Good day and welcome to the Yatra second quarter 2022 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.

Thank you Cecilia. Good morning everyone. Welcome to Yatra's fiscal second quarter 2022 financial results for the period ended September 30, 2021. I am 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, reflects management's views as of today, December 21, 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 discussion may constitute forward-looking statements which are based on management's current expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that maybe 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 this morning. Copies of this and other filings are available from the SEC and on the IR section of our website. With that, let me turn the call over to Dhruv. Dhruv, please go ahead.

Thank you Manish. Good morning everyone and thank you for joining us. I hope that you and your families continue to stay safe as we navigate our way through the pandemic and its new variants. As we had shared with you in November, we are working with bankers and lawyers in India to explore our options for an India IPO. I will get into more detail later. But following this course of action, I believe, will greatly enhance Yatra's strategic flexibility and act as a catalyst to improve shareholder value. Now on to our results. We are pleased to announce strong September quarter results with adjusted revenue of INR788.7 million. This represents an increase of 61% Q-on-Q and 109% year-over-year. This growth was faster than the Indian travel industry as a whole, as we began recovering from the Delta-driven lockdowns in the summer months. Case counts, as you would recall, during that period were hovering around the 400,000 mark and currently they hover around the 7,000 mark. In fact, yesterday it was less than 6,000. India's mass vaccination program has truly been remarkably and as of last week over 820 million people or about 60% of the population had received at least one dose of the vaccine and about 530 million people or 40% of people are now fully vaccinated and have received both doses. Air passengers booked was up 93% year-over-year in the September quarter and up 116% sequentially. This outpaced the industry sequential growth of 74%. More notably, our hotel room nights were up more than 6X year-over-year and up 313% sequentially. We continue to see low levels of competitive intensity on the hotel front during the quarter and our brand continues to resonate positively with Indian travelers. Adjusted EBITDA was INR23.3 million. This is despite the significant…

Cecilia, can you please open the call for Q&A.

[Operator Instructions]. We will now take our first question from Scott Buck from H.C. Wainwright. Please go ahead.

Hi. Good morning guys. Thank you for the time. I was curious, can you remind us what international travel was as a percentage of revenue pre-pandemic?

Sure. So international travel was approximately 30% to 35% of pre-COVID revenue.

Okay. That's helpful. And then I guess, the slow recovery in international, is that because of certain restrictions that are in place? Or is that just driven by consumer demand at the moment?

No. It's driven largely by the restrictions. So in the period where the restrictions have eased, like we saw in the month of October and November, international demand picked up quite strongly. But it's only in the month of December where, again, this news of Omicron came out and countries started placing additional restrictions on international travel, that international demand has slowed down a bit. The domestic market, however, continues to be very resilient and we are seeing strong growth happening on the domestic side. So we feel, while there might be some drop, which will happen in international, I feel confident that in a relatively short period of time, the domestic demand should be able to offset the drop in international at least for the time being till the markets fully open up internationally.

All right. That's very helpful. And then turning to freight, I am curious what additional investments do you guys need to make at this point to really position that business to scale? Or have you kind of completed that process at this time?

So the investment which has been made is largely in terms of resources, which is ranging from technology to sales and marketing and operational resources. We have ramped up the team quite significantly. Now onwards, you will start seeing incremental investment happening at a more gradual level. So the initial ramp-up that needed to happen has happened and the cost for that has come in. And from here, you will see a more gradual increase in cost as opposed to a sharp increase that we have seen in the last quarter.

Great. That's very helpful, Dhruv. And then last one for me. You guys have been pretty disciplined around marketing spend. I am curious when we may see some real investment there kind of back to pre-pandemic levels?

I think today, we are seeing the strength of the brand truly come to the forefront and we are seeing a high degree of traffic coming in without needing to invest incrementally. We have also come up with some very creative ways of working with micro influencers on platforms like Instagram and that's working out really well for us. So I think we are still maybe another couple of quarters away from doing large-scale investment in consumer marketing. My sense is that we would first want to tap out the kind of growth that we can see organically, which is what we are benefiting from right now.

That's very helpful. I appreciate the time, guys. And congrats on all the progress.

Not at all. Thank you.

We will now take our next question from Anja Soderstrom from Sidoti. Please go ahead.

Great. Thank you for taking my question. And congratulations. It seems like things are trending in the right direction for you in India. I just got a question about the corporate travel. How many new customers did you sign? And can you talk to sort of the size of them and have you seen any churn in the corporate travel?

Sure. So in terms of new customers, we signed approximately 20-odd new customers. And these new customers that we have signed, these are largely people who are coming in for corporate travel and a few which are also cross-selling for freight. In terms of churn, I think our churn rate is less than 2% at this point in time per annum.

Okay. And do you typically sign a length of contract or it's a very sticky business, right? So once they sign, they stick with you?

Yes. So on the corporate travel side, where we implement the technology platform, it does tend to be a very sticky business. And hence, the 98%-plus kind of retention rates that we see because we are also making the upfront investment along with the customer to deeply integrate into the customers, their ERP systems, the HRIS systems and put their workflows on our platform. So it becomes a tightly coupled solution, which makes it more stickier from a customer's perspective and from ours.

Okay. And do you see mostly the new corporate customers coming onboard for the travel business? Or does the freight business drive any new customers?

So the freight is also driving new customers. But today, it would be like almost a 75-25 kind of split with 75% coming in on account of travel and 25% coming in on account of freight.

Okay. Thank you. And you already touched on the marketing spend and the need. You don't really see a need to ramp that up right now because we see the organic growth coming back strongly. But what do you see in terms of competition?

