Yatra Online, Inc.
Q2 2019 Earnings Call Transcript

Published: 3 Nov 2018

[Operator:]

Good day, and welcome to the Yatra Second Quarter 2019 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, sir.

[Manish Hemrajani:]

Thank you, Brandon. Good morning, everyone. Welcome to Yatra’s Fiscal Second Quarter 2019 Earnings Conference Call for the period ended September 30, 2018. On the call with me today are Yatra’s CEO and Co-Founder, Dhruv Shringi; and CFO, Alok Vaish. The following discussion, including responses to your questions, reflects management’s views as of today, November 1, 2018. 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, specifically 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. With that, let me now turn the call over to Dhruv. Dhruv, please go ahead.

[Dhruv Shringi:]

Thank you, Manish, and good morning, everyone. I am pleased to report that we’ve built on the strong start to fiscal 2019 with strong fiscal results in the second quarter as well. Our multichannel approach has enabled us to deliver another quarter of strong growth with a meaningful improvement in our adjusted EBITDA loss in the quarter. Our business platform and consumer business platform both continued to deliver strong adjusted revenue growth, while a combination of improved efficiency in our marketing spend and optimization in our cost base helped us deliver a meaningful improvement in our adjusted EBITDA loss. The integration of the ATB acquisition remains on track, and we expect about half of ATB’s customers to migrate onto the Yatra platform by the end of calendar year 2018, which should enable us to realize the resulting cost synergies. We remain confident of our ability to meet our growth objectives in this fiscal year and deliver a meaningful improvement year-over-year in our adjusted EBITDA loss. We believe that our unique strategy of segmenting customers between business and leisure travel is powerful. It enables us to better capture the highest spend and loyalty of business travelers, while separately service the more cost-conscious and opportunistic leisure travelers. We believe we are well positioned to capitalize on India’s rapidly expanding travel industry. This multichannel approach drove our top line with adjusted revenue up 23.7% year-over-year. Operating efficiencies driving cost savings, enabled us to reduce our adjusted EBITDA loss by 19% year-over-year to $3.2 million in the September quarter. Marketing expense was around 50% of adjusted revenue. Furthermore, the integration of ATB, as I mentioned earlier, is on track and we are beginning to realize the initial cost synergies. The full impact of this will start resulting from the next quarter. Let me now review the key operating highlights of the quarter. I’ll touch on the general macro environment, then review air, hotel, corporate travel and some of the other initiatives in marketing and technology. We believe the aviation macro trend will remain favorable over the long term due to lower discount penetration and government impetus, despite some near-term macro headwinds related to higher fuel prices and currency weakness. Overall air traffic was up 17% year-over-year in the September quarter. Our own air-ticketed passengers were up 22.1%, with gross bookings up 25.3% year-over-year, as we continue to take share on the back of our strong brand recognition and leadership position. Drilling down, Air Ticketing adjusted revenue posted growth of 14.4%, last year on account of lower Air take rate of 5.7% versus 6.3% last year, as a result of higher corporate business mix and higher airfares. This lower take rate, however, does not having any negative impact on our operating profitability, given the lower cost structure of the corporate travel side. In addition, part of the drop in Air take rate was made up by the increase in cross-sell revenue, which was affected under other income and grew 69% year-over-year as we continued to work towards improving attach rates for travel insurance and driving up advertisement revenue. Now let’s turn to Hotels. We continue to be the leading platform for domestic hotels and homestays, and I’m pleased to announce that we now have over 100,000 properties on our platform, as we added over 5,000 properties during the quarter. Our Hotel and Packages business grew at a rate of 33.8% on an adjusted-revenue basis, largely due to net revenue margin improvement of 210 basis points year-over-year to 13.7%, aided by gross booking growth of 13.6%. Standalone hotel room nights booked were up 30.2% year-over-year. We’re now just starting to realize the cross-sell benefits in our corporate business, and we anticipate further progress along that front as we continue to migrate legacy ATB corporate customers onto the Yatra platform. We saw some weakness in our holiday packages business, with packages passengers travel declining 15% year-over-year, largely on account of natural calamities that happened in the peak season in the high tourist