Mondee Holdings, Inc. (NASDAQ:MOND) Q1 2024 Earnings Call Transcript May 10, 2024

Mondee Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.29646 EPS, expectations were $-0.1. MOND isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the Mondee First Quarter 2024 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference call over to Jeff Houston, Senior Vice President. Jeff, please go ahead.

Jeff Houston: Thank you, operator and good morning, to everyone. Welcome to Mondee’s first quarter 2024 conference call. With me today is our Founder, Chairman and CEO, Prasad Gundumogula; and Chief Financial Officer, Jesus Portillo, Executive Vice Chairman, Orestes Fintiklis; and Chief Operating Officer, Jim Dullum will present our results and be available for questions-and-answers. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, including statements about revenue, growth of our business, our management and governance plans and other historical statements as further described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Mondee’s growth, the evolution of our industry, our product development and success, our management performance and general economic and business conditions.

We undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to have a material difference from these forward-looking statements are discussed in our reports filed with the Securities and Exchange Commission, and in our earnings press release that was issued this morning. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. Listeners are caution to not place undue reliance on any forward-looking statements. During the call, we also refer to non-GAAP financial measures. Reconciliations of the most comparable GAAP measures are also available in the press release which is available at investors.mondee.com.

With that, it's my pleasure to turn it over to Prasad.

Prasad Gundumogula: Thank you, Jeff. Good morning, good afternoon and good evening, everyone. And welcome to Mondee’s first quarter 2024 earnings call to discuss our results and significant developments. We are pleased to have had a strong start to 2024 with a record first quarter exceeding net revenue and adjusted EBITDA market expectations. Despite some caution expressed in our latest earnings call, take rate continued to expand with a 10% increase year-over-year to 8.2%. For Q1 2024, this translated into net revenue of $58 million, representing growth of 16% year-over-year. First quarter 2024 adjusted EBITDA was $5.1 million as a result of continued marketplace expansion in product and geography, driven by our innovative AI tech platform.

Based on this Q1 results, we are now increasing our net revenue guidance for the year. To further support this growth trend, we are continuing to enhance and deploy Mondee’s AI capabilities in every aspect of our business with exciting innovations in the pipeline. As mentioned, when presenting our 2023 year-end results, we remain focused on achieving the near and long-term goals of enhancing profitability, expanding our travel marketplace and maintaining our AI technology leadership. Let me provide a bit more detail on these. First, enhanced profitability and free cash flow. We remain focused on transaction volume growth, improving take rates on our way to achieving sustained double-digit levels, as well as implementing cost control measures and the AI supported ecosystem optimization As Jesus will explain in more detail, we were free cash flow positive, which led to our cash results increasing by $11.4 million from the prior quarters.

Second, we are seeing good early results from expanding our travel marketplace across more geographies, while broadening our product mix. With emphasis on packages, events and activities, we continue to achieve notable diversification in revenue mix. During Q1 2024, our non-air components such as hotels and packages expanded to 51% from 26% in Q1 2023. This diversification of our product mix supports further take rate improvement. Third, maintain technological leadership in AI. We are continuing to develop, innovate, train and deploy new air travel features and comprehensive end-to-end capabilities across our ecosystem. Stay tuned for more exciting and specific announcements in the second half of the year. I now turn the floor or to Jim Dullum, our Chief Operating Officer, who will discuss some business trends and Mondee initiatives underpinning our results and outlook.

Jim?

James Dullum : Thanks, Prasad and hello everybody. Turning to some business drivers and marketplace enhancements. Mondee remained very well positioned in the volatile and rapidly transforming travel environments throughout the first quarter. We anticipate good demand growth from the emerging market trends, despite post-pandemic pent-up demand peaking and some headwinds from regional armed conflicts. On a macro industry note, the strong travel demand from last year continued through the first quarter of this year with the international consumption led very handily by Asia Pacific. Mondee’s strong position in international travel, which emphasizes LATAM, Asia and the Middle East is expected to continue benefiting us into 2024 with these macro trends.

Amid this growing demand there remains supply side challenges for airlines, hotels and auto suppliers, who are facing high cost capital constraints for renovations and upgrades, while trying to solve for labor shortages and aircraft delivery delays. As we have highlighted previously, Mondee’s ecosystem and business model flourishes in such conditions of volatility. Travelers seeking effective options for full-service support aligns very well with Mondee’s offerings, while on the supply side, these volatile conditions can create more perishable capacity, motivating suppliers and travelers to work through full-service B2B channels. These are outcomes which are all well-suited to Mondee’s AI-driven marketplace. Looking into the future, the macro trends - These macro trends benefit - provide benefits for Mondee that are complemented by the emerging consumer trends, which are being driven by the younger traveler demographic and [Indiscernible].

These trends include the emergence of inspiration travel, such as entertainment, music tourism and hybrid work or leisure travel. These new age [Indiscernible] requirements and trends are a great fit with Mondee’s AI platforms and expanding new age distribution channels. From an AI perspective, as we interact with these new cohorts at scale, we gain additional valuable feedback allowing us to refine our platform, monetization and content localization strategies. We also continue enhancing our marketplace. As Prasad described, with our continually expanding marketplace Mondee is steadily increasing its market share within the $1 trillion plus assisted and affiliated travel market by focusing on our added content and distribution expansion.

