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

Ladies and gentlemen, hello, and welcome to the eDreams Q1 Fiscal Year 2022 Results Presentation. My name is Maxine, and I'll be coordinating the call today. [Operator Instructions] I will now hand you over to your host, David de la Roz, Director of Investor Relations, to begin. David, please go ahead when you're ready.

Good afternoon, everyone, and thank you all for joining us today for our first quarter and year end fiscal year 2022 results presentation for the 3 months ending 30th of June 2021. 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 Relations section of our website. I will now pass you 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. I'm pleased to share with you today our excellent results and our strong prospects for the future. When the pandemic hit, it was a once-in-a-lifetime event. As a company, it's a point of inflection. And as I said to you back then, we will use this moment to make us better, stronger and emerge a clear winner. We have been seeing the fruits of these efforts and our latest set of results continue to highlight this. For the past few months, we have actually been performing above pre-COVID-19 levels for bookings and outperforming our peers. In addition, our unique subscription proposition has been going from strength to strength and bodes very well for our future growth prospects. Our subscription product, Prime, has grown 50% over the last 3 months to 1.5 million members now. And we've returned to positive cash EBITDA of EUR 3.1 million, including the full contribution of Prime. In total, we are confident that as the global travel market opens more fully in the future and gets to a more post-COVID world, we will be a clear winner. And we have a bright future. I'll now take you in more detail through some of the key points of our most recent results and then hand over to David Elizaga, our CFO, who will discuss in more detail the performance of our consolidated financial statements. I will then finish with some closing remarks. So please turn now to Slide 4, in which I give a summary of our performance to date. Overall, bookings are ahead of pre-COVID-19 levels since the month of June, and Prime has added another 0.5 million members and we've returned to EBITDA positive, including Prime fees. Some of the key highlights for today's presentation are: one, bookings are well ahead of pre-COVID levels. June bookings surpassed pre-COVID levels and July and August accelerated and strengthened further on 2019. August bookings were 27% ahead of 2019 levels. Results are encouraging. Despite COVID-19 impact, the first quarter of this new financial year has shown encouraging signs of market recovery, particularly in leisure travel, where we, as eDreams ODIGEO has the leading market position. Revenue margin in the first quarter increased 313% versus the same period last year. This is due to bookings being up 491% and a reduction in revenue margin per booking driven by lower average basket value of bookings due to the COVID-19 effect on travel. The effect of COVID-19 induced restrictions resulted in revenue margin being 48% below pre-COVID-19 levels, including the full contribution from Prime. Cash EBITDA was EUR 3.1 million positive, it was the first time positive since the beginning of the pandemic back in March 2020. Marginal profit stood at EUR 13.4 million positive, which is 11x the amount of the first quarter of the last financial year FY '21. And our strong liquidity position was maintained at EUR 136 million at the end of July. And as I have stressed previously, our liquidity was never at list, and we were an exception in the industry. The third highlight of today is that Prime, Prime continues to reinvent travel and travel provision. And let me tell you why. First, we're the leader, an inventor of Prime, and it's a highly successful subscription-based model that is now in travel. We grew our Prime members by 116% in the 12 months through June 2021, and that would bring us to about 1.2 million subscribers. And we've now reached over 1.5 million Prime members in August. This means we added 500,000 or 0.5 million members in just 3 months, whereas the addition of the previous 500,000 members took 15 months to achieve. We will continue to grow Prime and through product innovation, through geographic expansion. And we expect to achieve our target of 2 million Prime members over 1 year ahead of schedule. The already revised target was newly set for before the end of summer 2022. But very likely, we will move forward yet again this self-imposed target that we set last May by yet another 3 to 6 months. Fourth highlight. We strongly believe we will be a clear winner in the post-COVID world because we have a unique relationship model with customers, à la Prime. We have an unrivaled scale advantage and now #2 in the world in retailing flights. Our market share, in fact, grew in Europe by 6 percentage points to 37% last year. And we have a balanced business with diversification revenues of 30 -- I'm sorry, 63%, which is up 10 percentage points year-on-year. And bookings through mobile devices remain market-leading in excess of 50%, while the industry average is still around 37%. Now I will go through the points I've just mentioned in more detail in the following slides. Please turn to Slide 5, in which I will update you on current trading. Our current trading demonstrates our strong performance and rapid turnaround experienced during the summer period due to the strong desire for our customers to travel with bookings surpassing pre-COVID levels even when the market has not fully recovered. As we have repeatedly said, consumers want to travel. The pandemic has not affected this, but instead only reconfirmed this. As and when restrictions are lifted, uncertainty eased, consumers return with confidence. And that we want to be ready for them and take market share through superior strategy, business model and consumer proposition. We have seen exactly this in our numbers. The company's booking levels over the past quarter have shown continuous improvement. Bookings in April were minus 51% compared to the same period of 2019. May showed strong improvement with bookings going to minus 22%. In June, bookings improved further to, in fact, surpass pre-COVID-19 levels with positive single-digit average growth rate of 2%. And in July and August, trading has accelerated further with the company now seeing strong growth levels, plus 27% in August versus pre-COVID levels. I do want to point out that I do believe that the 27% growth rate in August is an extraordinary result. Since we experienced pent-up demand for last-minute bookings due to the increasing in restriction -- sorry, due to the easing