Yatra Online, Inc. (NASDAQ: YTRA) Q4 2021 earnings call dated Jun. 08, 2021
Corporate Participants:
Manish Hemrajani — Vice President, Head of Investor Relations
Dhruv Shringi — Co-Founder & Chief Executive Officer
Analysts:
Scott Buck — H.C. Wainwright & Co. — Analyst
Matthew Galinko — Sidoti & Co. — Analyst
Presentation:
Operator
Good day and welcome to the Yatra Fourth Quarter and Full Year 2021 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Manish Hemrajani. Please go ahead.
Manish Hemrajani — Vice President, Head of Investor Relations
Thank you Shelby. Good morning, everyone. Hope everyone and their family is safe and healthy. Welcome to Yatra’s fiscal fourth quarter and full year 2021 financial results for the period ended March 31, 2021. 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’s views as of today, June 8, 2021. We do not undertake any obligation to update or revise the information. Before we begin our formal remarks, allow me to remind you that certain statements made during the course of the discussion today 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 from this morning. Copies of this and other filings are available from the SEC and on the Investor Relations section of our website.
With that, let me turn the call over to Dhruv. Dhruv, please go ahead.
Dhruv Shringi — Co-Founder & Chief Executive Officer
Thank you, Manish. Good morning everyone and thank you for joining us. I hope that you and your families are safe as we continue to navigate our way through what we hope is going to be the last significant wave of the pandemic, especially in India. As you are all well aware, subsequent to the closing of our March quarter, India suffered a severe setback as a second far worse COVID wave hit the country with case counts peaking in the 400,000 a day range and many regions once again began to curb travel. Many of our friends and colleagues have been unfortunately impacted by the second wave and our thoughts and prayers are with them and their families.
Thankfully since peaking on May 6, case counts have sharply declined and India yesterday reported 86,000 cases, that’s a significant drop from the peak. A number of states and cities have started easing restrictions with effect from June 1 and more are expected to do so by the middle of this month. This easing of the curbs, combined with the vaccination program has begun to show some early greenshoots of recovery in travel with our domestic travel bookings almost doubling between last week of May and first week of June. India has managed to administer over 230 million vaccine doses till date. And the government has committed to fully vaccinating all citizens before the end of 2021.
In fact, the Prime Minister yesterday laid out a new roadmap for a more streamlined and accelerated vaccination program starting June 21. We expect the vaccination drive to gain even more traction in July and August as more vaccines become available and expect travel to recover alongside it. As part of our Helping the Community initiative, you will recall that last year we had arranged parcel [Phonetic] supply thousands of stranded migrant laborers back to their hometowns across India during the lockdown. This time around, we launched a COVID Connect platform and our site. This platform, supported by a number of volunteers including our employees enables people to get verified information on COVID-19 resources such as availability for oxygen, hospital bed, ambulances, medics, test centers, etc.
And all these things were in extremely short supply during the peak of the pandemic in the month of May. As we continue to navigate our way through this pandemic I’m very proud of the dedication and effort exhibited by my Yatra colleagues both internally and towards the larger community during this challenging time. While travel demand was subdued due to high case counts and partial lockdown across the country, I am very confident that the industry will inevitably recover and we have begun to see early signs of that in the past few days. As we look forward to the end of this pandemic, which we believe will be driven by the pace of vaccination in the coming months we believe travel should recover strongly as evidenced by the strong recovery post the first wave.
Now, coming to our March quarter performance; I’m pleased to report Yatra had a robust March quarter driven by the recovery in domestic flight travel where we saw passenger traffic recovering to about 20% of pre-COVID levels for the quarter. Adjusted revenue of $13.3 million was up 60% sequentially and the combination of revenue growth and tight cost management helped us achieve positive EBITDA, adjusted EBITDA of $1.3 million. This was well ahead of plan and we ended the quarter with a strong balance sheet with a cash balance of approximately $31 million. As we look to the year ahead, we see travel recovering towards the back half of calendar 2021 as vaccination accelerates and travel restrictions gradually lift, with domestic first in the near term and international travel towards the latter part of the year.
