eDreams ODIGEO delivers strong financial performance for third consecutive year; growth in bookings, revenue margin and adjusted EBITDA meets raised guidance

eDreams ODIGEO: Full Year Results to March 31st 2018

eDreams ODIGEO delivers strong financial performance for third consecutive year; growth in bookings, revenue margin and adjusted EBITDA meets raised guidance

 

Barcelona, 27 June, 2018 – eDreams ODIGEO (www.edreamsodigeo.com), Europe’s largest online travel company and one of the largest European e-commerce businesses, today reported its results for the twelve months ended March 31st 2018.

FISCAL YEAR RESULTS HIGHLIGHTS

  • Solid revenue margin growth of 5% to €508.6m, despite strategic shift. Adjusted EBITDA growth of 10% to €118.3m
  • 12M bookings +3% on last year adjusted for the sale of corporate travel and packaged tours business
  • Revenue diversification initiatives accelerating and delivering results;
  • Revenue diversification ratio increased to 35% (from 30%)
  • Flight-related ancillaries revenue margin up 49% year-on-year
  • Dynamic Packages revenue margin up 24% year-on-year
  • Product diversification ratio increasing to 56% (from 45%)
  • Strong growth in mobile bookings now representing 35% of total flight bookings in fiscal year 2018 (34% in Q4 FY 2018 versus 30% in Q4 FY 2017)
  • Net leverage ratio reduced from 2.7 to 2.1 times in the past 12 months

 

Dana Dunne, CEO of eDreams ODIGEO said:

We have delivered a third consecutive year of strong financial performance and made progress against all of our KPIs. It’s clear that our strategy, to invest in the firm and put in place the building blocks for growth, is working and we have solidified our position as leader in the European online leisure travel market. As a front-runner in mobile and technology we continue to focus on responding to evolving customer needs, while delivering long-term benefits for the business.”

“Looking ahead, our unique scale and diversification strategy will allow us to take full advantage of an attractive macro environment, where more customers are heading online to find the best and most convenient travel options. With the leading app in the industry, we are best placed to serve the growing mobile travel sector; and with one billion online searches every month, we continue to be the one-stop shop for travel.”

 

Business Overview

eDreams ODIGEO delivered a solid financial performance in the fiscal year 2018, with 5% growth in revenue margin and 10% growth in adjusted EBITDA.

As anticipated, change in bookings during the year was driven by the core market and non-flight business, due to an accelerated investment in our revenue model change, the transition to mobile, as well as by the sale of our corporate travel and packaged tours business.

We estimate the impact of the sale of the corporate travel and packaged tours business to be in the region of 219,000 bookings. Excluding this factor, bookings would have grown by 3%.

The results for the fiscal year 2018 demonstrate that the shift in our business model is delivering the desired outcome. Our revenue diversification strategy continues to have a positive impact on our business by increasing revenues outside of flight tickets, which have a higher margin and generate more profit for the business.

This progress is visible in our KPIs. We have increased our product diversification ratio and revenue diversification ratio from 45% and 30% (in Q4 FY 2017) to 56% and 35% (in Q4 FY 2018), respectively. Notably dynamic packages and ancillaries delivered strong revenue margin growth in fiscal year 2018, up 24% and 49%, respectively. Continued investment in mobile also resulted in 21% growth in mobile bookings for the year, with mobile now representing 35% of total flight bookings (34% in Q4 FY 2018 versus 30% in Q4 FY 2017), significantly exceeding the industry average.

In fiscal year 2018, we made significant progress in deleveraging the business. Gross leverage was down from 4.0x in March 2017 to 3.6x in March 2018, providing us with ample headroom against our leverage covenant. Working capital in Q4 performed strongly despite the impact of Easter falling in March compared to April in 2017, with a cash inflow of €110 million. Our net leverage ratio also decreased from 2.7x in March 2017 to 2.1x in March 2018. We also prepaid €10 million of the outstanding 2021 bonds, reducing the principal amount from €435 to €425 million.

The Group reported a very strong cash position, which stood at €171.5 million, up 20% year-on-year, driven by strong operating performance, despite investment in the change of our revenue model and our focus on profitability.

 

Summary Income Statement

 

Business review by geography

Booking and revenue margin in our core markets (Spain, Italy and France) were down in fiscal year 2018 (-4% and -3% respectively). Change in bookings was driven by investments in the change of our revenue model and the sale of non-core businesses. Despite this, revenue margin stood at €263.2 million, due to a 1% increase in revenue margin per booking reflecting results from operational execution and leveraging scale, and more favourable terms in a number of suppliers’ contracts.

Expansion markets bookings were up 5%, as a result of investments made in the business and revenue diversification, and despite the adverse impacts mentioned. Adjusting for the sale of the corporate travel business, bookings grew by 10% in FY 2018.

