MakeMyTrip Limited (MMYT) on Q3 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by and welcome to the MakeMyTrip Limited Fiscal 2021 Q3 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jonathan Huang. Thank you. Please go ahead. Jonathan Huang: Thank you, Polly. Welcome everyone to MakeMyTrip Limited's Q3 fiscal 2021 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 US 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, Jonathan. Welcome, everyone, to our fiscal third quarter earnings call. I'd like to wish all our listeners happy and more importantly, a healthy New Year. As we begin 2021, the world continues to deal with the ongoing COVID-19 pandemic, which has impacted most industries and the travel industry in particular. The good news is that since our last earnings call, we have seen vaccines being approved, as well as commencement of an effective phased rollout in India. While the distribution is still in its early stages, we are optimistic that it will gather pace given India's strong mass vaccination history. I'm also encouraged to see India's recorded daily infection rates, which peaked in mid-September has continued to decline steadily thereafter. As the country continues to unlock or reopen, normalization of economic activity is broadening. As disruptive as this pandemic has been, we believe it has accelerated and transformed the way commerce will be conducted in India. With social distancing needs greater than ever, the use of ecommerce has also been rapidly adopted by a country's half a billion plus digital citizens. In fact, some analysts are forecasting a three x increase in online ecommerce transaction values to reach over $180 billion by fiscal year 2025. While online travel as a category is still on its journey of recovery, we believe it's only a matter of time before we also start to accrue the benefits of such structural changes in booking behavior. Now I'd like to share the latest reopening trends for the domestic travel industry, which remains the primary focus of our ongoing recovery today. We believe international outbound travel recovery will eventually gain momentum, but only once herd immunity takes hold across destination countries and the ease of cross border travel presumes. In the meantime, we will keep focusing our efforts on driving full recovery of our domestic business and maintaining strict cost discipline. Rajesh Magow: Thank you, Deep and Happy New Year everyone. Let's all hope 2021 will be a much better year than 2020. Before I get into our operating performance and recovery trends for the quarter, I would like to congratulate our entire team who had worked relentlessly to achieve MakeMyTrip's near term goal as the industry continues to recover. With daily new infection rates on a steady decline since September, improving economic activities and now the rollout of effective vaccines in India, we hope to see 2021 be a much better year for all of us and the industry. In Q3, we were encouraged to see a steady recovery continuing within our domestic business since the country's reopening in late May of last year. This trend has only increased our confidence level on domestic travel recovery, further gaining momentum in the coming quarters, while we wait for international travel to open up. It's also a good reflection on the resilience shown by the industry and our brand, and we hope to emerge even stronger post the pandemic. While much of the recovery has been led by domestic travel demand, we are encouraged to see some strong demand for leisure travel to a couple of international destinations like Maldives and Dubai as well, which have reopened its borders to tourists with safety protocols. We continue to believe outbound travel will provide a long-term growth tailwind for us given the high fragmentation and offline nature of its distribution, but is expected to take a longer time to fully recover. A few other countries have also opened their borders since like Thailand and Sri Lanka, but they are honoring quarantine requirements at present. We look forward to these being reduced going forward. Now I would like to share and highlight our achievements in the fiscal third quarter of 2021, which reflects the continued domestic travel industry recovery, market share gains and cost discipline, which helped deliver positive quarterly adjusted operating profits. Mohit Kabra: Thanks Rajesh and Happy New Year everyone. Since the outbreak of COVID pandemic, followed by complete lockdown in India until late May 2020. Our focus has been to optimize costs, with the objective of minimizing losses during this fiscal year, which has seen business being very significantly impacted by the pandemic. Our relentless focus on cost optimization, coupled with continued recovery in the domestic travel demand has helped us achieve adjusted operating profits during the reported quarter, which is ahead of our expectations we had when we entered this fiscal year. Our overall business recovery compared to same quarter last year, which was pre-pandemic in terms of gross bookings in constant currency terms is nearly 37%. Considering that this number was about 15% in the last reported quarter, it is also reflective of the gradual pace of quarter-on-quarter business recovery that we are seeing led by restoration of domestic travel demand. Moving on to the main business segments, our air ticketing adjusted margin stood at $26 million, which is over 38% recovery in constant currency terms versus pre-COVID levels during the same quarter of last fiscal year and more than double the adjusted margin of $11.9 million achieved in Q2. The adjusted margin in our hotels and packages business stood at $25.2 million, which