Thank you, Alex. Good morning, everyone. Welcome to Yatra's fiscal third quarter 2023 financial results for the period ended December 31, 2022. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi; and 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 month. Copies of this and other filings are available from the SEC and also 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 and Chief Executive Officer

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 road shows 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 with 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 infrastructure spending in the aviation sector. However, given the overall macro environment and the global market sentiments, 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 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 for the government in October 2016, more than 425 new air routes have been commenced to date with plans to take that number to 1,000 by 2026. The number of operational airports have also grown in the last five years from 74 to 141. And the government plans to have 220 airports operational by 2026.

Last month, the now privatized Air India placed two mega orders, one with Airbus and the other with Boeing, adding up to 470 aircrafts. 70 of these are our wide-body aircrafts and double-line planes, which are going to be used for long-haul international travel, and 400 of narrow-body, single-aisle aircrafts to be used for domestic and nearshore destinations. Air India's current fleet size of approximately 115, nearly quadrupled on the back of this order. And that takes the expected number of planes in India to grow by over 2.5 times from the approximate 700 planes at the moment to almost 1,700 planes by 2027.

The outlook for aviation market in India remains very favorable, and we expect a prolonged period of sustained growth on the back of these initiatives. India's domestic traffic has now grown to about 2% of the overall world share from 1.6% pre-COVID but still remains well below China's 6.4% world share, which suggests that there are multiple years of growth ahead of us as we get into a similar environment as China over the next three years.

India's hotel industry too turned into stellar 2022, with revenue per available room, or RevPAR recovered to pre-COVID levels despite a slow start to the year 2022, caused by a surge in the Omicron variant. Anecdotally, if you look at the results of some of the large hotel chains, they have posted some of the best quarterly results in a very long time in the December quarter. We see that domestic occupancy levels and RevPAR have all now surpassed pre-COVID levels with corporate momentum stronger than leisure as compared to pre-COVID.

From a macro standpoint, the IMF predicts India's GDP to grow at about 6.8% in fiscal 2023. As we have mentioned previously, the travel industry has historically grown at approximately 1.5 times to 2 times GDP growth in developing markets. We continue to believe that we should be able to achieve growth above market rates driven by share gain in the corporate travel market and the ongoing secular shift from offline to online in the consumer market.

Given the ongoing recovery in corporate and leisure travel, our continued success in signing new large and midsized enterprise customers, we believe we are poised for a strong calendar 2023.

Aside from these narratives, we expect our results to benefit from accelerating growth in our corporate business as we continue to add to our blue-chip customer base. Just to reiterate, today, Yatra India sells one out of every four of the top 100 listed companies in India. We service three of the big four accounting firms, and we service three of the top five technology companies in India, indeed, an enviable client base.

Now on to our fiscal Q3 results. I'm pleased to report that we delivered strong year-over-year growth of 43% in adjusted revenue, driven by recovery in both our consumer and corporate travel business. The recovery was on account of the domestic travel market in India rebounding back to the pre-COVID levels along with the onboarding of new corporate customers in our corporate business.

In fiscal year '23, we have signed a record number of over 72 medium to large corporate customers in the first nine months of this fiscal year as the travel recovery has gained momentum. Our revenue and adjusted revenue for the quarter came in at INR902 million, which is approximately USD11 million, and INR1,489 million, which is approximately USD18 million, respectively. So revenue close to $11 million in the quarter and adjusted revenue close to about $18 million in the quarter, respectively. Marginal decline in adjusted revenue by 1.7% sequentially was on account of seasonality in our corporate business. The December quarter typically is the slowest quarter for the corporate business because of the large number of holidays, both in accounts of Diwali, which happens in October, and then Christmas towards the year-end.

Adjusted EBITDA for the quarter came in at INR36 million, approximately USD400,000. The decline in adjusted EBITDA by INR8 million is due to higher legal and professional services costs, mainly relating to increased compliance costs year-over-year.

Our consumer business remained strong on the back of the holiday season and strong growth in the aviation industry. Overall, domestic air travel industry volumes expanded by around 19% in the third quarter.

Domestic travel ended surpassing pre-COVID levels as in the current quarter. We also saw continued strength in new corporate customers with 72 new signings in the first nine months. And the December quarter, as we said, has been a lean quarter given the nature of the industry.

