Question-and-Answer Session
Operator
[Operator Instructions] And your first question comes from the line of Lloyd Walmsley with Deutsche Bank.
Lloyd Walmsley – Deutsche Bank AG, Research Division
Wondering if you can just elaborate a bit more on the strength in the HP segment. How much of that was contribution from EasyToBook? And then what are some of the other core factors driving your bookings growth there? It sounded like, I think, you said something to the effect of some better competitive pricing on outbound. If you could kind of, I guess, explain if that may have been part of that take rate moving slightly down, but I guess incorporating that into perhaps the booking strength.
Rajesh Magow
Sure, Lloyd. This is Rajesh. Let me take this. So the first question was how much is it coming from EasyToBook and how much is the growth from the existing business. So the simple answer is, as you know, that we’ve been reporting consolidated financials, but the growth — last part of the growth, actually, came from India business. And the EasyToBook number, although, it is part of the consolidated financial, but it wasn’t a material number. And in the India business, all key segments standalone hotels, holidays, even air business specifically as highlighted in the script earlier, international Air ex India, where there has always been a lot more headroom. All of these segments grew and also some part of the growth kind of came back on domestic air as well. As far as on the outbound side, I guess, can you just repeat your second part of your question?
Lloyd Walmsley – Deutsche Bank AG, Research Division
Yes, I mean, it looked like the take rate in the HP business declined slightly. Was that in part due to some discounting or aggressive pricing on outbound? I think, you all had mentioned in the script.
Rajesh Magow
Yes, no, it’s a great observation, but it’s just a very small, small number. And as you would go back in history and analyze, typically, in the high season quarter, there would always be a little bit of a trade-off on transaction growth that you would — one would do it tactically. But in terms of just from a trend perspective, more on a full year basis, whatever we’ve been talking about, historically, just to kind of incrementally improve the overall HP margin on a full year basis, we think we are on track to do that. So I don’t think there is anything to kind of get concerned about that at all.
Mohit Kabra
Also Lloyd just to add to what Rajesh has mentioned, typically in the high season travel quarter, our holiday season quarter, because of the increased mix of packages, which is typically adding a lower margin on account of transport mix. The overall HP margin tends to be slightly softer than the off season quarters.
Lloyd Walmsley – Deutsche Bank AG, Research Division
Yes, it looked like last year was your strongest quarter but…
Rajesh Magow
Yes, Lloyd. No, so I would like to just clarify on that. You’re right. I mean, last year it was like 12.9% same quarter. But last year if you would remember it was also a bit of a slowdown. And so during the slowdown period, it kind of changes and typically you will have high margin and less transaction growth. And also the mix was strongly in favor of more hotels because leisure business is what it kind of take because, relatively speaking — but I — as we’ve been talking about in the past as well and when it comes to analyzing the overall margins, I think, we should perhaps be more full year picture rather than just a quarter-on-quarter picture, because there would be tactical moves within a particular quarter for one reason or the other, which we’ve done it historically. We would continue to kind of do it, because that’s important. Again, more like technical moves, but as we growing our web — we continue to grow our volumes, as you can see on the HP segment, we definitely think that we will continue to keep improving our margin on an overall basis portfolio.
Lloyd Walmsley – Deutsche Bank AG, Research Division
Yes, okay. That’s one, and another if I may. Granted it’s early in your fiscal year, but the first quarter is really strong and the guidance implies slower growth in the remainder of the year. Is there anything in particular that you see that could slow things down or is it just a general conservatism in wanting to really not get ahead of yourself?
Rajesh Magow
Yes, I think it’s more the latter, Lloyd. There has been, of course, a big turnaround on the political side. We have a government with a single large majority. So there are signals all around. I think on the air side, as we know, it takes a little longer and it takes some time for them to play out. We’ve finally see the launch of AirAsia, something we’ve been hearing and talking about for a long time. Tata-Singapore Airlines on the annual, but it takes time. At the same point of time, some of the incumbent airlines are still under duress, not in the best of financial health. So I think, it takes a little — it will take a little bit more time there. We would be very bullish about and what we are actually confident in seeing month-on-month more growth is actually new users coming to mobile, and that’s the positive development. In fact, to the earlier point also, there’s a good deal of, as you noticed, standalone hotel transaction through mobile, which has crossed 25%. And there are some amount of incentives being given through that channel to get some of the new users out there. So I think, on HP, there are very positive signs. On air situation, I think, it’s getting better. But I wouldn’t say that the air industry or the air ecosystem is completely out of the woods yet.
Operator
And your next question comes from the line of Manish Hemrajani with Oppenheimer.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Strong hotel numbers, I know that there’s been talk about a lot, but can you touch upon the #1 factor that’s driving transaction growth in hotels? And what’s the median ticket size for hotels currently?