in restrictions in some countries, which in a normalized year, many of those bookings would have taken place in the fourth quarter or the first quarter of the new fiscal year instead of happening in August. Nonetheless, all indicators we have is that we outperformed the market, which is a good indicator of our future growth prospects. Please turn to Slide 6, where, as evidenced by IATA's public data, you can see that we do continue to outperform the market. Our trading suggested an overperformance against the airline industry, both regular and low-cost carriers, and growth of market share versus supplier direct due to better quality, more comprehensive content and flexibility and a focus on leisure travel. This slide shows eDO's overall performance versus IATA in Europe, where on average during fiscal year 2021, eDO has been 13 percentage points ahead of supplier direct in Europe. The most recent IATA numbers from Q1 FY '22 suggest that our overperformance has extended to 52 percentage points. While there may be some seasonality and time differences between booking date and departure date, the message is clear, we do outperform the market. If you please turn to Slide 5 (sic) [ Slide 7 ]. I believe it's important to highlight that the market is still recovering. And we still have some effects of COVID-19 affecting the market and our performance as we journey towards a post-COVID-19 world. These COVID-19 effects are, firstly, restrictions. There are still significant restrictions from free travel, including bans, forms filling, tests, uncertainty of rules and disparate vaccination levels. This leads to an influence on demand, meaning consumers are choosing to stay closer to home such as taking shorter-haul flights with shorter lead times to booking. And this, in turn, has an impact on revenue margin per booking. It leads to lower average basket value, which is 35% below 2019 levels. All in all, what is clear is that despite all of the above impacts, eDO results demonstrate a very strong performance in the current market and show how eDO will continue to prosper as the market transitions to a post-COVID-19 market. Please turn to Slide 8. In this slide, I'm pleased to share with you the very positive results we have achieved in our subscription program, Prime. If you remember in late May, I shared with you an important milestone. eDO has surpassed the 1 million-mile mark. In less than 3 months from then, eDO has surpassed 1.5 million members, which means that we added over 500,000 members in less than 3 months. As you know, eDreams ODIGEO is the leader and the inventor of the first subscription-based model and travel. Over the past 4 years, we have invested a lot of time and resources in developing and testing our unique subscription offering into the successful product that it is today. During the pandemic, while others were cutting back, we have continued to invest and develop Prime and have seen remarkable results. In total, you can see the customer take-up is very strong, and it has large future potential. And we transition our business from a more risky transaction-based business to a much more appealing relationship subscription-based business that has strong growth prospects. In the past 12 months, our membership grew by 116% to EUR 1.2 million at the end of the first quarter of this financial year. 39% of our flight bookings are now from Prime members, indicating the benefit that members accrue from the program, and we are ahead of schedule to hit our 2 million subscriber target. This target was initially set to be achieved in 2023. As you know, we revised the target to be a full year ahead of schedule before the end of summer 2022. It is most likely that we will hit this self-imposed target yet another 3 to 6 months in advance. Let me put in context the achievement of the additional 500,000 members we just realized. Prior to this, it took us 15 months to achieve the last 500,000 members while we have now achieved in just 3 months. As I said, the future is bright. And when the market returns, we have a strong proposition for customers. Please turn to Slide 9. The group continues to have a strong balance sheet with a strong liquidity position of EUR 136 million at the end of July. We are the only global OTA that did not require a capital or debt raise to navigate through the pandemic. So the liquidity of eDreams was never at risk. Which is amply demonstrated by the, again, unanimously approved covenant waiver extension on the 30th of April until the 30th of June 2022. This liquidity position is a solid starting point for the low seasonality period in the coming months as naturally, the level of bookings decreases from September to December. Please turn to Slide 10 in which we cover our diversification revenue KPIs. Overall diversification revenue continued to improve, and this is the largest contributor to revenues. Product diversification ratio and revenue diversification ratio have both improved. The product diversification ratio increased from 76% in the first quarter of 2020 to 89% in the first quarter of 2022 financial year. That's a 13 percentage point improvement in 2 years. Similarly, the revenue diversification ratio increased from 46% to 63% in the first quarter FY '22, a 17 percentage point improvement again in 2 years. We continue to believe that Prime is a key consumer offering in which we continue to evolve to a full-service one-stop shop towards the consumer and this allows us to further grow our share of wallet in the future. Please turn to Slide 11, which demonstrates the progress made against our 2 other KPIs that we disclose. We continue to lead the travel industry in mobile innovation and have again stood out in mobile, which serves us well for the future. In the last 2 years, bookings through mobile, a top priority for us, a major focus has risen exponentially from 40% of our total bookings to 52%. The shift to online and specific to mobile accelerated by the pandemic leaves us in an optimal position to take advantage of future demand as the leader in mobile for travel. Let's now look at the changes to the acquisition cost per booking index which deteriorated by 22 percentage points year-on-year. This is due to the adaptability and flexibility of our business. As guided, the very low level we had in the past 12 months was not sustainable for the long term. As travel restrictions ease and consumer demand increases, we expected to spend more on online marketing, and therefore, this ratio will trend back to a more normalized level. However, if we compare the first quarter of FY '22 with the first quarter of FY '20, we still show an improvement of 11 percentage points. Now I'll pass you to David, who will discuss in more detail our financial results.

