Hello, and welcome to the Yatra Fiscal Third Quarter 2023 Financial Results Call. My name is Alex, and I'll be coordinating the call today. [Operator Instructions] I will now hand you over to the host, Manish Hemrajani, Head of Investor Relations. Please go ahead.

Thank you, Alex. Good morning everyone. Welcome to Yatra's fiscal third quarter 2023 financial results for the period ended December 31, 2022. I am pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi; and the CFO, Rohan Mittal. The following discussion, including responses to your questions, reflects management views as of today, March 28, 2023. 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 Investor Relations section of our Web site. 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 third quarter earnings call of fiscal '23. Before we discuss our results for the quarter, let me first provide you with an update on our ongoing India IPO process. As you may recall, our Indian subsidiary, Yatra Online Limited, filed a Draft Red Herring Prospectus just about a year ago, on March 25, 2022, with the Securities and Exchange Board of India. SEBI has issued the final observation letter dated November 17, 2022 to Yatra, which means that Yatra India's proposed initial public offering can open for subscription within 12 months of that date. We commenced our India investor outreach, the India roadshows in earnest at the beginning of the March quarter. We met with a number of marquee investors in India, including large domestic mutual funds, family offices and hedge funds who are focused on the Indian market. Our story has been well-received given the strong underlying performance, the strong recovery in both consumer and corporate travel in India, and favorable macro trends for sustained long-term growth which are supported by the government prioritizing the infrastructure spending in the aviation sector. However, given the overall macro environment and the global market sentiment, the investor feedback process has taken longer than expected, but the key investors continue to remain engaged with us. And we are hopeful and confident of getting the IPO done in the near-term. Switching tracks to the macro for business environment. In the December quarter, domestic aviation witnessed a strong recovery with air passenger traffic up 17% year-over-year, and 19% q-on-q. The Indian government remains committed to growth in this sector by way of infrastructure spending on new airports and expansion of existing airports. Under the UDAN scheme launched by the government…

Thank you, Dhruv. I will now review our December quarter results and focus primarily on year-on-year YoY comparisons. Our adjusted revenue increased by 42.5% YoY to INR 1.49 billion. The strong YoY growth was driven by a rebound in the air passenger traffic by 17% YoY and an improvement in the yields which resulted in a 39.2% increase in air ticketing adjusted revenue to INR 1.01 billion. Adjusted revenue for hotels and packages was also up by 21% to INR 254 million. Our other revenue was posted at INR 129.3 million in the December quarter, an increase from INR 52.5 million in the year-ago quarter due to increase in advertising revenue. Total gross bookings increased by 33.4% YoY to INR 15.8 billion, reflecting the normal seasonality. Hotel and packages gross bookings also improved 57% YoY reflecting the strength in our corporate uptake of hotels as well as a 41% volume growth in packages. Gross air passengers booked were 1.32 million, up 4.2% on a YoY basis, while the standalone hotel room nights booked were 398,000 up by 16.3% YoY. Moving on to the expenses, marketing and sales promotion expenses including ad back for consumer promotions and loyalty program costs increased by 53% on a YoY basis to INR 820.9 million. Our personnel expenses increased by 22.9% to INR 311.6 million, which is about $3.8 million in the three months ending December 31, 2022 from INR 253.4 million in the previous year same quarter. Excluding the employee share-based compensation costs of INR 54.5 million in the three months ending December 31, 2022, compared to INR 49.6 million in the previous year same quarter. Personnel expenses increased by 26.1%, this is due to the impact of the reinstatement of salaries for employees to pre-pandemic levels and annual salary increase along with increase in headcount. Other operating expenses increased by 43.5%, which is in line with the adjusted revenue growth to INR 374.8 million versus INR 261 million in previous year same quarter. This was primarily due to the increase in commission, legal and professional charges and payment gateway charges, rates and taxes, and provision for doubtful receivables. As of December 31, 2022 we had a cash balance, cash and cash equivalent balance of more than INR 1 billion, a little around USD 13.1 million, which was an improvement over the previous quarter closing of INR 703 million. This concludes our prepared remarks; handing back to Manish. Thank you.

