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

Ladies and gentlemen, welcome to the eDreams Results Presentation. My name is Daisy, and I'll be the operator for this call. I will now hand over to your host, David de la Roz from eDreams to begin. So David, please go ahead.

Thank you. Good afternoon, everyone, and thank you all for joining us to today's -- for our Q3 fiscal year 2021 results presentation for the 3 months ending 31st of December 2020. I'm David de la Roz, the Director of Investor Relations at eDreams ODIGEO. As always, you can find the results materials, including the presentation, on our results report on the Investor Relations section of our website. I will now pass you to our -- over to Dana Dunne, our CEO, who will take you through the first part of the presentation. Thank you.

Thank you, David, and good afternoon, everyone, and thank you for joining us. Today, I'll give you an overview of our Q3 FY '21 results and current trading to date. Following this, David Elizaga, our CFO, will take you through our financial performance in more detail. I will then finish with some closing remarks. Please turn to Slide 4, which gives a summary of our performance during Q3 FY '21. During Q3, our short-term trading continued to be affected by travel restrictions. Despite this, we are pleased to report strong liquidity and improved strategic positioning. As you will see later, our trading has outperformed the airline industry, both regular and low-cost carriers and most of our OTA peers. We have continued to gain market share. Our revenue margin in the third quarter FY '21 was down 77% year-on-year, reaching EUR 30 million. This was driven by travel restrictions and uncertainty due to COVID-19 situation, which resulted in a decrease in bookings of 65%. Also, revenue margin per booking reduced due to lower average basket value of bookings as a result of the COVID-19 situation, i.e., customers flying shorter distances, fewer passengers, et cetera. Also marginal profit, which is revenue margin minus variable cost, was EUR 6 million positive for third quarter FY '21 despite us investing in short -- in the short term in higher call center costs to help our customers due to flight cancellations and uncertainties. And adjusted EBITDA was a loss of EUR 10.4 million. Turning to liquidity. We have maintained strong liquidity despite short-term trading challenges. The main reason for this are: the high variability of our cost base, good cost management and our unique business model. Also, the reduction of our average monthly cash burn, excluding working capital and tax, but adding the increase in Prime deferred revenue from EUR 13 million to EUR 7 million; also working capital inflows due to higher volumes and gross sales, better cash collection from suppliers and refunds collected; lastly, we also benefited from lower income taxes paid. This has resulted in positive cash flows and strong liquidity. Specifically, net cash from operating activities improved by EUR 31.4 million. We ended the quarter positively with cash flow before financing of EUR 13 million. This is the first time since the fourth quarter of FY '19 that we have achieved this, remarkably, especially in a weak market with revenues down 77%. Also, we have managed our liquidity position well. It was EUR 125 million in December and has remained stable since September 2020 despite short-term softening of trading. As we have highlighted in our July, our August and our November results presentations, we are using this period under COVID-19 to improve our strategic positioning. This is demonstrated via Prime, our pioneering travel subscription program, which continues to shine during these tough times with subscriptions continuing to grow. For example, Prime members, in the third quarter of FY '21, we reached 758,000 members. That's a 55% increase versus the same period the previous year. Prime is proving to be a successful and attractive proposition to customers. Even in this current COVID-like market, we achieved an additional 94,000 new subscribers just in 1 quarter. Also, the Prime share of our total bookings continues to expand and reached 37% in the third quarter of FY '21 versus 9% the previous year. It is also important to highlight, as we do not believe the market is aware of it, is that Prime deferred revenue has reached EUR 20 million. That's an increase of 126% versus the third quarter of FY '20. This revenue is the Prime subscription fees not yet recognized into revenue till the Prime customer makes another booking or the renewal day takes place. So despite revenue margin per booking being impacted in the short term, if we would have included this revenue, revenue margin would have been higher than what we are currently reporting. Also, I'm very pleased to disclose that on Prime, despite all that has happened, we are absolutely on track to exceed 2 million subscribers by 2023. And secondly, in terms of strategic positioning, we continue to outperform the market as our booking performance at minus 65% in the third quarter FY '21 continues to beat the overall European market, which is at minus 79%. In terms of current trading, our short-term outlook is largely outside our control and driven by travel restrictions caused by COVID-19. Our January and February are