MakeMyTrip Limited (MMYT) on Q1 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the MakeMyTrip Q1 Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s call is being recorded. I would now like to hand the call over to Jonathan Huang, Vice President, Investor Relations. Please go ahead. Jonathan Huang: Thank you, and welcome, everyone, to MakeMyTrip Limited fiscal 2021 first 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. Deep Kalra: Thank you, John. Welcome all. I hope everyone listening is staying safe and healthy during the ongoing global pandemic. Today, I'd like to share some of the actions we continue to take during these difficult times to ensure we remain in a position of strength to weather through this storm and begin our journey of recovery with a better financial trajectory than in recent past. Since our last earnings call, we have begun to see some early signs of recovery within our domestic travel business. As a reminder, while domestic flights in India were allowed to resume from May 25th, albeit to a certain amount, most other travel services was significantly impacted throughout the reported quarter. As a result, our fiscal first quarter's performance reflected the bulk of the impact that the lockdown had on our business. During the quarter, we took painful, but necessary fixed cost reductions and fully flexed our variable costs to ensure we have ample liquidity to reemerge stronger competitively. In addition, we have secured additional financings, which Mohit will discuss later to further bolster our balance sheet. We've also maintained strong cost discipline to manage our quarterly cash flow usage going forward. These actions will allow us to manage our quarterly cash burn despite a material hit to our top line numbers. Lastly, we continue to invest in our technology platform for the long-term to ensure we have the opportunity to serve customers' needs via online channels even better going forward and achieve operational cost efficiencies through greater automation. Recent developments of travel opening up gradually makes us believe that the worst of the pandemic impact might be behind us, and it should hopefully only continue to recover more gradually thereafter. Rajesh Magow: Thank you, Deep. Hello, everyone. I sincerely hope you are all staying healthy and well during this pandemic. I would like to start by sharing a quick overview of the first fiscal quarter of 2021, which reflected the bulk of the impact that the nationwide COVID-19 lockdown had on travel and our business specifically. As we had shared on the last earnings call with the lockdown spanning all of April and most of May, our business only really resumed, albeit in a very restricted manner for the month of June. While various segments of travel had resumed in late May and early June, the travel industry was still met with a myriad of capacity limitations and travel restrictions imposed on a state-by-state level, making the resumption of travel initially challenging. As a result, while the top line was impacted, we were able to control our operating cash burn with our timely and aggressive efforts to manage the costs. The good news, however, is that we do not anticipate another prolonged and nationwide lockdown, and expect the business to continue on its path of gradual recovery, with volumes improving quarterly as demand improves. Now I would like to share color on trends. We have been seeing within each of our main lines of business. I will then share some details of the various technology projects, accomplished during the quarter, which are aimed at helping us reduce fixed costs going forward. Mohit Kabra: Thanks, Rajesh, and hello, everyone. I hope everyone is doing well and staying healthy. As Deep and Rajesh have both already provided a quick overview of how our first fiscal quarter transpired, I would like to share more details on cost optimization initiatives and steps being taken to ensure that we have sufficient liquidity to see us emerge stronger through this pandemic. As we begin this new fiscal year 2021, I would like to call out some changes in our segment reporting metrics or key performance indicators. The key travel services that the company offers booking of air tickets, hotels and packages and bus tickets. Income from the sale of airline tickets, hotel room nights and bus tickets is recognized as an agent on a net commission basis as the company does not assume any performance obligation relating to the service. In our packages business, the company acts as a primary obligor for such packages since the group controls these services before such services are transferred to the traveler and accordingly, the revenue for the packages business is accounted for on a gross basis. As you can see, certain parts of our revenue are recognized on a net basis and other parts of our revenue are recognized on a gross basis, therefore, to better reflect the value addition of the travel services we provide to our customers, we have historically evaluated our financial performance in each of our reportable segments based on adjusted revenue or what we used to call revenue-less service cost until fiscal year 2018. With a view to providing a more accurate representation of the margins achieved in each of our segment from our suppliers, this segment profitability measure will now be called adjusted margin. To reiterate, there is no change in the way the metric is