Thanks, Rohan. Alex, you can now open up the call for Q&A. Thank you.

Thank you. [Operator Instructions] Our first question for today comes from Scott Buck of H.C. Wainwright. Scott, your line is now open. Please go ahead.

Hi, good morning, everybody. Thank you for taking my questions. First one, hoping you could give us a little more color on some of the market share gains on the corporate side, and maybe talk a little bit about what the ongoing opportunity is there?

Sure, Scott. Good morning. On the corporate side, as we've shared, we won 72 customers in the first nine months of the year. The customer base that we're winning are more towards the mid and the larger end of the market. And what we are seeing today is that there is an increased awareness on the part of the organizations to adopt technology. And given that we are the market leaders, we continue to see a strong pipeline on people wanting to adopt technology to service their business travel needs. We've also seen some share shift gains happening in some of our larger customers, and we are confident that that will continue to accelerate as well. In terms of the market opportunity, today, while we are servicing close to about 770-plus customers, the market itself is about 1,300 large corporate customers. So, there is enough and more headroom for growth for us as we tap into just this first level of mid-to-large scale corporate customers. While pre-COVID, the bulk of our demand for technology adoption would either come from the consulting firms or the software development companies which had a more younger and more agile workforce, what we've seen off late is that even the old-school Indian manufacturing companies have now looked at adopting technology as companies focus on trying to get to terms with the new hybrid working environments. So, we are seeing a strong resurgence happening, and the market suddenly growing from just being the MNC/the large consulting firms to the Indian large corporations also wanting to adopt technology at a brisk pace now.

Great, that's helpful. And then, Dhruv, are you guys seeing any softening in corporate travel due to -- or, I'm sorry, I should say any impact on corporate travel due to some of the softening macro environment or between market share gains and recovery that's all being offset?

Scott, even in terms of same customer spends; we are not really seeing any slowdown at this point. The market in India is quite buoyant, demand continues to be strong, and there is enough and more growth happening, and business happening in the Indian environment. See, if you look at even the growth data that IMF puts out, it's anywhere between 6.5% to 7% kind of growth rate for the economy as a whole. So, we are not seeing a slowdown of economic activity in India. There might be one or two pockets which really heavily export focused; those might be witnessing some slowdown. But the overall growth in the market continues to be very robust at the moment as we've witnessed on the back of what we've seen on the aviation demand, right? As I just articulated in February, we crossed the highest number of domestic air passengers traveled ever. Likewise, hotels have been reporting occupancy and RevPAR rates that they've never really witnessed in a very long time. So, economic activity in the country continues to remain very buoyant at this point, and we're not seeing any signs of a slowdown.

That's great. And then last one for me, it looks like personnel expenses were up a bit sequentially. Can you talk about any hiring you've been doing or may need to continue to do on that front, and how it could impact OpEx?

Sure. So, personnel expenses sequentially moved up only marginally. Year-over-year, there was a bigger jump. The year-over-year jump is also because last year, so this is now 2021 October, November, December that we are referring to; a large part of the working population in Yatra was still at reduced salary levels. And salaries only began to get reinstated towards the middle of 2022. So, there is some effect of that base effect coming through when it comes to salary cost. In terms of incremental costs from here, while there will be annual inflationary cost increase, which is there. In terms of headcount, we might add one or two more people in the senior team. But beyond that, the most significant number of people which will get added will be more at the operating level. So from a weighted average cost point view, it's not going to have a large impact on the overall cost structure of the organization. It's going to be much more towards the front end and frontline staff which is there to service the corporate demand as we go into more and more corporate and we go through a transition process with them as they adopt technology, there is some manual servicing effort also which is there. So, it's going to happen more at that end, and hence should not have a meaningful impact on our overall cost structure.