showing minus 76% to minus 73% bookings growth year-on-year. Due to the uncertainty around COVID-19 and travel restrictions, we continue to offer no guidance for this financial year. Now I will go through the points I have just mentioned in more detail in the following slides. Please turn to Slide 5, in which we cover our diversification revenue KPIs. Overall, diversification revenue continues to improve and is the largest contributor to our revenues. Product diversification ratio and revenue diversification ratio have both improved. The product diversification ratio increased from 82% to 89%, a 7 percentage point improvement in a single year. Similarly, the revenue diversification ratio increased from 51% to 55% in the third quarter FY '21. That's a 4 percentage point improvement, again, in a single year. Please turn to Slide 6, which demonstrates the progress made against 3 other KPIs. We continue to lead the travel industry in mobile innovation and have again stood out in mobile, which bodes well for our future. In the last 5 years, bookings from mobile have risen exponentially, from 18% of our total bookings to 58%. Mobile has always been a top priority for us and a major focus. The shift to online and specifically mobile, accelerated by the pandemic, leaves us in a very strong position to take advantage of future demand. Let's now look at the changes to the acquisition cost per booking index, which improved by 45 percentage points year-on-year. This is due to the adaptability and flexibility of our business. However, I want to make it clear that this very low level is not sustainable for the long term. As travel restrictions ease, we expect to spend more on online marketing, and therefore, this ratio will trend back to more normalized levels. Lastly, on KPIs, I am delighted to talk to you about the success of Prime as a customer proposition. Prime is performing strongly in this weak market. As we have said, we want to transform the travel industry and the way in which consumers interact. We want to create unique relationships with consumers that, again, transform the way in which people think about travel and travel providers. Prime is a good example of how we achieve this and how we continue to innovate within travel. Even in the pandemic, Prime is performing well. The number of subscribers has continued to improve and has risen by 94,000 in 3 months, that's from Q2 to Q3 of FY '21. As you can see on the right-hand side of the chart, Prime subscription rate and the share of Prime continues to grow. Specifically, Prime members in Q3 FY '21 grew 55% versus the same period of last year, growing from 490,000 in Q3 FY '20 to 758,000 in FY '21. And the Prime share of our total bookings quadrupled from 9% in Q3 FY '20 to 37% in Q3 FY '21. Also, we launched Prime in new markets, the U.K., the U.S. and dotcom in November. We also launched new products, launching hotels in all of our Prime markets, such as France, Italy, Spain, Germany, U.K., U.S. and dotcom. If you can now turn to Slide 8, let me take you through our current trading. Current trading shows that the short-term outlook is impacted by travel restrictions. However, we continue to outperform the market. Current trading is affected by the wave of travel restrictions imposed due to an increase in COVID-19 cases and hospitalizations during the autumn to winter. After the initial lockdowns of last spring, once restrictions were lifted, consumers quickly came back into the market and almost 50% of our bookings returned within 2 months. Now we see the latest wave of restrictions, keeping our bookings at the low minus 70%. In comparison to the market, our trading suggested an outperformance against the airline industry, that is both regular and low-cost carriers, meaning we're gaining market share versus the supplier direct due to better quality, more comprehensive content and flexibility and customer focus, unique innovative products and solutions and, of course, a focus on leisure travel. Please turn to Slide 9. We are pleased to continue to report strong liquidity, a consequence of our strong business model and active management of the situation. We have achieved this despite increasing travel restrictions, thus reducing the level of trade. This resulted in a liquidity position of EUR 125 million and EUR 122 million at the end of December and January, respectively. This is a level at which it has remained stable since September 2020 despite the short-term softening of trading. We have achieved this from 3 sources. First, working capital inflows which were due to higher volumes in gross sales, better collection from suppliers, refunds collected and Prime deferred revenue increases -- sorry, Prime deferred revenue increases. Secondly, lower income taxes paid. And then third, our active management of the situation, which resulted in higher variability of the majority of our costs, also fixed cost and CapEx reductions and additional financial resources of EUR 15 million from a government-sponsored loan due in 2023 and the reduction of average monthly cash burn, excluding working capital and taxes, but adding the increase in Prime deferred revenue moved from EUR 13 million to EUR 7 million. I will now hand you over to David Elizaga, who will take you through our consolidated results.

