Good morning. My name is Henry, and I will be your conference operator today. At this time, I would like to welcome everyone to the MakeMyTrip Limited Fiscal 2021 Quarter 2 Earnings Call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session. [Operator Instructions] Thank you very much.

Now, I would like to turn the call over to our first presenter for today, Mr. Jonathan Huang, Vice President of Investor Relations. Sir, you may begin the conference..

Thank you. Welcome everyone to MakeMyTrip Limited's fiscal 2021 second quarter earnings call. I would like to remind everyone that certain statements made on today's call are considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

These statements are not guarantees of future performance, are subject to inherent uncertainties and actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date. And the company undertakes no obligation to update the information to reflect changed circumstances.

Additional information concerning these statements are contained in the Risk Factors and Forward-Looking Statement section of the company's Annual Report on Form 20-F filed with the SEC on August 17, 2020. Copies of these filings are available from the SEC or from the company's Investor Relations department.

I'm joined today by Deep Kalra, MakeMyTrip's Founder and Group Executive Chairman; Rajesh Magow, Co-Founder and Group CEO; and Mohit Kabra, our Group CFO. Now, I'd like to turn the call over to Deep to begin today's discussion..

Thank you, John. Welcome, everyone, to our fiscal second quarter earnings call. I sincerely wish all our listeners good health and safety as the world continues to grapple with the ongoing COVID-19 pandemic. It is encouraging that the word over and in India as well.

There are multiple vaccines, which are in various stages of trials, promising a cure sooner than later. That should clearly help restore normalcy to pre-COVID-days, something that we are all looking forward to. We at MakeMyTrip continue to believe that the need for travel is innate in humans.

And while we are already seeing green-shoots of demand across different travel services, we believe business recovery would significantly accelerate once a vaccine becomes widely available. As for India, recent trends seem to indicate that we are past the peak of daily confirmed COVID-19 infections.

It is also helpful that despite having the second largest number of confirmed infections globally, the country's mortality rate is fairly low. This has helped us to get some travelers back and the travel industry is also adapting and innovating to address the concerns of the travelers in such times.

While we had updated on the gradual unlocking in the country post May during our last call in August, thereafter, we have seen the unlocking gain for the momentum. As we speak, the country's domestic airlines have been permitted to operate up to 55% of their capacity as in the same period in the prior year by the DGCA which regulates the sector.

The actual passengers flown have already recovered to about 40% levels. As for international flights, restrictions remain in place until at least October 31.

So many bilateral country bubbles have already been established for special-purpose flights, and new arrangements are currently being negotiated with countries such as Italy, Bangladesh, Kazakhstan and Ukraine.

These existing bilateral arrangements along with tourist destinations like the Maldives and Dubai have opened up their borders are helping to revive demand from customers eager to travel beyond India. We continue to believe that international travel will take longer to recover.

And for the next few quarters, domestic travel will lead the business recovery for us. When it comes to domestic hotels, currently about 50% of the properties across our network have resumed operations and almost 30% of demand has been restored.

One of the silver-linings from this pandemic has been the acceleration of digital and e-commerce adoption globally and across India, driven by increased demand for contactless transactions as a result of social distancing and greater hygiene awareness.

This trend towards online will inevitably provide a long-term growth tailwind for companies like ourselves, considering that a majority of travel in this country is still booked offline. To ensure we maintain and further gain share, we remain keenly focused on our customers' experience with our brands.

We have therefore launched the new version of our loyalty programs across both brands, MakeMyTrip and Goibibo, during this quarter.

The new version of our MakeMyTrip BLACK was re-launched in September, powered by more benefits for consumers in association with our partners, which is likely to give better engagement and retention results in the future, while helping our program economics. Since its re-launch, the MakeMyTrip BLACK program has enrolled 820,000 members so far.

Similarly, Goibibo's new loyalty program called goTribe has also registered over 0.5 million members since its recent launch. More exciting is the fact that 3 quarters of goTribe's base are new customers to our rewards program. Apart from reviving travel demand, we remain focused on cost optimization to reduce our losses and conserve cash.

Therefore, our marketing approach has been very disciplined. We greatly leverage the use of direct online channels and the enduring strength of our brand as COVID-related travel restrictions were lifted. We also employ tactical, but targeted campaigns to nudge customers to travel, as well as reactivated dormant users with our CRM campaign.

As a result, traffic on our platform has been growing consistently now over the last quarter, with organic traffic, direct and SEO touching 90% of total traffic.

