Yatra Online, Inc.

Good morning and welcome to the YATRA's fourth quarter and full year 2023 earnings conference call. My name is Carla and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Manish Hamrajani. Please go ahead.

Thank you, Carla. Good morning, everyone. Welcome to Yatra's fiscal fourth quarter and FY20 financial results for the period ended March 31st, 2023. As always, I'm pleased to be joined in the call today by Yatra CEO and co-founder Dhruv Sringi and CFO Rohan Mittal. The following discussion, including responses to your questions, reflects management views as of today. May 30, 2023, we don't undertake any obligation to update or revise the information. Before we begin our formal remarks, allow me to remind you that certain statements made on today's call may constitute forward-looking statements which are based on management's current expectations and beliefs and are subject to several lists and uncertainties that could cause actual results to differ materially. For a description of these risks, please refer to our filings with the SEC and our press release file earlier this morning. Copies of this and other filings are available from the SEC and also on the IR section of our website at investors.kyatra.com. With that, let me turn the call over to Dhruv. Dhruv, please go ahead.

Thank you, Manish. And good morning, everyone. Also, thank you for joining us today for our fourth quarter earnings call of fiscal 23. We wrapped up the fourth quarter of fiscal 23 with our strongest quarter yet since the onset of COVID. We registered an exceptional year-over-year growth of 97.4% in revenue and 93.3% in adjusted revenue. This strong performance is attributed to the market recovering and also gaining shares in recent quarters in both our consumer and corporate travel businesses. And this has enabled us to achieve the highest incentive levels with most of our airline and GDS contracts for the full fiscal year 2023. India's domestic passenger traffic saw a sequential growth of 4.6% in the quarter ended March 2023. Compared to this, our domestic passenger traffic grew 33% sequentially. reflecting strong market share gains for both our consumer and corporate businesses. Notably, we signed a record number of 97 medium to large corporate customers in the year ended March 31st, 2023. This is a testament to our corporate segment leadership and capabilities and the continued recovery in the travel sector. On the consumer side, our strong brand and high brand recall helped grow the B2C business also significantly faster than the industry growth rate. A favorable macroeconomic backdrop with the domestic travel market in India surpassing pre-COVID levels also contributed to our impressive turnaround. Our revenue and adjusted revenue for the quarter ended 31st March 2023, were reportedly at INR 1.19 billion, which is USD 14.5 million approximately, and INR 1.89 billion, which is USD 23.1 million respectively. These were well ahead of our projected guidance range of US dollar 19.5 to 20.5 million in adjusted revenue issued last quarter. Adjusted EBITDA for the quarter reached INR 185.6 million, which is approximately USD 2.3 million, marking a significant increase of 251% year over year. The domestic aviation in India between quarter four of fiscal year 2022 and 2023 grew 52% year over year, reflecting a swift recovery from the lows of COVID, and the long-term growth trajectory for the Indian travel market remains very positive. This positive momentum has carried over into the new fiscal year as well, with April 2023 domestic air traffic rising 17% year over year, to 12.9 million passengers. International travel has also shown a steady improvement during the quarter ended March 31, 2023. It reached approximately 90% of pre-COVID levels as well. As we move forward, we remain optimistic and committed to leveraging these positive trends to drive further growth and success. I'll now give you a quick update on our ongoing IPO process in India. As you might recall, Yatra Online Limited, our Indian subsidiary also referred to as Yatra India, filed a draft redheading prospectus on March 25, 2022 with SEBI. This is in preparation for a potential initial public offering in India. The plan includes listing Yatra India's equity shares on the Indian Stock Exchange, hence referred to as the Indian IPO. On November 17th, 2022, we received the final observation letter from Sadi indicating that the IPO can open for subscription within a year from the set date. In light of this, we embarked on our India investor outreach in the early parts of the March quarter. This involved engaging with prominent investors in India, including leading domestic mutual funds, family offices, and hedge funds in the Indian market. The feedback has been very positive due to our strong performance, the evident recovery of both consumer and corporate travel businesses in India, and the favorable macro trends that suggest a potential for substantial growth in the sector for years to come. However, due to the broader macro environment in the global market, the investor feedback process has been lengthier than what we anticipated. Despite this, we have noted that key investors continue to express interest and engage. Our strong operating performance and macro tailwinds behind the industry give us the confidence in our prospects for a successful IPO in the near future. Aside from bolstering our financial position, we believe that this offering will provide us with the opportunity to be more assertive, pursue new corporate businesses, and also explore strategic alliances with partners who might not have been comfortable with an overseas structure in the past. Moving on to further details on the quarter, our consumer business gained further momentum on the back of the strong brand recall that the Yatra.com brand continues to enjoy in the market. And during the quarter, we closed 25 new corporate customers to close the full year with a record number of large and medium corporate customer