On the consumer side, despite the second wave hitting us towards the end of the quarter passenger traffic in the March quarter was up 21% sequentially averaging over 60% of pre-COVID levels. On the international air front, recovery continues to be muted and it’s now being further impacted by the second wave. We expect the recovery in international to continue to be more gradual and more likely towards the end of this calendar year and largely dependent on the case counts and rate of global vaccinations. Our hotel room nights booked saw healthy result as domestic hotels saw recovery led by pent up demand on the consumer side prior to the second wave.
Our hotel room nights grew over 48% Q-on-Q and even exceeded prior year numbers by growing 23% year-over-year led by a rebound in the consumer demand, the strength of our brand and our industry-leading hotel inventory along with lower competitive intensity in the quarter. We continue to make strong progress in the corporate segment and signed 21 new notable contracts in the March quarter alone to further solidify our position as the leading corporate travel service provider. These new customer signings in a challenging quarter further underscore Yatra’s leadership position in the corporate segment in India and our ability to extend our platform to cross-sell other products and services.
Our pipeline of prospective new customers continues to grow as inbound interest has increased meaningfully post-pandemic. We believe online penetration in the corporate travel market in India is approximately 10% to 15%. A larger part of the market today, about 60%, we believe is still underserved or served by smaller offline players. As a result of the pandemic, we are seeing evidence of an accelerated shift towards online players especially as contracts come up to their end-of-life and rebidding. We remain confident in our platform’s capabilities to serve and scale any type of customer. Corporate travel recovery is expected to lag consumer, but please do note that before COVID corporate was growing at a faster rate and we expect this dynamic to return post-pandemic.
Coming to our fiscal fourth quarter results, we saw meaningful sequential recovery this quarter reflecting a recovery led by pent up consumer demand. This recovery in domestic travel led to a sequential quarterly growth of 60% in adjusted revenue to INR983 million, which is approximately $13.3 million versus about $8.3 million in the December quarter. This growth in revenue further combined with strong cost controls enabled us to achieve positive EBITDA in the March quarter, well ahead of plan. Our adjusted EBITDA in the March quarter was INR97.4 million, which is approximately $1.33 million. This was a vast improvement from a loss of INR36 million higher in the December quarter.
We continue to hold our cost to the minimum and we believe we have adequate liquidity on the balance sheet to weather the second wave and see us back to sustained profitability. One other strategic growth driver for us is the expansion of our corporate digital platform as we continue to add non-travel related digital offerings to our captive corporate customer base. As the largest corporate travel service provider in the country we have strong relationships with some of the biggest and best known enterprises in India and we continue to make inroads into these organizations with our non-travel offerings.
One of our non-travel offerings which has met with a great initial response is our solution for freight management. We are currently offering ocean and airfreight booking services to our customers and we’ll be expanding it to include surface transport later in the year. We are seeing very strong demand for this service offering. The freight industry as some of you might know is multiple times the size of the travel industry and exhibit similar attributes to what the business travel industry did about a decade ago. The industry is extremely fragmented and has very low levels of technology adoption.
We are fortunate to be able to leverage the expertise we have acquired in building our own SaaS platform for corporate travel over the years and the same is being leveraged to build out our freight platform. We believe we have a great opportunity to create a SaaS platform for freight bookings along the line with our corporate travel platform. Additionally, we are also looking to leverage our existing vendor and corporate relationships on both the supply and demand side for our freight business. Based on our current revenue run rate we expect our freight business to generate between $1.5 million to $2 million of revenue in fiscal year ’22, which we believe should grow to between $4 million to $5 million in fiscal year ’23.
Given the size and scale of the freight industry and its current dynamics, we believe that this is a business which could potentially grow to a similar size and scale of our corporate travel business pre-COVID over the next few years. We currently have a team of over a 100 people focused on this and we will continue to grow this further. We are very excited about this and believe this is a great complementary addition to our platform. As of March 31, 2021 the balance of cash and cash equivalents and term deposits on our balance sheet was INR2.26 billion or approximately $21 million.
