Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Yatra Fiscal First Quarter 2023 Earnings Conference Call. My name is Irene, and I will be the coordinator of today's event. Please note all participants will be in listen-only mode. [Operator Instructions] I would now like to turn the conference call over to Manish Hemrajani, Head of IR. Manish, please go ahead.

Yes, thank you, Irene. Good morning, everyone. Welcome to Yatra's fiscal first quarter 2023 financial results for the period ended June 30, 2022. 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, reflects management views as of today, August 30, 2022. We don't undertake any obligation to update or revise the information. Before we begin our formal remarks, allow me to remind you that certain statements made on today's call 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. For a description of these risks, please refer to our filings with the SEC and our press release filed earlier this morning. Copies of this and other filings are available from the SEC and also 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 today for our first quarter earnings call of fiscal 2023. I'm pleased to report that we had our best quarter yet since the advent of COVID with gross bookings growing 56% sequentially, demonstrating a strong recovery post-Omicron. Revenue of INR899 million also reflected accelerating growth of 49% Q-on-Q. Adjusted revenue of INR1.25 billion, which is approximately US$15.9 million, increased 28% Q-on-Q. Adjusted EBITDA for the quarter also came in at a post-pandemic high of INR123.5 million is approximately $1.6 million for the quarter. This included our investments behind the freight initiative. This is a very strong start to fiscal 2023, especially in corporate travel, exited the June quarter at approximately 90% of pre-COVID levels as office traffic reverts back to levels seen prior to the pandemic. Consumer business was also strong, domestic travel ending the quarter at approximately 100% of pre-COVID levels. First particularly heartening was that we had our best quarter in terms of new corporate customer signings with a record 27 large medium-sized enterprises, chose the Yatra as platform for their travel needs. It clearly underscores the value and robustness of our proprietary platform as well as the superior service levels that we provide to our customers. National travel has also continued to recover. It's recovering strongly since the easing of international travel restrictions at the end of March 2022, is trending at approximately 60% of pre-COVID levels. India's GDP growth was a strong 8.3% fiscal year 2022. The IMF expects India's GDP to grow at about 7.2% in 2023. As it relates to Yatra, looking at how the travel industry has unfolded through history, we see that travel trends to grow at approximately 2x GDP in developing markets versus a 1.5x multiple in developed markets.…

Thanks, Dhruv. Irene, we can now open up the call for questions. Thank you.

Of course. Thank you. [Operator Instructions] Our first question comes from Scott Buck from H.C. Wainwright. Scott, your line is open.

Hi, good morning, guys. Thank you for taking my questions. I guess the first one, Dhruv, for me, could you give us a little bit more color now that you’re back to essentially pre-COVID levels, where is the incremental revenue going to come from in 2023 and 2024?

Hi, good morning, Scott. When we think about the incremental revenue going forward, Scott, at this point, the first factor, which is there is international travel. International travel is still only at about 60% of its pre-COVID levels. We expect that to continue to scale up and get to the pre-COVID kind of numbers by the end of this calendar year. In addition, we are seeing very secular growth happening, travel in general in India. So the kind of things that people are talking about in the more developed markets, the inflation, consumers holding back spending, doesn’t seem to be the case like that in India. Bonds is recovering very strongly in India. And we anticipate this demand for travel and disposable income growth in the hands of consumers continue to be there. Income levels are rising. We’ve got a growing middle-class population. Secular trends are all pointing towards a very strong travel industry. As I mentioned in my opening remarks, we expect travel to grow at almost 2x of GDP growth rates. There’s a very strong secular trend that’s happening with growth in travel at a more general level, specifically for Yatra, there are two factors that I think are playing really well for us is on the corporate travel side, we are seeing very strong inbound demand. Our conversion ratio on new customers is looking extremely healthy as more and more companies want to adopt technology. The companies have been through a significant amount of disruption due to COVID. Going forward, people have realized that they want to work in a more digitized environment as opposed to an off-line environment. So that’s leading to a very strong amount of inbound interest on our corporate travel side. It’s one lever for us that will drive believe tremendous amount of growth going forward. The other is the more secular trend in terms of just online adoption that we are seeing play out on the travel side, on the leisure travel side. What’s happening in Tier 2 markets in India? These markets were typically serviced by the offline agent. The offline agencies, a large number of them shut shop during COVID, some temporarily, some permanently. We are seeing tremendous amount of uplift happening over there. Customers moving online from these markets as well. To get all these customers have pretty much done everything signed in the past two years, right? People who have been stuck in doors or under lock down, the grocery, home delivery, e-commerce, everything online. So there is hardly anyone in these markets today who can also turn around and say not tech-savvy. So the online adoption we are seeing on the consumer side also has not significantly accelerated post-COVID. These two factors, I think, will drive a tremendous amount of growth for us. Then there is obviously new business lines like freight, which we’ve initiated will add on to growth from here on.

Great. That’s very helpful. And then my second, on the corporate travel side, you signed 27 large and medium-sized customers during the quarter. What’s the pipeline look like for fiscal 2023, was the first quarter just particularly strong? Or should we expect these elevated levels to continue through the year?

