eDreams ODIGEO S.A. (EDR) Earnings Call Transcript & Summary

Welcome to the eDreams 9 Months Fiscal Year 2020 Results Presentation. This conference call will be recorded today. [Operator Instructions] I would now like to hand over to the company to begin. Please go ahead.

Good morning, everyone, and thank you all for joining us today for our Q3 fiscal year 2020 results presentation for the 9 months ended 31st of December 2019. I'm David de la Roz, the Director of Investor Relations of eDreams ODIGEO. As always, you can find the resource materials, including the presentation, and our results report on the Investor section of our website. I will now pass you to Dana Dunne, our CEO, who will take you through the first part of the presentation. Thank you.

Thank you, David. Good afternoon, everyone, and thank you for joining us today. I'll give you an overview of our 9 months results. And following this, David Elizaga, our CFO, will take you through the performance of our condensed consolidated interim financial statements in more detail. I will then conclude today's presentation with our outlook for FY 2020. Please turn to Slide 4, in which I give a summary of our performance to date. I'm pleased to say that we have achieved solid results in the period with our 9 months performance in line with our guidance. Bookings, following the completion of our strategic revenue model shift, have begun to show faster growth. This is as anticipated and guided to the market. Q3 FY '20 bookings grew by 5% year-on-year and reached 8.3 million in the 9 months FY '20, which is up 2% year-on-year in the aggregate for the first 9 months of FY '20. This growth in bookings has accelerated during the quarter with December growing at 11% year-on-year. It's worth noting as well that growth in bookings has been achieved after absorbing the SEO changes introduced by Google and our own push of our Prime Subscription Program. Revenue margin was EUR 412.9 million, which is an 8% year-on-year increase, driven by an increase in the revenue margin booking of 6% up. Adjusted EBITDA reached EUR 86.8 million for the 9 months, which is a 10% year-on-year increase, and the cash position improved by 47% to EUR 71.7 million. Our results are in line with our expectations and reflect the seasonality of our business and the investments made to build Prime, our customer subscription program. For Q3, we guided that expected growth in bookings, revenue margin and adjusted EBITDA will be in line with our full year guidance, with quarterly variations due to the timing of changes we made in the last fiscal year. Results have been in line with guidance, except for revenue margin, which has been better than expected and above full year guidance. In the 9 months FY '20, revenue diversification initiatives delivered strong results. For example, revenue diversification ratio increased to 51%, and that's up from 43% in the same period last year. Simply, the product diversification ratio increased to 82%, up from 68% in the same period last year. So overall, our revenue diversification is very strong. And you can see from our revenue and product diversification ratios. I am especially pleased with the way dynamic packages as well as ancillaries have performed, with both growing revenues over 25% year-on-year. Our industry-leading subscription program, Prime, is showing strong results. The number of subscribers continues to increase. And in Q3, an additional 110,000 subscribers joined the program, reaching 499,000 at the end of December, which is up 28% versus just the previous quarter, Q2. As of the 23rd of February, we have reached 555,497 subscribers. In addition, following the established trends, bookings on mobile have continued to grow and reached 44% of our total flights booked in Q3 FY '20. This is a 5 percentage points increase versus the same period of last year. So overall, we've delivered a solid set of 9-month results in line with the guidance set. Also, our revenue diversification strategy is reaping rewards with diversification revenues growing. Please turn now to Slide 5, where I give an update on our views on the coronavirus and overall impact upon our business. As you can see on this slide, before the outbreak of the coronavirus, we were seeing solid, high single-digit growth rates for bookings. After the outbreak, increasing concerns about coronavirus have inevitably resulted in a slowing of demand. While assessing performance and potential impacts, I'd like to start by saying that bookings, following the completion of our strategic revenue model shift, have shown improving performance in the first 3 quarters this fiscal