eDreams ODIGEO S.A.

Good morning, everyone, and thank you all for joining us today for our first half fiscal year 2024 results presentation for the six months ending 30th of September, 2023. I'm Davide Larros, the Director of Investor Relations at E3M Sotillo. As always, you can find the results material, including the presentation and our results report on the Investor Relations section of our website. I would like to inform you that today's presentation will be a bit longer than usual. It will be broken down into two parts. Part one will focus on our results for the first half of the current financial year, Part 2 is a special deep dive into the business, focusing on a follow-up of our performance since our Capital Market Day two years ago, as well as an update on our progress towards our three-year guidance. I will now pass you over, Dana Dunn, our CEO, who will take you through our results highlights.

Thank you, David. And good morning, everyone. Thank you for joining us. We are two years on from the November 2021 Capital Market Day. and I'm pleased to be able to say that the Prime model has more than proven to be a success, with the results speaking for themselves. The key takeaway today is once again that profit margins and profits are up significantly due to Prime, that we continue to show strong subscriber growth and revenues and profit growth. In fact, our cash EBITDA almost doubled over the last 12 months, And cash EBITDA margin further improved 9 percentage points versus the first quarter of financial year 2023. This means that our cash EBITDA margin improved from 9% in Q1 23 to 18% in Q2 24. And we added 3.4 million subscribers in the last 24 months and 380,000 in Q2 of FY24. 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, firstly, covering the EDO results highlights, second, a discussion about the prime model, and a review of our excellent first half of the year results. Third, we'll update you on our strategy two years on post our capital markets debt. Fourth, we'll discuss our investment highlights. And lastly, we'll conclude today's presentation with some closing remarks about our long-term growth potential well beyond FY25. So now let me ask you all to please turn to slide four, which is a summary of our performance of the first half for our fiscal year 2024 results. In the first half of FY24, again, the strength of our prime model drove significant profit improvement with cash EBITDA almost doubling year on year. We remain well on track to meet or exceed our FY25 guidance. Some of the key highlights for today's presentation are, first, in the first half of FY24, the significant improvement in profitability, specifically. Cash EBITDA was up 84% to 63.5 million euros. That's almost doubling the 34.5 million euros reported in the first half of FY23. And the cash EBITDA margin, as said, gained 9 percentage points since the first quarter of FY23. Cash marginal profit was up 46% year-on-year to 108.9 million euros. And the margin improved by, as well, 9 percentage points since the first quarter of FY23. Prime's percentage share of our cash marginal profit reached 72% of the group total. And this means that now our results are largely driven by subscription. And our free cash flow, excluding non-prime working capital, was up from 20 million euros in FY23 to 40 million euros in the last 12 months of the first half of FY24. This means it doubled in the past six months and will outperform cash EBITDA growth again in the next 18 months. Second highlight. Edo Prime model is firmly established as a success. In the first half of FY24, we surpassed 5 million subscribers, reaching 5.1 million, which is a 41% increase versus the same period last year. This, of course, is in the context of the industry moving to a more normalized seasonality patterns. And in the last 24 months, we added 3.4 million new subscribers. And on the 31st of October, our prime members stood at 5.2 million. Prime cash revenue margin. As we said last time, this is a new quarterly reporting KPI since the first quarter of FY24. Prime cash revenue margin showed very significant improvement. It was up 53%. versus the first half of FY23, in line with growth in prime members. Prime share of the total cash revenue margin was up from 38% in the first half of FY23 to 55% in the first half of FY24. And growth in cash marginal profit for prime increased more than cash revenue margin. With an increased maturity of our prime member base, cash marginal profit for prime is up 86% versus the first half of FY23. And as a result, prime share of cash marginal profit reached 72% of the group total. Third highlight. In November 2021, at our Capital Markets Day, we announced our FY25 guidance. Now as a reminder, this was during a period in which zero travel company had a quarterly yearly or multi-year guidance out there. And this was before Omicron, Ukraine War, double-digit inflation, and other macroeconomic issues. So we're two years on today, and we are reconfirming our guidance that we had set in November 21. We will meet or exceed our targets. In terms of prime members, our quarterly net ad run rate is ahead of the implied run rate needed to achieve our FY25 target of 7.25 million members. Prime ARPU, as expected, is converging with our FY25 guidance for around 80 euros per user. In the second quarter of FY24, prime ARPU stood at 78.8 euros per user. And cash EBITDA, our first half of FY24 results, demonstrate that an increasing share of year two plus prime members has a very positive impact upon margins, which doubled year on year. Today, numbers reconfirm we continue to be well on track to meet our target of over 180 million euros of cash EBITDA in FY25. The fourth highlight you'll hear in today's presentation is about the long-term and beyond for 2025, that Edo has strong fundamental growth. This is due to the attractiveness of our segment of travel, which is leisure. We will continue to benefit from the strong consumer demand for leisure travel, in which there's a clear structural shift from offline to online for convenience and, of course, the underlying desire to travel. Also, we'll benefit from either's ability to further increase household penetration from low levels in the markets in which we currently offer Prime. We'll also expand Prime into new markets, moving well below the 10 markets in which we currently operate, and enter into new customer segments and further launch additional products and services under Prime. Now let me pass it over to David, who will take you through some of the KPIs of our Prime model, and the excellent first half of FY24 results.