Thank you, Dana, and good afternoon, everyone. If you could all please turn to Slide 11 of the presentation, I will take you through the financial results in more detail. Clearly, the pandemic had a significant impact in the last quarter of last year, and this has continued into the first 9 months of the current fiscal year. But let's outline the financial performance during the third quarter of fiscal '21. Looking at the income statement for the third quarter of fiscal '21 on Slide 11, revenue margin decreased by 77%. This was due to a decrease in bookings of 65% and lower revenue margin per booking, driven by lower average basket value of bookings due to COVID-19. Customers are booking on average with fewer passengers per trip and to destinations closer to home. As a result, the revenue we get from providers is smaller, and the classic and diversification revenue we get from customers is also lower. When travel patterns return to normal, we expect revenue margin per booking to increase from its current level. On the cost side, variable cost decreased by 70%, which is the result of the adaptability of our business model to the new mix of bookings made by customers during COVID-19 in spite of higher short-term call center costs. As guided in the second quarter of fiscal '21, we invested to significantly increase our contact center capacity and thus better serve our customers. We estimate we have expensed around EUR 1.3 million of additional cost in our call center to help our customers over and above that already expensed in the previous quarter, the second of fiscal '21. Again, when travel patterns normalize, we expect variable cost per booking to increase from its current level. These dynamics resulted in a marginal profit of EUR 6 million positive. To remind, the marginal profit is revenue margin minus viable cost. Fixed cost decreased by 22%, driven by a decrease in personnel costs, taking advantage of the government HR support programs as well as IT and external fee savings, despite an increase during the quarter of the negative foreign exchange impact by EUR 1.5 million versus the third quarter of fiscal '20. As a result, third quarter of fiscal '21 adjusted EBITDA amounted to a loss of EUR 10.4 million. If we continue down the income statement, you will note that the EBITDA loss was EUR 12 million, the difference being adjusted items, which decreased by EUR 2.2 million versus the same period of last year. Full details of adjusted items can be found in our condensed consolidated interim financial statements and in the excel file. D&A and impairment increased by 29% relating to the increase of the capitalized software finalized in March 2020. Our overall financial loss increased by 4%, mainly due to the use of the revolving credit facility and the new government sponsored loan due 2023. The income tax amounts to EUR 3.7 million in the third quarter of fiscal '21, which compares with an income of EUR 5.9 million in the third quarter of fiscal '20, largely because of lower tax expenses due to group tax losses for which a deferred tax asset has been recognized and the reduction in provision from group tax contingencies. This was offset by higher tax expenses due to the absence of a one-off revival of U.S. foreign tax credits in fiscal '21, an increase of the tax rate applicable to deferred tax liabilities, the write-off of tax attributes in the U.K. and other line businesses. Finally, adjusted net income stood at a loss of EUR 23.4 million (sic) [ EUR 23.1 million ]. We believe that adjusted net income better reflects the real ongoing operational performance of the business. And full disclosure of the adjusted net income can be found in Section 7 within the condensed consolidated interim financial statements and notes. Turning now to Slide 12, I will take you through the cash flow statement. In the third quarter of fiscal '21, despite increasing travel restrictions, net cash from operating activities improved by EUR 31.4 million, and we ended the quarter with cash flow before financing positive of EUR 13 million for the first time since the fourth quarter of fiscal '19. This is primarily due to a working capital inflow of EUR 29.9 million in the third quarter of fiscal '21, and we also benefited from lower income tax paid. The group continues to have a strong balance sheet, maintaining in the third quarter a solid liquidity position of EUR 125 million at the end of December, including EUR 107 million undrawn from our Super Senior Revolving Credit Facility. This will place us in a position of strength where normal trading conditions return. Cash position net of overdrafts stood at EUR 18 million at the close of December. The cash performance during the third quarter of fiscal '21 was driven by, firstly, the net cash from operating activities improved by EUR 31.4 million. This is reflecting mostly a working capital inflow of EUR 29.9 million due to higher volumes in December versus September, which is worth EUR 10 million; higher gross sales per booking worth EUR 5 million; better collection from suppliers worth EUR 5 million; refunds collected for another EUR 5 million; and the Prime deferred revenue increase was EUR 3 million. Income tax paid decreased by EUR 7.3 million from EUR 7.6 million to EUR 0.3 million, mainly due to lower Spanish taxable profits, the fact that there were no advanced payments of Italian income tax in fiscal '21, the refund of advanced payments of Spanish income tax and other minor differences. There's been a decrease in adjusted EBITDA by EUR 40 million, following the decrease in bookings. And better noncash items, items accrued but not yet paid, increased by EUR 3.5 million, mainly due to the variation of provisions. Cash used for investments is EUR 6.5 million, in line with the same quarter of the previous year. However, please note that for fiscal '21, we estimate to finish at around EUR 21 million, which is a 30% reduction versus the same period of last year due to the implementation of cost-saving measures to minimize the temporary impact of COVID-19. This is ahead of the decrease of 25% versus the third quarter of fiscal '20 in fixed cap costs plus CapEx, which we guided the market to in April of last year. If we were to run the same scenario today, we would be at minus 28% with annual cash flow savings of EUR 33 million, which is EUR 5 million ahead of what we guided. We have used in financing EUR 1.5 million of cash, in line with the same quarter over the previous year. And before I hand it over to Dana, I would like to flag again the impact of Prime in our financial magnitude, especially regarding our profitability. As we have pointed out, there is cash inflow through the incremental deferred revenues generated from the subscription at the time of subscription or renewal, depending on the case. Currently, the increase in the deferred revenue from Prime is included within the working capital movement, but it does not have the same dynamics as the rest of the working capital. Our working capital presents an inflow or outflow, mainly due to an increase or decrease in bookings from one period to another. On the other hand, the increase in deferred revenue for Prime reflects the cash-in which will not blow up, and it's just a matter of time that it is recognized as revenue and profits in the P&L as there is no additional cost associated to that new revenue in the P&L. I will now turn the presentation back to Dana to do the closing remarks.