year. This is as anticipated and guided to the market. This growth in bookings had accelerated during the third fiscal quarter, with December growing at 11% year-on-year. After the coronavirus outbreak, the biggest drop has actually been in Asia. But also, we've seen a drop in all our destinations and more recently, in Italy, in particular. While the impact on Asia destinations bookings is clearly attributable to the coronavirus, we believe the softness seen in our trading and other destinations is also related to the coronavirus. What we have seen since the expansion of the virus to Italy is a drop in bookings for the entire group of 12%. If we assume this pattern continues for the remaining 5 weeks of FY '20, we estimate the following results for the aggregate of the fiscal year: bookings would be up 1% versus FY '19, reaching 11.3 million; revenue margin up 4% versus FY '19, reaching EUR 552 million; adjusted EBITDA up 9% versus FY '19, reaching EUR 130 million. I would like to conclude this by saying that without coronavirus, we would have expected to end the year with the bookings and revenue margin within guidance range and adjusted EBITDA above guidance. Please turn to Slide 6, where I give an update on why we think we have a resilient business model. As you can see on the right-hand side of the slide, we have seen these shocks before. But in the end, we consistently have grown our revenues due to our resilient business model. In fact, we believe we are well protected because, one, the majority of our costs are variable. That means around 80% of our costs are variable. So if we don't generate bookings, we also don't spend money in marketing, fraud, merchant costs, et cetera. Two, business is diversified by geography. We do not have high exposure to a single destination. For example, Italy, as a destination, only represents 7% of our total bookings. Three, we have current availability on our RCF of EUR 170 million, which could be used if we needed it in periods of slowing demand. And we have significant cash on hand. Four, we have ample room -- headroom versus our 6x gross leverage covenant. Five, we have no short-term financial debt payments. Our senior notes are due in 2023. So over the long term, we remain very optimistic about our business and its fundamentals given our strength and the underlying fundamentals within our industry and our competitive advantages. Moving to Slide 7. Diversification revenues continue to drive growth. It is the largest revenue contributor, with diversification revenues increasing by 29% in the 9 months FY '20. And it now represents 51% of our total revenues. This impressive growth offsets our planned reduction in classic customer revenues, which have decreased to 30% of the group's revenue margin in Q3 from 38% in the same period last year. This is the first year in which diversification revenues have outstripped classic customer revenues. And this is a major milestone and endorses the strategy put in place in 2017. With the shift in our revenue model, we have had significant success. The product diversification ratio and revenue diversification ratio have increased to 82% and 51% in Q3 FY '20 from 68% and 43% in Q3 FY '19, respectively. This is a 14 percentage points and 8 percentage points expansion in only 1 year. Can you now turn to Slide 8, where you can see the positive progress made against our other 3 KPIs. On an annualized basis, our customer repeat booking rate has increased by 2% since last year to now 41%. As we increased price transparency, there were some short-term impacts on traffic and the number of bookings. However, after these short-term impacts, it leads to an improved performance through increased loyalty as customers return to make additional bookings, offsetting the initial impact. This is already evidenced in the segments of our business that have been using the new price display for more than a year. Also, we have significantly increased the number of customers booking to our mobile channel. In the last 5 years, we have gone from 18% of our total bookings being via a mobile device to 44% of our total bookings. Lastly, on KPIs, let's look at the changes to the acquisition cost per booking index. It has improved by 8 percentage points year-on-year. This is due to acquisition channel optimization with a focus on app, CRM and Prime. We estimate that the 3 of the percentage points decrease in this quarter are likely to repeat on an ongoing basis, while another 5 points correspond more to actions, which are less likely to repeat. With that, I will now hand you over to David Elizaga, who will take you through our consolidated results.

