Raised full year adjusted EBITDA guidance to €118 million – €120 million

Barcelona, 28 February 2019 – 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 first nine months of the fiscal year 2019.

 

9M RESULTS HIGHLIGHTS

  • Performance in line with our guidance, on track to meet updated full year guidance targets
    • Bookings were 8.2 million (-3% year-on-year), in line with strategic revenue model shift
    • Revenue margin was €381.6 million (+4% year-on-year)
    • Adjusted EBITDA was €79.1 million (-11% year-on-year)
  • 9M performance reflects strategic progress, as the business achieves its KPIs:
    • Bookings performance reflects focus on high quality sustainable business, achieving higher revenue on fewer bookings
    • Mobile bookings up from 36% to 39% in 3Q fiscal year 2019, as the business diversifies its offering for the benefit of customers
  • Diversification revenues drive growth as the largest revenue contributor, up 38% in the first nine months of fiscal year 2019
  • Raised full year adjusted EBITDA guidance to 118 million – 120 million

 

Dana Dunne, CEO of eDreams ODIGEO said:

“We have made excellent progress this quarter on a number of fronts for our business. As a result, we have raised our Adjusted EBITDA guidance for the year and are on track to meet all other full year targets. We continue to implement our strategy of enhancing our revenue diversification model, allowing us to deliver sustainable growth over the long term and cement our leading market position. We are fully committed to continue to provide the best possible service to our customers and would like to thank all our shareholders, employees and other stakeholders for their ongoing support.”

 

Business Review

eDreams ODIGEO performed in line with our guidance in the first nine months of 2019 and the results reflect the strategic progress made by the business as it continues to achieve its KPIs.

Reflecting the shift in the revenue model and our focus on high quality sustainable business, bookings were down 3%, while revenue margin increased 4% as we achieved higher revenues on fewer bookings. As guided to the market, Adjusted EBITDA was down 11% with performance reflecting investments made in the period. Additionally, we have also continued to successfully diversify our offering for the benefit of customers towards mobile, which represents 39% of our bookings for the period.

Diversification revenues continue to drive growth as the largest revenue contributor, with revenues increasing by 38% in the first nine months of the year. This impressive growth was capable of more than offsetting our intentional reduction in classic customer revenue, which has decreased to account for 38% of the Group’s revenue margin in 3Q fiscal year 2019 down from 47% in 3Q fiscal year 2018.

As an intended consequence of our revenue model shift, product diversification ratio and revenue diversification ratio have increased to 68% and 43% in 3Q fiscal year 2019 from 53% and 33% in 3Q fiscal year 2018 respectively. Notably both dynamic packages and ancillaries continue to report strong revenue margin growth. Continued investment in mobile resulted in accumulated mobile downloads up 46% in 3Q fiscal year 2019, with mobile now representing 39% of total flight bookings, exceeding the industry average.

In the first nine months of 2019 gross leverage ratio was up from 3.6x in December 2017 to 4.4x in December 2018, still providing us with ample headroom against our leverage covenant. Net leverage ratio also increased from 3.0x in December 2017 to 3.9x in December 2018.

Additionally, the Company hosted an Extraordinary General Meeting on the 26th of February. The purpose of the EGM was to seek shareholder permission for the Company to undertake an acquisition of its own shares for up to 10% of the total shares over the next 5 years.  The EGM was well attended by shareholders having had a quorum of 57%, while the action proposed by the Company received strong shareholder support with almost 100% of the votes in favour of giving the Company a mandate to complete an acquisition should it choose to.

 

Summary Income Statement

 

Review by Business line

In our flight business, flight revenue margin grew 2% in the first nine months of fiscal year 2019 to €301.3 million. This growth was driven by a 5% improvement in revenue margin per booking which was due to the better attachment to our flight products of our ancillaries.

As outlined when our revenue model shift was articulated the decrease in flight bookings is mainly driven by the short term impacts of our revenue model switch including changes in price display which is a conscious decision to improve customer experience. We continue to shift our revenue model towards increased price transparency in order to improve our business model, and create better customer experience.

