Yatra Online, Inc.

Good day and welcome to the Yatra first quarter 2022 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Manish Timrajani. Please go ahead.

Thank you, Katie. Good morning, everyone. Welcome to the Yatra fiscal first quarter 2022 financial results for the period ended June 30th, 2021. I'm pleased to be joined on the call today by Yatra CU and co-founder Drew Stringy. The following discussion, including responses to your questions, reflects management's views as of today, August 19, 2021. We do not undertake any obligation to update or revise the information. Before we begin our formal remarks, allow me to remind you that certain statements made during the course of the discussion may constitute forward-looking statements which are based on management's current expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond the company's control. These include expectations and assumptions related to the impact of the COVID-19 pandemic. For a description of these risks, please refer to our filings with the SEC and our press release this morning. Copies of this and other filings are available from the SEC and on the IR section of our website. With that, let me turn the call over to Dhruv. Thank you, Manish. Good morning, everyone. And thank you for joining us. I hope that you and your families are safe as we continue to navigate our way through this pandemic. As you're all probably aware, India was hit particularly hard by the second wave of COVID-19, with cases reaching over 400,000 a day at its height in the quarter. This led to widespread localized lockdowns across the country, significantly reducing air travel, though not as severe as a year ago. The impact was widespread and touched most of us personally. with family, friends, and employees impacted. Despite these challenging conditions, we continued our strong execution. Adjusted revenue was rupees 489 million, which is approximately 6.6 million US dollars, down about 50% from the prior quarter due to the effect of the widespread lockdowns across India, but up 107% versus a year ago when India was first placed under lockdown. Despite the effects of this second wave, I'm proud to report that stringent cost controls enabled us to deliver positive adjusted EBITDA of INR 39 million, which is approximately half a million US dollars. As I've been telling our shareholders, Yatra will exit the pandemic a more financially stable and profitable company than it was pre-pandemic. And as a result, we'll be in a much better position to kept maximize shareholder value going forward. While we're not out of the woods yet, I am guardedly optimistic that the worst of the lockdown is now behind us and that we saw the trough in travel this June. The combination of lockdown and the vaccination drive has lowered case counts to a level low enough right now to encourage a recovery in travel. July industry air passenger numbers grew 56% and the strength has continued into August. I'll go into more detail shortly But Yatra has seen a rapid recovery in consumer travel and hotel bookings in July and August. Perhaps more importantly, corporate travel is finally starting to come back and rapidly. Recall that before the pandemic hit, B2B accounted for approximately 50% of Yatra's gross bookings and greater than that of our profitability. Why is corporate travel coming back now? The reasons are manifold, but we believe the most significant factor in corporate travel recovery is the genuinely remarkable mass vaccination program India has undertaken. India is vaccinating nearly 5 million people per day. To date, 557 million plus doses of the vaccine have been administered, with 123 million people, approximately 9% of the population, getting fully vaccinated. and another 434 million people, which is about 32% of the population, having received at least one dose. At the current pace, we anticipate close to half of India's population being fully vaccinated by the end of this year, which will reassure businesses that they are getting back to normal. I'm very confident that the industry is well on its path to recovery. As we look forward to the end of this pandemic, which we believe will be driven by the pace of vaccination in the coming months, travel should recover strongly, as evidenced by the strong recovery post the first wave. Now coming to our June quarter performance. In the June quarter, we felt the brunt of the impact of the second wave in India. Adjusted revenue of $6.6 million was up 107% year over year, but down 50% sequentially. Despite the sequential revenue decline, our tight cost management helped us achieve positive adjusted EBITDA of half a million dollars, and we ended the quarter with a solid balance sheet with a cash balance of approximately $30 million. As we look to the year ahead, we see travel rapidly recovering as vaccination accelerates and travel restrictions gradually lift with domestic in the near term and international towards the latter part of this year. We continue to hold our costs to the minimum and we believe we have adequate liquidity on the balance sheet to see us back to sustained profitability. On the consumer side, we are beginning to see demand coming back in domestic travel on account of the low case counts and the vaccination drive in India. In the month of July, air passengers grew 56% from June and are currently trending at a growth rate of 39% for the month of August over July. We expect the recovery in international to continue to be more gradual and more likely towards the end of this calendar year. and largely dependent on the case counts and the rate of global vaccination. Having said that, of late, a number of European countries, including Switzerland, France, Spain, have eased restrictions on travel for fully vaccinated Indian citizens, and the UAE also today announced further easing of travel restrictions. This should give a boost to international travel in the short term as well. Air passengers booked was up 170% year over year in the June quarter, but down 62% sequentially, reflecting the impact of the second wave. Our hotel room nights almost quadrupled year over year, but was down 76% sequentially. On