Thank you, Dan, and good afternoon, everyone. If you could all please turn to Slide 10 of the presentation, I will take you through the financial results in more detail. I am pleased to say that we have achieved solid results in the period. Looking at the income statement for the 9 months of fiscal '20 on Slide 10, revenue margin has increased by 8% to EUR 412.9 million, reflecting the increased diversification revenue due to higher attachment rates to our flight product and as a result, an increase of 6% in revenue margin per booking. This is directly due to the successful execution of our strategy as we accelerate investment to mobile and to diversify our revenue model. On the cost side, variable costs grew by 8%, as a result of higher revenues, merchant cost due to strong growth in Rest of the World's markets as well as new variable costs related to the sale of ancillaries. Our fixed costs increased by 8%, due to higher investment in platform capacity, but also due to the foreign exchange impact. As a result, adjusted EBITDA for this first 9 months amounted to EUR 86.8 million, up 10% year-on-year. If we continue down the income statement, you will know that EBITDA decreased by 4%. This was primarily due to the increase in our nonrecurring items, mostly because of the provision related to the social plans with regards to the closing of the Milan and Berlin call centers, which cost a total of EUR 8.9 million, EUR 2.5 million below initial guidance. We expect to realize cost savings from the fourth quarter of fiscal '20 onwards once both call centers are closed at the end of December 2019. Full details can be found in Note 2.4 of our unaudited condensed consolidated interim financial statements. Full details of nonrecurring items can be found in our results report and in the excel file. The D&A and impairment increased by 27% relating to the increase of the software capitalized. Financial loss decreased mainly due to the cost in fiscal '19, related to the refinancing of the 2021 notes for EUR 31.4 million and the variation between the interest expense on the 2023 Senior Notes, which is 5.5% and the former interest of the 2021 Senior Notes of 8.5%. It is also important to note that the income tax expense decreased by EUR 8.9 million from EUR 9 million in the 9 months of '19 to EUR 0.1 million in the 9 months of fiscal '20. The reason for the decrease was that, one, based on an IRS Regulations, the U.S. Foreign Tax Credits turnover, which had to be written off at the end of the fiscal '18, have now been reinstated resulting in EUR 9.5 million less income tax expense. And more income tax expense was due to higher customer profits for EUR 0.4 million more tax expense. Finally, adjusted net income was EUR 31.4 million in the 9 months of fiscal '20, up 46% on last year. This is a result of the increase in adjusted EBITDA plus savings in interest expense, which flow through to the bottom line in the case of the adjusted net income. Turning now to Slide 11. I will take you through the cash flow statement. Cash position, net of overdrafts, improved by 47% to EUR 71.7 million in the 9 months of fiscal '20. The solid cash performance was driven by net cash from operating activities, which increased by EUR 40 million, mainly reflecting a lower outflow in working capital due to volume increase, higher merchant share, increase in the average gross sale per booking and working capital optimization measures, mainly focused on improvement of commissions collection and conditions with credit cards suppliers, which was offset by unfavorable geographical mix and regular versus low-cost mix, which affected the third quarter of fiscal '20. Income tax in the 9 months of fiscal '20 remained stable in terms of cash outflow at EUR 13.2 million and an increase in adjusted EBITDA by EUR 7.7 million. Cash used in investments of EUR 20.5 million was broadly in line with the same period of last year and cash used in financing, which amounted to EUR 16.1 million compared to the EUR 21.2 million in the same period of last year. The decrease by EUR 20.8 million in financing activities mainly relates to higher financial expenses in fiscal '19 in relation to the refinancing of the 2021 Senior Notes as well as variation between the interest of the two bonds. Overall, we finished the 9 months with a solid cash position, net of overdrafts of EUR 71.7 million, which is 47% higher than the EUR 48.9 million we had in the same period of last year. Let me now update you in the change in the remittance period to IATA and the implications that this will have in our fiscal '20 cash flow. As highlighted at our first half results presentation, IATA announced the elimination of the monthly remittance period in Spain and Italy and the move to a single 10-day remittance period in Spain and 15-day remittance period in Italy as of the 1st of January of 2020. As a result, both changes have been enforced from the 1st of January, which will have a one-time negative impact on working capital in the fourth quarter of fiscal '20 of approximately EUR 30 million. Legal proceedings from the association of travel agents and including eDreams ODIGEO are ongoing. And if an injunction preventing IATA from enforcing the tender remittance period in Spain is approved, we will inform you. Before I hand back to Dana, please turn to Slide 12 for an overview of our debt position. During the first 9 months, due to the benefits of the refinancing, interest expense on notes and revolving credit facility decreased by 26% compared to the same period of last year, that's a reduction of EUR 6.9 million in financial expenses as a result of a reduction of the debt coupon by 300 basis points. And as a result, our solid cash position, net leverage ratio, was reduced from 3.9x in December of '18 to 2.9x in December of '19. The gross leverage ratio was also down from 4.4x in December '18 to 3.6x in 2019, which gives us ample headroom versus our only covenant ratio of 6x gross leverage. I would like to conclude my section by giving you an update on the share repurchase program, which was approved by the Board for a total of EUR 10 million, which we have started executing on the 17th of December of 2019. The total shares purchased as of the 21st of February, 2020, last Friday, are 362,835 for an aggregate purchase cost of EUR 1.7 million. As we have said before, we are well positioned to pursue growth opportunities that enhance shareholder value. And a good example is the recent strategic acquisition of Waylo, the wholesale price prediction engine whose algorithm foresees future wholesale price variations. Waylo will be a great addition to our Hotel and DP platform. Our financial strength allows us to pursue growth opportunities and also to dedicate EUR 10 million of cash to fund the long-term incentive plan for our employees. And with that, I will now turn the presentation back to Dana, who will take you through an update on our current trading and fiscal '20 for the remainder of the current fiscal year.

