First half performance in line with guidance; Diversification Revenue leads growth to become the largest revenue contributor

Barcelona, 28 November, 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 six months ended September 30th, 2018.

 

H1 RESULTS HIGHLIGHTS

  • Performance in line with guidance. Bookings were 5.8 million (-2% year-on-year), Revenue Margin was €267.6 million (+5% year-on-year) and Adjusted EBITDA was €52.6 million (-10% year-on-year)
  • 1H performance reflects strategic progress visible in KPIs:
    • Bookings performance reflects focus on high quality sustainable business, with higher revenue on fewer bookings
    • Mobile bookings up from 37% to 42% in 2Q fiscal year 2019
  • Diversification Revenues lead growth and become the largest revenue contributor:
    • Diversification Revenue up 40%+ in 1H fiscal year 2019, becoming the largest contributor, more than offsetting intentional reduction in Classic Customer Revenue as we shift the revenue model
    • Product diversification ratio up from 50% in 2Q fiscal year 2018 to 64% in 2Q fiscal year 2019
  • Highly successful refinancing will significantly improve future cash flow
    • Reduction of coupon by 300 basis points to 5.5%
    • Coupon 80 basis points better than average B2 rated bonds issued in 2018
    • €12.7 million savings in annual interest cost
  • On track to meet full year guidance

 

Dana Dunne, CEO of eDreams ODIGEO said:

“In the first six months of the year, we have continued to deliver against our strategy of investing in our revenue diversification model and improving price transparency for our customers. Our results are in-line with expectations for full year guidance, as financial performance has slowed in response to changes to our revenue model. Better attachment of our flight ancillaries and growth in our Dynamic Packages has continued to drive positive revenue margin growth and we are confident of further growth opportunities as we continue to add new products and services to our offering. Following a successful refinancing earlier in the year we are in a sound financial position and looking ahead we remain committed to delivering the best service to our customers so that we can meet all of their travel needs.”

 

Business Overview

In the first half of fiscal year 2019 eDreams ODIGEO performed in line with guidance. Bookings were down 2%, Revenue Margin was up 5% and Adjusted EBITDA was down 10%, as guided to the market and reflecting the investments we are making in the shift in the revenue model.

The results for the first six months of the fiscal year demonstrate expected progress in the shift of our business model. Our revenue diversification strategy continues to have a positive impact on our business, increasing revenues outside of flight tickets, which are higher margin and generate more profit for the business.

For the first time in the history of the company, diversification revenues are the largest contributor, whilst we intentionally reduce classic customer revenue as a result of our shift in the revenue model, from 48% in 2Q fiscal year 2018 to more than 40% in 2Q fiscal year 2019 of the total revenue margin of the Group.

This progress is visible in our KPIs. We have increased our Product Diversification Ratio and Revenue Diversification Ratio from 50% and 32% in 2Q fiscal year 2018 to 64% and 41% in 2Q fiscal year 2019, respectively. Notably dynamic packages and ancillaries continue to report strong revenue margin growth. Continued investment in mobile resulted in accumulated mobile downloads up 47% in 2Q fiscal year 2019, with mobile now representing 42% of total flight bookings, exceeding the industry average.

In September the Group highly successfully refinanced its debt. This transaction allows the Company to extend the maturity of its debt to five years and gain significant flexibility vs its previous financing. In addition, the favorable pricing terms of the new Bond allowed the Company to reduce the coupon of its bond by 300 basis points compared to its existing 8.50% bond due 2021 and save more than €12 million in annual interest resulting in a significant improvement of its free cash flow generation.

The Company has also refinanced its Super Senior Revolving Credit Facility, increasing the size to €175 million from the current €157 million, extending its maturity at the same time.

In 1H of fiscal year 2019 Gross Leverage Ratio was up from 3.8x in September 2017 to 4.0x in September 2018, still providing us with ample headroom against our leverage covenant. Net Leverage Ratio also increased from 2.9x in September 2017 to 3.3x in September 2018.

 

Summary Income Statement

 

Business review by business line

In our flight business, the decrease in flight bookings is mainly driven by the short-term impacts of our revenue model switch, including changes in price display. We continue to shift our revenue model towards increased price transparency in order to improve our business model and create a better customer experience.

Flight revenue margin grew 4%, to €211.2 million for the first half of fiscal year 2019, driven by a 6% improvement in revenue margin per booking. This improvement was due to the better attachment to our flight products of our ancillaries and, which was partly offset by the effect of changes in our pricing and price display to improve customer experience.