signings of 97. as corporate travel continues to recover strongly post-COVID. International travel also continues to improve. As I mentioned earlier, it exited at about 90% of pre-COVID levels, and with the lifting of all restrictions now pretty much across Asia Pacific, we expect recovery in international travel to be pretty disc, and we expect international travel to make up for some of the lost ground over the course of the last 12 months. On the hotel front, our adjusted revenue was up 49.3% year-over-year, with standalone room nights up 34% year-over-year. Packages grew 35%, albeit from a small base. From a competitive standpoint, the intensity has remained stable from last quarter and remains manageable overall. In our drive for innovation in AI and data sciences and creating corporate sales growth and technology innovation, We made two key appointments this quarter. We welcomed Dr. Shakti Goyal, a seasoned technologist from IIT Delhi and MIT as chief scientist and chief data architect. We also welcomed Tarun Kumar Bakri as vice president corporate sales. He's a seasoned sales leader with three decades of travel domain experience and in his last role led American Express's sales efforts in India. From a macro standpoint, the Indian government remains strongly committed to the growth of airport infrastructure in India. An investment of roughly $3.3 billion has been earmarked for expenditure through FY26, signifying a substantial commitment towards infrastructure development. More than 70 projects worth approximately $2.2 billion are projected for completion by mid 2024. These projects encompass a wide array of improvements and expansions across several Indian cities. Notable initiatives include the construction of a new Greenfield Airport in Rajkot, extension of terminal buildings in Surat and Goa, expansion of the civil enclave at Gwalior Airport, and the construction of a new ATC tower in Calcutta, amongst others. Additionally, the government predicts a massive investment influx into India's aviation sector in the coming years. Over the next three years, it is estimated that both private airport operators and the state-owned airport authority of India will invest approximately $12 billion into this sector. This significant financial infusion is anticipated to increase the number of operational airports from the current tally of 140 to over 200. This strategic investment aligns with the government's vision of enhancing accessibility and connectivity across the nation on the liquidity front as of march 31st 2023 the balance of cash and cash equivalents and term deposits on a balance sheet was inr 1.09 billion which is approximately usd 13.3 million we plan to also start repaying the mac debt facility that we had taken on towards the end of calendar year 2022. We will start paying this off in tranches starting with the first tranche by June 30th and expect to repay the entire facility before its due date. We believe we remain adequately capitalized and have sufficient working capital facilities in place to continue to fund the robust growth in our corporate business. Given the ongoing recovery in corporate and leisure travel, our continued success in signing new large and medium sized enterprise customers, we believe we are poised for a strong FY24. Aside from seasonality, we expect our results to benefit from accelerating growth in both our corporate business and consumer business as we continue to add to our formidable blue chip customer base and leverage the strength of our brand. Just to reiterate, today Yatra serves one out of four of the top 100 listed companies in India by market cap, three out of the big four accounting firms and three of the top five technology companies in India, amongst others. Now onto guidance for FY24. Based on macro factors and our quarterly trends to date, we anticipate an adjusted revenue range of USD 88 to 92 million in constant currency for FY24, which translates to a growth range of approximately 18 to 23%. Taking advantage of the leverage in our business model, we anticipate that the adjusted EBITDA will grow at a much faster pace of 46 to 50% in FY24. Before I hand over to Rohan to walk you through the financial performance in more detail, I would like to talk about the recent bankruptcy protection filing by GoAir. On May 2nd, 2023, Go Airlines India Limited, or Go First, one of the smaller domestic airlines, filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal in India, citing the supply of faulty aircraft engines and failure of its engine supplier to replace them on time, which resulted in grounding of half of its fleet and consequent operational and financial issues. On May 10th, 2023, The Company Law Tribunal admitted the application and granted protection to Go First by imposing a moratorium against recovery by lessors, lenders, and other creditors of Go First. In addition, the Company Law Tribunal has appointed an interim resolution professional to operate Go First and to maintain Go First as a going concern. Yatra India has made the appropriate filing with the interim resolution professional in connection with its claims and as of date thereof go first has suspended all flights until may 30th 2023. goa's market share at the time of its filing for bankruptcy was approximately 6.4 percent and it's one of the relatively smaller airlines operating in india and given the amount of incremental capacity being added in the country by the other airlines we expect only a marginal impact on our business of GoAir's bankruptcy. While we remain optimistic that GoAir will commence operations in the near term, we have, as a matter of prudence, created a one-time provision of INR 39 million against the full amount that was due to us from GoAir at the time of this filing. Finally, I would like to express my deepest appreciation to our dedicated employees and shareholders for their unwavering support. With that, let me hand it over to Rohan to walk you through the details of the financial performance. Rohan?

