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.

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.

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…

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…

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

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?

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.

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?

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.

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?

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.

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?

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.

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?

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.

And how much is that?

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.

$15 million to $20 million.

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

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.

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…

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

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?

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.

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?

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: one, the technology itself; and two, the quantum of domestic hotel content that we bring to the table. So for some of our key customers, the breadth of hotel inventory is very important. So when I look at some of the large Indian conglomerates today, they’ve got large fields sales teams. So take the case of, let’s say a telecom operator. The telecom operators will have 15,000, 20,000 people in the field. Now these guys are traveling to far off corners of India, not staying in 4-star and 5-star hotels, right, but staying in budget hotels. So given the fact that we’ve got today 100,000 properties on our platform, and by far the largest chunk of budget hotel inventory across the country, that gives us a very strong foothold when we go pitch our product proposition. In addition, we’ve now got the partnership with Chrome River. So it’s like a full platform approach and a one-stop shop that we offer to the customer. It’s not that you do your flights somewhere else, you do your hotels somewhere else. Here you can do your flight, hotel, cab, your expense management, your insurance, everything bundled into 1 platform, that then them seamlessly flows and connects into the ERP systems of the organization and will push through from a billing and a consolidation point of view. So it’s an end-to-end integrated platform that we provide to corporate travelers, not just for booking, but from end-to-end booking, to approval process mechanism, to policy compliance, to billing and reconciliation.

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?

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

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?

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.

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?

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.

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

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?

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.

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?

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.

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?

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.

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