Thank you, David. Please turn to Slide 14. Let me conclude by giving you an update on how I see the leisure travel industry based on the recent news flow about the vaccines, et cetera. Overall, I believe we're ahead of predictions on the vaccine. Prior to the vaccine entering stage 3 trials, predictions were that the average efficacy of the vaccine would be between 50% and 70%, and more towards the 50%. And that the likelihood of rollout of a vaccine would be second half of 2021. But with scenarios that very plausible would be rolled out in 2022 with some skeptical if there would be a vaccine for reasonable efficacy rolled out in 2 to 3 years. The reality, thankfully, is that we are ahead of schedule. Vaccines have shown up to 95% efficacy, not 50% to 70%, and are being rolled out in the first half of 2021, not the second half, and certainly not in 2022. While mutations and new variants have occurred, we are likely to see others. Current vaccines still provide good level of protection and booster shots can be administered to protect against new variants. In some industries, they say COVID accelerated progress online 3 years in just 3 months. The leisure travel industry has, to a large extent, been or moved online. But COVID is deepening the penetration in online, especially with certain segments such as, for example, the older demographic who will have become more internet savvy during lockdowns to communicate with their relatives and to shop online. There are many people who have found a whole new world online and a whole new level of confidence in purchasing online. The biggest barrier to this type of customer does face a trust issue, which is where well-known brands and market leadership undoubtedly benefit. At eDreams ODIGEO, our brands are market leading. We are #1 or #2 in all main European countries in flights and #1 in Europe with over 30% market share. Mobile is the other major digital trend and is increasingly important. Consumers are more accustomed to using this platform for e-commerce purchases. eDreams ODIGEO has led the travel industry and, in fact, all e-commerce industries in Europe in Mobile. We are getting close to 60% of our bookings being actually made on a mobile device, and this will continue to grow. I strongly believe the leisure travel industry has a bright future, and all the evidence is that it will rebound quickly. We are a leisure-only focused business, a leader in our market, and that's why we think a rebound of online leisure travel is likely to be ahead of the initial predictions. Turning to Slide 15. Let me share with you what we have seen from our latest trading, which highlights a strong pent-up demand for leisure travel and that travelers want to return as soon as practical. With news of approved COVID-19 vaccines, European sentiment towards travel has improved. The European Travel Commission has been monitoring sentiment for domestic and intra-European travel. Highlights from the most recent survey are that 52% of respondents intend to travel in the next 6 months, 52%. Significantly, 20% increase in the proportion of Europeans willing to take a trip during April to June 2021. The 50% will change plans to ensure their trips still goes ahead. Also 40% of respondents said that they plan to visit another European country and the intention to travel by air improves as 52% of respondents now intend to fly to their next destination, and that leisure is still the primary travel purpose. So we see leisure travelers do want to return as soon as possible. This is also evidenced in our own evolution of searches on long advanced trips. That means departures more than 90 days from the search of booking, right, which in the last 4 months has improved materially, 1.7x versus the searches done in October 2020. Turning to Slide 16. Let me conclude by giving you a quick recap of our overall view. We believe we are positioning ourselves for real success in the post COVID-19 world. The strength of our finances, the adaptability of our business model, the vast majority of costs being variable and the mitigating actions taken during the pandemic allow us to emerge strongly and well positioned from this crisis. Also, we have a good liquidity position of EUR 122 million at the end of January, excluding no short-term financial -- sorry, including no short-term financial debt payments and our secure notes. New government-sponsored loans and bank facilities are all due in over 2.5 years' time from now, meaning the second half of 2023. Also our Prime subscription program is going from strength to strength. Even in the pandemic, we have added, in this last quarter, 94,000 new subscribers, and the share of total bookings is rapidly increasing. So our business remains financially strong. We remain marginal profit positive. And we have kept our teams intact and motivated so we can take maximum advantage when restrictions are lifted as we are building for the future. eDreams ODIGEO is agile, nimble and this allows us to adapt quickly as necessary. We continue to pride ourselves and lead through product development and innovation, such as Prime, mobile, customer management, et cetera, and are leading the transformation of the leisure travel industries in how consumers interact with providers in this industry. We continue to build and offer innovative solutions, take care of our customers and are optimally positioned and ready to see the market growth as travel restrictions are lifted. Thus, we clearly believe our future is bright. We will emerge a winner from these unprecedented times. Thank you. With that, let's turn it over to questions. [Operator Instructions]