Great, that's very helpful. I appreciate the time, guys. Thank you.

Sure, thank you.

Thank you. Our next question comes from Anja Soderstrom from Sidoti. Anja, your line is now open. Please go ahead.

Hi, and thank you for taking my questions. So, you said 72 new customers in the quarter. How much time does it take for them to build up and become a significant contributor to our top line?

See, Anja, these are customers who've been signed over the nine-month period. But the vast majority of this only started happening towards the May kind of timeframe, May-June kind of timeframe. So, typically, you look at a 90-day to 120-day implementation cycle for a large customer, and then another 30 to 60 days for them to ramp up volume. So, you would see the bulk of the effect of these new signings playing out in the current quarters. So, starting from January, you'll start seeing these numbers come through.

Okay, thank you. And you noted you expect -- you sort of guided for the fourth quarter it's going to be pretty strong. How should we think about that building up in the next year? Is there anything exceptionally happening in the fourth quarter that's driving that or --

No, I don't think there's anything exceptional. It's just that there is the underlying demand. We continue to see strong demand playing out on both B2C and corporate clients. So these new customers that we're talking about, as they get implemented, their numbers continue to bake in and there will be a waterfall effect of that happening. And likewise, we are seeing strong resurgence happening on the B2C side as well. So, today we are seeing both cylinders firing strongly on the corporate side and on the B2C side. And we expect this trend to continue.

Okay, thank you. And in terms of the expansions in Dubai and Africa, how meaningful are those for you?

As of now, there obviously, this is just a start of the process. We think over the -- it will take a bit of time for them to become meaningful contributors. But we are quite excited about these market opportunities. The dynamics when we studied these markets are very similar to where India was seven, eight years ago in terms of adoption of technology. However, COVID has now made it almost imperative for organizations to adopt technology at a much faster pace. So, we are very excited about these markets. It might take a bit of time for them to become meaningful contributors, but in the long run, I think this can be a very interesting and very highly accretive business for us, because the operating margins out here as a pure fast play are extremely high.

Okay, thank you. That was all for me.

Sure. Thank you.

Thank you. Our next question comes from Lisa Thompson of Zacks Investment Research. Lisa, your line is now open. Please go ahead.

Thank you. Good morning. So, you showed excellent revenue growth this quarter. But also expenses were up, so that the losses kind of increased. Is there anything in the quarter that was, say, exceptional or how do you expect expenses to trend versus revenues? I didn't get a chance to go through in huge detail but I did notice the interest expense was up a lot and I assume that goes away when you do a capital cash raise. Talk a little bit about that?

Sure. So, the interest expense also had a bit of one-off in it for the new facilities that we've taken. The upfront administrative fee for all these facilities would have got a charge to the P&L in the December quarter. So, there will be some of that one-off effect which will be there, which won't be there going forward, because these facilities will then be, in a reckoning nature. So, that's one aspect of it. The other in terms of marketing costs, given that seasonally, this is typically the highest quarter for personal travel, there was a bit of incremental marketing cost which was there and we did that consciously also because we thought it was important to just get the brand out there from next year's perspective and to build out some sustainable direct traffic for us. So, that's a slight one-off which is there but otherwise we should see as we go into the subsequent quarters, profitability also growing in line with revenue growth.

Great, that helps a lot. And does the strong hotel business kind of affect product mix? Is that a lower margin business?

So, hotels is a higher margin business for sure and as we move forward, we expect this to keep improving our product mix going forward. This will be a relatively slower burn because the SKU at this point from a revenue perspective is still heavily in favor of air but we expect hotels to continue to scale up nicely like we are seeing in the last four or five quarters. So, today, close to about 20% of our revenue comes from hotels, and about another 14 odd percent comes from other services and the remaining from air. So, we expect the mix to continue to, I think hold at this level with just a gradual improvement happening in favor of hotels. And the reason this is happening in India, Lisa is because unlike more mature markets, the aviation industry in India is growing at double-digits. We spoke about the kind of capacity expansion that we are seeing on the part of the airlines. We spoke about the new peaks being reached by domestic air traffic. So, air in India is also growing at a very brisk pace. So, it's not just the hotel part like you would see in more developed parts of the world. In India, it's actually all boats rising at this point of time.