Please turn to Slide 14, where I will conclude by giving you an update of our current trading and the remainder of FY '20. eDreams ODIGEO continues to innovate and improve its customer proposition, delivering compelling value for millions of customers. We have the industry-leading innovative subscription program, Prime, have a top-rated travel app and many other things that gives us unique competitive advantage. Within this, we have an efficient, flexible business model, and we are proud of having achieved or exceeded expectations for 20 consecutive quarters. During this time, we have successfully transitioned our business model from alliance and classic customer revenues to much more diversified revenue streams, including ancillary revenues and nonflight products such as accommodation, car rentals, transfers and tours, not to mention, our groundbreaking subscription program. For the first 9 months of FY '20, we have seen solid results as anticipated and guided to the market. Following the completion of our strategic revenue model shift, bookings for the first 9 months began to show faster growth. This growth in bookings accelerated during the third fiscal quarter with December growing at 11% year-on-year. Despite solid high single-digit growth rates for bookings in January, we now clearly see an impact from coronavirus. February has been characterized by increasing concerns about the coronavirus outbreak, which has inevitably resulted in industry-wide slowdown of demand. After the start of the coronavirus outbreak, the biggest drop is in Asia. Also, we've seen a smaller drop in all of our destinations and more recently, in Italy, in particular, as you've seen in the table on Slide 6. What we have seen since the expansion of the virus to Italy is a drop in bookings for the entire group of 12%. If we assume this pattern to continue for the remaining 5 weeks of FY '20, we estimate the following results for the aggregate of the fiscal year: bookings up 1% versus FY '19, reaching 11.3 million; revenue margin up 4% versus FY '19, reaching EUR 552 million; and adjusted EBITDA up 9% versus FY '19, reaching EUR 130 million. Without coronavirus, we would have expected to end the year with a booking and revenue margin within guidance range and adjusted EBITDA above guidance. Also, our long-term view on our business is underpinned by 4 fundamental drivers. One, excluding one-off shocks, travel is a significant growth industry with consumers year-on-year wanting to travel more and more. Two, continuing consumer shift of travel from off-line to online with still large opportunity for market shift to occur. Three, increasing consumer comfort to use mobile as the entire purchasing mechanism. Four, complex needs of individual consumers that need to be tackled in a way that makes their life easier in a mobile environment. All of these things are still underlying this uncertain time as we trade through this period of the coronavirus. We at eDreams ODIGEO are managing this situation prudently and looking after our employees and customers while still building for the long term. With that, I'd now like to take your questions. We will start with questions on the phone. And if there is additional time, we will answer the questions sent to us in writing in the webcast. For the webcast, we will take questions on a first come, first served basis, but we will also try to group questions of similar nature. Should we not have time to respond to questions from the webcast, the Investor Relations team will make sure those are answered afterwards. Operator, if you could please open the conference for questions.

[Operator Instructions] Our first question today comes from Alex Hogan of PGIM.

