Good day and welcome to the Yatra First 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, Katie. Good morning, everyone. Welcome to Yatra’s fiscal first quarter 2022 financial results for the period ended June 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, August 19, 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 course of 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.

Thank you, Manish. Good morning, everyone and thank you for joining us. I hope that you and your families are safe as we continue to navigate our way through this pandemic. As you are all probably aware, India was hit particularly hard by the second wave of COVID-19, with cases reaching over 400,000 a day, a bit high in the quarter. This led to widespread localized lockdowns across the country, significantly reducing air travel, though not as severe as a year ago. The impact was widespread and touched most of us personally, with family, friends and employees impacted. Despite these challenging conditions, we continued our strong execution. Adjusted revenue was INR489 million, which is approximately $6.6 million, down about 50% from the prior quarter due to the effect of the widespread lockdowns across India, but up 107% versus a year ago when India was first placed under lockdown. Despite the effects of this second wave, I am proud to report that stringent cost controls enabled us to deliver positive adjusted EBITDA of INR39 million, which is approximately $0.5 million. As I have been telling our shareholders, Yatra will exit the pandemic a more financially stable and profitable company than it was pre-pandemic. And as a result, we will be in a much better position to maximize shareholder value going forward. While we are not out of the woods yet, undoubtedly optimistic that the worst of the lockdown is now behind us and that we saw the trough in travel this June. The combination of lockdown and the vaccination drive has lowered case counts to a level low enough right now to encourage a recovery in travel. July industry air passenger numbers grew 56% and the strength has continued into August. I will go into more detail shortly, but Yatra has…

Thank you, Dhruv. Operator, please open up the call for Q&A.

Thank you, sir. [Operator Instructions] Our first question comes from Scott Buck with H.C. Wainwright.

Hi good morning guys.

Good morning, Scott.

Good morning, Scott.

It looks like the corporate travel growth has been pretty impressive coming off of June. But could you help us – can you give us an idea or frame that in terms of what it looks like versus pre-pandemic levels?

So in a pre-pandemic level, Scott, in corporate travel revenue right now, August would be trending somewhere close to about 25% of pre-pandemic levels, maybe even slightly north of 25, late 20s.

Okay. Perfect. That’s helpful. How many of these new corporate travel bookings are coming from customers that maybe you’ve signed over the past 18 months or so?

I don’t have that number handy right now in terms of how much of it is new customers and how much of it is existing customers. But there is recovery, which is happening right now. On a fairly broad base, the lead in the recovery is happening by the big consulting firms, so the EYs, BCGs, PwCs of the world. They are the ones who are driving the large part of the recovery, and maybe some of the more industrial and manufacturing businesses are recovering more gradually.

Okay. That’s helpful. And then last one for me. It looks like you guys have still been fairly conservative on marketing and sales spend. I’m curious when we start to see that ramp given the new demand for travel?

So I think the competitive landscape right now is fairly benign, as I mentioned, Scott. I don’t see us needing to ramp up tremendously on the marketing. We are seeing numbers in July and August as well, which are fairly encouraging from an overall competitive landscape perspective. So my sense is that while there will be a little bit of ramp-up, which will have, it’s not going to be very significant as we go forward. The ramp-up, though, will also be in recovery of the B2C business. In which now – It’s happening quite strongly at the moment. But from an overall percentage point of view, we should see some operating leverage on the marketing and sales spend for the next few months, at least, right. The advantage that Yatra has when it comes to this, Scott is that we’ve got a very strong and well-recognized brand in the country and that high brand recall allows to be – allows us to get a meaningful amount of direct traffic. So we should not see spends recovering in line with revenue. We should be seeing some operating leverage on the spends.

Okay, that’s perfect. Thanks a lot guys.

Sure. Thank you.

Thank you. Our next question comes from Tim Moore with Zacks.

Thanks and good work on cost savings shining through. It’s nice to see the air ticketing margins so high, and I was kind of curious about your Book Now, Pay Later option getting added. So I just have three sets of questions to ask. The first one is on the hotel side. I read that 70% of India’s domestic hotel capacity is operational. By the end of June and that the premium hotel side was leading the hotel recovery. Can you – I know you just mentioned this, and Scott asked about this in operating leverage, but can you kind of share your approach, if you’re willing to maybe increase marketing on the hotel side, to the market share – if the discounting behaviors staying rational and kind of benign lately? And just what is kind of your thinking of a trade-off between maybe spending for repeat customers versus acquiring new customers on the hotel side?