Even more encouraging is that the mix of new users increased meaningfully since the lifting of travel restrictions in late May, indicating we continue to gain share from both online and offline users.

Lastly, before I hand the call over to Rajesh to share greater details on our achievements during the quarter, I'd like to mention our newly launched advertising platform. This platform started out as an idea generated during the lockdown.

As one of the most recognized and visited online consumer brands in India today, we believe we have an opportunity to leverage and monetize the value created over the years in terms of visitors to our sites.

Utilizing our technology, advertisers can access a self-serve automated platform to buy advertising space, utilize a bidding system for sponsored listings, and leverage a real time inventory planning and optimization system to increase their returns.

Going forward, our team's plan to keep improving this platform to make it even more useful and value additive for users and help us drive incremental revenue to the group. Now, I'd like to hand the call over to Rajesh..

Thank you, Deep. Hello, everyone. I hope everyone is staying healthy and well during this ongoing pandemic.

Before I begin, I would like to thank the entire team, who had been working relentlessly during this last couple of quarters in a constrained environment to help with the industry's reopening and slowly bring MakeMyTrip back on the track of business recovery.

Let me now share a summary of our fiscal second quarter of 2021, which is the first full quarter along the journey of recovery, as COVID-19 travel restrictions were largely only lifted in June.

Since then, we have seen a gradual return of demand with sequential week-on-week improvements that is fairly in line with the lifting of localized restrictions and opening up of all modes of travel and accommodations in the country in a graded manner.

Since restrictions were lifted, we were encouraged to see pent-up demand for the short-stay leisure break segment where travelers flocked to nearby getaway destination after having fatigued out due to the severe lockdown conditions in most of Q1.

While the pace of recovery remains uneven state by state, we are encouraged to see continued momentum into the beginning of the festive season here in India, where people typically travel to celebrate with friends and families.

Now I would like to share some details of our different lines of business fared during the quarter, along with the efforts we have put in to help us maintain the momentum of our recovery going forward.

In our hotels business, as mentioned by Deep, currently almost 50% of the properties across our network have resumed operations, and we are seeing domestic demand recovering to almost 30% so far during this festive season.

The hotel demand recovery is currently led by short-stay getaway vacations, great travel deals, and naturally hygienically safe properties. To aid in the recovery of our hotels business, we've been deeply engaged with partners to work out the right pricing for travelers, and offering tempting deals in the marketplace to address safety concerns.

We launched several initiatives, including our MySafety and GoSafe programs with the partners, which stressed safety and hygiene protocols to address concern in consumers' minds. Furthermore, these programs are validated by third-party property audits as well, as well as user reviews.

In addition, we rolled out contactless checking, which allows guests to upload via app required documents ahead of time, increasing the speed and safety of the process. Today, more than 500 of our hotels are offering this feature, and we anticipate more partners to join in soon to allow this feature at their property.

One of the other consumer insights gained exiting the lockdown was the uncertainty around travel plans in order to offer customers complete flexibility in their plans. We expanded the coverage of our free cancellable rates to more than 90% of our partners' properties.

We are also offering a zero payment at the time of booking option to further drive booking confidence with our brands.

On the post-sales front, we made multiple changes to ensure easier discoverability of our MyTrip's customer support module and directly linked suppliers with bookers to drive faster and better customer support resolutions, while optimizing our servicing costs.

On the back end, we made improvements to our supplier management system, or extranet by creating a new help center to aid partners with sharing FAQs and video content.

The enhanced system also helps improve partners listing by providing a quality score based on attributes like content submitted for listing and amenities offered, which aids in greater likelihood of bookings. Now, I would like to share some of the achievements made in our flights business.

Similar to hotel, I'm pleased to share there had been sequential improvements in seat capacity and demand in the domestic air market since the unlocking took place in June. For the fiscal second quarter, the total number of passengers flown in the market was about 23% of pre-COVID level, with the capacity at 31% of the quarter.

More encouraging is that currently domestic capacity has reached roughly 48% in terms of departures with daily passengers flown returning to more than one-third of pre-COVID levels, indicating strong recovery momentum so far during the festive season.

For the coming winter months, the DGCA has approved domestic carriers to operate up to 55% of their prior year's domestic flight, which should further help with capacity constraints during the typically strong travel quarter.

More encouragingly, since exiting the lockdown, we have seen buyers' behavior changing even more in favor of online, resulting in our market share improvement by 240 basis points in September when compared to February.

Now, I would like to share some of the things are being developed and implemented, which I believe has allowed us to improve our leading market share position further.

