Yatra Online Limited

Thank you, Katy. Good morning, everyone.

Welcome to Yatra's fiscal fourth quarter and full year 2019 financial results for the period ended March 31, 2019. I am pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi; and our CFO, Alok Vaish.

The following discussion, including responses to your questions, reflects management's views as of today, July 23, 2019. We do not undertake any obligation to update or revise the information.

As always some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to Company's filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements.

Additional information concerning these statements is contained in the Risk Factors section of the Company's Annual Report on Form 20-F filed with the SEC on July 31, 2018. Copies of this and other filings are available from the SEC and on the Investor Relations section of our website.

Please note that the purpose of this call is to discuss our fourth quarter results and we are not answering any questions on the EBIX merger. We will file our proxy materials with additional information about the merger in due course.

Thank you. With that, let me turn the call over to Dhruv.

Thank you, Manish. Before we actually talk about the quarter, let me just quickly touch base on the pending merger with EBIX.

As you know, on July 17th we announced that we have entered into a definitive agreement under which EBIX will acquire Yatra via a merger. In connection with the merger, each share of Yatra will be entitled to receive 0.005 shares of a new class of preferred stock of EBIX.

Each share of EBIX convertible preferred stock received to each Yatra ordinary share will in turn be convertible into 20 shares of common stock of EBIX. We will file our proxy materials with additional information about the merger in due course.

As we said that we are quite excited about this transaction. This provides our shareholders with the opportunity to participate in the significant upside potential of the combined entity.

As part of EBIX’s EbixCash Travel business, we will be a larger more diversified organization with the necessary scale and resources to be a leader in today’s dynamic travel market. We will provide more options and an enhanced experience for our joint customers and will be an even stronger partner to the airlines, hotels, car rental and other businesses we work with.

We are confident that combining Yatra’s loyal customer base, comprehensive service offering and multi-channel platform with EBIX’s complementary Via and Mercury businesses will create a leading online travel platform and India’s largest corporate travel platform that will help capture growth opportunities and deliver enhanced value to shareholders. That said, the purpose of today’s call is to discuss Yatra’s fourth quarter and full year results.

We will file our proxy material as I mentioned earlier with additional information about the merger in due course. Moving on to our results, in the last twelve months, we further consolidated our position as the leader in the large and growing business travel market in India on the consumer front as well we continue to grow our market position driven by the strength of our brand.

A combination of these factors helped us deliver annual adjusted revenue growth of 20.3% coming in ahead of our guidance despite a very challenging macro environment towards the latter half of fiscal year 2019. We were able to deliver solid growth in the March 2019 quarter, as well despite a challenging aviation macro environment with air ticketing gross bookings up 17.6% against a backdrop of low-single-digit domestic air passenger growth.

During the quarter, we also accrued for certain charges which adversely impacted our adjusted EBITDA for the quarter by $266.9 million. These charges primarily relate to the bankruptcy proceedings of Jet Airways.

Excluding the effect of these charges, our adjusted EBITDA loss for the quarter would have improved from a loss of $623.2 million to a loss of INR166.3 million in the quarter. We believe that our unique approach to combining business travel and consumer travel in an emerging growth market like India positions us well to capitalize on the rapidly expanding travel industry in India.

We expect the macro environment to remain challenging on the aviation time for the next couple of quarters. However, despite this, we continue to make good progress towards our objective of achieving breakeven adjusted EBITDA in the near-term.

We expect the aviation sector to largely recover from Jet Airways’ headwinds in the second half of this fiscal year. From a longer term perspective, industry experts have forecasted India to become the third largest aviation market by 2022 and there are plans to double the number of aircrafts over the next five years and double the number of operational airports in India over the next twelve years.

Now onto some additional data points that reflects the strength of our business during the quarter. Revenue from our Air Ticketing business grew 17.5% in the fourth quarter, largely driven by gross bookings growth of 12.4%.

However air business continues to outpace the growth of the overall market on both domestic and international travel. If I turn to our goal of attaining the EBITDA, our adjusted EBITDA breakeven in the near-term, we made a conscious decision to lower our marketing spend on the loss-making Consumer Hotel business.

As a result, our Hotel and Packages business declined during the quarter with adjusted revenue down 12.1% year-over-year with gross bookings down 18.2%. Our net revenue margin however improved by 100 basis points year-over-year to 14.3%.

On the Corporate Travel business, where we believe we are firmly entrenched as the largest corporate travel provider in India in terms of gross bookings, corporate travel opportunity in India to our mind is more exciting and larger opportunity in India with regards to the travel industry and is projected to grow at over 12% per annum through 2020 making India the fastest growing corporate travel market in the world according to KPMG Research. We continue to win new business and migrate new customers onto our corporate platform.

Not too long ago we signed on Sony Pictures on our corporate platform. This is just another example of the kind of marquee customers that we are able to attract to a mature and feature-edge corporate platform.

We are also making good inroads into cross-selling our hotel product to our existing corporate travel customers. Our online self-booking platform adoption continues to grow strongly with about 52% of Yatra’s organic Corporate Travel business transactions now being done on the self-book platform.