Rajesh Magow
Manish, thanks. This is Rajesh here. So it’s actually a combination of factors quite frankly. Fundamentally, as you know, that the standalone hotels market has been fairly under penetrated, and therefore, from our push perspective, we’ve been trying to actually cover this space 360 degrees. From supplier to user interface to just improving the content, and also a lot more actually push is coming from mobile as well. As you can notice, I mean, if there is any — between air and hotel, actually lot more transactions are coming in on the mobile platform from a percentage of total business perspective through mobile platform as well. So that’s kind of contributing as well. So bunch of factors. But if you look at overall Hotel and Packages together, the season was a good season quarter for even the domestic holiday [indiscernible] as well as outbound holiday as well. And if you compare it with the last year, same quarter, there has been lot more concern about the currency movement, and therefore, long-haul bookings kind of were getting impacted because it’s becoming a lot more expensive. And there has not been that much fluctuation on the currency of late. So that kind of helps as well. So I won’t say there is one single factor that drove this. These are some of the factors that kind of helped the growth overall.
Deep Kalra
Manish, just answering your question on the average ticket size. The average ticket size on the hotel site, has been increasing both quarter-on-quarter and also year-on-year. So that your seeing an improving trend as far as average ticket sales is concern. And more so because of the improving mix of international hotels in the overall hotel bookings.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Okay, you mentioned that you had 184,000 total properties, right, in your network. How many were domestic?
Mohit Kabra
No, no. So the domestic number is actually 13,000, Manish, up from…
Mohit Kabra
13,000, 1-3, up from 11,400.
Mohit Kabra
84,000 is in international hotel now.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Right. So in terms of bookings, what would your mix between international and domestic for hotels for HP?
Mohit Kabra
As far as bookings are concerned, both domestic as well as international bookings kind of now contribute almost equally, particularly in the peak season quarter. So it’s kind of directionally moving well on those lines. And particularly as Rajesh was mentioning during the call, the large part of the growth is kind of coming in from international segment, whether Indian air versus international air, which is kind of ex-India, which is kind of growing the fastest. And similarly, international hotel bookings is the other segment, which is kind of growing the fastest as well.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Okay. And then on your conversion rates, how do your conversion rates on the mobile platform compare with the desktop?
Deep Kalra
So, fairly comparable actually, Manish. When it comes to hotel booking specifically. And we have some ground to cover when it comes to the air bookings and we are kind of working on that. But on the hotel side, fairly comparable.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Got it. And on the mobile front given where we are in very early stages in terms of penetration levels, what are the technological investments that you’re making at the back end to see that up again?
Deep Kalra
Maybe I can just take that, yes, Manish. So Manish, in India, as you know, there is a very large proportion of independent. Most of these hotels are not actually using sophisticated systems as one would imagine. So a lot of investment has gone in actually getting the hotels to work either directly through our extranet or for our extranet to actually talk to the channel managers, which have now become quite popular among the domestic hotels. So we have been working quite hard on that side. So on the mobile point of view, also, just averaging the whole mobile opportunity like you were saying, we now are working on solutions where the smaller hotels can actually move directly onto a mobile platform. We have seen a very typical use case of hotel owners, managers, not really being on large phones and managing a lot of their inventory and the kind of booking profile ahead through the phones and that’s where we are — we have efforts which are going on, they’re underway. And we think that’s going to help us significantly as well. I think in the next couple of quarters, we’ll see a significant shift of people just working on the solution. They can still work on the solution for the mobile, but it’s not really built for a mobile first solution as of now, but there’s work going on there.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
Got it. One last one for me on the take rates. Take rates down on air, as well as hotels. Hotel is down 11.9%, take rates on air were 5.8%. Is there some user discounting that you guys are undertaking to drive volume growth here, which has impacted take rates?
Rajesh Magow
Not particularly very high on discounting. But the difference is not yet year-on-year compared it — when you compare, it’s a drop, probably a material drop. But I would rather compare this quarter-on-quarter where it’s almost flattish. And except for mobile, where for early adoption you would do some tactical discounting and stuff like that. That is all — aiming during the high season when you have kind of momentum on the growth of transactions, you would like to probably be a little more invested on pricing, very tactically. And nothing beyond that. So this has nothing to do in terms of production coming in from suppliers into it or from the contracting side, this is just in the high season quarter where the transaction growth was pretty high, you would just make some technical moves, but I won’t lean particularly too much into it that this trend is going to continue. From a trend perspective on a full year basis, I think we should be able to make the incremental improvement from last year.
Manish Hemrajani – Oppenheimer Co. Inc., Research Division
So then how should we look at directionally for both air and hotels, up from here? Is that what you’re suggesting?
Rajesh Magow
Yes, so Manish as we’ve been talking about within the parts of our air. From a long-term perspective, we’ve always been saying that it will settle at some point in time between 5% and 5.5% and as it’s going towards that. And as far as HP is concerned, last year we did about 12%, and we will see some improvement given our volumes are growing on a full year basis. Like incremental improvement maybe half a percentage points or something. So that’s how we should think about that.
Operator
And your next question comes from the line of Gaurav M with Citigroup.