states of Kerala and Himachal Pradesh. We recently launched a very innovative Flexi Stay product for hotels in India. This product allows customers to book budget and premium hotels with anytime check-in/check-out facility, while only paying for the time based usage of the room. We introduced the product in September of this year. It is being offered in two of India’s largest metro areas near Delhi and Bengaluru at this point in time, and two religious destinations of Shirdi and Tirupati. We will also start this year offering these packages and these products to our business travelers, driving meaningful savings in their travel spends. Most business travelers who travel for night today pay for full room charges, while only utilizing the room for 12 to 14 hours. With Flexi Stay, they can simply book a hotel from 8 p.m. in the night till 11 a.m. the following morning, and pay just 70% of the full-night price. That’s a direct saving of 30%. Let me now talk about our Corporate Travel business. In an emerging market with limited disposable income, business travel is generally the first form of travel undertaken by consumers. As such, by being the leader in business travel, we believe that we are positioned to capture some of the most attractive target group of customers in India as they make their first online travel purchase. Corporate travel demand also tends to be less price sensitive when it comes to fare hikes, an important characteristic when considering those near-term headwinds I mentioned earlier. We believe we are the largest corporate travel provider in India in terms of gross bookings. Corporate travel opportunity in India in our mind is the more exciting and larger opportunity in travel in front of us. It is projected to grow at an annual rate of over 12% through 2020. This makes India the fastest-growing corporate travel market in the world according to industry research. Next let me cover some recent accomplishments in our corporate travel segment. First, we continue to strengthen our presence in this segment. For example, we recently announced some key customer wins, with the largest one being Airtel, one of India’s leading wireless telecom providers. We now have well over 700 corporate customers using Yatra for their corporate travel needs. Secondly, while our recent partnership with Chrome River, a leading provider of expense management services in the U.S., is still in the early stages, we are starting to see some traction in customers opting for a bundled product with Chrome River EXPENSE as part of an integrated travel booking and expense solution for the authorized sell-through platform. I am very excited to report that our first customer with the bundled Chrome River EXPENSE solution is expected to go live in early December. With that, I would like to take this opportunity to congratulate the technology team that’s been working so hard at integrating the Chrome River solution within the Yatra Corporate Travel platform. Speaking of self-book, our online self-book platform adoption continues to grow very nicely. About 55% of Yatra’s organic corporate business transactions are completed on the self-book platform, up from 50% last quarter. Also, we continue to successfully migrate customers from business travelers to personal travelers. This number grew over 100% year-over-year. Let’s now turn to some of the business highlights. As I mentioned earlier, I am pleased with the progress we’ve made so far with the ATB integration. We expect about half of ATB’s customers to migrate onto the Yatra platform by the end of calendar year 2018, which has enabled us to realize cost synergies. We believe that there is a low-hanging opportunity to cross-sell Yatra’s Hotel platform, and a new entry to the combined over 700 strong corporate customer base. Moving on to the Corporate self-book tool which we launched for SMEs earlier this year, our customer base there has grown 50% sequentially in the last quarter alone, with now over 12,000 SMEs using our platform for their travel needs. Our mobile traffic continues to garner the largest share of our overall traffic, with 80% of our traffic during the quarter coming from mobile devices. Our organic mobile app downloads have now crossed the 16.1 million mark, as we added just under 1 million new installs in the quarter. On the cost side, while we clearly stand to benefit from cost synergies with the integration of ATB, I would also like to share with you some of the other steps that we’re taking to optimize to our cost. We recently completed the outsourcing of our call center operations, which we believe could result in cost savings of around $2 million per year. In closing, with our high brand recall, deep distribution network across India and our leadership position in corporate travel, we believe we are well positioned to capitalize on this next wave of growth. I am now going to turn the call over to Alok to walk you through the details of our financial performance. Alok?