Just three questions for me. On your outlook, if you're looking at the revenue for the full year implies -- and then the EBITDA implied for the full year, I'm a bit confused because Q4 implied revenue looks like it's down 17% of revenue margin. But then you've got significant 7% EBITDA growth, so you're seeing an 8 percentage point increase in your margin for Q4. What's driving this? And then I heard you mentioned EUR 30 million working capital impact. I was wondering what do you expect the working capital impact to be of the coronavirus related to lower booking levels? And finally, the customer repeat booking rate, how would you think the impact of eDreams Prime has been on this on a percentage point basis?

David, do you want to take those?

Yes. Absolutely. I'll take those. So on your first question, there is a difference in the numbers that you're mentioning, and it has to do with the title in the first release that we did in the results this morning and we apologize for that. We did a second release of the results. There was a typo in the number for the estimated revenue margin end of the year. It was actually EUR 552 million of EBITDA, and that will give you an implied evolution for the fourth quarter of negative 8%. So let me run you a little bit through the drivers of how bookings move, how revenue moves, how recurring EBITDA moves for the fourth quarter of the year, which I think is what basically you're trying to tackle. The bookings don't have a lot of science to it. It's what we said in the conference call about the high single-digit of January and then February being a mix of weeks of same and after the outbreak, seeing the impact in Asia mostly, for the Asian destinations. And then we have taken the performance over the last 4 days since the outbreak expanded into Italy of the 12% and extrapolated those for the following 5 weeks left in the fiscal year. And that's what results in negative 1% for the quarter, the fourth quarter and results in positive 1% in the aggregate of the year. Revenue margin in the fourth quarter will decrease more than bookings as we are doing investments in pricing so that those customers are still searching for results that don't have an, let's say, an excuse to delay their decision to book. And we can keep the volume better in terms of optimizing the conversion of those searches that we have. And then at the cost level, as we have explained, you have the ability of sheltering the majority of the decrease through the variability of the costs themselves. 80% of our costs are variable. So that helps a lot to protect the EBITDA. And then there are individual movements within the cost that also helped. Acquisition cost per booking are decreasing as the percentage of the 2 channels is increasing. Also, you may have seen in our results, we've discussed that after the redundancies in our Berlin and Milan call centers that we would see reductions in costs starting from the fourth quarter you're seeing than that, and that helps in the results as well. And we also have in the comparison against the fourth quarter of the previous year, some fixed cost elements in the period of last year that I'm not going to repeat this year. And that helps you to have a good performance for the costs in the fourth quarter at the fixed price level. We now move to your second question. Yes, we have quantified exactly the IATA impact, which we have known since the last quarter release, and it will be an impact one-time of EUR 30 million. And then the expected impact that we would see because of the coronavirus in working capital with the specific assumption of the 12% decrease in volume for the following 5 weeks of the year would be an additional EUR 40 million. All in all, we would expect to have cash levels at the end of the fiscal year in excess of EUR 100 million still, which I think proves again the resilience of our business to a very significant macro shock that we're seeing. And then in terms of your last question, which is customer repeat booking ratio and Prime, we have not seen an impact yet on the levels of subscription of our customers. As you have seen from the data that we have provided, we had 499,000 Prime subscribers. As of 31st of December, last Friday, we have 555,000. So the rates at which we are seeing people to continue to join our subscription program has continued. And with that, let me pass it on to Dana, who will complement my answer.