Non-flight bookings were up 3%, which reflects our diversification strategy including better attachment of non-flight products.

Non-flight revenue margin was up 11% in the first half of fiscal year 2019, due to growth in bookings and an 8% increase in our revenue margin per booking supported by the successful implementation of our revenue diversification strategy. This growth was primarily driven by the increase in revenue margin per booking in our Dynamic Packages and Car Rental businesses.

 

Business review by geography

In our core markets, the decrease in core bookings is as a result of the investment we are making in the evolution of the revenue model and our transition to mobile. We continue to shift our revenue model towards increased price transparency in order to improve our business model and to create a better experience for our customers.

Core revenue margin was down 5%, to €129.8 million for the first half of fiscal year 2019, driven by bookings and partially offset by an increase in Revenue Margin per Booking of 8%, driven by the execution of our Diversification strategy.

Expansion markets bookings were up 9% with the growth principally due to the successful implementation of our strategic initiatives in our expansion markets, as well as to investments made in our business and revenue diversification.

Revenue margin in our expansion markets grew strongly by 17% to €137.8 million in 1H fiscal year 2019. This was due to an increase in Bookings of 9% as well as an increase in Revenue Margin per Booking of 7% driven by the increase of flight related ancillaries and other Diversification Revenue per Booking which is in line with our diversification strategy in our expansion markets.

 

Strategy update

Our performance over the last three years has been driven by a successful transformation journey, focused on the customer and developing our scale. Following the continued success of our price transparency initiatives introduced in October 2016, in June this year we announced a further acceleration of our revenue model change.

We are pleased to report that our price transparency initiative in another one of our main markets led to an increased conversion rate in double digits, created a more diversified revenue model (up by 9bps), reduced marketing costs by 5pp and increased repeat purchase rate. Whilst we saw an initial reduction in traffic due to the shift, we were pleased to see levels return after only four months, which shows our strategy is working.

Mobile continues to be a key focus for the business, and we remain well above the industry average for performance in this area. In the first half of this year we have seen further positive growth in mobile bookings, which have increased again from 37% to 42% in 2Q fiscal year 2019. In fiscal year 2019, the business expects mobile to deliver the largest source of traffic to our platforms.

As we look forward, our revenue diversification initiative offers expansion in a fast-growing market. The flight ancillaries market in Europe was worth €80 billion in gross sales in 2017, up 22% on the previous year. We have seen significant progress in this area, with the flight ancillaries attachment rate to flight bookings growing 27% year on year as we continue to take advantage of this growth.

The dynamic package market also offers notable growth opportunities moving forward, with similar double-digit market growth last year to €110 billion. Our dynamic packages attachment rate to flight bookings grew 28% year on year and our mobile contribution increased by over 100% in this area compared to the same period last year.

Looking ahead we are confident that we are well positioned for the future. We will continue to increase our focus in post-booking, including the development of existing products and the introduction of new products to drive more value for customers beyond the initial transaction. We will also continue to enhance our dynamic packages and post booking product funnel to improve user experience. The implementation of these diversification initiatives, along with improved price transparency and investment in mobile will ensure we continue to provide the best possible service for our customers.

 

Outlook

In fiscal year 2019, we will continue to invest and accelerate the strategic shift in our revenue model, including increased price transparency display in some countries. We expect this strategy to adversely affect our performance in the short term, but to improve our strategic position and long-term value, both for customers and shareholders.

Reflecting this strategy, and as guided, we expect improvements to start materialising in the second half of this fiscal year, as the strategic initiatives start to deliver the desired and guided results.

Based on the strategic actions taking place in the following two quarters, we expect 3Q to be relatively in line with 2Q performance, except for adjusted EBITDA that we expect better year-on-year performance in 3Q vs 2Q fiscal year 2019, as the catch-up in supplier incentives of fiscal year 2018 will not affect the comparison.

For 4Q we expect to see improved performance in Revenue Margin and Adjusted EBITDA, whilst Bookings will still be affected by the short term impact of the shift in our revenue model.

All of the above will lead to achieve all our annual targets for Bookings, Revenue Margin and Adjusted EBITDA.

  • Bookings: – 4% to flat vs fiscal year 2018 Bookings
  • Revenue margin: in excess of €509 million
  • Adjusted EBITDA: €118 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 600 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.