In an era, where social distancing is the norm, we've invested to improve our web checking experience even more, with the introduction of an industry-first option of allowing scheduled web check-ins and auto seat assignments.

We also implemented a hub to help navigate ever changing travel restrictions to further ease customers' concerns on both our main app as well as via WhatsApp. We also totally revamped our review screens to ensure customers are fully aware of all options and policies that may apply to their selection.

Lastly, we are in an additional door-to-door baggage pickup and drop services to help drive a better experience for users to drive cross sell within the flights funnel, bookers now also have the option to pick up a hotel within the same transaction, further reducing the shopping time required to complete their entire journey.

Now, I would like to share an update on our bus ticketing business. Similar to our other lines of business, we have seen a gradual, but steady recovery in terms of supply and demand since the unlocking took place play in June.

As we entered the festive season, we've seen more than 50% of the inventory come back online and available to be sold in terms of demand. So far in October, we have seen a recovery of around 40% on a daily run rate basis relative to pre-COVID day and expect this to only improve in the quarter.

To inspire confidence with bookers, we've strengthened the safety standards of bus operators with our Safety Plus program by facilitating independent audits of their entire safety protocol and compliance.

Our pre-registration feature for bus travel, which notifies' riders when a desired bus route resumes operations, has now crossed over 1.9 million travelers. We are leveraging this data to help operators to aid in their route planning as they continue to restore services going forward.

Now, I would like to share a quick update on our other ground transportation business, which includes cabs and metro or train ticketing. During Q2, we introduced home-to-home within our flights product to offer safe cabs to and from airports.

Additionally, we've built features to suggest alternative modes of ground transport to the customers in case there is unavailability of one of them. On our corporate business side, our focus has been more to acquire new customers. And during Q2, we have added 200 new clients on our corporate platform.

And lastly, to share an update on our brands foray into the GCC region, which we announced last quarter. Since launch, we've seen good traction in terms of app downloads and active users. On product development side, we are now investing in building the platform in the Arabic language, which is the most popular language in the region.

With that, I would like to hand the call over to Mohit to share more color on our financial recovery and performance in Q2..

Thanks, Rajesh, and hello, everyone. During the second fiscal quarter, our primary focus was to maintain a very tight cost discipline, as we started with the gradual business recovery process, following the various phases of unlock being rolled out by the Indian government.

While the overall business recovery in terms of gross bookings for a quarter was about 15%. The recovery in the exit month of September was almost 23%. We are, therefore, hopeful of our business recovery gaining further momentum in the approaching winter quarter.

The adjusted operating loss for the quarter at $12.9 million was lower than the previous quarter's loss of $21.3 million, and also better than last year's same quarter loss of $19.3 million.

Adjusted further for non-cash depreciation and amortization expenses, the quarter's adjusted cash operating loss is stood at about $7.6 million compared to $16.3 million in the previous quarter, and $14.5 million in same quarter last year.

As highlighted by Rajesh, we have seen better business recovery so far in our air ticketing business compared to other business segments. For the quarter, our air ticketing adjusted margin stood at about $11.9 million, which is a recovery of about 19% in constant currency terms versus pre-COVID levels during the same quarter of last fiscal year.

The adjusted margin in our hotels and packages business is stood at $5.5 million. It was about $2.5 million for the bus ticketing business, and $3.1 million from other businesses. I'd now like to share some color on our operating cost line during the quarter.

We significantly pruned our marketing and sales promotion expenses, which stood at 2.4% of total gross bookings considering that the business recovery during the quarter was very gradual.

Our personnel and SG&A expenses stood at about $24.4 million for the quarter compared to about $46.7 million for the same quarter during the last fiscal year, and it's slightly about the $22.4 million during the previous quarter.

This small increase was in view of the gradual restoration of salary reductions during the reported quarter for most of our employees, excluding the top management. We do expect to fully restore salary cuts for the entire team by the next quarter.

The significant reduction in these costs compared to the last fiscal year, continue to aid our reduction of cash adjusted operating losses.

During Q2, we continue to focus on cash management, and ended the quarter with about $198 million in cash and cash equivalents versus about $174 million at the end of June, while we registered, adjusted cash losses of about $7.6 million during the quarter.

Our cash balance improvement during the quarter was also aided by the fact that we were able to realize tax refunds from the tax authorities, and we also kind of witnessed significant working capital releases in line with the gradual business recovery.

The cash and cash balances that I've called out do not include our secured credit and guarantee facilities of approximately $100 million, which remain fully available to us as and when needed.