calculated. And this change is only to reflect in a better way, the way we view our top-line. As mentioned earlier, our focus during the reported quarter was to optimize costs with a view to minimize losses, and I am pleased to share that our adjusted operating losses at $21.3 million were quite low compared to the same quarter last year's loss of $29.3 million. Adding back for non-cash expenses like depreciation and amortization, the adjusted cash loss for the quarter stood at about $16.3 million compared to $24.7 million in the same quarter last year. To begin with initiatives on the variable costs, which largely include marketing and sales promotion expenses, along with payment gateway costs, these were significantly pruned down to about 3.2% of gross bookings compared to being at 8.1% of gross bookings in the previous quarter and 10.5% of gross bookings in the same quarter last year. This is a reflection of us fully flexing down our variable costs of marketing and sales promotions during the quarter, as we remained under nationwide lockdown. As we had shared on our last earnings call in late June, we have also taken cost actions on our fixed costs, which include company-wide salary reductions and headcount rightsizing in some of the offline channels. These actions taken early on during the fiscal quarter enabled us to reduce our absolute personnel expense by almost $6 million compared to the previous quarter. As we had indicated earlier, we have begun restoring the salary reductions of the frontline staff and are planning to restore the reductions for the middle management staff starting in September, in line with our plans to do so, once the business gradually starts resuming and its momentum is assured. While the restorations will increase our quarterly personnel expense from fiscal quarter one levels, we do anticipate some savings over fiscal-year 2020 Q4 levels as we have rightsized the headcount in a few offline channels. We have also significantly reduced our selling, general and administrative expenses by nearly $17 million on a quarter-on-quarter basis. We have achieved much of this reduction by optimizing very significantly on the outsourced call center staff at the start of the nationwide lockdown. We anticipate that as the business scales up, there will be some increases in the outsourced call center spend. However, the technology and automation initiatives, as highlighted by Rajesh, will help us yield longer-term cost efficiencies in this area going forward as well. We also achieved savings in our technology-related expense, including site hosting charges. We've also been able to further reduce our fixed cost by shutting down our company retail office expenses and move them over to franchisee networks. We have also adopted work-from-home or remote working as a longer-term measure. So that a certain percentage of our workforce can work on a remote basis and accordingly have initiated steps to reduce the overall size of our office facilities, particularly in Gurgaon. Lastly, with focused cash management, despite the cash burn during the quarter, we have been able to improve our cash and cash equivalents, which stood at approximately $174 million as at the end of June compared to nearly $168 million as at the end of March '20. Factoring in the restructured costs that I've just talked about, our current cash position gives us ample runaway for at least six to eight quarters based on the reported quarter's run rate. We have also been working towards establishing additional lines of credit. Considering that we have zero debt, we believe it is prudent in current times to have additional facilities to dip into, particularly to capitalize on any growth opportunities that might come our way and to emerge stronger, post the current crisis. With this view, we have secured multiple credit and guarantee facilities to the tune of approximately $100 million, this includes a revolving credit facility from an affiliate of our largest shareholder to the tune of $70 million. These facilities are over and above our cash and cash equivalents of $174 million as at the end of June 2020. I'd also like to reiterate that we do not anticipate any need to utilize any of these credit facilities at this stage, and this is to substantially enhance our liquidity profile for any unforeseen contingencies or investment in potential opportunities. With that, I'd like to turn the call over to the operator for Q&A. Operator: Jonathan Huang: Thank you, everyone, for joining our Fiscal 2021 First Quarter Earnings Call. We feel -- we look forward to speak with you very soon. And have a nice day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
MakeMyTrip Target Raised to $130 Amid Steady Growth
BofA Securities analysts increased their price target for MakeMyTrip (NASDAQ:MMYT) to $130 from $119, maintaining a Buy rating on the stock. The upward revision reflects confidence in the company's solid business momentum and its ability to capitalize on a recovering travel market.
The analysts noted slight adjustments to earnings forecasts, with 2026-27 EPS estimates raised by 1.5-1.7% due to steady operational performance. However, 2025 EPS projections were lowered by 2.2%, primarily due to non-cash translation impacts stemming from the recent depreciation of the Indian rupee against the U.S. dollar. Rolling forward the discounted cash flow model contributed to the higher price target.