When we come out of this pandemic on the back of the secular growth in Indian travel, the acquisition of new corporate customers that we made during the pandemic, our digital platform business that is completely accretive, and has the potential to grow to the size about pre-pandemic corporate travel business in the coming years we believe we should be on a significantly better revenue growth trajectory. This growth in revenue combined with the efforts we made during the pandemic to improve operational efficiency will we believe lead to significantly higher levels of profitability and cash flow. I want to thank our shareholders who have stood by Yatra through these trying times. I’m hopeful and honestly believe it’s only a matter of time before your patience and understanding is rewarded.
I think this concludes our prepared remarks. Let me now hand it back to Manish for Q&A. Thank you.
Manish Hemrajani — Vice President, Head of Investor Relations
Thank you, Dhruv. Shelby, can you please open up the call for Q&A.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We’ll take our first question from Scott Buck with H.C. Wainwright.
Scott Buck — H.C. Wainwright & Co. — Analyst
Hi. Good morning guys. Thank you for the time. I jumped on the call a little bit late. I was hoping maybe you could provide a little bit of color around bookings in terms of — are we back to booking habits that look pre-pandemic or are we still looking at a lot of kind of closer in type of bookings?
Dhruv Shringi — Co-Founder & Chief Executive Officer
So in terms of bookings, Scott, the fourth quarter obviously saw a very strong recovery in the bookings. We were sequentially up 62% in terms of revenue Q-on-Q. So we saw good revenue growth quarter-on-quarter. But with the second wave of the pandemic, which began towards the last two weeks of March and then continued into April and May, we saw a meaningful slowdown. But in the last two weeks ever since lockdown restrictions have begun to get eased and case counts have come down, we’ve seen very steady recovery in fact, very important recovery in the number of bookings. So our sense is that as vaccination continues to take a stronger foothold across the country and the case count continues to come down we should see travel recovering quite strongly in the coming quarters.
Scott Buck — H.C. Wainwright & Co. — Analyst
And I guess in terms of that visibility — what’s your level of confidence as you look out the first couple of quarters of the fiscal year versus the back end at this point?
Dhruv Shringi — Co-Founder & Chief Executive Officer
Yeah, I think I look at how things panned out in the first wave. So after the first wave the recovery on the domestic side in Q3 and Q4 of the fiscal year was quite strong and we think the similar story is going to play out this time around as well with the added advantage that a number of people are beginning to get vaccinated. So we’ve spoken to customer and anecdotally the feedback that we have from people who have been vaccinated, right, it seems those people are willing to travel a lot more. There is internal talk — I was part of the taskforce discussions with the government as well and there is talk that people who are fully vaccinated might be allowed to travel freely within the country as well. If that comes through over the next couple of weeks that should definitely lead to significant uptake in the number of people who are traveling.
Scott Buck — H.C. Wainwright & Co. — Analyst
Yeah, no, that’s very helpful. And then last, on the corporate travel side, I’m curious what the competitive landscape looks today versus what it maybe looked like six months ago at the height of the pandemic? Are you starting to see some of your competitors in this space get more aggressive in the way they’re pricing or anything along those lines, that kind of color would be helpful?
Dhruv Shringi — Co-Founder & Chief Executive Officer
I think on the corporate travel side, we think the competitive landscape actually is building even more in our favor. The more this has dragged out, the harder it’s become for the smaller and mid-tier players who operate in this segment. It just continues to put additional pressure on them. Even some of our larger competitors have been fairly quiet over the last quarter or so. So I think from that perspective, we are very well placed to take advantage of the situation and it’s reflecting in the number of new customer wins that we’ve had in the last quarter.
Scott Buck — H.C. Wainwright & Co. — Analyst
Great. That’s very helpful. I appreciate the time guys. Congrats on the quarter.
Dhruv Shringi — Co-Founder & Chief Executive Officer
Thank you.
Operator
[Operator Instructions] We’ll take our next question from Matthew Galinko with Sidoti.
Matthew Galinko — Sidoti & Co. — Analyst
Hey, thanks for taking my questions. And I apologize. I dialed in late, so apologize if this was already covered in the prepared remarks. But I’m curious how the changes we saw increasingly the fare bands I think the lower end of the fare bands might impact demand for air travel? And then if that will have any influence over the next few quarters for you?