both air and hotel at a competitive level, we continue to see moderate to low levels of competitive intensity during this quarter. We're also currently in the process of expanding payment options such as book now, pay later solutions, which are similar to Afterpay that some of you might be familiar with on a consumer platform to enable customers greater flexibility of payment timings. On the corporate side of things, our corporate travel business is beginning to recover well. We are seeing a strong recovery in business as more employees continue to get fully vaccinated. July gross booking for corporate grew 268% over June. and August is trending at 316% growth over June. And August, it looks most likely to be the best month for corporate travel since March 2020. We are optimistic about the growth and recovery based on the trends that we are witnessing in the months of July and August, and believe that our healthy balance sheet puts us in a solid position to capitalize as the recovery continues to gain momentum. Our pipeline of prospective new customers continues to grow as well, as inbound interest has increased meaningfully post-pandemic. We believe online penetration in the corporate travel market in India is approximately 10 to 15%. A large part of the market today, approximately 60%, is served by smaller to mid-tier offline players. As a result of the pandemic, we see evidence of an accelerated shift towards online players, especially as contracts come up to the end of life and rebidding. Once we get back to normal, Given our recent new customer signings and our ability to gain share in this highly fragmented market, we believe it is possible that corporate travel accelerates growth to levels higher than pre-pandemic. One other strategic road driver for us is the expansion of our corporate digital platform as we continue to add non-travel related services to our captive corporate customer base. As the largest corporate travel service provider in the country, we have strong relationships with some of the biggest and best known enterprises in India. We continue to make inroads into these organizations with our non-travel offerings, primarily amongst which is freight. So let me now give you an update on our freight initiative. As we look towards digitizing the logistics space, our corporate travel relationships with both airlines and enterprise executive management, together with our technology capabilities, give us a significant head start. Despite the pandemic, we have rapidly scaled up this business over the past few months, And we believe this business longer term has the potential to be even larger than a corporate travel business. We now have a team of almost 200 seasoned freight and logistics industry professionals who we believe can help scale up this business. We expect 2022 to be a year of rapid expansion for this business. The freight industry is multiple times the size of the travel industry and exhibits similar attributes to what the business travel industry did about a decade ago. The industry is highly fragmented as very low levels of technology adoption. We are fortunate to be able to leverage the expertise we have built in our corporate travel platform over the past several years. And we can look at leveraging that strength for building out our freight travel platform as well. Additionally, we are also looking to leverage our existing vendor and corporate relationships on both the supply side and demand side of our freight business. We remain confident in our platform capabilities to serve any scale and type of customer. Our corporate customer base is a great asset for us and is a platform that we intend to leverage to cross-sell services. As of June 30th, 2021, the balance of cash and cash equivalents and term deposits on our balance sheet was Rupees 2.263 billion or approximately USD 31 million. When we come out of this pandemic on the back of the secular growth in Indian travel, the mid-teen signing growth we made during the pandemic in new customers, and in the growth of our hotel network, our digital platform business, has the potential to grow to the size of our pre-pandemic corporate travel business in the coming years. We should be on a significantly better revenue growth trajectory as we come out of the pandemic. We believe the opportunity ahead for Yatra is massive. We believe Indian internet travel will hit an inflection point in the coming years as we get past COVID. And we believe corporate travel, where we are the leaders, will recover quickly and also adopt technology at a rapid pace. In addition, the efforts we made during the pandemic to improve operational efficiency will lead to significantly higher levels of profitability and cash flow. I want to thank our shareholders who have stood by Yatra through these trying times. I am hopeful and honestly believe it is only a matter of time before your patience and understanding are rewarded. Finally, I would like to extend my appreciation to our employees whose hard work and dedication is the ultimate driver of our success. I also want to voice my sympathies to my friends and colleagues, many of whom have lost near and dear ones in this pandemic. Stay safe and healthy. Our prayers are with you. Before I open the call for questions, I would like to make a few additional comments. You may have seen a recent filing by one of our shareholders commenting on our business and strategy. This morning, we have issued an open letter to all of our shareholders articulating our perspective on the opportunities that Yatra has to succeed as the travel market recovers from the pandemic. As I have discussed on today's call, we are well-positioned and we are now excited about the initiatives we have underway to create shareholder value. Now, we'd be happy to take any questions you have about our business and outlook. Manish, over to you. Thank you, Dhruv. Operator, please open up the calls for Q&A.

Thank you, sir. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll pause for just a moment to allow everyone the opportunity to signal for questions. Thank you. Our first question comes from Scott Buck with HC Wainwright.