[Alok Vaish:]

Thank you, Dhruv, and hello to everyone. As Dhruv mentioned in his opening remarks, we are very pleased with our performance in the ended 30th September, 2018. Let me step you through the key financial highlights, starting with the income statement. Our adjusted revenue grew by 23.7% year-over-year to INR 2.1 billion or $28.9 million. We also recorded a reduction of INR 27.9 million or US$0.4 million, which was related to the timing of recognition of revenue required by IFRS 15. Without considering the impact of this reduction in revenue, our adjusted revenue would have been $29.3 million for the current quarter as compared to $28.9 million. Gross air passengers booked were 2.67 million, that represents year-over-year growth of 22.1%. Standalone hotel room nights booked were 577,000, representing an increase of 30.2% year-over-year. Adjusted revenue from our Air Ticketing business increased by 14.4% to INR1.37 billion or $18.9 million in the current quarter. This growth was driven by a 25.3% increase in gross bookings to INR24 billion or $331 million in the current quarter. Gross bookings growth was offset by a decline in our net revenue margins to 5.7% versus 6.3% in the year-ago quarter, due a change in business mix in favor of B2E business and slightly higher domestic fares. Corporate business has a lower net revenue margin, but significantly better economics due to new digital marketing and sales promotion expenses and payment gateway costs. I would also like to highlight that our net revenue margin in the Air Ticketing business in the current quarter increased from 5.2% margin in the sequential previous quarter. Our Hotels and Packages, our adjusted revenue for this segment was up 32.8% year-over-year to INR428 billion or $5.9 million in the current quarter. This growth was driven largely by a net revenue margin improvement to 13.7% from 11.6% last year, with gross bookings growth of 13.6%. Our net revenue margin in the current quarter increased from 12.9% margin in the sequential previous quarter. Other revenue including other income grew by 69.4% to INR 295 million or $4.1 million from INR174 million in the prior-year quarter. Moving onto expenses. Marketing and sales promotion expenses decreased by 76% to INR199 million or $2.7 million in the quarter from INR828 million or $11.4 million in the prior-year quarter. Adding priority consumer promotions and loyalty program expenses, which were reduced from revenue according to IFRS 15, our marketing expense would have been INR1.05 billion or $14.5 million, which is 50.3% of adjusted revenue, similar to the ratio that was in Q1 of this fiscal year. Our personnel expenses decreased by 7.7% to INR616 million or $9.1 million in the current quarter from INR715 million or $9.9 million last year. This decrease was primarily due to a decrease in employee share-based payment expense to INR78 million or $1.1 million in the current quarter from INR184 million or $2.5 million in the prior year quarter. This was partially offset due to the impact of consolidation of ATB. Personnel costs as a percentage of adjusted revenue declined to 31.5% for the current quarter versus 42% in the prior year quarter. Other operating expenses increased by 89% to INR1.2 billion or $16.2 million in the current quarter from INR624 million or $8.6 million in the prior year quarter. The increase is primarily due to a re-measurement of contingent consideration of INR485 million for the acquisition of balance ATB shares. Increases of impairment gated expenses and commission, both due to increasing business volume and the impact of consolidation of ATB. Based on these factors and operating efficiencies, adjusted EBITDA loss has decreased by 19% year-over-year to INR233.6 million or $3.2 million in the current quarter, from INR to 289 million or $4 million in the year-ago quarter. Turning to liquidity, our cash position remains strong. As of September 30, 2018, the balance of cash and cash equivalents in term deposits on our balance sheet was INR5 billion or approximately $68.3 million. This obviously has converted via convenience exchange rate of INR 72.54 versus the prior-year quarter’s number was at exchange rate of INR68.5. In conclusion, we’re positive on the Indian macro environment. We see solid growth potential in air and hotels industry and believe we are uniquely positioned with a strong presence and market leadership in the corporate travel. We reiterate our guidance for fiscal ‘19 of over 20% growth in adjusted revenue, with a meaningful improvement in our adjusted EBITDA loss on the back of efficiency in marketing spend and leverage in operating costs. This concludes our prepared remarks. We can now open up the line for Q&A.

[Operator:]

[Operator Instructions] The first question will come from Jed Kelly with Oppenheimer.

[Jed Kelly:]

Yes. I guess, my first question is, it looks like your marketing sales and promotion, when you do all the add backs was up about 27% year-over-year, despite the continued strength in the corporate business. I think your competitor, I mean they grew their sales and marketing, I think in the low single digits. So can you just talk about some of the puts and takes around the increase in marketing expense this quarter?

[Dhruv Shringi:]

Yes, Jed, we can take that. Just in terms of by way of comparison, I think last year’s same quarter was a quarter where from a marketing point of view we were just coming of the back of a big brand campaign in the previous quarter, so it was very light from a marketing point of view. So there is a bit of base effect which is there. But if you look at it from a sequential point of view, you’ll see that there is sequential improvement in terms of marketing spend which has happened. The other thing which is also there is that there is a bit of onetime out here. We had the brand and the Yatra launch anniversary in the month of July/August, so 1st of August the launch of the Yatra brand. And during that phase this year, we have done a bit of incremental marketing around that from a consumer promotion standpoint. So there’s a bit of that as a onetime thing. But otherwise, if you were to look at sequentially, you’ll see that marketing continues to be optimized quarter-on-quarter.