Gaurav A. Malhotra – Citigroup Inc, Research Division
Good set of numbers, just had 3 key questions. Firstly on Air Ticketing. Now that is a trend, obviously, as Rajesh said, would the net margins would be trending down, but are the margins falling faster than what the expectations have been in the, say, last 6, 9, 12 months. That’s one. Secondly, on Hotels and Packages, this quarter if I understood correctly, the proportion of packages was higher because of its — the net margins went down by 20 bps quarter-on-quarter. Is that correct? And would we expect the margins to move backup, say, between 12% to 13% range in the next 2 or 3 quarters? That’s the second question. And the last question is just on the share-based compensation, how should we look at it for the full FY ’15?
Mohit Kabra
Gaurav, I’ll take that. On the air margin, if you look at it, air margins are kind of comparable in line with seasonality. So year-on-year they’re kind of comparable to what is reported in the same quarter of last year. And that typically tends to happen because in peak season, the air fares continue to remain high and because of this semi-variability of the air margins. It tend to kind of be on the lower side during peak travel quarters or high season quarters. Moving on to your next one, this is in terms of the HP margins. Year-on-year, HP margins, our sales represent and I did announce that earlier also. Again, in the peak season quarter, there tends to be a higher mix of packages within the overall HP segment. And therefore, you’ll see a little bit of softness in the overall HP margin. And this could kind of vary in between season lean and peak season quarter. And as Rajesh was pointing it out, overall for the full year, it would be kind of — we still believe that we’ll be able to kind of see small improvement in the overall take rate for the HP business over last full fiscal and this full fiscal.
Deep Kalra
Coming to your third one on the employee share-based compensation cost. We have kind of guided at about the share-based compensation cost remaining in around the range of about 2% of outstanding shares. And even in the current quarter, the share-based compensation cost is close to about $2.6 million. And that is what could be kind of taken as a fair number close to that $2.5 million to $3 million is what we should have in the coming quarters as well.
Gaurav A. Malhotra – Citigroup Inc, Research Division
Okay, just one follow-up question on Air Ticketing, if you could just explain perhaps as to why in the peak season there is a softness. That’s one. And secondly, are we seeing that in the next couple of quarters you will see the margin sort of going up to an extent?
Mohit Kabra
See what it mean in terms of slight compression in the margin percentage, in peak season is because you are — the overall asset tends to kind of be higher during the higher season quarter and when it comes to margin, there’s certain amount of — certain elements within the overall margin, which are more like value-based number and not really a percentage basis. So since there is a slight fee typically in case of service fee or consumer or convenience fee, there tends to show a slight downward trend when the layer are high. We’ve yet to see how does the air fare trend be going forward, we believe there could be certain amount of softness, at least in the lean season quarters during the year. In which case, we might see small improvements coming through in the air margins as well. But slightly early to call that out. But as we’ve been saying, we do believe during this year, the air margins will be more around the 6% mark, and it would kind of will vary by about 0.25 to 0.50 percentage point between quarter-on-quarter.
Operator
And your next question comes from the line of Pinku Pappan with Nomura.
Ashwin Mehta – Nomura Securities Co. Ltd., Research Division
This is Ashwin, instead of Pinku. I had one question in terms of our personnel costs, which saw almost 20% sequential jump in this quarter ex of the severance costs as well. So where exactly are these investments being made and how do you look at this cost item going forward? And secondly, I wanted to get a sense in terms of what our overall headcount was.
Mohit Kabra
Ashwin, the sequential cost, I mean, quarter-on-quarter more up in the range of about 12-odd percent, excluding [indiscernible]. And of that 12-odd percent, large part of it comes in largely on account of the annual wage increase that gets rolled out in April. So it’s largely on account of that.
Ashwin Mehta – Nomura Securities Co. Ltd., Research Division
And what was our headcount as of this quarter?
Mohit Kabra
Headcount movement hasn’t been kind of very different. Overall, we stay kind of larger on the same headcount number as in the last 1,300. It’s close to about 1,300.
Operator
And your next question comes from the line of Chad Bartley with Pacific Crest.
Chad Bartley – Pacific Crest Securities, Inc., Research Division
To your revenue guidance is helpful and I was hoping you could provide some comments on how you’re managing profitability this year, even with a higher investments in mobile, which makes sense. For example; can you still achieve positive adjusted operating income? Or should we expect losses this fiscal year?
Mohit Kabra
We have been kind of mentioning that in line with what we’ve been saying focus largely remains on kind of driving growth, both in transactions as well as revenues. And at least there is a good possibility of us being able to closer to breakeven for the full fiscal, particularly having seen profitability return in the high season Q1. So depending upon how the air trend prevails in the forthcoming lean quarter and in the next quarter or 2, I think we’ll have greater clarity on that. But it looks like they’re kind of getting better clearly year-on-year and quarter-on-quarter when it comes to getting the business back on profitability.
Operator
And at this time, we have no further questions. [Operator Instructions] And at this time, we have no questions.
Deep Kalra
Thank you, everyone, for joining our first fiscal 2015 first quarter earnings call. We look forward to speaking with you on next quarter.
Rajesh Magow
Yes, thanks.
Mohit Kabra
Thanks, everyone. Thank you.
Operator
Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect, and have a great day.
MakeMyTrip Limited"s (MMYT) CEO Rajesh Magow on Q1 2015 Results ...
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