Dhruv Shringi — Co-Founder & Chief Executive Officer
Sorry Matt, I was struggling to hear the question. The voice was getting a bit distorted. Manish, were you able to get the question?
Manish Hemrajani — Vice President, Head of Investor Relations
No. Matt, can you please repeat that?
Matthew Galinko — Sidoti & Co. — Analyst
All right. So we saw some changes to fare bands I think for air travel in India announced in the past week. So I’m curious if you see those impacting demand for air travel as the COVID wave kind of wanes and air travel starts to recover? Is that going to shift more demand back towards rail or how do you see that shaping up?
Dhruv Shringi — Co-Founder & Chief Executive Officer
Sure. I’ve got it Matt. So in terms of the fare band change, which is there, now those are threshold limits, which are recommended by the government, but the airlines continue to price, right, in line with where the market demand is. And today, what we’ve seen is that the market demand has largely shifted from being travel between the metro cities to travel between metros and Tier 2, Tier 3 towns. And the airlines are very aware of this change in buying pattern and we haven’t really seen any significant price changes being affected by the airlines.
If anything, I feel prices and we’ve looked at this data, continue to remain soft and to that extent we expect demand to recover quickly. Even from our customer’s point of view who’s traveling from a Tier 2 town even if rail travel is slightly cheaper those who can afford air even if it means stretching a little bit are doing so because A, the availability of trains is also limited and B, air is viewed as a much more safer means of travel then rail transportation. So given that I think this trend, which we’ve witnessed over the last year or so of increasing amount of traffic originating from Tier 2, Tier 3 towns, I think that’s here to stay. We don’t see that reversing anytime in the near future.
Matthew Galinko — Sidoti & Co. — Analyst
Got it. Thanks. And then in terms of the freight strategy, I think you mentioned you have about 100 people working on that strategy today and I think you fleshed out some expectations around revenue in the near term. At what point do you think that strategy hits an accretive leveler? Do you expect it to be profitable? What’s the breakeven point for that service?
Dhruv Shringi — Co-Founder & Chief Executive Officer
So actually, interestingly enough even the last month that business managed to get to breakeven in the last month itself. So we expect it to be accretive in the very near term. We don’t expect that business to be a drag on earnings in let’s say for an extended period of time. There might be a quarter or so of impact where we are ramping up the teams. But what we’ve seen in terms of results on this has been very encouraging. Our customer wins have been pretty rapid on this and we expect that trend to continue. So we might see some ramp up cost coming in which might impact us third quarter because typically it’s taking maybe about two to three months for new sales teams to come in and get fully productive. But that’s about it. So I don’t see a long gestation period for this.
Matthew Galinko — Sidoti & Co. — Analyst
Got it. And last question from me, just I guess, big picture around the — amidst what you saw in Q4 in terms of offline versus online bookings in the market, do you think that’s heavily skewed online at this point or how much mix shift is left — in the Indian market?
Dhruv Shringi — Co-Founder & Chief Executive Officer
Again, this is based on discussions with the airlines. But the airlines have seen very significant shift in their booking pattern towards the online players versus the offline players. Obviously, corporate travel is at a very low ebb, right? So that is contributing to a part of that reason, but stripping aside the corporate travel as well the airlines have seen a very meaningful and more than a double-digit shift towards the online players.
Matthew Galinko — Sidoti & Co. — Analyst
Got it. Thank you.
Dhruv Shringi — Co-Founder & Chief Executive Officer
Sure. Thanks Matt.
Operator
We have no more questions in the queue at this time. That concludes today’s question-and-answer session. Speakers, at this time, I will turn the conference back over to you for any additional or closing remarks.
Manish Hemrajani — Vice President, Head of Investor Relations
Thanks Shelby. Thank you for attending the call today. We’re as always available over the phone and email. Please feel free to reach out to us. Thank you.
Dhruv Shringi — Co-Founder & Chief Executive Officer
Thank you. Stay safe everyone. Thank you.
Operator
[Operator Closing Remarks]