Thank you, Dhruv. I will now review our quarter flow numbers for the grant for March 2023, followed by full year FY23 results. For the March quarter, our adjusted revenue increased by 93.3% on an year-on-year basis to INR 1.9 billion. The strong growth was driven by a rebound in the air passenger traffic by about 53%, further supported by an increase resulting in an overall 119% increase in air ticketing adjusted revenue to INR 1.5 billion. Adjusted revenue for hotels and packages was up 49% to INR 268 million on the back of a 34% growth in booked room nights. As the macro travel trends continue to witness strong tailwinds, we were able to grow our gross bookings to INR 17.8 billion in Q4, registering a YOY growth of 56%. It's important to note here that hotel and packages gross bookings doubled on a year-on-year basis, reflecting strength in corporate uptake of hotels. Turning to expenses, Quarter 4 marketing and sales promotion expenses, including an at-back for consumer promotions and loyalty program costs, increased by 144% to INR 1.05 billion. This enabled us to gain market share and unlock higher thresholds of income from GDS and airline suppliers. Our personal expenses increased by 10% on a year-on-year basis, to INR 279 million during Q4. The increase from the prior year was primarily due to the impact of reinstatement of salary to pre-pandemic levels, annual salary appraisals, and marginal increase in headcount, keeping in line with the overall business growth. The moderate increase relative to the 93% jump in adjusted revenue for the same period reinforces the operating leverage that is built on the back of automation of backing processes, as well as the adoption of self-booking tools in our corporate business. Other operating expenses in Q4 increased by 48.5% Y01 to INR 411 million. This was driven by an increase in commission, legal and professional charges, payment gateway charges, and provision for doubtful receivables. The net impact of all these factors led to a 3.5x year-on-year jump in adjusted EBITDA, from 53 million in Q4 FY22 to 185.6 million in Q4 FY23. On the back of a robust growth in our passenger count, we were able to achieve higher thresholds of incentives with our GDF and airline suppliers. These incremental incentives, net-off provisions begged them to prudently account for the ongoing go first insolvency led to a net positive impact to the tune of approximately INR 80 million in our adjusted EBITDA for quarter four. Now coming to the full year FY23 numbers, we have recorded an adjusted revenue of INR 6.2 billion, reflecting an 86% growth year on year over FY22. This was registered primarily on the back of a 96% year-on-year growth in adjusted revenue from air and a 78% growth in adjusted revenue from hotels and packages. At the quantitative level, air passengers booked saw a 56% year-on-year growth in FY23 versus FY22, while room nights booked increased by 72% during the same period. Due to all these factors, we were able to register an adjusted EBITDA profit of INR 423 million in FY23 versus an adjusted EBITDA loss of INR 159 million in FY22. Lastly, as of March 31st, 2023, the balance of cash, cash equivalents and term deposits was INR 1.09 billion This was marginally higher than the December quarter balance of 1.08 billion. With this, we conclude our prepared remarks and hand it back to the moderator for the Q&A. Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. If any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star followed by one. Our first question comes from Scott Buck from HC Wainwright. Your line is now open.