You may recall that just four short years ago, Mondee almost exclusively offered discounted airfares. In the first quarter of this year, air-only net revenues accounted for only 49% of total net revenue as previously mentioned. Let's break down the non-air components a bit further. Packages were 28%, up 13% from Q1 ‘23. Hotels were at 13%, up 4% from Q1 ‘23. Fintech was a 6% and all other, which included SaaS, insurance, ground transportation and other ancillaries were 5%. These adjacent products and markets not only significantly expand Mondee’s total addressable market, but also contribute to the impressive rise in take rate. As we continue deploying this content with more personalized and localized experiences through our AI technology platform, Mondee will more effectively grow its distribution channels such as the new age distribution partners.

Moreover, beyond this growing expert-led distribution, we continue to see transactions and net revenue increases year-over-year with our enterprise and membership organizations closed user group customers. This is a result of our Bleisure-friendly platforms, packaged offerings and the trends in corporate travel growth, such as hybrid work travel and cultural exploration trips. Turning to our end-to-end business ecosystem. During the quarter, we continue to make progress in a number of areas that benefit profitably and up profitability and operating cash flow. These included further automation-led optimization of pricing and transaction flows, additional deployment of NDC connections with our airline and other distribution partners and implementing some hotel direct connections with major brands with immediate positive effect on our pricing and take rates.

On the synergies and integrations front, finally during the first quarter we focused on achieving further synergies with our five acquisitions in 2023 through seamless integration and lucrative cross-selling opportunities. Along these lines, the integration of financial supplement processes has yielded strong early cost savings results, while the consolidation of all hotel content under one global content hub is advancing. We also made good progress on integration of our cross-border air content and indicatively, on May 2nd of this year 2024, Mondee Brazil has launched flight-only distribution in the country, levering our air carrier relationships and superior air content. For the balance of this year, we're focusing on realizing organic growth and synergy benefits.

I now yield the floor to Jesus, our CFO for a review of Mondee's financial performance and outlook. Jesus?

Jesus Portillo : Thank you, Jim, and hello, everyone. As I go over our first quarter results, I would like to point out that all growth rates are on a year-over-year basis unless otherwise indicated. Let me start with our financial highlights. We continue to generate strong performance throughout this first quarter around net revenue, EBITDA and more noteworthy free cash flow generation, which was materially positive as I will detail. Our gross bookings were $708 million in this quarter, up 6%. This growth was driven by a 62% increase in the number of transactions with a big share of that coming from an expansion in our short haul international flights, which carry a lower price point per transaction. Our net revenue increased 16% to reach $58 million.

This growth in net revenue is the result of higher gross bookings combined with our continued improvements in take rate. Our take rate of 8.2% was ahead of our expectations for this first quarter, up 10%. As with prior quarters, this improvement in take rate was driven mostly by the growth of higher margin products and the diversification of revenue streams, including Fintech and ancillary services. Turning out to expenses, our largest expense category sales and marketing was up 8% in absolute terms, but as a percentage of net revenue, sales and marketing improved from 75% to 69%. The main drivers for this improvement continue to be AI-driven optimization of marketing credit to our B2B distribution network and reductions in performance marketing spend in our B2C business.

Adjusted EBITDA improved by 27%, from $4 million to $5.1 million. Adjusted EBITDA margin also improved from 8% to 8.7% as we continue to prioritize operating efficiencies and improve profitability. On a GAAP basis, our net loss was $19.5 million, which included $20.7 million of non-cash and/or non-recurring items, such as $5.6 million of depreciation and amortization, $5.5 million of PIKed interest, $5.3 million of stock-based compensation, $1.9 million amortization of loan origination fees, $1.2 million change in fair value of earn-out liability, and $1.2 million of acquisition and financial related costs among others. Looking at our balance sheet, at the end of this quarter, we had $47 million in cash and cash equivalents and $166 million of total debt, compared to $36 million and $162 million respectively at the end of December 2023.

The increase by $11.4 million in our cash balance quarter-over-quarter is a result of the company achieving the important milestone of being free cash flow positive for Q1 2024. Free cash flows were $13.8 million, a $25.7 million improvement from the same quarter last year. This improvement in free cash flows included certain timing led to working capital and cash management initiatives. We have advanced further on the refinance of our term loan to increase duration and improved terms. We expect these to optimize our capital structure, adding value to our shareholders. In the meantime, we have executed an amendment with our current lenders extending the existing loans maturity to June 30th, 2025. And turning now to our 2024 guidance. Based on our improved financial performance with this first quarter, we will remain optimistic about this fiscal year 2024.

And now forecast our nerve revenue to be between $250 million and $260 million, representing an increase of 14% versus 2023 net revenues measured at the midpoint. We reiterate our adjusted EBITDA guidance of $30 million to $35 million, representing an increase of 67% versus 2023 adjusted EBITDA measured at the midpoint. With all this, let me now turn it back to Jeff for Q&A. Jeff?

Jeff Houston: Hey, thanks, Jesus. Operator we are ready for questions now.

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