In terms of the competitive landscape also, we think the competitive landscape is a lot more benign than what it's been historically. It seems like a rational market at this point in time to that extent. And hence we don't really see the need for any large-scale marketing investment. For us, what's also there is because we have historically spent a fair bit on maintaining the brand, the brand recall today is high. And as travel is circulating into Tier 2, Tier 3 markets where our brand recall has been high, we are getting the organic benefit of that. But overall, from a competitive landscape perspective, I think till now, at least, we have seen the markets remain fairly sensible from a competitive landscape point of view.

Okay. Thank you. And then in terms of the freight business, I think you said you were planning on building that to a 200-people team. How is that going? And - are there any challenges in hiring? Or are things easing up because the vaccination rate is increasing? How is that trending?

Sure. So the hiring process has definitely picked up. And we are pretty much, as I mentioned, we have done bulk of the heavy lifting that we needed to do from a hiring point of view. We have got the teams to the size and scale that we need them. And from here, it's going to be a more gradual ramp-up. So the big effort that needed to be done has been done in the last four-odd months now. In terms of the hiring process, as you rightly pointed out, given that more and more people are now vaccinated, if the market has opened up and it has eased out our ability to hire people, we are able to physically interview them as well. So all of those things are making it easier to ramp-up faster.

Okay. Thank you. And also, you gave an overview of the India listing. But is there any sort of time frame on that or a time line for any news that we should be looking out for?

So we are looking at filing at least in the near term over the coming few weeks is what we expect to file. And then it has to go through a regulatory process like it does in the U.S., where the SEC reviews it. And typically in India, SEBI, which is the regulator, takes between 10 to 12 weeks to review and clear documents. So that's the kind of time line that we are broadly looking at. So subject to all regulatory clearances, we are looking at maybe towards the end of the first quarter or early part of the second quarter.

Okay. Well, that was all for me. Thank you so much for your time.

Thank you.

[Operator Instructions]. We will now take our next question from Tim Moore from Zacks.

Yes. Thanks. A few of my questions have already been addressed. It was a nice topline growth and nice to see the vaccinations keep rising. I am just wondering, you were nice enough to kind of put in the press release and mention the 20% booking drops in domestic travel the first week of December, but then you start seeing maybe an uptick the past week. Is that uptick because it faced a year ago kind of easy two-year comparable? Or do you think that's kind of most recovery-driven in the past week for the bookings?

Yes. It's a comparative that I was drawing. The comparative that I was doing was in fact versus the November numbers, so not over year-over-year. Because year-over-year comps become hard in this environment to compare. So compared to November itself, while there was a drop of 20%, in the last few days, we have seen recovery happening on the domestic travel front. We are still not back fully to the November levels, but we are getting pretty close to that now.

It's good to hear. And just it was nice to hear corporate bookings, the wins and that's still at only half the pre-COVID level and you are not by yourself on that. I mean all the OTAs are in the kind of same camp. How much of a lag do you think that might be compared to like domestic leisure travel for kind of corporate recovery? Is it really folks have to stop working from home and get back to the office and you might be looking at kind of another year to get back to maybe 80% of kind of pre-COVID level for corporate bookings.

What we saw in October and November of this year was very encouraging. The kind of quick ramps that happened in corporate travel was a pleasant surprise. And as I mentioned, we were back to almost 50% of pre-COVID numbers in November. And had Omicron not happened, at least the indication we had from some of our largest customers was that in Q1, they would have been somewhere between 75% to 90% of the pre-COVID levels. So we were seeing and we were expecting a fairly quick ramp happening on the corporate travel side as well. My sense is the lag between consumer and corporate should not be more than a quarter or two at the max. The only difference which is there, I think corporate travel, on a per customer spend basis, might recover only to between, let's say, 85% to 90% of pre-COVID level, if I look at it from a weighted average point of view, right. But we will have new customer wins that we have been seeing. And those, as they come in, should help us offset the drop in per customer spend.

And for maybe that 85% level estimate, does that include freight cross-selling? Or is that separate?

No. Freight is completely incremental to this. This is just on a like-for-like basis, comparing travel to pre-COVID travel, yes.

Good. That's wonderful to hear. And it was nice to kind of hear the revenue, possible guidance for freight, I think I heard maybe $4 million to $5 million for next year. Do you think this year is already trending at least $2 million and you think you can double it each year going forward, beyond next year, maybe it's $10 million the following year?

So I think we are trending at those kinds of numbers. We are comfortable with this projection that we are sharing, right, the guidance that we are sharing. And yes, in terms of seeing a doubling year-over-year from there on as well, I think that's something that we are definitely aiming towards.

So I just have one more question on service costs. It's been quite low. And we know it's tied to packages and hotel packages and travel packages. When do you think that will start coming back? And it probably shouldn't go back to the same level it was pre COVID, right, because you probably negotiated things and put some things in place that could keep that down.

Yes. So over there, there's also a change in consumer behavior that we are seeing right now. People are traveling in closed family groups. You don't see large groups of people who don't know each other traveling together in package groups. So that part of the business is actually getting unbundled. And it's baking into smaller groups where people are then booking flights and hotels with us rather than taking a large package along with others who are traveling with them. And this is maybe to do more with the pandemic where people don't want to travel with people that they don't know.

Okay. Good. No, that's really helpful. And so if that behavior continues for the next year, maybe longer, the net service cost percentage of revenues, that should stay pretty low and help with operating leverage, right?

That's right. And also packages is one part of the business which is still not fully online and needs more manual intervention. So the actual unbundling of that where customers are booking the flight and hotel online itself is providing even greater operating leverage.

That's very helpful. And thanks for the color on that. That's it for my questions.

Thank you.

As there are no further questions in the queue at this time, I would like to turn the call back to your speakers for any additional or closing remarks.

Well, thank you Cecilia. Thanks everyone for joining the call today. We look forward to speaking to you in the near term.

Thank you. Stay safe everyone. Thank you.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.