Also we continue to migrate customers from being business travelers to personal travelers on the Yatra’s platform. We have mentioned this in the past, but I again want to just reiterate that in an emerging market with limited disposable income, Business Travel is generally the first foremost travel undertaken by customers.

As such, by being the leader in Business Travel, we believe that we are in a position to capture some of the most attractive consumers in India as they make their first online travel purchase. We believe that there is tremendous opportunity to cross-sell Yatra’s hotel inventory to the over 861 strong corporate customer base.

On the cross-sell front, we are beginning to see some traction on Yatra’s SMART events which is a curated lodging service for corporate customers at standardized pricing and standardized service backed by our own quality assurance. On the mobile traffic front, mobile traffic continues to garner the largest share of our overall traffic with 82% of our traffic during the quarter coming from mobile devices.

We expect to see this trend continue as the cost of mobile data continues to drop in India. And I am pleased to announce that our organic mobile App downloads have now crossed the 17.4 million mark as well, as we added 0.6 million new installs in the last quarter.

Additionally, I would like to point that our App – our Apps have been the highest approval ratings on the Play Store. As we continue to focus more on the quality of our downloads versus the quantity, as is evident by gross bookings per download which continue to lead our peers by a wide margin.

We think that on the back of our high band recall and redistribution network across India and now our leadership position in Corporate Travel, we are well positioned to strongly capitalize on the next phase of growth. I am now going to hand it over to Alok to walk you through the details of the financial performance.

Alok?

Thank you, Dhruv. On the key financial highlights for the year, on an overall basis, our adjusted revenue grew by 20.3% year-over-year to INR8.9 billion, which is slightly ahead of our guidance of at least 20% growth.

Gross air passengers booked were 10.2 million representing year-over-year growth of 14.5% with a favorable mix towards international travel. Standalone hotel room nights booked were 2.3 million representing an increase of 11.6% year-over-year.

Coming to the quarter results for the year ending March 31, 2019, on an overall basis, our adjusted revenue grew by 17.5% year-over-year to INR2.44 billion. Gross air passengers booked were 2.64 million representing year-over-year growth of 5.3%.

Standalone hotel room nights booked were 586,000 representing a decrease of 14.1% year-over-year. Adjusted revenue from our Air Ticketing business increased by 18.4% to INR1.6 billion in the current quarter.

This growth was driven by an increase in gross bookings of 17.6% to INR26.1 billion in the current quarter. Our net revenue margins improved by ten basis points year-over-year to 6.3%.

On Hotels and Packages, our adjusted revenue for this segment declined 12.1% year-over-year to INR441 million in the current quarter. This decline was due to a conscious effort on our part to reduce marketing spend on the loss-making Consumer Hotel business and also decision to shutdown of our physical retail stores in a drive towards profitability.

Our other revenue grew by 86% to INR370 million. On the expenses front, marketing and sales promotion expenses decreased by 86% to INR159 million in the current quarter, post adoption of IFRS 15 on April 1, 2018.

Adding back the expenses for consumer promotions and loyalty program costs, our marketing and sales promotion expenses for the quarter ended March 31, 2019 would have been INR1.2 billion, which would be 2.9% higher from a year-over-year prior quarter. This was lower than the growth in adjusted revenue for the three months ended March 31, 2019 of 17.5%.

Our personal expenses decreased by 31% to INR509 million in the current quarter from INR743 million in the three months ended March 31, 2018. This decrease was primarily due to a decrease in employee share-based payment expense to INR4.9 million in the three months ended March 31, 2019 from INR142 million in the prior year quarter, the outsourcing of customer contact centers and also certain rationalization of headcount.

Other operating expenses decreased by 4.5% to INR1.2 billion in the current quarter from INR1.25 billion in the prior year quarter, primarily due to decrease in rates and taxes, traveling and conveyance, and remeasurement of contingent consideration in the quarter ending March 31, 2019. This was partially offset by increase in payment gateway expenses, legal and professional expenses, call center outsourcing expenses and provision for doubtful debts due to sufficing of operations and subsequent insolvency proceedings for Jet Airways and technology tools provided by GDS resulting in a charge of INR202 million.

As a result of the foregoing factors, our loss for the quarter was INR859 million. Adjusted EBITDA loss for this quarter was INR433 million as compared to adjusted EBITDA loss of INR 623 million in the year ago quarter.

Taking into account the certain charges related to Jet Airways being referred to insolvency process, and the reservation content movement on GDS, which adversely impacted our adjusted EBITDA for the quarter by INR267 million and the projected reduction of brand marketing spend for the current year and beyond, we should see reduction in our adjusted EBITDA losses going forward. As of March 31, 2019, the balance of cash and cash equivalents and term deposits on our balance sheet was INR3.2 billion or approximately $46.1 million, as compared to INR3.47 billion as of March 31, 2018.

This concludes our prepared remarks. Let me now turn it over to Katy for the Q&A.

Hey, how are you doing? Just one quick question for me.

Is there any way you can break out the percentage of revenue from the corporate business versus what was generated from the consumer segment for this year?

No, Jed, historically we haven’t broken that out. And unfortunately I won’t be able to share that in today’s call either.