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

Sure. Thank you.

Thank you. [Operator Instructions] Our next question comes from Jeff Van Rhee from Craig-Hallum. Jeff, your line is now open. Please go ahead.

Great. Thanks for taking my questions. A couple for me; one, Dhruv, if I look back at the pre-COVID period and let's take maybe the March '19 quarter, and I look specifically at air and hotel and I compare now what you would assume you'll do in a March quarter, as I think most of the levels you're quoting now are kind of back to pre-COVID levels. Is that the right way to think about it? When I look at that March '19 quarter, I mean, if I use that as a reference, why should or shouldn't hotels and air be higher than those numbers as a baseline reference?

So, as we go forward, Jeff, we should start seeing numbers begin to grow from that baseline. We are today getting to that stage where we should be crossing those baseline numbers. The big difference also which will be there will be in the profitability that in that quarter versus our current quarter, our operating profit margins would be significantly different. Sorry, Manish you are saying something?

Yes, also Jeff, you should be looking at the INR number, not the USD number, because currency has moved unfavorably in that direction.

Okay. And then I guess just to complete the picture, on the March '23 quarter, I think you gave us a pretty good glimpse on revenues and you commented on a few of the expense items. But I guess ultimately what matters here, I would think EBITDA is going to be the key number one-off, how should we think about EBITDA for the March quarter?

Jeff, I'm giving the guidance for the EBITDA, but overall, we expect the macro environment and our business environment to continue to improve. And as you're seeing improvement happening in the revenue, it should have a flow through effect to the bottom line as well.

Okay. And then just two other quick ones, if I could, my standard question, I know I've been asking you for a while, I think you had laid out roughly 17% to 19% EBITDA margin than targeted at roughly $90 million in revenues. Is that still valid?

Yes, we think at $90 million, we should be back to those kinds of levels.

Okay, all right, great. And then just lastly for me, recognizing we've been through kind of a lot of turmoil and economic headwinds, et cetera, but just touch on the logistics in terms of any expectations for '23?

The logistics business, it's been in the last quarter relatively slow. I'm sure you guys are all following the global logistic rates, and you would have seen that global shipping rates have completely collapsed. They are now trading anywhere between 60% to 75% lower than where they were as recently as about six to nine months back. So, there is a bit of softening on that side. Plus, obviously, exports out of India are a bit tough given the recession that we are looking at in the U.S. and other parts of the world. So, the logistics part is slightly slower at this point in time, slower than what you would have expected, but largely on account of these global macro factors.

Okay. Okay. And then one last one, you gave the cash balance and a nice increase there, but I missed the commentary about debt issuance, and it sounded like you had issued some debt. Just refresh me on those numbers.

Yes, so we've issued debt and we've taken on working capital facilities. The working capital facilities are more perpetual in nature i.e. they are like a revolver facility which is there, and the debt which is we've taken that was a debt of INR 300 million, and this was taken in the month of, I think December of 2022, so, about INR 300 million in terms of debt and about INR 900 million in terms of the seasonal financing facilities.

Okay, very helpful. Thank you so much.

The seasonal facilities, just to be clear again, that the seasonal facilities have happened post the December year-end, so they are current quarter year-end.

Okay, thank you.

Thank you. We currently have no further questions, so I'll hand back to Manish for any further remarks.

Thank you, Alex. Thanks everyone for joining the call today. And as always, we are available for follow-ups. Thank you.

Thank you all for joining today's call. You may now disconnect your lines.