International travel continued to improve during the quarter ended December. This is following the easing of international travel restrictions and reached approximately 88% of the pre-COVID levels. With the lifting of all travel restrictions in the Asia Pacific region, which has lagged the global recovery in international travel, we are now optimistic in the outlook for a sustained recovery in nearshore international travel as well.

On account of the above factors, our adjusted air revenue was up 39.2% year-over-year, with air gross bookings up 37% year-over-year. On the hotels front, our adjusted revenue was up 21% year-over-year with standalone room nights up 16%. Please do note that our stand-alone hotel room nights were up 33% compared to standalone hotel room nights in the pre-COVID year of 2019. This is on account of the hotels business continuing to benefit from stronger corporate demand as more and more corporates come under the managed hotel program and our partnership with Flipkart owned Cleartrip.

Packages grew 41%, albeit from a small base as seasonality played its part in the December quarter. On the liquidity front, as of December 31, the balance of cash and cash equivalents and term deposits on our balance sheet was INR1,083 million, which is approximately USD13.1 million, and this is an increase of INR380 million or USD4.6 million versus the September quarter.

During the three months ended December, we raised debt of INR300 million for the purpose of meeting our working capital requirements, which was raised from our nonbanking financial corporation in India. And subsequent to the end of the quarter, we have been sanctioned secured sales invoicing and working capital facilities to the tune of INR902 million from vested Indian banks [Phonetic], taking our total facilities in place in India to INR1,452 million versus a pre-COVID level of INR1,300 million.

With these facilities in place, we believe our balance sheet is strong, and we are adequately capitalized and have sufficient working capital financing facilities in place to continue to fund the robust growth in our corporate business and be in a position to retain any obligations that come up in the later part of the year.

Given that we are almost at the end of the March quarter, we thought it would also be prudent to share some preliminary expectations for the March 2023 quarter.

A record high number of Indians traveled by domestic air per day on an average in February 2023, surpassing the previous high of November 2019. On average, 431,000 people traveled in domestic flights per day in February. This was up 6.5% from January and higher than the previous record of 430,000 in November 2019. Based on such quarterly trends to date, we anticipate an adjusted revenue range of INR1,650 million to INR1,700 million, which is approximately USD19.5 million to USD20.5 million for the March 2023 quarter. And this would translate to a sequential growth rate of between 10% and 14% on a Q-on-Q basis, and also late the March quarter, our strongest quarter since the start of COVID.

In addition, during the March quarter, our Indian subsidy, Yatra Online Limited also set up our wholly owned subsidiary in Dubai. The objective of the subsidiary is to focus on expanding our software platform for corporate travel to customers in the Middle East and Africa.

With that, let me hand you over to Rohan to walk you through the details of the financial performance. Rohan?

Rohan Mittal - Chief Financial Officer

Thank you, Dhruv. I will now review our December quarter results and focus primarily on year-on-year, Y-o-Y comparisons. Our adjusted revenue increased by 42.5% Y-o-Y to INR1.49 billion. The strong Y-o-Y growth was driven by a rebound in the air passenger traffic by 17% Y-o-Y and an improvement in the yields, which resulted in a 39.2% increase in Air Ticketing adjusted revenue to INR1.01 billion.

Adjusted revenue for Hotels and Packages was also up by 21% to INR254 million. Our other revenue was posted at INR129.3 million in the December quarter, an increase from INR52.5 million in the year-ago quarter due to increase in advertising revenue.

Total gross bookings increased by 33.4% Y-o-Y to INR15.8 billion, reflecting the normal seasonality. Hotel and Packages gross bookings also improved 37% Y-o-Y, reflecting the strength in our corporate uptake of hotels as well as a 41% volume growth in packages. Gross air passengers booked were INR1.32 million, up 4.2% on a Y-o-Y basis. While the stand-alone hotel room nights booked were INR398,000 up by 16.3% Y-o-Y.

Moving on to the expenses. Marketing and sales promotion expenses including add-back for consumer promotions and loyalty program costs, increased by 53% on a Y-o-Y basis to INR820.9 million. Our personnel expenses increased by 22.9% to INR311.6 million, which is about USD3.8 million in the three months ending December 31, 2022, from INR253.4 million in the previous year same quarter. Excluding the employee share-based compensation costs of INR54.5 million in the 3 months ending December 31, 2022, compared to INR49.6 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 INR374.8 million versus INR261 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 INR1 billion, a little around USD13.1 million, which was an improvement over the previous quarter closing of INR703 million.

This concludes our prepared remarks. Handing back to Manish. Thank you.