Thank you, Dana. Let me proceed then to the questions and to read them and answer them. So the first question that we come -- that we have is from Lenny Senkovsky from Eaton Vance. Can you provide a cash flow bridge from the EUR 125 million of cash at December to the EUR 122 million of cash at January? Bookings declined significantly from the third quarter. Was there a working capital outflow in the month. Thank you for your question, Lenny. The -- it is true that if you look at the whole aggregate of the months, like you point out, there were less bookings in January than they were in December. However, I want to remind you and everyone else that our average period of payments to providers, to the airlines, which are the most important ones, is a period of about 2 weeks. So in terms of working capital movement, it is more relevant the comparison of -- now you mentioned month-to-month, the second half of December against the second half of January. Now those 2 periods of time, we had a very, very similar amount of bookings because the December bookings, which had a good run of new leisure bookings triggered by last-minute Christmas trips of people, those bookings happened much more during the first half of December than during the second half. And the second half of December looks a lot in terms of bookings like the second half of January. So from a working capital movement generated by volume, it's more or less neutral, actually, the 2 periods of time that you're comparing. So from the EUR 125 million to the EUR 122 million, you have our average cash burn, including the Prime deferred revenue, which is around EUR 7 million, and you probably have some other movements in there which are of minor importance because you can see that the delta between one and another month is just EUR 3 million. The next question comes from Keaney McNeill -- Keaney Neill, sorry, of CreditSights. And it says, can you remind us of the covenants on your revolving credit facility and any discussion you've had with your lenders in relation to these? We have the privilege of having a very good and strong relationship with our banks who have been banks of the company for an extended period of time and then have a relationship with us that goes beyond lending. They also participate on the asset side of the business and help us to move the payments, get cash from our customers and a number of other things. So they know really well the insights of the company. You will have noted, and I think we've discussed that about a year ago now, that when we had to renegotiate our covenants back in the spring of 2020, we actually received better terms than just about every company in our universe. We didn't have to raise additional liquidity, and we didn't have to accept an alternative covenant or any other, let's say, prejudices to our business. What we continue to have is a very fluid dialogue with our banks. There is a monthly communication related to not only our historical liquidity but also our forecast liquidity, and therefore, our banks have a very, very good visibility of what is going to happen ahead. And we continue to meet or exceed every projection that we have given to our banks, which creates an enormous amount of trust. They really know what is going on inside the company and with our trading. Having said that, ours is a single covenant of 6x gross leverage, and it is a springing covenant, which means that the covenant is actually only measured when we are growing more than EUR 52.5 million in the way of cash in the revolving credit facility. You will see in our results that as of December, we had EUR 55 million, and we had still EUR 18 million available in cash. So at that point in time, if we just wanted to give back EUR 3 million, we would be in a position of not springing. And ever since then, we're keeping a strong liquidity like you will all have seen. So the dialogue with the banks is in no particular rush right now, and we are confident that we're going to have a very productive dialogue with them going forward, like we have had in the past. Let me go to the next question, which is a question from Savan Shah of Oaktree. How should we look at working capital going forward? And there is a second question saying, what proportion of refunds are still outstanding? So if we look at working capital going forward, if you exclude the increase in the Prime deferred revenue, which is constant and will continue to be an inflow going forward, we believe, given the success of our Prime program, is really driven by the amount to volume that we trade, like you all know. So it's going to depend on the gradual recovery of the volume as the vaccination increases on the one hand and the level of occupation of beds in hospitals and ICUs in hospitals allows the government to lift a portion of the travel restrictions. And what we are very certain, as we have shown as well in the presentation, is that there is a very high level of pent-up demand in the market as manifested by the increase in the amount of searches that we see for travel. People are just waiting for the travel restrictions to be lifted to be able to go ahead and make their bookings. And once the volume comes, the working capital in a positive way will come. And you even saw that in Q3 like we have reported, that the end of the period was better than the end of the period in the Q2 when we already have a very good working capital inflow. On your second question, what proportion of refunds are still outstanding? The refunds is actually -- unfortunately, it is a dynamic that goes on. Because in Europe, the airlines have been exempt and continue to be exempt of the 80/20 rule of usage of the slots at airports in the rounds. So they are consistently canceling around 50% of the