Thank you, Dana. If you could all please turn to slide six of the presentation, I will take you through some of the KPIs of the prime model and financial results in more detail. On a run rate basis, we are ahead of the required pace to achieve our target of prime members, and the run rate needed for the next six quarters is less than the one we achieved in the past four quarters. Please note that the net ads of Prime members are influenced by seasonality on a quarterly basis. For example, the net ads of Prime members in the first quarter of fiscal 23 were positively influenced by the Omicron catch-up effect as more people were looking to book travel closer to some of departure dates. Net ads during that period increased because of that. Similarly, when there are less people in the market looking for travel, such as in the third quarter, quarter, which is a seasonally low quarter, net ads of prime members will grow less. That is why it is important to look at our net ads over multiple quarters, and we are on track to meet our guidance of 7.25 billion members by March of 2025. Please turn to slide 7. Profit margins were up significantly due to the growing maturity of prime members. This has resulted in strong improvements in profitability during the last fiscal year. In the second quarter of fiscal 24, cash margin for profit margin in our prime segment continued to improve. It increased to 36% on a 12-month basis from 31% in the first quarter of 23. That is a 5 percentage points improvement. Cash EBITDA also improved substantially. In the second quarter of fiscal 24, cash EBITDA margin more than doubled to 18.2% versus 8.8% in the first quarter of fiscal 23. This is an improvement of 9 percentage points, well above the first quarter, the second quarter, the third quarter, and the fourth quarter, given the margin of fiscal 23. If you please turn to slide 8, 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-first-month basis. as prime is an annual subscription business, and seasonality affects the amount of NEDAs in a particular quarter, and the non-prime part is influenced by seasonality patterns in most respects. Our KPIs reported today show strong growth and significant marginal profit uplift as maturity of our prime members increased. A strong characteristic of subscription companies is strong growth in cash revenue margin and cash marginal profit. Our performance in these areas demonstrates this clearly with a 54% share of cash revenue margin and 64% share of cash marginal profit in the last 12 months to September 24 being delivered from prime members versus 42% and 54% a year ago. As we now have a much larger proportion of our prime members in the second and subsequent years of membership, the level of profitability of prime continually improves. Please turn to slide nine of the presentation. In the first half of fiscal 24, we delivered strong growth in cash EBITDA and substantial improvements in margin as the maturity of prime members increases. In the first half of 24, cash revenue margin is 12% higher than in the same period of the previous year. Cash margin of profit in cash EBITDA improved 46% and 84% respectively. Over the past year, our subscribers grew by 41%. In addition, 59% and 72% of our cash margin margin and cash margin and 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 strong improvements in profitability as we have more prime members renewing their memberships. Cash margin and profit margin increased seven percentage points to 31% in the first half of 24. Cash EBITDA margin in the first half of 2024 also achieved very substantial improvements and stood at 18% versus 11% in the same period of last year. That's a 7 percentage points advance. Cash EBITDA was up 84% year-on-year to 63.5 million euros, which compares to 34.5 million euros in the first half of 2023. Please turn to slide 10 of the presentation. Revenue margin, excluding adjusted revenue items, increased by 13% to €327 million, mostly driven by an increase in the prime side of the revenue margin, which is up 67%, following the successful expansion of the prime value base. Prime revenue margin growth rates were offset by the non-prime revenue margin, which decreased 19% versus the first 123%, as the first quarter of 23 was positively impacted by the catch-up of the Omicron bookings. Prime revenue margin growth rates were offset by the non-prime revenue margin, which decreased 19% versus the first half, as the first quarter was again impacted. The variable costs were broadly in line with the first half of 23, despite higher revenue margin, as maturity of prime members increases and reduces the member acquisition costs. Overall, the first half of 24 has seen the improving trends we saw during fiscal 23 continue and significant improvements in profitability as we have more prime members renewing their memberships. Fixed costs increased by 5.5 million euros, mainly driven by higher personal costs as we scale the business. As a result, adjusted EBITDA was 36.1 million, a material increase versus the same period of last year. Adjusted net income was a 2 million euro loss in the first half of 24. That's a meaningful improvement versus a loss of 19 million in the first half of 23. This was mainly due to the second half of 24 not having the revenue adjustment in prime of 7.9 when we changed the estimates, and a 10.5 million of higher tax expenses in Spain on higher taxable profits. Turning now to slide 11. I will take you through the cash flow statement. In the first half of 24, we ended the second quarter with a positive cash flow from operations of 73.7 million euros following the growth of our business. We had a working capital inflow of 31.7 million, again driven by the growth of our business. We remind you that in the first quarter of 23, the higher inflow in working capital was positively impacted by the catch-up effect of the Omicron period bookings. We have managed our liquidity position well, a consequence of a strong business model, cash