Hi, good morning, everyone. Thank you for taking my questions. First one for me, Dhruv, it looks like if I look at year-over-year adjusted revenue growth, hotels and packages seem to be lagging or ticketing by quite a bit. I'm just curious if you could talk a little bit about the dynamics there and whether there's

an opportunity for that to accelerate here in coming quarters sure so into uh firstly good morning scott in terms of hotels and packages if you look at the the numbers from a adjusted revenue standpoint hotels and packages grew 49 year over year in the quarter right so it's not you know by any means low growth It's just relative to air, which grew at about 120, 20%, right? So 49 or 49.3% looks relatively low, but still pretty impressive growth. On the hotel side, we do expect to see continued growth happening. The implementation cycle typically on hotels for corporate customers tends to be a bit longer than air. Hotels is more of a curated product. As you can imagine, different corporates will have different requirements of hotels. The geographic areas will vary. The kind of hotels that they want their employees to stay at will vary. So it's a very curated list that gets created for corporate customers. And hence, there's a slightly longer growth path or implementation cycle for that. But we expect to see strong growth continuing to happen out there as we go forward as well. So it's not a case of it lagging. I mean, yes, in relative terms, it's lagging air growth, but it's not that it's not growing by itself. It will continue to grow in strong ranges going forward as well.

I appreciate that. Scott, if you look at gross bookings, our hotel and packages gross bookings actually grew at about 100% year over year compared to air ticketing. Okay.

Yeah, no, I see that. Thanks. I appreciate that, Manish. Second one, Drew, historically, what has international been as a percentage of revenue, you know, if you go back pre-COVID, I guess?

So historically, international has been close to, it's been hovering between 25% to 30% in revenue terms pre-COVID.

Okay, and what is it today?

So today, it's still, you know, less than 20%. yeah it's recovering quickly but you know what's also played out very strongly is that we've seen uh traffic on the domestic side really be on a pair travel in india is becoming much more deep-seated and expanding into tier 2 tier 3 markets and the strength of our brand continues to resonate in these markets and as we are seeing more and more traffic pick up We are seeing stronger growth happening on the B2C domestic air. We do expect international to also continue to grow strongly. But at this point, domestic air is growing really strongly on the B2C side. On the corporate front, it's more or less a case of all boats driving. We are seeing strong growth happening on both domestic and international on the corporate front year over year.

Yep. That makes a lot of sense. And then last one for me, you guys have done a really nice job with the OPEX controls and kind of maintaining, you know, lower rate of growth there versus what you're seeing in the top line. I'm curious, you know, how confident are you that that can continue into 2024? It sounds like from the guidance that you feel pretty comfortable that you can, you know, kind of keep costs under control here.

Right. So on the workload fee, automation efforts that we've undertaken for the last, now coming on to three plus years, Scott. We are fairly confident that we'll be able to keep our costs broadly in check. There is a lot of time and effort that has gone into making the back end fairly automated and scalable. In addition to that, the change in consumer behavior that we're seeing on the corporate side with more and more employees self-booking is also looking like an irreversible one. it's unlikely that having now spent the last six, eight months doing pretty much everything on their own, employees will go back into an offline mode and go back into reverting to calls and emails. So I think these trends are fairly permanent in nature, and I would expect to see this leverage continue into the coming years as well.

Great. That's helpful. Congrats on the quarter, guys. Thank you very much.

Thank you, Scott.

Our next question comes from from . Please go ahead.

Hi, and thank you for taking my question, and congratulations for the good quarter. So I'm just curious about what is the margin difference between the business and the leisure revenue streams, and what are the main drivers for the margin and profit improvement going forward?

