasonality of our business and of the travel industry.

Okay, thank you. The next set of questions comes from John Garcia of Ave Maria Funds. The first one says, your growth past fiscal 25 in my mind will come from One, expanding Prime within its 15 European markets. Two, broadening the product offering. Three, expanding a fully functional Prime program into new markets. Any updates of this initiative, especially pushing to hotels?

Do you want to take this one, David? Sure, sure. Look, I think Chad asked this question before I did my closing statement, and so I absolutely did address it. most of the growth on this. Let me just kind of summarize first the growth and then cover a couple of things that maybe I didn't touch on. But the growth is around kind of, let's say, you know, multiple dimensions. So one is I talked about in terms of expense lines within the existing European markets and talked about the penetration being on average around 2.7% and talking about, you know, other subscription-based products being at 20 to, you know, 50, 60% even There's a lot of room for us there to grow in it. The second one is obviously expanding it to new markets where, as a transaction-based business, we're in 44 countries. In terms of description-based, we are in 10 countries. So clearly, there's a lot more geographies that we can go to, and that just simply increases our total addressable market. The third one is around broadening our product offerings. Prime has, we started Prime as being a flights-only subscription program. And then we added hotels, we added cars, we added dynamic packages as well. And it's shown that the vehicle of Prime is actually a travel product, not just a flight product. And we get very, very good and high levels of customer satisfaction, and actually much higher levels of customer satisfaction for a customer when they're in Prime, and when they're taking one of those four prime products versus doing it as a non-prime. And so overall, there's really good growth for us in terms of the product offering and dimension as well. And then there's also, lastly, from a customer segmentation point of view, when you look at other subscription-based businesses, they do have segmented offerings, and that provides good and meaningful growth as they try to target new or adjacent customer segments. And so we absolutely have that opportunity as well. So in total, there's very large growth opportunities ahead of us around these four dimensions.

David? Yep.

The second question from the same investor says, it looks like your margins on non-prime business are moving up. What is happening there? Longer, more complex trips, a pullback in performance marketing spend. Lower performance marketing prices. Let me take that. We said a few times, I think, during the call today, we flagged that the first quarter of the previous year was a little bit abnormal, and there was a very high amount of bookings with, you know, some of the bookings that should have been made in January, February actually happened much later, what we call the open crime bookings. And when we compare what we've done on the non-prime side of the business this quarter versus last year, basically we're becoming more selective, right? And we're doing less bookings with higher revenue margin for booking and marginal profit margin. The third question says, when do you anticipate announcing post fiscal 25 financial targets? I feel almost tempted to say nice try. We have given a super detailed guidance part, which right now is 18 months out, that no other company does. We feel very comfortable sticking to that one. And even when we will give guidance beyond fiscal 25, you will be the first to know. The next set of questions come from Tom Bushy of Sunderland Capital. It says, we appreciate the commentary on the business change since 2017 and the new metrics. Now that you have proven to have a stable high growth and significantly cash generated business, what are your current thoughts on share buybacks to take advantage of the undervalued stock? I do agree with you that we are a cash generating business and that with the subscription model we will continue to be and in fact generate more cash over time. Over the last year, We've been able, because of this, to repay all outstanding back debt, and that includes what we had under the revolver credit facility drawn and the government-sponsored loan. And we have a good liquidity cushion now, which is composed mostly of large availability under the revolver as opposed to cash in hand. In order to make an investment into our own securities, we first need to have discretionary cash in the balance sheet. which given we are about to enter the low seasonality period of the year in winter, it will happen at the end of fiscal year. It is at that point in time that the board will decide what to do and will make the best use of discretionary cash to invest in our securities. The next question comes from Gabriel Mejia of Best in There. You have provided non-prime bookings in the first quarter of 24. Could you give the figure for the first quarter of 23? We actually don't disclose this number. I can give you an indication of direction. And directionally, we have had less non-prime bookings in fiscal 24 than we had in fiscal 23, based on the dynamic that we were saying, but we're not going to disclose retroactively the non-farm bookings.

We will disclose those from this moment onwards in time.

There's another question from ,, the CEO, ,, and you repeat what the time current household penetration is market or ?

That is 2.0. The next.