Expansion markets revenue margin grew very strongly, up 13% to €245.3 million in fiscal year 2018. This growth was driven by bookings growth and an 8% improvement in revenue margin per booking in fiscal year 2018.

 

Business review by business line

In our flight business, bookings were driven by our strategic shift in our revenue model, which is positioning us well for long-term sustainable growth. Adjusted for sale of the corporate travel and packaged tours business, bookings grew by 3%. We continue to make investments in order to build scale, become more agile, improve the business model, and create a better customer experience.

Flight revenue margin grew 6%, to €405.5 million for fiscal year 2018, driven by a 4% improvement in revenue margin per booking. This growth was due to improved operating performance, revised terms with suppliers, leveraging our scale, and delivery on the revenue diversification strategy. Performance was partly offset by the shift in our revenue model, which includes increased price transparency display in some countries.

Non-flight bookings were up 4%. This was due to sale of the corporate travel and packaged tours businesses, investment in the change of our revenue model and transition to mobile. Bookings performance was also negatively affected by non-strategic products, such as traditional packaged tours, as well as the trains business. Dynamic packages, a strategic focus for the business, performed well (up 34% in Q4 FY 2018).

Non-flight revenue margin was up 1% in fiscal year 2018, due to a 4% increase in our revenue margin per booking. This reflected strong improvements in our dynamic packages business, where revenue margin was up 24% and 47% in fiscal year 2018 and Q4 FY 2018, respectively, overall product and operational improvements, and revised terms with our providers.

 

Strategy Update

The shift in our business model has delivered on both a strategic and financial level for the year. Our position as the leader in the European online leisure travel market provides us with invaluable customer insight, which we have used to make strides in mobile and technology and inform our strategic transformation.

We have balanced this scale with a high level of agility. This enables the business to execute and deliver new concepts rapidly and cost effectively. In fiscal year 2018, we implemented over 6,000 new features in our products across eDreams ODIGEO’s various platforms.

Our mobile-first approach has helped us build the leading app in the industry, with a total of 35% of bookings taking place through mobile devices in fiscal year 2018 (34% in Q4 FY 2018) – well ahead of the industry average of 24%. We are best positioned in the market to take advantage of this growth. Mobile growth is expected to contribute to 87% of total industry growth from 2017-2020; and we are already ahead of the curve, with mobile set to deliver our largest source of traffic in fiscal year 2019.

Our strategic efforts over the last two years to improve transparency and provide wider access to a range of products and services is seeing demonstrable success. By transforming our revenue model in pricing, we have seen improvements in conversion rates and pilot tests show an increase in loyalty amongst our customer base, which has responded well to the price changes.

We have built our business beyond flights by diversifying our revenue streams through expansion into innovative flight-related features, achieving a 24% revenue margin growth year-on-year in dynamic packages.

This shift is in tangent with continued growth in sales of traditional and innovative flight-related ancillaries, where we delivered a 49% increase in revenue margin year-on-year.

Both strategic changes have seen tangible benefits for the business and our customers, by allowing us to build stronger relationships. For customers, they receive a more comprehensive, transparent offering, whilst for eDreams ODIGEO, we have strengthened our business by cementing our position as the ‘one-stop-shop’ for travel.

 

Outlook

In fiscal year 2019, we will continue to invest in and build on what is a highly sustainable and attractive business, due to the long-term investment in customer value and the shift in our revenue model, which includes increased price transparency display in some countries.

In fiscal year 2019, we will continue to execute on our strategy focusing on:

  • Evolving our pricing and the communication of pricing;
  • Offering an exciting range of innovative products and services as a ‘one-stop shop’ for travelers;
  • Improving our product diversification ratio and revenue diversification ratio as a result;
  • Accelerating the transition to mobile, which affects performance in the short-term but improves our strategic position and long-term attractiveness.

In fiscal year 2019, we will continue to invest and accelerate this strategic shift in our revenue model.

As a result, we expect annual targets for fiscal year 2019 to be:

  • Bookings: -4% to flat vs fiscal year 2018 bookings
  • Revenue margin: in excess of €509 million
  • Adjusted EBITDA: €118 million

Reflecting the investments in the shift of the revenue model, we expect markedly soft revenue margin growth and a reduction in bookings and adjusted EBITDA in the first half of the fiscal year, and improvement in the second half of the fiscal year.

The guidance for fiscal year 2020 is as follows:

  • Adjusted EBITDA: €130 to €145 million

 

About eDreams ODIGEO

eDreams ODIGEO is one of the world’s largest online travel companies and one of the largest European e-commerce businesses. Under its leading online travel agency brands – eDreams, GO Voyages, Opodo, Travellink, and the metasearch engine Liligo – it offers the best deals in regular flights from 530 airlines, hotels, cruises, car rental, dynamic packages, holiday packages and travel insurance to make travel easier, more accessible, and better value for the more than 18,5 million customers it serves across 43 markets. eDreams ODIGEO is listed on the Spanish Stock Market.