Non-flight bookings were flat in the first nine months of fiscal year 2019.  Non-flight performance driven by the implementation of strategic initiatives in the hotels, traditional packaged tours as well as the trains business. Strategic business like the one dynamic packages are performing positively (up 19% in the first nine months of fiscal year 2019), which is as a consequence of diversification strategy including better attachment of non-flight products.

Non-flight revenue margin was up 9% in the first nine months of fiscal year 2019, due to growth in bookings and a 9% increase in our revenue margin per booking supported by the successful implementation of our revenue diversification strategy.

 

Review by geography

In our core markets, the decrease in bookings are a result of our investment 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 create better customer experience.

Core revenue margin was down 6% to €181.1 million for the first nine months of the year. However, this decrease was partially offset by an increase in revenue margin per booking of 7%, which was driven by the increasingly efficient execution of our diversification strategy.

Expansion markets bookings were up 6% with growth principally driven by the successful implementation of strategic initiatives in our expansion markets, as well as investments made to both operations and revenue diversification.

Expansion markets revenue margin grew very strongly up 14% to €200.5 million in the first nine months of fiscal year 2019. This growth was due to an increase in bookings of 6% 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 in line with our diversification strategy in our expansion markets.

 

Outlook

In fiscal year 2019, we will continue to invest and accelerate the strategic shift in our revenue model, including increased price transparency, for the long-term success of our business. As outlined when the new strategy was unveiled in 2016, we can expect a short-term impact to our financial results. However, this revenue model shift will enhance our long-term market position and be value accretive to the Company, both for customers and shareholders.

As previously guided, we expect material improvements in the second half of the fiscal year, as our strategic initiatives start delivering the desired financial results.

As a direct result of our strategic actions, we expect 4Q to see improved performance in both revenue margin and Adjusted EBITDA, whilst as outlined an uplift in bookings performance is expected to take longer to materialize.

The progress made with these initiatives mean that we expect to achieve all our updated full year targets for bookings, revenue margin and Adjusted EBITDA.

Bookings

  • From: – 4% to flat vs fiscal year 2018 bookings
  • To: -3 to -5% vs fiscal year 2018 bookings

Revenue margin

  • From: In excess of €509 million
  • To: €524 to 530 million (+3 to +4% vs fiscal year 2018 revenue margin)

Adjusted EBITDA

  • From €118 million
  • To: €118-120 million

Cash (net of overdrafts)

  • €120-140 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 four leading online travel agency brands – eDreams, GO Voyages, Opodo, Travellink, and the metasearch engine Liligo – it offers the best deals in regular flights, low-cost 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 in the Spanish Stock Market.

 

Glossary

Bookings refers to the number of transactions under the agency model and the principal model as well as transactions made under white label arrangements. One booking can encompass one or more products and one or more passengers.

Classic customer revenue represents customer revenue other than diversification revenues earned through flight service fees, cancellation and modification fees, tax refunds and mobile application revenue. Our management believes that the presentation of the classic customer revenues measure may be useful to readers to help understand the results of our revenue diversification strategy.

Product diversification ratio (%) is a ratio expressed on a percentage basis and calculated by dividing the number of flight ancillary products and non-flight products linked to bookings (such as insurance, additional check-in luggage, reserved seats, certain additional service options, dynamic packages and car rental) by the total number of bookings for a given period.

Variable costs includes all expenses which depend on the number of transactions processed. These include acquisition costs, merchant costs and other costs of a variable nature, as well as personnel costs related to call centers as well as corporate sales personnel. Our management believes the presentation of variable costs may be useful to readers to help understand our cost structure and the magnitude of certain costs. We have the ability to reduce certain costs in response to changes affecting the number of transactions processed.

Variable costs per booking means variable costs divided by the number of bookings. See definitions of “Variable costs” and “Bookings”.