Thank you, Dana, and good afternoon, everyone. If you could all please turn to Slide 13 of the presentation, I will take you through the financial results in more detail. Despite the COVID-19 impact, the first quarter of fiscal '22 has shown encouraging signs of market recovery. In the first quarter, we experienced a sharp increase in demand despite uncertainty and some travel restrictions remaining. Revenue margin increased by 313% year-on-year to EUR 68.4 million due to the 491% increase in bookings following the progress of vaccination rollout and increase in leisure travel demand. This was partly offset by a 36% reduction in revenue margin per booking, driven by a lower average basket value of bookings. When travel patterns return to normal, we expect revenue margin per booking to increase from its current level. I remind you that COVID-19 induced restrictions still resulted in revenue margin being 52% below pre-COVID levels due to disproportionate demand in short distance flights. In fiscal '22 and fiscal '21, our focus has been on what we can control. to continually build and further enhance our high-quality and adaptable business model. This is demonstrated by our marginal profit in fiscal '22, remember marginal profit is revenue margin minus variable costs, being EUR 13.4 million positive. That's 11x the amount of the same quarter of last year despite the investment in our call center to help our customers. Adjusted EBITDA was a loss of EUR 1.9 million in our last quarter but improved every month during the quarter and was positive for the month of June. Cash EBITDA, which is the EBITDA with a full Prime contribution, was EUR 3.1 million positive once we add the impact of EUR 5.1 million due to the increase in Prime deferred revenue in the quarter. But I will talk more in detail on these on the next slide. Please turn to Slide 14 of the presentation. With Prime subscription growing so strongly, we feel it is important and timely to increase disclosure of the accounting impact, which is caused by the Prime subscription program. For clarity, the annual subscription fee for Prime services is charged in 1 lump sum at the point of making the first booking and subscribing to the program, a full cash impact for the company at the time of the subscription or at the time of the annual renewal. This revenue is accounted for once the customer starts to make bookings and accrues the revenue with the corresponding discounts applied to being a Prime customer. The portion of the subscription fee in excess of the discounts received is booked in the balance sheet as deferred revenue. Additional revenue margin will be accrued as the customer makes additional bookings. In the amount, also, this can't be apply as a Prime customer. Any unconsumed portion of the subscription fee at the end of the 12 months will be accrued as revenue margin and becomes EBITDA for the same amount. In fiscal '21, the increase in deferred revenue driven by Prime amounted to EUR 10.7 million, and that was a 91% increase year-on-year. And in the first quarter of fiscal '22, it has continued to grow, amounting to EUR 5.1 million in the quarter, and that is up 120% year-on-year. This amount is expected to continue increasing in time as we continue to see a rise in Prime members. This results in an amount of cash revenue margin and cash EBITDA, not recorded in our P&L. Thus, we feel it is important to disclose going forward our cash revenue margin and cash EBITDA with the full time contribution to show the full impact of the year of value created in the form of the Prime fees collected and nonaccrued from new customers during the year. As a result of the positive contribution for Prime, we are very pleased to say that cash EBITDA with a full Prime contribution was EUR 3.1 million positive. The first time we have recorded a positive EBITDA in a quarter since March of 2020. Turning now to Slide 15. I will take you through the cash flow statement. In fiscal '22, despite continued travel restrictions, net cash from operating activities improved by EUR 45.8 million and we ended the quarter with positive cash flow from operations of EUR 37.9 million, mainly due to a working capital inflow of EUR 35.4 million. The improvement versus the same quarter of last fiscal year was driven by the better EBITDA performance, the variation in provisions and working capital inflows from stronger volume in the last 2 weeks of June '21 than we had in March '21. The group continues to have a strong balance sheet, maintaining a robust liquidity position of EUR 136 million at the end of July, including EUR 98 million undrawn from a super senior revolving credit facility. This undoubtedly places us in a position of strength for the low seasonality period until December. We have used cash for investments of EUR 5.7 million in this first quarter of the fiscal year. That's an increase of 1.2% in fiscal '21 as last year, we implemented cost-saving measures to minimize the temporary impact of COVID-19. Cash used in financing amounted to EUR 17.4 million of cash inflow compared to an outflow of EUR 1.7 million from financing activities in the same period of last year. The variation by EUR 19.1 million in financing activities mainly relates to the drawdown of EUR 19 million under the super senior revolving credit facility. I will now turn the presentation back to Dana to do the closing remarks.