generation, and active management. At the end of September 23, the liquidity position was strong at €237 million. We have invested €23 million in the first half of 2024, That's an increase of 6.8 million euros as we capitalized the development of software with that. Cash used in financing amounted to 16.7 million euros compared to 50.3 in the first half of 23. The difference of 33.7 relates to the absence in 24 of three elements that happened in 23. The repayment of the revolver by 45 million, The payment of costs associated with the refinancing of 3.4 million offset by a revolver drawdown of 15 million euros. Let's now move to our strategy performance updates. In the two years that have passed since November 21st, Capital Markets Day, there have been lots of movement in the market. We have had Omicron. We had the Ukraine invasion. We've had flight disruptions. We've had high inflation, but our investment thesis remains exactly the same. Nothing has structurally changed for that, and we're fully on track and reconfirm our fiscal 25 guidance. Please turn to slide 13. Let me start with our first KPI, which is the prime numbers. We are very confident we will achieve the 7.25 billion subscribers in fiscal 45 as we have a large addressable market, and very realistic assumptions. We are ahead in terms of net ads. The reason we were confident in exceeding the 7.25 million subscribers by March of 25 is because the addressable market is huge, and we have very realistic and conservative assumptions. More than 70% of the new Prime members we get are new customers. This indicates the product is equally attractive for travelers who did not transact with us in the past, and that is is a huge and awful market. Our assumptions are very realistic. The implied penetration rate needed to reach 7.25 million members by fiscal 24 is 2.5% in the 10 markets in which we currently offer Prime. This is assuming no additional markets launched. In the market we have been operating in longest, which is France, we're already at 5.2% penetration, and the rest of the markets, excluding the U.S., are at 2.1%. Furthermore, on average, in the rest of the markets, excluding France and the U.S., in which Prime has been live on average for 3.5 years, we have an average penetration of only 2.1%. Please turn to slide 13. Prime has demonstrated the ability to capture customers even during major macroeconomic events. During COVID, Ukraine war, flight disruptions, high inflation, Prime continues to attract new subscribers in large numbers. Over the past two years, we have added 3.4 million new Prime members. If you could now please turn to slide 18, our second KPI that we set two years ago is Arapu. Two years on from the capital markets day, the Prime Arapu is on track to meet our fiscal plan guidance as well. Primark has anticipated and guided in the second quarter of fiscal 24 increased to 78.8 euros. This is converging towards our target of 80 euros per user. Main reason for the output rising is because of the increased usage of the program and increased value for number of that usage. Let's now move to a third KPI and target, which is cash EVTA, which is well on track to reach the $180 million by fiscal 25, as we announced back in November of 21. Cash immunization is starting to show as expected the desired results. Consequently, profit margin and free cash flow are also increasing as the prime member base matures progressively. If you look at slide 20, as you may remember, because we showed this in the first half of fiscal 23, a strategy update, so one year ago, This slide shows you the breakout of our subscribers between year one and year two onwards, and outlines how cash marginal profit margins increase as Prime members become more mature. You will recall that in year one of a customer's membership, we do incur considerable customer acquisition costs. However, from the second booking and after renewal, the profitability increases, and there's no meaningful CAC thereafter. So that percentage changes, so too does the average company cash margin or profit. On the left-hand side is last year's prime cash margin or profit margin mix of year one and year two with 61% and 39% respectively of the cash revenue margin. So you take the margin figure, multiply by the actual speed of revenue derived from the prime members in first year versus second and subsequent, and you obtain the aggregate cash margin or profit for the prime side of our business, which was 31%. On the right-hand side, we show the same mechanism, but for today's figures. You can see clearly that the percentage of revenue coming from year two plus members increase from 39% in fiscal 23 to 63% in fiscal 24. The aggregate margin increases in a mathematical way from 31% to 36% today, a five percentage points increase in a single year. Conceptually, As the portion of year two plus members increases, so do our margins, since year two members have very low cap. Thus, as you can see, margins will continue to increase progressively from now to fiscal 25. If you could please turn to slide 21, it is important to highlight that as cash EBITDA continues to grow, our free cash flow, excluding non-prime working capital, grows even more. As you can see on the slide, it doubled in the past six months and will outperform cash EBITDA growth again in the next 18 months. And just to be clear, this analysis excludes any uses of cash applied to either reduction of debt or repurchase of equity. The reason for this outperformance of cash flow versus cash EBITDA is that while the increase in margins from a higher share of year 2 plus members will lead to significant growth in cash EBITDA, on the other hand, capex, interest, and taxes will remain relatively constant. As a result, free cash flow will outperform cash EBITDA growth again in the next 18 months. I will now turn the presentation back to Dana to cover our long-term fundamentals and do some final closing remarks before we open the webcast for a Q&A session. Thank you, David.