So the margin in terms of operating margin, the corporate business would be high teams to getting into 20% kind of range. And this is, you know, once you get back to the full pre-COVID scale, which is where we are now pretty close to. And on the B2C side of things, it would be in the high single digits in terms of operating margin. The main growth drivers and profitability drivers on the corporate side we've got strong operating leverage coming in on account of employees adopting technology. So it's reducing the amount of manpower that we need to support the same amount of business, right? So that's giving us strong leverage and it also provides a much more scalable model that your employee cost does not go up linearly, but instead ends up growing in only a step function. So we are seeing strong leverage on that. On the B2C side, while there is leverage on all other costs, The overall profitability of the B2C business is driven to a certain extent by the competitive intensity of the competitive landscape. At this point, the competitive landscape has been fairly stable. And that's allowing us to both gain market share because we've got a very strong brand in the market. So the minute the competitive landscape is more neutral, it leads to organic traffic growth for us and improved conversions for us. And we are seeing the effect of that play through. And that's what, you know, we are counting on going forward as well. We don't see the environment changing quite drastically. So to that extent, at this point, it seems like, you know, all boats are rising, all guns are firing, right? And business is growing very strongly.

Okay, thank you. And in terms of the IPO timing, is there anything additional you can tell us there? Is there any sort of deadline you have for that that has to be done by or?

The outside limit on that is 16th of November, so it can be done and priced anytime before 16th of November of 2023. We are actively, as we've put in our commentary as well, engaged in conversations with investors. We had to give it a break because we were in a quiet period, but now again, the process will start once the results are out in public.

Okay, thank you. And given that we're two months into the current quarter, have you seen that acceleration in the packages growth continue into the fiscal first quarter as well, or what are you seeing in this quarter?

Yes, so the momentum that we saw in Q4, we continue to see that carry forward into Q1 as well of the current fiscal year.

Okay, thank you. That was all from me.

Thank you.

Just as a reminder, if you would like to register a question, please press start followed by one on your telephone keypad. Our next question comes from, so we currently have no further questions.

Carla, I have a couple of questions that have come over email. Julie, if I may. Okay.

Yeah, of course.

Go ahead. Can you talk about the market share gains in air that you've seen this quarter? What is causing that and how do you expect to see that trending in the near to medium term?

Sure. The growth in market share on the air side is coming in on account of us gaining share on the back of the strength of the blind and also opening up new online channels of distribution where we are now gaining market share. We expect the growth to continue to be steady and much faster than market. Market itself is expected to grow in the early teens. We expect our growth to far outpace the growth in the market. So we expect our gains to be permanent in nature. We don't expect these to be short-lived gains, so to speak, of. We've also seen given that travel is going deeper and deeper into tier two, tier three markets, and there's strong demand emerging from these sectors. The strength of our brand continues to resonate in these markets. And that's also helping us gain more market share. And likewise on the corporate side, we've got new customer signings. We've signed 97 new customers. That's the highest ever in terms of new customer signings that we've done. And that also, as these customers end up getting implemented, will continue to accelerate our market share gains.

Thank you, Dhruv. I have one more. Please add some color initiatives in the Middle East and African markets. And what kind of contribution can we expect from these initiatives? What other markets are you looking at going forward? Sure.

So it's relatively early days when it comes to opening up of newer markets. We have established a toehold in the Middle East and African markets, and we are exploring a couple of other markets in Southeast Asia as well. The software business and software as a service business and software as a platform, the way we are trying to pitch is a very high EBITDA margin business. We do expect that this is a kind of business that can over the next few years deliver a 50 plus percent kind of operating margin but as of today it's still relatively early days and like a large fast platform sale it will have a slightly long gestation period to sell but once implemented should have a relatively high lifetime value thank you that's all i have from all the email questions sure Carla over to you back to the queue

Yep, so we do have a few more questions now. So if we go to Lisa Thompson from Zach's Investment Research. Good morning. Your line is now open.

Thank you. You cited that you had reached the highest payout slabs this quarter. Could you discuss how that works? And do they reset? Is it a time thing? And now that you're up there, are they going to change the hurdle for you?

Yeah, it's a good question, Lisa. So typically what will happen is in most contracts, there will be a tiered structure which will be there that based on the volume that you end up delivering, you end up getting incremental amounts as you keep going into the next higher slab. And typically this payout will start from zero and go to the threshold. So if you get, let's say, a slab moving from 2% to 2.5%, then that half a percent extra that you get is on your total sale. So that's the way the slabs will typically work. These slabs are set, these contracts are negotiated for one particular fiscal year, and then they start again. Similarly, in the case of the GDS contracts, there is a particular threshold that we need to meet. If you are below that threshold, then there is a lower payout which ends up happening. And if you achieve that threshold, then there's a higher payout that ends up happening.