[Jed Kelly:]

Okay. Yes, it’s just high, I guess still. I know just giving the strength in your Corporate segment, and I mean do you ever think about exploring marketing partnerships or partnerships in your core OTA segment, given -- and leveraging the Yatra brand, just given the strength of your Corporate segment? I mean by my math, the corporate sector is probably doing what this year, about $8 million to $10 million of EBITDA? That’s pretty solid and a nice story. And then I would think you might be able to get some leverage with a partnership. Just how do you think about that?

[Dhruv Shringi:]

Sure. That’s an interesting observation, Jed. I think that’s something that we continue to explore options around. There is some work which is going on in terms of partnerships around leveraging our brand with some other players in the sector. It’s maybe a bit early to give more details around that, but hopefully as they [indiscernible] in current and the next quarter, we’ll start sharing more details around that. But that’s definitely something which is actively being explored by us.

[Jed Kelly:]

And then just on the guidance, with net revenue above 20%, so sort of in that low 20% range, I mean can we still expect overall cash expenses to grow in maybe, what is it, the high single digits? I mean just how should think about that in terms of top-line and bottom-line guidance?

[Dhruv Shringi:]

So as we’ve guided, we continue to be positive and confident that we will grow at early 20s in terms of revenue less service costs. And on the cost side, we continue to see improvements, right. We’ve also just recently announced outsourcing for our contact centers, that should save us a couple of million dollars a year, and on a full year run rate basis, plus there are some other measures which are also been taken to optimize both marketing and non-marketing spend. There is work that’s going on in terms of the integration of the ATB business within our business and their customers migrating onto our platform. In fact, a large chunk of their customers migrated this morning on to the Yatra platform. So we do expect cost synergies to be there and meaningful ones to start resulting from the Jan/Feb/March quarter of calendar year 2019. So I think all in all we are very confident about getting to our revenue guidance, and also seeing a very meaningful improvement in our operating EBITDA.

[Jed Kelly:]

And then you said half the ATB customers are going to migrate by the end of fiscal ‘19. Is that just then the other half migrate after fiscal ‘19? That’s not a churn rate, correct?

[Dhruv Shringi:]

No. What I said was they would migrate by the end of calendar year 2018. So half will migrate by end of calendar year ‘18, and we expect 80%, 85% of them to migrate before the end of fiscal year 2019. So there will be maybe a few customers who will remain outstanding, because these customers have some unique requirements which will need to be built specifically for them. But barring those few customers, everyone else from ATB should be on the Yatra platform by the end of this fiscal year. So 50% before December 2018, and another 35% to 40% before 31st of March, 2019.

[Jed Kelly:]

And then one final one for me. Does ATB, are there any more earn out payments you’re going to have to make over the next 12 months?

[Dhruv Shringi:]

The last payment for that will get made in the next few days. But we expect this to happen within the current quarter itself. Beyond that, there won’t really be any other payout.

[Jed Kelly:]

And how much is that?

[Dhruv Shringi:]

So there’s one payout only. There’s one payout only, and that payout will be in the range of $15 million to $20 million.

[Jed Kelly:]

$15 million to $20 million.

[Dhruv Shringi:]

That’s the same payout, Jed, that we’ve been talking about all in all. There isn’t any other payout apart from that.

[Operator:]

[Operator Instructions] We will take our next question from Mark May with Citi. Please go ahead.

[Mark May:]

Apologize if it’s been covered already. But if you could talk a little bit about your confidence level in terms of being able to continue to meet your kind of breakeven targets this year. I’m sure there’s a lot that goes into that in terms of the competitive intensity on the consumer side of the business and whatnot. But maybe if you could just speak to your level of confidence and some of the key reasons why you’re confident, if you still are? And on the business travel side, I don’t know if it’s possible to talk a little bit about in the quarter, the pace of new customer wins as well as kind of trends in average spend per existing customer, that’d be helpful too.