scheduled flights on an ongoing basis in Europe, which means there is a continued high level of cancellations. There was a very, very big level of cancellations, which was about 95% of the flights back in the first way of the virus. But it's not something that has disappeared since then. It's something that is continuing at a lower level because you have lower number of scheduled flights, but still 50% of them are getting canceled. So the dynamic of refunds is permanent. We continue to receive refunds from the airlines, and we continue to pass on those refunds to our customers. It is a permanent flow. And I'm afraid that until Europe changes bank regulation and continues to -- and goes back to enforcing the 80/20 rule, we will continue to see this flow of cancellations. The next question comes from Wolfgang Felix of Sarria Limited. It says working capital, would you please break out the EUR 140 million of payables, which components are remaining elevated relative to your bookings turnover and for how long? Thank you. The broad distribution of those EUR 140 million of payables is you would have, first of all, the Prime deferred revenue, which we cannot stress enough for EUR 20 million. This is not really a payable. I would characterize this much more as a parking slot of cash until it is recognized as revenues in the P&L. You have around EUR 40 million for the payable to airlines, and that would be for the bookings over the last 2 weeks. You would have a proportion of payables for marketing, which is our biggest provider from the point of view of the costs in the P&L. And the rest will be other trade payables. And within that, you have the refunds, which are payable to our customers, and it would reflect the amount of money that we have already received from the airlines, but we are in the process of reconciling and matching booking by booking with the customers that are due those refunds, and then we go over and refund to the customers. And that's the one that I was responding in the previous question, it is a permanent flow of it. So which one is elevated related to your bookings turnover? That is certainly on the refunds portion because all of the rest are correlated to the amount of volumes that we have, whereas the refunds are really correlated with the amount of cancellations in the market, not with the level of our bookings. The next question comes from Chadd Garcia from Schwartz Investments. It says, can you discuss why the Prime program continues to grow? How is the launch of Prime in the U.K. going?

Absolutely. So let me take that, David. So I think you have 2 questions. Let me address first your question about Prime overall and why it's growing. I think there are 2 big macro things that we're doing to -- that enable it to grow. And I'm doing this also in order of importance. So the first one is around the customer proposition has improved during -- we've continued to improve it really during the course of this year. And by the way, I have to say, it's not about price changes, which I think someone else is asking as well. But really, in terms of the customer proposition improving, I would break that out to 2 elements as well. And the first part of the improvement of the customer proposition is around just simply experimenting and how to really convey this to customers and to get them to both understand the proposition and then not only once they do understand it to us and get them to repeat. And these are just simply some insights that we've continued to iterate on, and they do take time because while other industries have a subscription product, right, like Netflix for streaming, like Spotify for music, Amazon in consumer goods and delivery. In travel, no one has done this before. And so we continue to run experiments, run interviews with customers and really understand all these individual, if I can call them on these moments of truth and how customers really perceive things. And some of these ABs or experiments have really given us unique insights to this and how we position our proposition with customers. And so that is one of -- that's probably the biggest driver of this one. The second, I said there was 2 parts in the customer proposition improvement, and the second is that we've added more value to the customers. So if I jump back a year ago, if a customer would take Prime, they would get really amazing proposition for flights, right, price and non-price elements in there. Over the past year, we have rolled out Prime to hotels. So now for the exact same subscription fee, i.e., no increase, you not only still get the same flight's proposition but you now also get a hotel's proposition as well. And so we've added more value within the proposition of customers. So that will be the second part of the first one about improving the customer proposition. I did say that there was a second big bucket, which is really just expansion to new geographies, right? So over the course of the past year and particularly in the quarter, we have rolled it out to a number of new markets, including the U.K., which was one of your questions and we -- sorry, we rolled out to a couple of other markets as well. So that also has added as well to this. Now in terms of your second question, where you said Prime in the U.K., is it going well? And the answer is absolutely yes. We see roughly the same type of customer satisfaction, customer interest, customer takeup of this, of Prime as we do in other markets. Clearly, it's only been several months as opposed to in some markets, we even have several years on that. In all of the indicators of what we see indicates that this is roughly the same as any of our other core markets or core geographies. David?