Thank you, David. Please turn to Slide 17, and let me conclude here by giving you a quick recap of what we see in the market, why we believe eDreams will be a winner post-COVID. Leisure consumers want to travel. That is certain. And COVID has done nothing to soften this desire. As more people are vaccinated, travel activity picks up. While we still are in a transition phase from full COVID to post-COVID, there may be some ebbs and flows, such as with the delta variant. However, it is certain that leisure consumers want to travel and that eDO is their provider of choice. So there are clear reasons why eDO will be a winner post-COVID. One, we're structurally well positioned in the leisure segment, leaders in mobile, geographically diversified and with a product portfolio that suits consumers needs and in fact, is superior to other competitors. Two, we have unrivaled scale, have increased our market share in Europe by 6 percentage points in just 1 year and reached the #2 position worldwide as a flight retailer. Three, Prime is a resounding success in the market. We have surpassed 1.5 million members already and will reach the 2 million member milestone more than a year earlier than originally expected. And most likely, we'll move forward our self-imposed target set last May by yet another 3 to 6 months. Four, we are reinventing travel and travel position. We are leading the way with a proven model and transforming the industry. With that, I'd now like to take your questions.

Before we do, let me point out that we will answer the questions sent to us in writing in the webcast. We will take questions on a first come, first serve basis. And we would also try to group questions of similar nature. Should we not have time to respond to all the questions from the webcast, the Investor Relations team will make sure those are answered afterwards.

And the first set of questions that we have are from Francisco Ruiz of Exane BNP. First question is why are mobile reservations falling compared to fiscal '21? Is it a seasonal theme? Dana, I believe you would answer this one?

Yes. Sorry, David, I'm having trouble with my connection. Can you repeat the question?