[Dhruv Shringi:]

Sure. So in terms of the parts to breakeven, we continue to make strong progress towards that. If you look at even sequentially quarter-on-quarter, in the previous quarter at current exchange rates, I think our loss would translate into something in the range of $5 million, $5.5 million. From that $5 million, $5.5 million, it’s come down to about $3.2 million in the current quarter. Now agreed that seasonally, this is the weakest quarter in terms of overall spend and all. But directionally we continue to see meaningful improvement quarter-on-quarter our operating loss and this trend we expect to continue. We should see this happening in the subsequent 2, 3 quarters as well as we get to breakeven, which we are targeting in the quarter of April/May/June of 2019. Now obviously, Mark, as you already pointed out, there are some macro trends as well that need to be taken into account. But given the macros that we see right now and the overall trajectory of the business, we feel fairly good about that, right. We continue to be able to optimize on our cost base, we’re able to get efficiency on our marketing spend, we’re able to get new customer wins and that momentum continues to be fairly strong in terms of new customer wins on the corporate travel side and likewise on the SME side. So both of those continue to have a strong tailwind behind that. And on that front, I think that should see us through in the next 3 quarters like we’re looking at to get to that breakeven number. In terms of average spends on the corporate travel side, on the average spends, we haven’t really seen any material movement on that Q-on-Q. We’ve seen air ticket prices begin to firm up slightly, so we are seeing maybe a couple of percentage points, so 2%, 2.5% of increase in terms of airfare yield year-over-year. But on the whole, the trends continue to be fairly similar to the previous quarter. The underlying macroeconomic growth in India continues to be very strong and we think as we get into the election year which is going to be next year, we will see increased spendings happening by certain sectors of the economy. So these are sectors like, for example trains, we see telecom being another sector where there will be continued investment that will continue to happen, there’ll be more growth over there. And these sectors along with sectors like consulting, where we are very strong, and we’ve got all the big 4 accounting firms, we’ve got people like BCG on our platform. We think from there, we will continue to see significant growth in the corporate travel spends. The other part which is there is the SME part. Today we’ve got about 12,000-odd SMEs on our platform. We want to -- we’ve got ambitious plans for this sector. We do want to scale this 12,000 number up to 100,000 in the course of the next 12 months. So I think that’s something we are very excited about, and we see very strong tailwinds in that sector as well. So on the corporate side of the business, I would cite I think we’ve got things firmly aligned for I think at least a continued growth over the next few quarters. I think we’ve got enough visibility on that.

[Operator:]

[Operator Instructions] The next question will come from Arya Sen with Jefferies. Please go ahead.

[Arya Sen:]

Firstly, if you could comment on the competitive intensity, specifically given that OYO has raised a lot of funding on the budget travel side. And on the Air Ticketing and B2B side, I think MakeMyTrip, in its recent call, TalkTalk becoming more active on the B2B side. Keeping these in perspective, if you could talk about how you see competition?

[Dhruv Shringi:]

Sure. Arya, so with regards to OYO, OYO continues to invest behind improving the quality of their supply. We’ve seen them being fairly active in terms of pretty much renovating hotels end to end, so the properties that they’re taking on, they’re doing an intensive amount of CapEx in terms of improving the quality of that supply. So from that perspective, we think it’s a good thing for the overall market where the quality of the supply improves and helps drive online adoption. But in terms of the overall landscape, I don’t see them being the person who’s disrupting the pricing in the ecosystem. I think that’s not the OYO of today. OYO used to be like that maybe about a year or 2 ago. But that’s not the approach that they seem to be taking today. Plus from what we’ve been given to understand, a fair bit of this incremental raise that they have done will be deployed in other markets, so markets like China, U.K., Middle East and some of some of the other Southeast Asian countries that they are entering into. So from that perspective, I think there is for the quarter at least, there’s been relative sanity on the competitive landscape. On the Air Ticketing side, while MakeMyTrip did talk about their endeavor and their foray into the B2B market, we’ve seen them maybe be more active on the SME side. In terms of the large corporate, I think that’s a very different play. That’s more of a SaaS platform play. Over there, the degree of customization and the platform required is quite different. It’s a platform that needs to be able to handle complex approval process mechanisms, policy -- and have very deep-rooted MIS, right, and reporting features, billing and reconciliation tools, all of those things are there. So it’s much more of platform play and that’s not something that we’ve seen MakeMyTrip launch in the market. So we haven’t really seen any competition from them in the large corporate space. On the SME space, yes, we’ve seen some efforts from them on the SME front. But the SME market itself is an extremely large and fragmented market and I think we today have a very large distribution network on the B2B side. We’ve also got almost 21,000 agents who are using our platform and reselling to SME customers. So I think we feel very good about the base that we’ve built on the B2B side.