Thank you, Dana. And we move to the next question. It comes from [ Manuya Shawi ] of RLAM. Thank you for all the details. Could you please clarify the way deferred revenues work for Prime? Is the subscription paid yearly? And how gradually will the deferred revenues be recognized over the coming quarters? There are a few questions linked. So rather than reading all of them and responding, I'm going to read one, respond one, I think it will be clear for everyone on the call. Let me just address this one first. If we take a single customer, you pay, it depends on the country, but let's say, that on average, you pay about EUR 55 for the subscription. And with that subscription, you make a first booking, okay? We will be recognizing revenue a proportion of the EUR 55 with that booking linked to the specific savings that you obtained for being a Prime customer on that booking in particular. Then the remaining, let's just choose for the argument, EUR 20, okay? So there was a discount of EUR 20. We recognize EUR 20 as revenue. You have EUR 35 remaining. Let's say, you do a second booking a few months later and you get another EUR 20 stock savings. We will recognize another EUR 20 of subscription revenue. You have EUR 15 remaining of the original EUR 55. Let's say you make no more bookings during the 12 months. The EUR 15 will be recognized at the end of the 12-month period, okay? Let's say you are that same customer and you were very satisfied with your 2 bookings and the level of service and discounts that you received with Prime and you renew. You pay another EUR 55. Because that renewal doesn't come with a booking on the date of renewal, our recognition of the revenue will be 0 at first. And then as you make bookings, you would follow the same dynamic that I've described for your first year of membership. That is how it works. Second question from the same investor. Can you please give some color on working capital change in January '21? This has been already answered. Liquidity is flat despite further drop in bookings in January versus December. Could you please give some color on that? I also did. Would you also speak of the ongoing customer refunds? Is eDreams still advancing refunds for airlines and how much refunds are currently outstanding to be collected from the airlines? So I think I've responded partially to this on how the dynamic works and how, unfortunately, it is not a permanent stock of cancellations, but rather there is new flow of cancellations, and therefore, new necessity for the airlines to refund our customers via us. So we continue to pay old cancellations and refunds. We continue to receive new funds -- or cancellation and refunds from the airlines. It is a permanent flow. On the advancing refunds, this is a reference to the comment that we made in the second quarter, that during the quarter, we had paid EUR 40 million more than we had received from the airlines during the quarter. You will have seen in my comments during today that in the third quarter, it was the opposite. We refunded EUR 5 million less than we received from the airlines during the third quarter. The next group of questions come from the analyst Carlos Treviño from Santander. The first one is, and I'm going to take them one by one again, like I did with the previous investor. Could you update us on your booking performance of last days following the recent announcement from the U.K.'s government? I don't think we can give specific numbers because it's not what we do usually. But I would say that the dynamic that we have seen is one that mimics what we have seen in the past, in the sense that when customers have visibility for the future or increased freedom to be able to travel, they go ahead and start making bookings. So we have seen an improvement in the last few days of the booking performance generally versus what we were seeing at the beginning of February in the absence of those news. There are countries like the U.K., where it has been very, I would say, detailed in terms of the visibility going forward on a month-by-month basis of what people are going to be able to do. And what we've seen there is a spike, for instance, in the bookings for departure over 100 days, which is a segment of bookings that we have not been seeing for some time because customers are afraid to book with that much length in general. So we have seen that spike in the U.K. for the segment, in particular, of bookings over 100 days till departure. The next question from Carlos Treviño is, looking at your acquisition cost per booking, even being at historical low levels, it has increased in the last 2 quarters from 48 in the first quarter to 52 in the second quarter and to 55 in the third quarter. Could you explain the reasons for that increase? Well, the reason for the increase is that at the very beginning of the pandemic, there was a very radical change of the amount of the investment in general because the expected revenue from the searches was very low at that point in time, and it didn't make economic sense for us to invest. We are seeing now that there are opportunities in which we can deploy marketing money that have a return on the investment for us. And what has happened as well ever since the Q1 is that, as you will have seen as well, there is a very high level of success of Prime within our customers. And like we have said and explained many times, the lifetime value of an average Prime customer is much higher than the one of a non-Prime customer. So it gives us the ability as well to invest additionally in marketing because we know that on a lifetime value basis we're going to recover more and more of that investment. Actually, yes. The follow-up -- I thought it was a different question, but it is a follow-up of Carlos, which applies to a previous question as well, especially considering the bookings from Prime subscribers have increased from -- to 37% from 18% in that period, which should have a positive effect on acquisition costs. That positive effect happens. So the second and subsequent bookings from a Prime subscriber come from 2 channels with an overwhelming majority of the bookings come from cheap channels. But at the same time, it is true that we are, as I said previously, investing additionally because there is more visibility on the revenue that we can get and on a lifetime value basis, the investment makes a lot of sense. The next set of questions says, could you please spend a bit more time on Prime? Did you do any incremental marketing to drive the product on your website? Have you reduced prices? Has anything else changed? Could you remind us, is the Prime customer profitable in the second booking or does it take longer to reach breakeven? And how do you view what your U.S. competition is doing with a similar subscription product? So it's kind of like several questions amalgamated around the topic of Prime. And I think probably Dana is going to take this one.