The question is why are mobile reservations falling compared to fiscal '21? Is it a seasonal theme?

Okay. Yes. So really, what's happening behind here is much more about a change in the composition of the type of customers coming to market. If I look back first a couple of years ago, we were at around 40% in terms of mobile bookings. A year ago, we were around 50%. So we have continued to grow year-on-year, the mobile bookings. But just over the past quarter, we've seen a shift where we have less right now in this quarter versus the previous quarter, less on passenger bookings and less mobile, very short to departure mobile type of bookings. And so it's really just driven by the consumer and the market. And so therefore, what we want to do is make sure we're there for the consumer and there'll be different types of consumers coming to the market, both in terms of seasonality, pandemic type of thing, work from home, work from office, et cetera. And that can slightly affect in any one period of time. But it's clear, overall, we are absolutely leading the market because the market is still sitting in the high 30%, whereas we're in the 50s percent.

Okay. The second question from Francisco Ruiz is variable for booking costs, are they sustainable at these levels? I'll take that one. Yes, we expect roughly the same variable cost of booking for the second quarter. We're seeing stability there. The third question is how do you foresee the recovery of the average basket value. And I would say -- sorry, you want to take that question, Dana? Okay. So I'll take it. About the recovery of the average basket value. And I would say that it's highly dependent on the amount of restrictions that exist in the market from the governments to mobility of the customers. The -- what has been very, very clear to us over the last few months is that there is a credible amount of leisure demand from customers, we see it on the searches. And there is also enough budget from the customers. Probably sure you're familiar with the unprecedented levels of savings that there are for European consumers right now in the market. So the only remaining, let's say, factor is where people allowed to travel. And the amount of uncertainty about changes in those restrictions. And that is what is driving the basket value. What we would expect is that this thing over the next few months continues to relax as the vaccination rate increases and presuming that there are no new variants that changes the grants. The fourth question says, don't you think the scenarios that you have in your impairment test on immunity are too cautious since today you have been 3 months above 2019 levels without immunity yet. Do you feel you could get back to pre-COVID levels in fiscal '22 instead of fiscal '23? So your assessment is correct in that we have been 3 months above 2019 levels. And we've been also for a bit more than 3 months above the scenario 3, which is the one on immunity. And the scenarios, remember they're set for industry expectations, right? And we have also said that all of our data points indicate that we are performing much better than the industry, right? So I would say that we are trading well and we're trading above the scenario 3, probably the industry is trading less well than we are. As to if we will have pre-COVID levels in fiscal '22 instead of fiscal '23? If we're talking about bookings, year-to-date, we are about 6% below, and that's 5 months out of the 12. If bookings continue to perform more in line with the last 3 months than in line with the first 2 months of the year. Yes, it is highly likely that in terms of bookings, we would recover pre-COVID levels in fiscal '22 for the aggregate of the year. That was the last question coming from Exane BNP, Francisco Ruiz. We have a set of questions now from Juan Peña of GVC Gaesco. The first question, he says I have seen that the percentage of bookings through Prime remains at 39% despite the strong growth of Prime customers. Why is this happening? And shouldn't this ratio increase in line with subscriber growth, gives us the impression of some being in active customers. You may want to take this one, Dana?

Yes. Absolutely, David. So let me make a couple of comments about Prime and about our overall business and the model that we're engaging in. We don't look at the 39%. And I would encourage all investors to not. Well, 39% is phenomenal, amazing, right? And you're saying that, look, almost 40% of the business is a transaction -- is a relationship business that is much lower risk, has a recurring revenue stream, et cetera. But it's not about the percentage, right, and I'll explain why. We are -- we want to make certain that we please the customer, right, that we delight customers. And absolutely have proven that a subscription-based model does do that as you see adding 500,000 members in 3 months really does. But there are a set of customers out there that want to have a transaction relationship. And remember, until we came along, no one in the travel industry did a subscription-based model. So a customer, even though they may be used to a subscription-based model in other industries, they're thinking travel, they come to us, and they're not necessarily expecting subscription. And there's a lot of customers that want a transaction instead. And so we continue to offer that. And what we want to make certain is that we offer those customers a transaction-based model and a transaction-based offering as well as then using some of that to convert some of those to subscribers, but equally capturing a whole new set of customers that may not have come to us originally as a subscription as well. So we look at this in terms of, first of all, total numbers of subscribers, not the percentage of our business and we look at it in terms of total LTV that we generate, right, for the business. And that's how we really manage this. I don't know, David, do you want to add anything?