Questions come from of CaixaBank. The first one is a clarification on the new reporting. Will prime subscription revenue be accrued exactly linearly across the year? Yes, it will be accrued gradually. And the second question is, will prime variable costs accrual maintain the previous reporting criteria? And the answer to that is absolutely yes. The costs have always been accrued and will continue to be accrued according to when they are incurred. If you take the buy order, marketing cost when we buy the click to come to our website, merchant cost when they are incurring the transaction, customer service costs when they are incurred, et cetera. Absolutely no change in the accrual of the costs in our income statement. It's only the revenue related to the subscription fee. That's the only change. What could be the implications for EBITDA seasonality? Well, in terms of EBITDA seasonality, I'd say that you probably have pretty much the same one because I referred to a comment that I was making before. If you look at the breakdown, which I think is useful for everyone, of the gradual revenues versus transaction date revenues, you're going to have gradual revenues on most of your subscription fees, which is going up quarter after quarter. And you're going to have the transaction date revenues, which are affected by this analysis. So if I take here, instead of a very short view, if I take a long view, the more we have the prime business being increasingly bigger than the non-prime, you're going to see much less seasonality in our business from a P&L point of view. You will continue to have some seasonality on the balance sheet side of things, on the working capital side of things. should become more and more regular over time. The next question comes from Ankit Gupta of Goldman Sachs. What is the expectation around marketing costs in the coming quarter? Will it trend at a similar level to 1Q? Yes, we do expect that the real driver behind the evolution of the marketing costs is the increased seniority of our prime members. The more prime members that we have, which are in second and subsequent years, the less marketing costs .

So the patterns are going to . The next question is, do you have any targets for leverage metrics?

We're very happy to see the evolution of the leverage metrics. Actually, if you look at how they have evolved over the last 12 months, 12 months ago, leverage was measured according to our covenants. So the net leverage over cash EVDA on a last 12 month basis has come down from 6 and 1 half times to 3 and 1 half times, which

which is three terms in just 12 months, which I think it is quite remarkable. But that is, again, on the last 12 months measure. If you just take the last quarter and you multiply it by four, you would actually be below three times. If you take our public guidance on cash with VA for March of 25, which is 180 million euros, you would actually be below two times. So this is a company that is going to be below a two times leverage, based on our public guidance already provided. The next question comes from Arnau Lopez Riera.

If I understood correctly, you said that beyond the second booking of a prime member, you don't make any money. Could you elaborate a bit more on why that is the case? Is it the case that you design the subscription fee such that you secure a target return within the first two bookings, and then once the target is reached, you give the full benefit of discounts to members? I'll clarify this, hopefully, by referring to the model that we are inspired by. The model we're inspired by is the Costco model. Some of you may be familiar with it as investors. Probably several of you will be familiar with it as customers. As an investor, the model of Costco is one in which Costco charges a subscription fee for being able to shop in their premises. And then the prices on the actual goods that people purchase just have a small margin put on top so that Costco is able to offset the cost of running the business that they have. So that each additional purchase from the customers brings in revenue, but it brings in hardly any profit. And really, the level of overall profits of Costco is quite predictable. They take their number of subscribers, multiply them by the subscription fee, and it takes you to the profit that they should have. That also means, from the consumer point of view, that they know that the best deal possible, they're going to get from Costco. Because Costco is basically giving back to the consumers almost everything except what they absolutely need to cover their costs. That's the same one that happens. And that's how we price transactions and how we think about the level that they give back that we have to do to our subscribers when they make the second booking and the third booking and the fourth booking. They're going to get the best deal possible with us. And that's what we want them to know and how we want them to repeat it. We don't price differently, depending if it is a first transaction, or a second transaction, or a third transaction. So it's not like you get a better deal on the second than the first, or vice versa, and you get a better deal on the first than the second. You get an extraordinary deal in the first, in the second, in the third, in the fourth, et cetera. But there is a big difference between the first and all of the rest, which is that the first is the one that comes with the subscription fee cost. The next question, and actually the last one that we have on the queue today, is from . Could you remind us in which countries is PRIME already present, and what other countries are you planning on entering this year? We currently have PRIME in 10 countries, which include France, Italy, Germany, Spain, Switzerland,

Portugal, the US, Canada, the UK, and Australia.

We are present, however, in another 34 countries with the transactional model only. We feel very positive about the opportunity we have ahead of us. We will open a new country, but we do not disclose which until the moment that we have already done it. because there will be interesting information from our competitors that we don't feel that we should provide to them. So that's the last question that we have. And with that, I would like to thank everyone for joining us today. Before we conclude, I would like to inform you that on the Wednesday, 15th of November, we will be hosting our conference call for the first half results for fiscal 24. And in the meantime, We will be very happy to receive your questions by our investor relations team or the investor email address, which is investors at eDreams and EGO.com. Have a great day and great end of August. And looking forward to see you in person soon or remotely on the 15th of November.

Thank you.