[Arya Sen:]

Understood. If I could just follow up on the large corporate side. So how do these deals work? I mean what helps you win a deal from last corporate customers?

[Dhruv Shringi:]

Sure. So large corporate customers will typically go through an RFP process and on the back of that, sign up deals for the mid to long-term. And out here, the dealer is won on the backs of the technology platform. That’s largely our play, more than just pricing. We focused on two things

[Arya Sen:]

Understood. Last question on the Air Ticketing side, have you seen any impact on the pressure on the airlines given the pressure on the profitability, because you talked about some of them hiking process a little bit. But have you seen any impact of that on volumes yet?

[Alok Vaish:]

No, volumes, if you look at the overall industry volumes, they still continue to hold strong. The September quarter also had 17% growth year-over-year in terms of volume. So the volume continues to be strong. I think there is some pricing action that the airlines are taking, but it hasn’t really been a sharp pricing action that’s been taken by anyone. I think the thing to take into account, Arya, is also the fact that there is a lot of incremental capacity that is still coming into the country. And on the back of that capacity, it’s hard to take very sharp pricing actions. So I think the pricing action will be more gradual in nature as opposed to be a sharper one. And that gradual pricing action will ensure that from a passenger volume point of view, the volumes continue to rise steadily.

[Operator:]

[Operator Instructions] The next question will come from Jon Hickman with Ladenburg Thalmann.

[Jon Hickman:]

I was just -- I was going to ask the same question about the air traffic. Could you elaborate a little bit more on like how the initiatives, the governmental initiatives are going to bring on this capacity? Is that working out as you expected, et cetera?

[Dhruv Shringi:]

Sure. So on the government side, the government is focused quite actively in terms of improving airport infrastructure. I think that’s been one of the key things that we’ve seen the government do. We’ve seen them continue to expand the number of airports, and then the airlines on the back of that are expanding the city pair connectivity. And that city connectivity today is not just limited to Tier 1 markets, but it’s going deeply into Tier 2, Tier 3 markets as well as these new airports are coming up. So I think we’re seeing a strong buildup. In fact, if my memory serves me right, I think there is a 22% increase in city fares this year versus last year. So we continue to see strong overall growth in the physical infrastructure in the economy. In terms of Air Ticketing volume also, the volume growth continues to be strong year-over-year till now, it’s been almost 20%; for the quarter as well, the Air Ticketing volume growth was about 17%. So I think all in all, from that perspective the overall macro trends continue to be very strong for the aviation economy in India.

[Jon Hickman:]

So could you talk a little bit about this -- I mean, I was kind of thinking somewhere in like the low 20% and they came in at 17%. Can you talk about that kind of softness there?

[Dhruv Shringi:]

Sure. So there is a bit of softness which did happen. Part of it was also happening because certain aircrafts had to be grounded. A couple of the airlines are having some issues with Airbus newer aircrafts that they’ve taken delivery of. And on the back of that there was some airline capacity that got taken out as these aircrafts got grounded for a period of time. So that’s part of the reason why you see this number being lower than the 20% number. We do expect that as that capacity comes back, as those engine issues continue to be fixed and some of those aircrafts getting deployed back in, we should see that growth coming back. Also just to highlight the 17% number, it’s a blended average number, right, for domestic and international. If you were to look at the pure domestic number, that pure domestic number, again, would be 20%. So the 17% is the blended number for domestic and international.

[Operator:]

The next question will come from Andrew Curran with University of Notre Dame.

[Andrew Curran:]

Just want to say thanks for the kind of increased transparency on the corporate business. Sounds like quite a gem of a business that you’ve got there. The Flexi Stay is pretty incredible, it’s something I’ve never seen before, and kind of paper consumption makes a ton of sense. Question I had was around the outsourcing of the call center. You mentioned kind of a cost savings $2 million a year. How are you thinking about -- obviously, this is a business where the customer experience is incredibly important for retention. You guys have done such a great job on the app side of things driving customer experience. How are you monitoring when you outsource kind of the quality of customer experience?