MakeMyTrip is well-positioned to benefit from the ongoing recovery in travel demand, supported by its strong market presence and relatively low competition in the sector. The company is also expected to achieve robust growth alongside margin expansion. Additionally, the recently announced $150 million share buyback provides a layer of downside protection for the stock, enhancing investor confidence.
MakeMyTrip (MMYT) Anticipates Strong Quarterly Financial Performance
MakeMyTrip (NASDAQ:MMYT) is on the brink of revealing its financial performance for the quarter ended March 2024, with expectations set high by Zacks Equity Research. The online travel giant is forecasted to unveil a notable year-over-year growth in earnings, pegged at $0.26 per share, a 23.8% jump from the previous year. This anticipated increase is not just limited to earnings; revenues are also expected to surge by 31.4% to reach $195.15 million. Such optimistic projections are underpinned by a recent upward revision of the consensus EPS estimate by 29.17% over the last 30 days, signaling a positive shift in analyst sentiment towards the company's business outlook and potential performance.
The financial community is closely watching MakeMyTrip's earnings, especially given the company's track record of exceeding consensus EPS estimates in three of the last four quarters. In its most recent quarter, MMYT didn't just meet expectations; it surpassed them by posting earnings of $0.35 per share against the anticipated $0.30, marking a surprise of +16.67%. This history of outperformance, coupled with a Zacks Rank of #1 (Strong Buy), positions the company favorably in the eyes of investors. However, the Zacks Earnings ESP (Expected Surprise Prediction) model indicates an Earnings ESP of 0%, suggesting that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, which introduces a layer of uncertainty regarding an earnings beat this time around.
Amidst these financial projections, MakeMyTrip's stock performance adds another layer of intrigue. Currently trading at $72.68, the stock has experienced a notable uptick of $0.87 or 1.21% in a recent session, oscillating between a low of $69.81 and a high of $72.98. This performance is part of a broader trend that has seen MMYT's shares climb from a yearly low of $25.08 to a high of $77.3, reflecting a robust investor confidence and market valuation of approximately $7.65 billion. Such market dynamics underscore the company's resilience and growth trajectory, even as it navigates the challenges posed by macroeconomic uncertainties, including inflation and high interest rates, which have been particularly taxing for the Zacks Internet - Delivery Services industry.
Despite these macroeconomic headwinds, MakeMyTrip, alongside its industry peers, is strategically poised for growth, leveraging the increasing internet penetration in emerging markets, a burgeoning middle class, and the widespread adoption of smartphones. The company's focus on cost-control measures and strengthening its hotel business, especially in light of improving travel conditions post-pandemic, are pivotal strategies expected to drive its future success. However, the downward revision of the Zacks Consensus Estimate for MakeMyTrip's fiscal 2024 earnings to $1.13 per share from $1.17 in the past 60 days signals potential challenges ahead. Nonetheless, MakeMyTrip's strategic initiatives aimed at adapting to consumer preferences and technological advancements may well equip it to navigate through the industry's current challenges, maintaining its growth momentum in the competitive landscape.
MakeMyTrip Reiterated With Buy Rating at Citi
Citi analysts reaffirmed a Buy rating and a $43.00 price target on MakeMyTrip (NASDAQ:MMYT). The analyst highlighted positive catalysts for MakeMyTrip, driven by resilient travel demand and strong expectations for the first quarter.
Notably, domestic airline ticketing has shown continued momentum through May 2023, and the hotel sector has experienced decent occupancy trends and sustained high average room rates, as indicated by RBI data in April 2023.
Despite MakeMyTrip's improving fundamentals and a favorable competitive environment among online travel agencies (OTAs), the stock has not participated in the broader NASDAQ/tech rally, with only a 2% year-to-date increase compared to the Nasdaq-100's 39% rise. Nonetheless, the analyst maintains a positive outlook on MakeMyTrip and sees approximately 54% upside potential in their target price.