Sure. So on to the hotel side, there are two factors at play for us, one which is happening is on the corporate travel side. We’re beginning to see hotels gain meaningfully on the corporate travel side. And the reason behind that is that a number of companies are now being much more stringent about their managed hotel stay programs. So as a company, you’re obviously, only as strong as your weakest link. So if your employees in up-country markets are going and staying at smaller places, places which might not be as hygienic, they are on the risk of getting infected and then bringing that infection back into the main office. Keeping that in mind, an increasing number of companies are now looking at their hotel programs to become much more structured and their employees staying at properties, which maybe have a certain standard, and they are working with Yatra in terms of identifying those properties, which would mean those kinds of standards. So we have a process called Clean Pass, where hotels have to meet a certain amount of – or a certain criteria for the kind of stuff that they are doing to maintain COVID protocols and we are seeing good traction on that and the adoption is also extremely good product on the corporate travel side. So that’s one thing which is driving and for that, we don’t really need to get into discounting and marketing, right? That’s an organic share that we are gaining from our own corporate customers who earlier might not have had a very structured and managed corporate travel program. But in the post-COVID environment, are looking at formalizing and putting more structure around the stay program as well. The other part of your question, which is on the consumer side. On…

That’s helpful. My next question is you just kind of helped answer some of the cleaning standards and the Clean Pass. Just I’m just wondering if you can maybe elaborate or add more specific actions, awareness that you might be doing proactively on the corporate travel side to stay in front of corporate clients as the step-up recovery is starting? And I’m wondering if you’re focusing a bit more on medium-sized ones? You mentioned consulting. I’m just wondering if you’re really focusing more on certain end markets like construction, pharma, consulting, tech, outsourcing, as those start to come back and they bring employees in maybe on the earlier and compared to other end markets?

Sure. So if you look at it from a strategy point of view, our market share has historically been higher in sectors like consulting, where three out of the big four work with us, right? Then we will have banks, where we will have a strong presence as and then with this large big tech companies in India like an HCL or TCS, right, which employ hundreds of thousands of people who on presence with them. The area where historically, we’ve got lesser penetration is more on the Indian large corporations. These are the ones who were historically serviced by mid-tier organizations out of India. That’s the segment today, which I think is ripe for disruption. So we have a two-pronged approach for our current installed customer base with the big consulting firms, the big banks. Our focus is on cross-sell of hotels and other services. Whereas in terms of new customer wins, we are, today, now looking much more closely at the large Indian corporations, which were hitherto being serviced by the mid-tier organizations. And a number of these Indian corporations also have shown a higher degree of interest in terms of adopting technology. So that’s the area and avenue for growth with us. That’s the 60% fragmented market that we’ve been referring to, right? And this pandemic is actually helping us accelerate penetration in that sector. So that’s the two-pronged approach. On the existing customers, the focus is going to be more cross-sell-driven and getting more and more products sold. And then on the new caster win side, it’s this fragmented market that we are going after.

Great. That’s helpful. And I’m just wondering, just the air ticketing margins were quite high, and they have gone up nicely. I’m just wondering with low load factors and less discounting and incentives for airlines, which seems to be also the case in the U.S., they are pretty expensive actually to airfares here. How many more quarters do you think you can keep the air ticketing net margins up until maybe corporate picks up and maybe brings that down a little bit, which would still be good op for operating levers? I’m just wondering maybe how you’re thinking about the margins when you look out a couple of quarters?

Sure. Yes. So margins in quarters like these, which have high degree of cancellation also, right, do get in a way a bit I’m trying to look for the right one. But maybe they don’t really give you a sense of what is the ongoing margin right? So if I was to look at the ongoing margin the underlying ongoing margins, we think, will be closer to the 10% mark at this point in time, right, with these kinds of aberrations happening on account of high degree of cancellation playing out. And as corporate travel begins to pick up more on the mix, the weighted average will then blend towards the 6% to 7% mark over a period of 12 to 18 months. That’s the way we would look at this. I think the 16% that you see right now in air margins is more of an aberration, an aberration that is led on account of the high cancellations in the quarter.

That’s a helpful explanation and that was my last question. So thanks for giving weight on that.

Sure. Thank you.

Thank you. I am showing no further questions. I will now turn the call back over for closing remarks.

Thank you everyone for joining the call today. As always, we are available for any follow-up questions you may have. Stay safe. Thanks.

Thank you.

Thank you, ladies and gentlemen. This concludes today’s teleconference. You may now disconnect.