No. That's absolutely fine. And there is a second question from Juan Peña, which has already been answered because it's about the percentage of reservations through mobile, which was already answered. Then I'm going to move then to the next group of questions that are from Guilherme Macedo Sampaio from CaixaBank BPI. The first question is, how sustainable do you see the bookings growth seen in August over the coming months in a scenario of progressive normalization of the pandemic situation? Well, I think in a scenario of progressive normalization of the pandemic situation, you will continue to see a positive performance. I don't think that you will see a performance as positive as the one in August. Like Dana said during our prepared remarks, August had a component of last-minute bookings that we would normally have seen. Well, customers booking is anywhere from January to June, and they happen on the month of August because people have uncertainty and many people have waited until the last minute. But I would expect a positive scenario of the bookings in that -- in the normalization, pandemic situation that you're describing. The second question from Guilherme is could you provide more color on the effects that drove this bookings growth acceleration? I think it's relatively similar to what we've been seeing which is one, that there is lesser travel demand, very, very clear, leisure travel demand from the customers. The second is that there is a move of customers from offline to online. And the third, I would say that it's been very clearly demonstrated that our product is significantly better than the alternatives offered by our competitors. First and foremost by Prime, but not only by Prime because we also have a lot of bookings coming from transaction customers that find our product better suited to the needs than others. And that would explain the very big difference between us and other competitors that also operate in leisure travel online. Third question is how was the average basket value evolution in July and August compared to the first fiscal quarter trend? Well, what I can say about that is that the improvement in the bookings that we have seen through July and August has not happened in the average basket value. So the average basket value continues to be in a depressed value compared to what we had prior to the pandemic. And the last one is about variable cost of booking, which I have already answered in the first block of questions. Then we have a group of questions from Carlos Treviño of Banco Santander. The first one is already answered, is about change in the average basket value in July and August. The second one is about the percentage of Prime bookings of 39%, that I think Dana gave an extensive answer already. And the third one is, do you have any reference on your market share in Europe in the first half of '21 versus the 37% in 2020? Well, we don't have it with the exact metrics used for the aggregate of 2020, which come from the focus right survey. What we do have is the indications that we look at when IATA publishes its monthly numbers, and they have published up until the month of June. And up until then, our gap versus the market is maintained or increased. So I would say it's a very positive evolution. We're really looking forward for the data of July and in August. What we see not from yet, but what we see, for instance, on passenger traffic in the airports seems to indicate that we continue to increase market share during the summer. The next question comes from Chadd Garcia of Schwartz Investments. He says it's exciting to see Prime grow so rapidly. At 1.5 million subscribers, I calculate that the Prime program alone is worth EUR 10 to EUR 20 per share. Your share price is well below that. What steps can you take to close this gap? Dana, you want to take it?

Yes. Absolutely, David. So thanks, Chadd, for the question. I think it's a very pertinent one. Let me start by saying, first and foremost, we need to focus on what we can control, and part of that is about really building a great business that continually improves and grows and beats the competition and, of course, generating value to shareholders. So let me cover these 2 points. In the first one in practical terms, we're pioneering in the travel industry, and we continue to grow Prime through product innovation and through geographic expansion. I believe we have a really unique relationship-based -- subscription-based model with customers. And you've seen that in the results. It's -- I don't think anybody would have expected us to deliver 0.5 million subscribers in just 3 months. And it shows our overperformance and our continued overperformance in building great business with great growth prospects. We're also now #2 in the world in retailing flights, and we have unrivaled scale advantage. And we use that very, I would say, cleverly to our advantage, and we think about that tremendously. And you've seen our market share. Our market share has grown in Europe to 37%. So again, it continues to show just a business that is really outperforming and that has really good strong growth prospects and from year-to-year really goes from strength to strength in terms of its proposition with customers, its insights and its strength versus competition. Let me talk about the second part about generating shareholder value. One of the things you can see is that we are the first, and we are pioneering on the subscription-based model. Now this model is very well bedded down in other industries. Investors in those industries really appreciate and understand them. And you can see the returns given by Netflix, given by Spotify and many, many other companies that do a subscription-based model. You can see our success, right, in this. And so what we need to do is continue to educate our investors and investor base within the travel industry where the travel industry is not used to it, was not thinking about an investment plan in subscriptions. But clearly, we're bringing something new and different and something that is proven to be superior and now we're proving that it is superior. And so with that, we continue to spend time dialoguing with people, getting them to understand the value of subscription. With that in mind, we also have an Investor Day coming up in November, which I would encourage anyone and everyone to please come. And it will be yet again to further expose our business to investors and potential investors, and in particular, to talk more detail about Prime and what we're doing in Prime to help other people understand it. So I do agree very much with your proposition. And I do summarize to say that we are absolutely building a superior business to our competitors and for shareholders.