Manish Hemrajani - Vice President, Corporate Development and Investor Relations

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

Question & Answers

Questions and Answers:

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Operator

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

Scott Buck - H.C. Wainwright - Analyst

Hi. Good morning, everybody. Thank you for taking my question. 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.

Dhruv Shringi - Co-Founder and Chief Executive Officer

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 are winning are more towards the mid and the larger end of the market. What we are seeing today is that there is an increased awareness on the part of the organization 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 13,000 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, yes, with a more agile workforce, what we've seen of 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 in the market suddenly growing from just being the MNC's stroke for large consulting firms to the Indian large corporations also wanting to adopt technology out of this space now.

Scott Buck - H.C. Wainwright - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

Scott, even in terms of same customer spend, 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.

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 want one or two pockets, which are 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 witness 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 passenger travel 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 are not seeing any signs of a slowdown.

Scott Buck - H.C. Wainwright - Analyst

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 may need - you've been doing or may need to continue to do on that front and how it could impact opex?

Dhruv Shringi - Co-Founder and Chief Executive Officer

Sure. So personally, 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 that will get added will be more at the operating level. So from a weighted average cost point of view is 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 go through a transition process with them as they adopt technologies. 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.

Scott Buck - H.C. Wainwright - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

Sure. Thank you.

Operator

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

Anja Soderstrom - Sidoti - Analyst

Hi. Thank you for taking my question. So you signed 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?

Dhruv Shringi - Co-Founder and Chief Executive Officer

So 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 time frame - May, June kind of time frame. 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.

Anja Soderstrom - Sidoti - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

No, I don't think there's anything exceptional. It's just that the experience, the underlying demand. We continue to see strong demand playing out on both B2C and corporate side. So these new customers that we are talking about as they get implemented, the numbers continue to bake in, and there will be a waterfall effect of that happening. And likewise, we are seeing strong reversions are 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.

Anja Soderstrom - Sidoti - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

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 study 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.

Anja Soderstrom - Sidoti - Analyst

Okay. Thank you. That was all from me.

Dhruv Shringi - Co-Founder and Chief Executive Officer

Sure. Thank you.

Operator

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

Lisa Thompson - Zacks Investment Research - Analyst

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 chance to go through in huge detail, but I did notice that 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.

Dhruv Shringi - Co-Founder and Chief Executive Officer

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 recurring 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.

Lisa Thompson - Zacks Investment Research - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

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 would 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, 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 market, the aviation industry in India is growing at double digits, right? 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.

Lisa Thompson - Zacks Investment Research - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

Sure. Thank you.

Operator

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

Jeff Van Rhee - Craig-Hallum - Analyst

Great. Thanks for taking the questions. A couple for me. I want to - 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?

Dhruv Shringi - Co-Founder and Chief Executive Officer

So as we go forward, Jeff, you 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 decisions [Phonetic], 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 were saying something?

Manish Hemrajani - Vice President, Corporate Development and Investor Relations

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

Jeff Van Rhee - Craig-Hallum - Analyst

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 of. How should we think about EBITDA for the March quarter?

Dhruv Shringi - Co-Founder and Chief Executive Officer

Jeff, we aren't giving 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.

Jeff Van Rhee - Craig-Hallum - Analyst

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 then targeted at roughly INR90 million in revenue. Is that still valid?

Dhruv Shringi - Co-Founder and Chief Executive Officer

Yes. We think at INR90 million, we should be back to those kinds of levels.

Jeff Van Rhee - Craig-Hallum - Analyst

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

Dhruv Shringi - Co-Founder and Chief Executive Officer

So logistics business has been, in the last quarter, relatively slow. I'm sure you guys are all following the global logistics rates and you would have seen that our 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 soft 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.

Jeff Van Rhee - Craig-Hallum - Analyst

Okay. Okay. And then one last one. On the - 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.

Dhruv Shringi - Co-Founder and Chief Executive Officer

Yes. So we've issued debt and we've taken on working capital facilities, right? 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 INR300 million, and this was taken in the month of, I think, if memory serves me right, December of 2022. So about INR300 million in terms of debt and about INR900 million in terms of receivable financing facility. The receivable facilities, just to be clear, again, the receivable facilities have happened post the December year-end. So they are a current quarter event.

Jeff Van Rhee - Craig-Hallum - Analyst

Okay. Thank you.

Operator

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

Manish Hemrajani - Vice President, Corporate Development and Investor Relations

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

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Q3 2023

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