That’s the decision I guess that we need to decide in terms of corporate segment break out which we are not doing at the moment. So hence I won’t be able to share that in the call.

Okay. Due to the pending acquisition, you will not be giving anymore guidance, correct?

That is right. Yes.

All right. And then, what’s the – can you sort of bridge what’s the difference between your net cash balance on the March 2019 balance sheet and the and how the enterprise value is calculated for the EBIX acquisition?

Because it seems like it went from like a net cash balance to net debt of about 100 million.

Jed, we will be sharing that as part of the proxy. So as we mentioned in our opening comments, in terms of how the price walk looks over there, how the fully diluted share count is calculated on the EBIX transaction, those are things that we will have to file as part of the proxy.

And we will request a little bit of patience on that. All this information should get covered in that.

Okay. And then just one more.

Once you are able to work – once – I guess, or once the industry is able to work out all this Jet Airways headwinds, I mean, when do you think the industry returns to normalized growth?

At this point in time, based on conversations with the airlines, it looks that it will take them the best part of this fiscal year to get to a more normalized growth rate. So you are looking at, maybe the latter half of this fiscal year or early part of calendar year 2020 to start seeing growth coming back to more normal levels.

And then, can you talk about sort of anything that’s developed competitively with your largest competitor acquiring a corporate travel provider and then how your expansion is progressing in the Middle East?

Sure. So with regards to the competition and acquisition that MakeMyTrip made, it’s a fairly small asset that they have acquired and as we’ve seen and said in the past, the corporate travel acquisition process of a customer is quite different from a normal B2C consumer that process goes through a much longer than larger technical evaluation process, it goes through a much more detailed RSP process, customers look at not just the technology but they look at your servicing strength as well.

It’s a full comprehensive offering. So while I understand that competition has made a small acquisition, we haven’t really seen any impact of that in the market at this point in time.

We remain very confident that the kind of comprehensive product that we have created and the self-book implementations that we have done which deeply integrate within our customers creates a very sound barrier from a new competitor entrance point of view. So we are very secure in the position that we have on the corporate travel front.

Thank you.

Sure. Thanks, Jed.

Hi, Dhruv. Thanks for taking my question.

Sure.

I was hoping maybe you could give an update on the Agoda partnership and how that has progressed. I know it’s fairly early innings for that now, but hopefully get an update on how that’s going?

Sure. We’ve been expanding the number of properties that Agoda is live, that they initially went live with a state of about 5,000 properties.

That’s now almost doubled in terms of the number of properties that we’ve got live on Agoda right now. So we are seeing good progress over there.

In the overall scheme of things, it’s still relatively small. But given that the Agoda portfolio of 100,000 plus properties in India, as we start scaling up towards that number, we should see good traction out of that.

So, Agoda, we continue to be very positive about that partnership and we think there is a good opportunity for us to expand and use that to get inbound customers.

Great. And then, on the corporate travel front, I know, for a while now, it’s kind of benchmarked off of the KPMG kind of 12% growth in the sector and with your share being plus or minus that over the past several years.

What – I am just trying to understand because it seems like adjusting for the PL Worldways acquisition, the total large corporate customer count hasn’t seem to have changed very much. How much of the growth, whether it be 12% or more or less, would you expect to come from net new large corporate customers versus winning business within the existing customer base?

See, in the quarter that ended March, we have seen some slowdown in terms of organic growth on a same-customer basis. That number has been more in the late single-digits number as opposed to the high double-digit number.

But that’s on account of Jet Airways’ capacity going out and the amount of disruption that got calls in that quarter. And plus, we had elections which were coming in the subsequent month.

So on the back of that, corporate houses have been circumspect with regards to their expense. But post the elections which happened in middle of May, we have seen that number rebounding quite fastly.

So, on the whole, we think it from a growth point of view, we should again look at trending that 12 plus percent of that growth with that coming as organic, and then another 3% to 4% of new customer acquisition adding to north of 15% growth for the corporate business.

Great. That’s really helpful.

And then, one last, maybe somewhat nuance question. The EBIX Travelution product, that they gotten through Zillious and I noticed that in their deck they referenced Yatra as a customer.

Can you help me understand how Yatra uses that product?

Sure. So that product was being used by ATB.

That was the legacy system that ATB was using and over the course of the last few months now, we’ve migrated some of those customers on to the newer Yatra platform. In the new environment or rather the combined environment with Zillious and EBIX, our endeavor would be to create a best-in-class travel product which will combine the features from the Yatra product and the Zillious product.

So that’s where the two synergies will come from by combining and creating one best-in-class product.

Great. Thanks.

That’s all I’ve got and congratulations again on the deal.

Sure. Thank you, Andrew.

Sure. Thank you, Katy.

Just to again summarize, we are very excited about the merger opportunity that we see ahead with EBIX. I think there is tremendous amount of synergy opportunities which exist on the ground between their businesses and ours.

And it also creates a platform for us to be able to take our products like corporate travel to other emerging and high growth markets. So we are very excited about that opportunity and we look forward to interacting with all of you in the near future once we file the proxy statement.

Thank you. Thank you everyone.