Thank you. The next group of questions comes from Deutsche Bank from Nizla Naizer. And the first one is, please explain the difference between cash EBITDA and adjusted EBITDA. Okay. So cash EBITDA is adjusted EBITDA plus the variation in the Prime deferred revenue. And I think I explained during the -- with you on the call how the deferred revenue -- but let me give you a practical example so that everyone understands. Let's say, a customer joins Prime today. They make a booking. And they're in a country in which the subscription fee is EUR 55. And the savings that they make on that first booking is EUR 25. We cash in the EUR 55, and that's a full value-added by Prime and then went on a cash basis. The only portion that goes to revenue is the savings that the customer obtained in that first booking. So it will be the EUR 25 of savings. And therefore, there will be EUR 30 that would go to the balance sheet as Prime deferred revenue, right? And we would not accrue revenue. Let's say, the customer does the second booking 6 months from now. And in that booking, the customer gets a EUR 20 discount. We would at the moment in time, take EUR 20 from the balance sheet of the Prime deferred revenue and book it as revenue margin, 25% first booking plus 20% of the second booking, 45%. Let's say, the customer doesn't make any more bookings. In the 1st of September of next year, when the 12 months expires, the remaining 10 -- and the remaining 10 we would book as revenue. That's how the mechanic works. So the actual value created during any period of time by Prime members is all of the cash that comes into the company, which would be the one that we recognize plus in the revenue margin, plus the delta, the increase in the total balance of Prime deferred revenue that has happened during the period. That's what feeds the cash EBITDA and what we call also the cash revenue margin, which would be the revenue margin plus the increase in the Prime deferred revenue. The second question says, what is driving the increase in Prime member numbers? Have you stepped up your customer acquisition efforts? And please remind us again how profitable is the Prime member versus a non-Prime member, the order economics. Do you want to take this one, Dana?

Yes, absolutely, David. So let me provide a little bit of context because it's a very good question about driving the increase in the Prime members. We continue to iterate and improve Prime. And we've been doing this very much just prior to the pandemic, but then during the pandemic, we said that we were going to dedicate disproportionate amount of our resources to continue to improve the proposition. And we have, and so the proposition has materially improved over the past, let's say, 24 months, 12 months and even 6 months. With that in mind, I should also say, though, the market as well has -- customers have come back to the market. So when you think about -- even if we just take IATA's numbers as the market, you would see IATA being quite recently, let's say, minus 80%, then it went to minus 50%. And so clearly, there's an improving market. Now when consumers come back to the market, obviously, our numbers can grow. And we've been taking disproportionate share, so they're going to grow even more proportionately. And so the combination of the 2 of those is really what's driving behind in essence, our growth in the Prime numbers. Put another way, let's just say the market was to even further accelerate, right? So even more customers will come back into the market and want to travel, then Prime will grow even more. If I take the converse, customers pull back, then the Prime numbers will slow down as well coming into the market. Also correct. We do have a whole set of improvements though that we contemplate and we test and we trial all the time. And so I do expect the Prime that you see today versus the Prime in 12 months will definitely be different. And we've got a significant amount of improvements on it, both from a product point of view and also from a geographic point of view as well. Now your question about are we -- have we stepped up our customer acquisition efforts? And I think that's a very, very good and valid question. And the answer is no, we haven't. And so I just really want to be clear about what I mean by my answer. When I think about customer acquisition in this context, we don't do any Prime specific customer acquisition. So let me just give you some examples. You could see a YouTube ad that talks about Prime and people click on the ad and they come to us. We don't do that. You could see banners, right, on different websites as you go around or even on mobile as you're reading a news article and you could see embedded in that an advert about Prime. We don't do that. We do not advertise Prime per se, actively. I do -- so therefore, it's not in the numbers. I do think it is an opportunity for us. We just haven't, let's say, done this yet. What we will do is during the fall, the autumn, is we'll start to experiment and I use that word experiment on some little customer acquisition around Prime, but it is an experiment to see about it. So it will not be in our numbers. It will not materially affect any of our Q -- our Q3 numbers whatsoever. But we just want to start moving our way to that one. I hope that provides enough context behind the numbers.