Yes. Thanks, David. So I think the first part of your question about Prime was around marketing and asking something to the effect like what did we -- have we been spending money on marketing to drive the product onto our website, and the answer is no, in the sense, and let me give you the clarifications around that. No, we have not spent any money off-line to bring people to our sites for Prime. We don't do any visual-based advertising and digital can be off-line. So you can imagine a billboard or TV. But similarly, you can imagine a YouTube commercial or even a display that ad banner. And we haven't done any of that for Prime whatsoever. We do -- yes, you've seen in our P&L, we do spend some money on marketing such as like a search engine marketing that would be on Google and stuff like that, but none of that is specific to Prime per se. So the answer would be no for that. We really have focused on building a great product for Prime, and we continue to really invest our time, effort and energy really on that. Clearly, as the market would return to more normal levels, there is an opportunity for us to potentially spend some money, let's say, on more visual-based types of advertising. But we have not, to date, spent any money on that. The second part of your Prime questions was about prices and saying did we reduce our prices or has anything else changed. And so I think I've answered most of this in the question that Chadd had answered before. But just to reiterate, the answer is we haven't reduced our prices, meaning, I think what you're asking is, did we really drop our prices below the market, below our competitors in our Prime product and versus what we were doing, let's say, 6 months or a year ago and so therefore, could that have driven more bookings? And the answer is absolutely 100% no. It is not that at all, nothing, 0. Now let me be just very clear about prices. Prices in the market move up and down all the time. So while a ticket from, let's say, London to Barcelona, may have cost, let's say, EUR 400 at one point in time and maybe the price has dropped in an absurd example to EUR 100, clearly, we follow the market, right? But we would be following the market and it's our machines because our pricing is not done by people, but by machines on our AI in terms of really driving and making sure our prices are always competitive. But we have not put in anything specifically to drive down our prices versus what we were doing before and know to try to attract more customers and pickup. All the reasons that we've seen in terms of our, let's say, takeup of subscription has been in the answer that I gave to Chadd's question about it. The next part of the question was about profitability of Prime on the second booking or does it take longer to reach breakeven. We do not price Prime products to make losses on it, be it the first or the 21st booking of that. So we do make money on all of that for it. Let's see what else you had on this. How do you view what your U.S. competition is doing with similar subscription product? Let me say several things. First of all, that we have been working at Prime for a number of years and there -- we have run a good, let's say, at least 50,000, if not more, individual customer interviews, right? This is not one survey sent out to 50,000 people. This is really in-depth interviews with individual customers and not just one point in time, but we're constantly doing -- gaining customer insights and doing customer research every month actually on this. And those are unique insights that help us really build our product in there and then we run tests and AB tests, and we've run in the thousands of AB tests around Prime on this to really understand customer behavior and insights. So I would actually say, looking at this competitor or this company that offers it, their product is different in a number of important ways from ours. But I would also similarly say is that when someone does something really good and shows real potential, likely others will come in and copy it. Now we have that advantage and that legacy of all of the institutional knowledge learning of it, plus we continue to expand it, meaning we have it in many, many countries. We have it not just in one product but in multiple products. We have it not just a price proposition but there's non-price elements as well in that. There's quite a lot of things. And we have, as you can see, even in the pandemic, every 3 months I get on here, there have been a number of new updates that we have, and we continue to progress forward and forward and build Prime into an even more robust proposition than what it was 3 months ago. And if you can imagine even 3 months from now and 6 to 9 months, it'll be even more robust than what you see today. David, let me pass it over to you to handle the other questions.