As the economy continues to unlock and bounce back, we believe we are well placed financially and operationally to benefit from gradually improving demand recovery in the travel sector. With that, I'd like to turn the call over to the operator for any Q&A..

[Operator Instructions] We have our first question. Our first question comes from Vijit Jain of Citi. Your line is now open..

Yeah, hi, guys. Congratulations on a great set of numbers. Terrific numbers on the adjusted EBIT yet again. My question is about the adjusted margins of the hotels and packages side, so quite a steep drop there. Does that reflect the fact that budget continues to lag premium in recovery in this quarter? Thank you..

Absolutely, Vijit, you're quite right. And like we have been calling out, the budget segment kind of continues to lag. In fact, the mix is getting skewed more and more in favor of premium properties.

And this is kind of relatable, because this is a period where most customers want to kind of address their concerns around safety, hygiene, et cetera, and believe this is better addressed in the premium properties compared to the budget properties.

And therefore, we're kind of seeing much better pickup in the premium properties that we have on the website. So, pretty much coming in from there. Also, we have been kind of supporting some of our partners, in appropriate cases, with reduced take-rates. And that's also kind of contributing in a small way.

But predominantly, this is coming in from the change in mix in favor of premium properties. So, to a large extent, I would say probably this is a slightly one-off kind of times. We don't really know, whether this change in mix is kind of here to stay.

Probably, we should gradually start seeing more and more recovery coming in the other segment or other price point as well, so probably more transient..

Right, thank you. And secondly, just a little bit color. I know you mentioned, Mohit, earlier about some income tax refunds and working capital as the reason for the roughly $35-million-, $40-million-odd net change in your cash when you remove the losses.

So can you break that up also a little bit for us, the income tax refunds? I don't see that for that in the release?.

Yeah, sure. Like I mentioned, our overall change in the cash position, if you look at it, is close to about $24 million for the quarter, from about $173 million to about $198 million. Probably, half of this $24 million comes in from income tax refunds that we've kind of received. So that's kind of really helped shore up the cash balances.

And the rest is largely a mix of multiple changes on the working capital lines..

Got it.

And my final question to you guys, with COVID levels dropping quite significantly now in India over the past 1 month or so, I know you've commented a little bit about festive season demand and about exit demand at the end of September, but any meaningful pickup you've noticed very recently? And, I mean, I know it's hard to disambiguate between festive demand and overall demand.

But I'm just wondering if the behavior change has been quite as fast as the COVID drop has been..

Yeah, hi, Vijit. This is Deep. Let me take that, sorry. So absolutely, I think we have noticed there has been definitely a distinct uptick. I think this uptick is probably in the last 4 to 6 weeks. So we started noticing pure tourist kind of travel even a bit in September, but definitely thereafter.

The second October weekend, as we know in India is a long weekend. I think that was a very positive sign, then the just past weekend for Dussehra et cetera is a pretty positive sign where there was a lot of travel.

So like Rajesh called out, a lot of road trips, lot of weekend getaways, et cetera, but also now flights to pure tourist destinations picking up quite a bit. So also off these 50% departures, there are quite a few to tourist destinations or the 40% load factor. So Goa has become increasingly popular.

People are now even looking to go beyond and to other places. So I think it's fair to say that October has definitely been more reassuring. And there is a week on week kind of increase. So we are hopeful this will continue. This is peak season, right through from October, November, December. There's no doubt that there is pent-up demand in getaway.

But people are still grappling with how can we travel safely kind of thing. So I think as more awareness grows around travel, hopefully better testing protocols, I think that can really help. If we have mandatory testing protocols, it can be of huge advantage.

But even until then, I think the fact that it's been quite well proven that people are not really picking up the infection or there's no transmission while they are traveling. So that is really helping people I think, give them the confidence that they can travel forth.

And then, in the choice of accommodation, while people are, like you called out, is this a skew towards premium properties? Absolutely. A lot of them tend to have independent villas and cottages where people are staying, also home-stays. So that is where we are seeing the skew going right now. So the premium chains are definitely gaining.

Some of them has been quite proactive, to put together programs. And we are obviously helping them, in terms of getting the word out, that there are interesting deals, good deals, and most importantly, safe way to travel. That's the key message..

Right, thank you so much..

Thanks, Vijit..

[Operator Instructions] Presenters, no questions so far. You may continue..

There are no more questions. Thank you, everyone, for joining our conference call today. If you have any further questions for us, please feel free to reach out and you may disconnect at this time. Thank you..

This concludes today's conference. Thank you all for joining..

Thank you..