Yes. And if you go back to our November Investor Day, we did show you for a Prime subscriber, that there is a significant increase in repeat booking rate, right? And so I refer you back to those and you get specific numbers for subscribers. The fact is that still is our business is, the majority is it is a nonPrime business still, albeit we continue to add every quarter, let's say, 100,000 to 150,000 subscribers, right? So increasing that will become more and more important, and more and more impactful for our business. Let me come back to -- and so I do think it is having some impact. But let's say it's not a big, big, big driver yet. For the outlook, let me also just complement something that David said, right, which is -- look, let me go back historically. We typically give a guidance out at the beginning of the financial year in June. And we usually say it's within the range of $2 million, plus or minus, right? So for this year, we're back in June. We gave it at EUR 132 million EBITDA and plus or minus EUR 2 million. So a range of EUR 130 million to EUR 134 million, right? And then typically, in prior years, as we get to this call, we shortened that range down within, let's say, EUR 1 million or EUR 2 million. And typically, all the years we've been within guidance or some years we've met -- we've exceeded guidance, actually. But we've given a very narrow range on the call, EUR 1 million to EUR 2 million, usually, of the EBITDA guidance. This time, it's too difficult. It's too uncertain. It's really not possible to predict where and to what degree outbreaks of the coronavirus will really occur and to what extent those are really going to impact travel patterns. And so what we've done this time is just been transparent with you and said, look, this is what we've seen. There's been a significant change 4 days prior to this call, which was in Italy. And so we've looked at our business over the past 4 days and we've said, here, this is what's the impact, which is a nice 12%. And if you flow that through and you assume that stays constant for the next 5 weeks to the end of the period, these are the results roughly that you get to. Now clearly, if it's -- if kind of demand picks up, then there'll be different results. If demand gets worse, similarly, there'll be different results. But we wanted to be transparent with you about the assumptions and what we're seeing today under an environment that is extremely difficult to predict when an outbreak is actually going to occur and what impact it can have on consumers or not.

Our next question today comes from Carlos Treviño of Santander.

Three questions from my side. Well, first, thanks for the information regarding the impact of the coronavirus. I know it's really -- this is changing for almost every hour, so it's not easy to provide data. I think that the data provided has been helpful. I have a follow-up. And then as far as I understand, the data that you have provided, well, are classified by destination, the bookings are classified by destination. My question is, if things are changing significantly, if you look at the bookings by origin, how is the different markets really moving in this crisis, looking at the origin of the bookings and not to the destination? My second question is on Prime. Well, you continue to have significant new ads. But looking at the data in this quarter in Q3, you are saying 110,000 net adds. And you have provided also the data until almost the end of February. And during this quarter, net adds has been at 56,000, so below the level of the previous quarter. Considering that this is -- you are much stronger quarter in the year, I was wondering about any reason behind that, if this is normal or if there is any change really in the seasonal patterns on -- with this product? And also, I don't know if you could share with us any kind of data on renewal rates in the products in Prime. And my final question is that, well, mainly due to you're -- if we say, diversification revenues strategy, revenues per booking are growing 10% but also variable costs by booking are growing by 10% in the quarter. So I was wondering if a significant part of this growth in these new products really is offset by a significant increase in variable costs. I would like to know a bit more about the drivers behind that and especially, moving forward, this is going to continue off of any time you've seen that revenues could grow there above the level that costs are growing.

Thanks, Carlos. And so why don't I suggest that David take questions 1 and 3, and then I'll come back and -- well, I'll answer Prime now, that's 2 and then pass it off to David. So I think the first -- you had 2 parts of the question on Prime. So the first one was about the number of subscribers and if there's any seasonality in this. And I think you were saying that roughly, we added 110,000 in Q3. And for kind of, let's say, during the first, I guess, 6 weeks of this quarter, we've added 56,000. So do we -- or maybe it would be 6 to 7 weeks, actually, we've added 56,000. So is that a slowing down or a seasonality or anything like that in it? And I -- on that one, I don't think so. I mean, I think we're -- as I look at this on a week by week, month by month, I think we're right on track for it, what we're expecting in the new ads that we are. They do go up and down, let's say, one week to another. But over the course of, let's say, a month, or so. We're really on track in terms of our net adds. What we have, though, is we have had a slowdown in bookings in the last half. So January was a good month for us, but February didn't keep at the same pace as Q2 did at all. And so if we don't have the same level of, let's say, traffic or customers coming to us, then we just simply don't -- we don't have a chance of getting either a subscriber or a repeat booking or even a nonPrime type of booking. And so my guess is, and I used the word guess, is that's really underlying this one. But I don't think it's really that large off of what -- even just on a stand-alone basis we would be expecting. I think going forward, we expect a drop in bookings. And so therefore, there would be a drop or a reduction in the pace of additions in Prime until demand comes back. I think your second part to the question was around the renewal rate. And I may get this wrong, so please just -- if I'm not answering the right question, Carlos, please just ask again. But I think you were asking about the renewal rate and do I see any changes in it. And I don't really, meaning, we were quite transparent and open about the renewal rates back in November for the Investor Day. And I think we're roughly still in line with that on an ongoing basis for renewals of it. And remember, actually, it's not just even the first year renewal. We're now in the second year renewal in a couple of markets. And so I feel quite comfortable with our overall renewal rate. And it's still roughly in that range that we showed you back in November. With that, unless there's other questions on Prime, then let me pass it over to David, who will answer 1 and 3.