[Dhruv Shringi:]

Sure, that’s a very good question, Andrew. And thank you for your earlier comments as well. This has been our biggest concern and part of the reason why till now we haven’t really outsourced the call centers. What has transpired over the last 12, 18 months now, the way technology is evolving, it’s allowing us to build our products around chat-based solutions, it’s allowing us to build products which are using natural language search to be able to come up with much better responses to customer queries. So we’re able to standardize to a great extent the work that an agent needs to do in responding to the customer. And given that you’re able to bring in that standardization, it then becomes easier for you to outsource that process. Earlier in the environment which we were in, we did not really have the standardized tools available with us to be able to have that confidence to outsource it to a third-party. This time around, that’s the big difference, that over the course of the last 12 months, we’ve been working on numerous search tools, tools that we’ve been working closely with Google on. We’ve worked with a couple of companies out of Israel who are working on some of these natural language search products. So these tools and chat bots have actually helped us standardize the customer servicing process to a significant extent and that’s what’s given us the confidence now to outsource.

[Andrew Curran:]

As you think about scaling the corporate side of the business, obviously that’s a business that requires capital to grow, unlike the B2C side. Even though your fundamental operating metrics have been really fantastic, the share price obviously has not responded. How do you think about your liquidity position, given the payments, the ATB coming out of spending basically $5 million on the operating loss? And just given how raising shares at $5.50 and now with a price lower than that, how do you feel about your confidence going forward with your capital right now?

[Dhruv Shringi:]

Sure. So in terms of capital, as Alok outlined, we’ve got about $68 million of capital. We have a payout of $15 million or -- to $20 million which is there. But this capital also, when you factor in there is a working capital buildup that has happened due to some onetime steps which are. There are some receivable which is there from airlines. And that will then start coming down in the current quarter. So on an ongoing basis, we expect the operating loss to come down and the incremental working capital requirement to also come down. So all in all, we expect that we will be consuming about $5 million of cash a quarter -- $5 million to $6 million of cash a quarter now for the next few quarters before it comes down even further. We’re also exploring some other payment solutions, because a large part of the working capital buildup which is there is the corporate customers. There is an increasing trend within the corporate customer base as well to move towards BTA and CTA cards. These are credit cards by companies like American Express and Citibank which are business travel cards. And by moving onto these cards platforms, they free up a lot of working capital for us. There is obviously a small charge which is levied on these, but the kind of operating margin that we’re working on and our confidence on the cross sell opportunity which lies ahead of us, we think we can easily absorb that cost without having any significant impact on our operating margins. So that’s something which is work in progress right now. And if that really does get the traction that we [indiscernible] get, it will free up a lot of our working capital requirement as well. So the capital consumption which is there should not really be on an operating basis. There will be working capital consumption, but I think as I mentioned for that, we are working on alternative solutions which we should be able to put in place over the next 2 quarters. So all in all, we feel fairly confident about the cash position that we have right now.

[Andrew Curran:]

Maybe one last question. Going back last year in the presentation, you broke out on the B2C side of the business, kind of average transaction per customer. And then the like 1.7 transactions for the new customers, and then roughly 3.5 transactions per repeat customers in a given year. How are you thinking about, just given how much you’re spending on marketing and how many customers you’re acquiring a year and the kind of return on marketing spend, is it something that you’re seeing positive return on spend right now? Or are you kind of investing at a negative rate now to just play the long game to have those customers down the road?

[Dhruv Shringi:]

So in terms of the increase in customers, we continue to see strong growth in terms of overall customers. We today have 83 million customer -- sorry, 8.3 million customers who have transacted with us. And our customer growth is growing at like 25-odd percent. So on the whole, commensurate with the kind of spend that we are making on customer acquisition, and the spends that we are making again need to be looked at by category. On Air, our customer acquisition is very healthily positive. In terms of hotels, where the online penetration is low, the customer spends used to be very heavily negative 12 months back. But quarter-on-quarter, we worked on optimizing that spend, and I think we’re getting that pretty close to breakeven now. We still aren’t there yet, but our endeavor is that over the course of next 2 to 3 quarters, we want to get that also down to breakeven. So overall from a customer lifetime point of view and even just factoring in the spends that our customers are doing, on a rolling 12-month basis we are pretty close to breakeven on the customer side.

[Operator:]

Thank you, speakers. There are no further questions at this time. I’ll turn the conference back over to you.

[Manish Hemrajani:]

Thank you, everyone, for joining the call today.