Okay, so do they change it this year, now that your year's over, to higher numbers or to make it harder to reach?

In a few cases, they will. But typically, the growth which is there in the slabs is in line or the target is in line with market growth and capacity growth. So let's say if an airline is adding six, 7% incremental capacity, then the growth will be more or less linked into that plus a couple of percentage points. So we don't think that these labs will in any way be reset to an extent that will make it unachievable for us in the coming years. Okay, and is this why you need your guidance? Is this why you beat your guidance? That's right, we beat our guidance. Yes, because we were able to achieve the higher thresholds and that higher threshold brought out an incremental payout for the full year.

Okay, excellent. I'm just curious, do you think that you're going to be staying profitable or is there seasonality involved in that?

No, we expect to remain profitable. So despite the lower seasons which will come in, especially in the July, August, September period, we do expect business to continue to be profitable quarter on quarter.

Fantastic. My last question is, do you have some sort of idea of what percent of revenues come from corporate versus consumer?

So peak COVID, we were getting about half and half. of our revenue coming from corporate and consumer. I mean, we are now getting to a stage where we are getting closer and closer to about a 60-40 kind of split between corporate and consumer. That would be for the full year.

Thank you so much. Looking forward to future quarters. Looks good. Thank you.

Thank you so much, Lisa.

Thank you, Lisa. As a final reminder, if you would like to ask a question, please press start followed by one. Our next question comes from Cobb Sadler from Catamount. Please go ahead.

Hey, guys. Congrats on the numbers and the outlook. It looks like the corporate investments you've been making are starting to pay dividends and inflect. I had a question from the press release. I think you mentioned that the local listing would would help you or an AWU to maybe strike some partnerships or maybe did you say strategic investment or joint venture? Could you tell us to the extent that you can what you have in mind there? Thanks a lot.

Sure, Cobb. So there isn't really anything specific on that, Cobb, that I can point you towards. But that's more in terms of a general description of the kind of opportunities which exist. There are Indian corporates which are reluctant because of, let's say, you know, RBI, Reserve Bank of India, which is the central bank of India, central bank restrictions on overseas investments and all of it reluctant to look at overseas markets. And hence, it will provide them an alternative to look at, you know, partnerships, strategic investments and those kinds of opportunities. with Yatra in India. But there isn't really anything specific that we are pointing towards as this statement alludes to. It's not that we are pointing to anything specific through the statement. It's more of a generic statement of the kind of potential opportunities that would exist.

Got it. And is that, I'm assuming it's not aspirational. I'm assuming historically you probably had some sort of interest in doing things like this and you want to be able to kind of move on them? Is that the idea? Or is it just once you get the local currency, the local listing, that you will be able to pursue things like that? Or is it both? Thanks. And I have one follow-up.

Rob, it would not be possible for me to comment on that, especially in terms of any historical thing which may or may not have transpired.

I understand that. Okay. Uh, and then on, I believe Manish said that the, the IPO, uh, talks, um, or investor meetings or, um, marketing would, would resume to have that right. Uh, after, uh, now that you put your numbers out, is that, do you have a plan for that? And the bankers, uh, uh, kind of in, in, I guess you're probably limited as what you can say on this, but like, uh, to what extent, uh, I guess like, yeah, you can't ask you when, when you expect the IPO to happen, but, but, Um, I guess at minimum talks are going to resume. Is that right? Can you add any other color?

Yes, I think, you know, now that we've got the results out there, this is something that we would be updating investors with. And as you can see, there is strong momentum in the results and there is strong tailwind behind the business. So this is something that we would be updating investors with.

Okay. All right. Well, that sounds good. Uh, Hey, congrats on the numbers. Um, excellent numbers.

Thank you so much, Cob.

We currently have no further questions, so I will hand back to the management team for any final remarks.

Thank you. Thank you, everyone, for joining the call today. And as always, we are available by email or over the phone. Dhruv, any final remarks?

No, I just would like to thank again everyone for their continued support. As you would have seen in this quarter's numbers, we are seeing strong traction behind the business, and we expect the business to continue to perform well over the quarters to come. So thank you once again for your continued support.

Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.