See, the way we are seeing the pipeline at this point in time, we expect this pipeline to continue, and we would like to actually see exploration happening in the second half of this year. So as more and more contracts come up for renewal, they come up for rebidding, companies just have begun to come back to a full-time working environment only largely in this quarter, right, till January, February, we had Omicron. It’s only been post April as we’ve seen companies come back to full-time working. This quarter, the first real quarter where we’ve had companies come back and work full time. I think the traction should continue and only accelerate going forward from here.

Great. That’s helpful. Will you guys need a meaningful ramp in OpEx to support the top line growth? Or are you pretty comfortable with the cost infrastructure you have in place?

The cost infrastructure should not change drastically from here. As we’ve been talking through COVID, we spend a significant amount of time and effort during COVID in automating our back-end processes. And just ramping up the technology stack, and that’s putting us in really good state at this point. The other change which we are also seeing is just in terms of sheer consumer behavior. The corporate travels side as well. The adoption of the self-book platform has gone up meaningfully. The higher the adoption on the self-book side, the lower is the manpower cost that we need at our end. Now just to give you a sense on the corporate travel side, in 90% of pre-COVID volumes, about 60% of the staff.

Okay. That’s helpful. And then last one for me, just on the potential Indian IPO. What should we be thinking about in terms of timing? And reading the release, it seems like the language there might be a little bit of hedging that actually gets completed. So is there a real risk that this doesn’t happen?

I don’t think they’re trying to hedge, and I don’t think the language should in any way suggest that we are trying to hedge, continue to work with the IPO. And I, in fact, want to say that market is looking much better than what it has over the last four months at any point over the last four months. Recent example that we saw of the IPO that got subscribed, it got subscribed 35x, it’s trading at a 41% premium. It does definitely show that the markets in India are looking up. I do agree that one summer doesn’t make a swallow, but I feel that it’s enough and more tailwinds behind the India markets as to have a successful IPO in the near-term.

Great. That’s helpful. I appreciate you guys taking my questions and congrats on the quarter.

Thank you so much, Scott.

Our next question comes from Lisa Thompson from Zacks Investment Research. Lisa, your line is open.

Thank you. Good morning. So I have two questions for you. First is, given current situation, what’s your feeling about the next few quarters? Are you going to see normal seasonality? Or is pent-up demand changing things? How should we look at it?

Good morning, Lisa. In terms of seasonality, firstly, there will be some effect of seasonality now coming into play as we are nearing our pre-COVID levels from a volume perspective. But it should not be a very significant impact as yet because we are beginning to see still some pent-up demand. Sparks of revenge travel still continue to be there. The seasonality effect – while the seasonality effect is beginning to play in, it’s still at a relatively modest level.

All right. That sounds good. And then my other question is, where you are now, when you look back at pre-COVID your business model, how is it going to be going forward after everything that's happened? What is your feeling about gross margins compared to back then and EBITDA margins? How has the world changed for you?

See, for us, the one big difference which has happened is happening on the EBITDA margins. And we are seeing meaningful improvement happening, the EBITDA margins as we go forward. This is largely on account of just change in consumer behavior, both on the corporate side and on the leisure side where customers are getting much more comfortable doing it themselves and needing much lesser support. So that's definitely one thing which is there. The other thing which we are seeing very good traction on is the adoption of the hotel program, both the consumer side and the corporate side. Hotels as we all recall, have better long-term margins. We do expect as we continue to scale up the hotel business, then should further enhance from there. On the whole, we expect our operating margins to continue to improve as we go forward.

Do you have some sort of number in mind of where you think you can go ultimately?

See, the near term, midterm margins that we've been talking about in the high teens? And we think that if I was just without the investment that they're making behind the trade business for the core travel business, that's the kind of margin number that we are working towards the near to midterm.

Great. Thank you. That's all my questions.

Thank you, Lisa.

Thank you. Our next question comes from Anja Soderstrom from Sidoti & Company. Anja, your line is open.

Okay, great. Thank you for taking my questions. I want to start off with a follow-up on the Indian IPO. Do you have any more color on the timing of that? I think you talked before about that's happening towards the end of the summer and we are there now. So what's the timeframe for that?

Yes. So Anja we continue to work with the regulator in India and we are working very closely with them. And the timing, as I said, the markets are beginning to look up. So we've seen the first IPO happened in almost four months now, period of four months, there was no real, no IPO that happened in the market. We've had one that's happened. We have another couple, which we believe are lined up the near term, that is give us a good indication of the kind of secular trend markets are projecting. Then based on market conditions expect that we should be looking at this. And we had always said this that time around [ph] the September, October kind of timeline, but we had initially anticipated and we continue to work towards those.

Okay, thank you.

We are beginning to look after. Yes.

Okay. Thank you. We are looking forward to that and pardon me, I missed part of your prepared remarks. I don't know if you had touched on this. But in terms of the air passenger traffic that's sort of picked up to 83% of the COVID levels – pre COVID levels. How has that been trending since June for you?