Yes. On the difference, if we look at data by destination or if we look at data by origin, Carlos, of course, the aggregate data is the same, right, the 12% decrease is a 12% decrease. So how you break that down depending on origin or destination, the picture by origin, really origin Italy is actually less bad than if you look at the destination. So this means Italians continue to fly. Italy suffers more in terms of people choosing Italy as a destination. So it's a few percentage points less bad if you look at the origin and if you look at destination. But the aggregate, of course, remains exactly the same. What changes is the breakdown of geographies. We traditionally look at data, as you know, from point of origin because it is about the customers, our Spanish customers, our German customers, our U.K. customers, et cetera, regardless of where they fly. In this case, because, let's say, the tendency to not fly is really much more driven by destination than by nationality of the traveler, we think that the most appropriate way to look at data is by destination. That's why we've done it that way. On your third question of the revenue per booking increasing and so doing the variable cost. Main driver of the revenue per booking is, as you've seen also in the KPIs that we showed, that we increasingly sell more products and services for each one of the flight bookings that we have. In terms of the variable costs, there are a couple of drivers, like we've said. One is that some of those products do come with an additional variable cost, and it -- this happens mostly for the cancellation for any recent products. So overall, it certainly adds in terms of marginal profit per booking. But it adds on both sides of the equation. You also have a secondary driver, which is the increase in the merchant costs as our Rest of the World countries grow more than the top 6 countries and there it costs us more to transfer the money from the accounts of the customers to our accounts. That cost, which is a variable cost, increases on a per booking basis. As how to think about this going forward, I'm going to ask you in a very short-termistic way, given also the kind of situation in which we're in. Once the outbreak of the coronavirus was known, we discontinued our product of cancellation for any reason. We continue to offer insurance alternatives to customers, than we offer external insurance to customers. So when we publish the fourth quarter, you're going to see a discontinuation in that trend. As we already told you, you should expect that the revenue margin per booking doesn't grow as much, right, because we expect the revenues to decrease more than the bookings. And on the other hand, the corresponding provision in the variable cost is not going to show either, right? Once this disturbance disappears in the market and demand continues to go to the, say, to the normal levels, we would also be comfortable again in offering this product by ourselves as opposed to externalizing to other sources.

Our next question comes from Nizla Naizer of Deutsche Bank.

I just have a couple of questions from my end. Firstly, Dana, you spoke about the FY '20 outlook, but I think the market is also interested in hearing your thoughts on the next 12 months. And I know it's very hard to quantify at this point but just some color on maybe how you think about the best-case scenario from where you are right now, what the worst-case scenario could be potentially and how that then ties into the midterm outlook that you did give us at the Capital Markets Day for the acceleration of bookings and revenue, et cetera? Just some color on how you're managing the business for the next 12 months would be great. Secondly, you also recently announced that you want to expand your developer base hire to get more recruits, et cetera. Are you putting all those plans on hold as the situation unfolds? And if you do continue with that strategy, and how -- what's the impact on profitability for FY '21 as you ramp up your workforce? Would be my second question. And the last question is related to Prime. Is it still only in the 3 markets that you referred to at the time of the CMD, which was France, Italy and Spain? Have you expanded it to other markets? And would you over the next few months? Or is that also sort of being held back for the moment? Some color there would be great.