Yatra Online, Inc.
Q2 2021 Earnings Call Transcript

Published: 7 Nov 2020

[Operator:]

Good day, and welcome to the Yatra Second Quarter 2021 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Manish Hemrajani. Please go ahead.

[Manish Hemrajani:]

Thank you, Katie. Good morning, everyone. Welcome to Yatra's fiscal second quarter 2021 financial results for the period ended September 30, 2020. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi. The following discussion, including responses to your questions reflect management views as of today, November 5, 2020. 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 a number of 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 filed this morning. Copies of this and other filings are available from the SEC and on the Investor Relations section of our website.

[Dhruv Shringi:]

Thank you, Manish. Good morning, everyone, and thank you for joining us. I hope that you and your families are all safe and healthy as we navigate our way through this pandemic. While the global COVID-19 pandemic continues to have a significant impact on travel, India is seeing a gradual recovery after the reopening of domestic aviation at the end of May. On the consumer side, domestic October passenger traffic numbers were up 33% month-over-month, and now have climbed back to 42% of October 2019 levels. In terms of capacity, we are back to between 55% to 60% of pre-COVID levels and passenger load factors continue to improve week-over-week. We believe capacity could reach 80% of pre-COVID levels by the end of the calendar year. Since the lifting of the lockdown back in June, we are seeing a meaningful shift towards online from offline. This has resulted in our domestic air market share rising by approximately 20% from pre-COVID levels in a relatively short period of time. We believe some of this shift in buyer behavior may be permanent in nature. On the international front, recovery has been a bit muted as airlines are operating under the air bubble agreements between countries. So far, we've seen approximately 10% capacity come back online. And this number as well continues to increase gradually, albeit slower than domestic. We expect the recovery in international to be more gradual since it's dependent on signing of international air bubble agreements. We anticipate approximately 20% of capacity to come online by the end of this calendar year. Domestic hotels have started taking bookings in May on a limited basis. And since September, a number of bookings have been trickling through. We are seeing some improvement happening as different states are easing the quarantine norms as well. And we expect to see gradual recovery here as well in the next quarter as people begin to undertake short-haul and driving holidays. The first impact of this we've seen post quarter end in the month of October, where there were 2 long weekends, and we've seen a healthy trend emerging of short-haul domestic holiday brakes. On the corporate travel side, where we are the leading provider in India, we expect travel to come back slower and will lag the recovery in consumer travel. That said, we believe we are well positioned to leverage our scalable SaaS technology platform and continue to take market share. I'm happy to report that we recently closed a significant customer who would rank amongst our top 20 customers and is one of the larger players in the retail sector.

[Manish Hemrajani:]

Katie, please open up.

[Operator:]

We'll take our first question from Matthew Galinko with Sidoti.

[Matthew Galinko:]

I guess, firstly, can you share any more color about the new corporate contract you referenced in the prepared remarks. Was that a competitive win? How did it come to be? If you could say anything about duration or sort of what got you over the hump to sign it now? And what was your experience trying to sign that sort of contract in this environment where corporate travel has been sort of limited?

[Dhruv Shringi:]

Sure. And good morning to you as well, Matt. in terms of this particular contract, this contract will now come in and fit in amongst one of our top 20 customers. It's been a lengthy engagement, as you would recall. Some of the corporate contracts can take anywhere between 3 to 6 months, even that time slightly longer for the contract itself to close and the company to go through a thorough evaluation process. At this point in time, the technology seems to have played an even more important role than earlier. The customer was very focused around digital solutions. They were also looking at the kind of disruption our business faced, and we were comparing that to the kind of disruption other offline players in the industry have faced. And I think that's something, at least in our reading of the situation is that bode really well for us. But given the online nature of the product and service that we are delivering, we were able to minimize the disruption for our customers when the pandemic hit. And even the refund claim processes, et cetera, subsequent to that had been fairly streamlined. So I think the technology played a very important role in their evaluation process. It was obviously a competitive bidding scenario, and I think that's been the differentiator for us.

[Matthew Galinko:]

Got it. I appreciate that. And then maybe just as a follow-up or maybe going towards, I guess, leisure travel. Does the quicker recovery on that side -- on the consumer side change your spending or marketing plans at all to try to maybe capture some of those transitions to online travel? Or do you go more into customer acquisition mode? Or do you feel that your brand and position in the market means that you're just kind of going to net some of -- or a decent portion of those customers that are now moving online?

[Dhruv Shringi:]

I think the brand that we have is a very strong and powerful one in the country, and we've already begun to see the impact of this. If you look at the numbers, you will see that there isn't really a meaningful step-up in marketing spend. And yet over the last few months, we've gained significant market share on the consumer side as well. We think this consumer market share gain is coming largely at the expense of the offline players, as customers move more towards adoption of digital versus offline. So, I think our guide is strong enough for us not needing to get into a large-scale customer acquisition and marketing spend, and we should be able to form on the basis of the strength of the brand itself.

[Operator:]

We'll take our next question from Scott Buck with H.C. Wainwright.

[Scott Buck:]

First one, I was hoping to get a little bit more color on bookings. I'm curious on the leisure side, if folks are booking for trips that are 2 weeks out or 6 months out? Trying to figure out how customers are viewing that?

[Dhruv Shringi:]

Scott, at this point in time, the bookings, which are happening are largely for near-term travel. And within that, also it's skewed within the next fortnight and then some spilling over into the subsequent fortnight or at the end of the month, but it's largely near-term travel. We've seen the odd bookings happening for people booking holidays for next summer, but those are still more the exception as opposed to the norm. The norm is still largely near-term travel within the next 30 days.

[Scott Buck:]

Okay. Great. That's very helpful. And two, I'm curious what you make of the argument that a lot of this corporate travel just won't come back. It's been permanently replaced by the Zoom calls and that sort of video conferencing. Just hoping to get your thoughts around that.

[Dhruv Shringi:]

Sure. So when we've had conversations, and we've had numerous such discussions with the CEOs and CFOs of our large corporate customers. There is, at this point in time, a question mark over a certain amount of corporate travel. And then we've indexed it, this is ranging between 10% to 20% of the total travel undertaken by companies. This is largely the travel, which is for internal reasons. So when you're going for an internal meeting, you're flying from Delhi to Mumbai for a 2-hour meeting, those kind of travel trips might, in the near term, happen digitally. So that risk is there when we are having these conversations. But what is also evident is that as India begins to open up and companies need to start growing their business again, business development trips will not be scaled back. So there will be a meaningful amount of travel, which will happen, maybe not to the same level because the internal trips will get pertained. The positive side for us, however, is that while on the per customer spend, we think the spend per customer might go down between 10% to 20%, depending on the nature of the customer. The new wins that we are looking at, and the pipeline that we are looking at building up right now. And I think, trend towards digitization and the move away from offline players is a very strong, and I believe, a permanent one. So on the whole, we feel over the next 12 months, while we might lose a bit on a per customer spend basis, we should be able to more than make up for it on new customer wins.

[Operator:]

That will conclude our question-and-answer session. At this time, I'd like to turn the call back over to your speakers for any additional or closing remarks.

[Manish Hemrajani:]

Thank you, Katie, for that. With this, we end our call for the day. Thanks for joining and stay safe out there.

[Dhruv Shringi:]

Thank you, everyone.

[Operator:]

That concludes today's call. We appreciate your participation.