is about 25% recovery in constant currency terms versus pre-COVID levels during the same quarter of last fiscal year and about four and a half times the adjusted margin of $5.6 million achieved in the previous quarter. As for our bus ticketing business, the adjusted margin stood at about $9 million and represented over 45% year-on-year recovery in constant currency terms and was about three and a half times the adjusted margin of $2.5 million achieved in the previous Quarter. Lastly, on our other businesses, the adjusted margin of $4.1 million during the quarter represented a year-on-year recovery of about 50% in constant currency terms. Let me now share some details around operating costs during the quarter, which continued to be an area of sharp focus and rationalization. Beginning with variable expenses, which largely comprise of marketing and sales promotional expenses, we continued with significant year-on-year improvement and as a percentage of gross bookings these expenses stood at 3.8% of gross bookings compared to 8.9% in the same quarter last year. Our adjusted personnel and SG&A expenses came in at about $27.7 million, compared to about $45.6 million in the same quarter last year. These are slightly higher from the $24.4 million reported in the previous quarter on account of restoration of salary reductions during the quarter, as well as some incremental overhead costs which have been incurred in line with increasing business volumes. Clearly, the highlight for the quarter has been the achievement of adjusted operating profit of about $5.2 million, which is an improvement of over $16 million on a year-on-year basis, and an improvement of over $18 million on a quarter-on-quarter basis. Adjusted further for other non-cash depreciation and amortization expenses, the quarter's adjusted operating cash profit stood at about $9.5 million, compared to a loss of $7.6 million in the prior reported quarter of Q2, and a loss of $6.2 million reported in the same quarter a year ago. This turnaround in the bottom line reinforces our belief in continuing to pursue the strategy of cost rationalization in comparison with pre-pandemic levels, along with a plethora of initiatives to aid business recovery, particularly in the domestic market over the next few quarters. Lastly, we continue to focus on operational cash management. We started the quarter with cash and cash equivalents of about $198 million and aided by the positive operating cash flow of about $9.5 million during the quarter, we ended at about $228 million of cash and cash equivalents. As previously reported, in addition to the cash balances, we also have credit and guarantee facilities of approximately $100 million. Our credit facilities remain undrawn at the end of the reported quarter. With that, I'd like to turn the call over to the operator for Q&A. Operator, please. Operator: Thank you. And at this time, we do have a question from the line of Manish Adukia with Goldman Sachs. Manish Adukia: Yes, hi. Good afternoon. Thanks so much for taking my questions. This is Manish Adukia from Goldman Sachs. Just one question from my end, I wanted to get your sense and congratulations on achieving cash EBITDA breakeven. How sustainable is that number? Going forward, do you believe as demand recovery happens, you should at least be able to sustain this positive cash flow number? Or with demand recovery there might be a need for higher spend in selling and marketing, which could again, put the EBITDA number back in the date. So any thoughts around that will be helpful? Thank you. Mohit Kabra: Hi, Manish, Mohit here. And let me tag that. Like we have been mentioning over the last few quarters, the intent has been to keep the operating losses down, and pretty much kind of get back to the plus or minus $10 million, kind of an operating cash profit or loss situation what we call it the breakeven range for ourselves to be in that range on a stable basis. I think the last quarter saw us being in that range, but with some losses, and we've seen this quarter with some incremental business recovery, we've kind of been able to breakeven and also post some positive operating numbers over there. We believe as the business recovery kind of continues to keep happening, the endeavor will be to kind of make sure that we continue to remain around the breakeven levels or in the breakeven range that we have called out. As I said we see quarter-on-quarter seasonality changing in India, and also are kind of largely in a competitive in a situation where most players are in the private domain, and therefore, we want to - I mean, in a highly growth market. So, therefore we'd want to kind of keep that flexibility going of being in that operating range of plus or minus $10 million. But the fact that we've significantly rationalized our fixed cost structures particularly around people expenses, particularly around sales, general and administrative expenses, gives us an additional comfort that with business recovery, even if your variable expenses go up a bit in line with volume recovery, the significant pruning in these fixed costs should really help us kind of keep on the breakeven path. Manish Adukia: Thank you, that's helpful. Thank you and all the best. Mohit Kabra: Most welcome. Operator: And at this time, there are no further audio questions. Are there any closing remarks? Jonathan Huang: Yes, thank you so much for joining our call today. We certainly wish you all good health and look forward to speaking to you soon. Operator: And thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Jonathan Huang: Thank you everyone. Deep Kalra: Thank you.
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.