Since June, there is some seasonality impact, which is there in the air passenger traffic numbers. These are published by the government and the aviation authority in India. So there is some impact of seasonality, but it's not as stark as what one would've expected COVID. There is still, I think, some pent-up demand, which is there on the travel side. So it's helping maintain volumes.

Okay. Thank you. And I think during the call, you sort of reduce the salaries during the pandemic? Has those gone back or what can we expect in terms of that?

So there is some rationalization that's happening on the salaries. As the market is really hot for talent in India, like most of the parts of the world there is ongoing war for talent. So to speak off the salary levels are back in most cases to pre-COVID levels, but we've also been able to rationalize our headcount quite significantly using technology. As I mentioned in response to Scott's question to get the corporate travel side of things, we are now tending towards 90% of pre-COVID levels, about 60% of the workforce. So while there might be individual salary costs which have gone up on a collective level, they able to keep our cost in check.

Okay. And it seems like the corporate travel is picking up. What is there any sort of, do you have any correlation or sort of any quantification there on that? How much of a pull that is for also the leisure travel then to pick up with you in tandem with the corporate?

See, typically we've seen leisure come back faster than business travel. The travel will come back and recover faster and that's what happened out here. To travel, I think recover with a one to two quarter kind of lag, which is what we are seeing. So while leisure travel has been at elevated levels, it's October, November of last year the travel has only begun to really gain traction since March, April of this year. There is a – maybe a one to two quarter kind of lag in consumer travel and corporate travel. That's why I was suggesting that by the end of this year or early part of next year we'll have corporate travel also since pre-COVID levels.

Okay. Thank you. And the last one is in terms of the competitive landscape, has that changed at all for you?

See, we've seen the competitive landscape here a bit more benign at this point in time compared to pre-COVID levels. Some of the disruptors like, we had Paytm, OYO all of these guys have scaled back. Competitive intensity has creating a more level playing field so to speak off.

Okay. Thank you. That was all for me.

Sure. Thank you for your questions.

Thank you. Our next question comes from Jeff. Mr. Jeff, your line is open.

Great. Thanks. Thanks for taking my questions, guys. Just a few from me if I could. First on the balance sheet, just thoughts on, on cash flow and cash balance over the next couple of quarters you commented on working capital, and I think the credit draw down. But just talk about what you're seeing and expecting with respect to cash flow, cash balance for the next two quarters. Maybe start there and then I've got a couple follow ups?

Sure. So on the cash balance side, there is deployment of working capital that's happening as the corporate travel business is recovering, given that now we've reached 90% of pre-COVID levels. We are expecting some growth from here on. There will be some cash consumption that will happen on the working capital side of thing. That's largely coming in from the draw down that is done for receivable financing facilities that we have. That's where the cash will come in. And we also expect these facilities to increase in size as the business continues to recover. Just to give you a comparative, pre-COVID facilities were about $25 million, which at this point in time are about 5.5 [ph]. So as the business continues to scale up, we expect these facilities to also continue to go up help finance the working capital requirements.

Okay. That's helpful. And then on the freight side, just refresh, I wanted to be clear on the answer; I think you gave to the earlier question about high teens target near-term margins. on the EBITDA side and then you talked a bit about, I think that was pre, the investments for freight. So can you just touch on freight again and help us understand expectations around both revenue and investments there?

So the investment that's happening on freight is in the range of $200,000 to $300,000 a quarter. That's the kind of investment level that we are looking, at the operating side. And there is some working capital deployment also about $2 million to $3 million, which is there on the freight side. In terms of revenue expectations, revenue expectations actually to be in the range of about $3 million to $4 million as we had spoken about earlier. The freight business, from that perspective, as I said, are – we are investing behind it, but it's not investment of an earth-chattering amount, right? So it's only to the tune of $200,000 to $300,000 a quarter. We expect this investment to happen another two to three quarters at max, and then we should start seeing portability come through from the freight side as well.

Okay. And last then on the 27 new corporate medium and large businesses you signed in the quarter. Is there any way to put some value around those signings and give us an anchor point to compare that to just to get a sense of bookings momentum?

We – obviously, we track that quite closely, but it's not something that we publicly disclose. And at this point, we need to keep our disclosures consistent with what we are disclosing in India in the DRHP and what we are disclosing in the U.S. So we have to just maintain parity. This is something going forward that we can consider sharing.

Yes. Okay. And then on the DRHP, just to get one point of clarification on the IPO. So when the DRHP gets approved, what is in your understanding, the typical time line from approval to actual completion of the IPO?

So from approval to completion, can be a four to six week kind of time frame of – it then depends on market conditions as well, Scott – sorry, Jeff, as you well know, right? So it will be a function of that, but the markets are conducive, can happen in a six week time frame.

Got it. Okay, thanks so much for taking the questions. Appreciated.

Not at all. Thank you.

Thank you. Currently, we have no further questions. Therefore, I would like to hand back to Manish for any closing remarks.

Thank you, Irene. Thanks, everyone, for joining the call today. As always, we are available for follow-up questions. Thank you so much. Take care.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for being with us today. Have a lovely day ahead. You may disconnect your lines now.