Okay. The next question is, since June, bookings have been above fiscal '19 levels. Does this mean full year fiscal '22 could be at fiscal '19 levels? I think I have answered this one already. And the last question from Nizla, how has the competitive environment changed as a result of the pandemic?

Yes, absolutely. I think it's fair to say, in the early part of the pandemic, a lot of companies went into, let's say, hibernation, fired staff, et cetera. We do see competitive intensity over the past, let's say, 3 months, and I would even say even 4 or 5 months really stepping up significantly. Travel is a competitive market. It's the largest e-commerce segment in the world. It's larger than any other type of segment, consumer goods, retail, anything, travel is the largest. And it is a competitive segment. And so it's been a very -- it's been competitive past 3 months. And that's why I take a lot of strength from that encouragement about how well we're doing in a competitive marketplace.

Very well. The next questions come from Gianmarco from Equita. And there are 2 questions. The first one, can you clarify if the HR cost base is benefiting from government aids and in this case, how much? Really easy answer. The answer is no. Everyone is working at pull and there are no government aids at this point in time. And there are actually no government aids of any sort since November of 2020. So it's been 9 months already. And the second question is, can you detail the June results? You mentioned that EBITDA was positive. Well, we don't usually give results on a month-by-month basis, I made that comment during the prepared remarks. And I was referring to the adjusted EBITDA and the adjusted EBITDA was the first month in which it was positive, and that was with the level of bookings that we had in the month of June. The next question comes from Ari Lazar of RGA. Says what trends are you seeing in the hotel supply? And what portion of bookings are hotel for this quarter? Do you want to take this one, Dana?

Sure. In terms of trends in hotel supply, like it's very similar to what I was just answering in terms of competitivity. It's both the flight and the hotel market at a very competitive and players are absolutely ramping up. And again, that's why I feel very good and comfortable about our overall results on that. It depends upon by geography, different geographies come and go. Obviously, the U.S. was very strong, let's say, in the latter part of last year, whereas Europe has actually taken off more in the early part of this year from a hotel supply perspective. In terms of what portion of our bookings are hotels for the quarter, we don't disclose that.

The second question from this investor says, thanks for the financial disclosure. These are very helpful. Do you expect to gain leverage on the variable costs for Prime? And what would it take for this to happen? There are several things that influence the variable costs because of Prime. The first one would be the marketing costs. The marketing costs for repeat Prime bookings are much lower than the marketing costs for transactional customer and the marketing costs of a first time Prime customer because the first time Prime customer has come to our websites normally through the same proportion of channels paid and nonpaid than the transactional customer. They made the decision to become subscription member once they are at the website. But the costs that we incur before they arrive at the website are the same one for those. Then what is likely to be different as well is the fraud cost. So there probability is a subscriber who will be a fraudster is we believe very low, right? And then the third important bucket in there is the fraud cost, which -- not, sorry, the fraud cost, the customer service costs. And the customer service cost is actually the opposite. One of the benefits of the Prime customer is that they get a privileged access to customer service, and we take that very much into account where we size the amount of resources that we need to have for customer service as the number of Prime customers increases, we also increase that portion of the agents, which are specifically dedicated to attend our Prime customers. That's part of the value proposition to consumers. And the last question of this investor is how has the spread of delta impacted bookings in August? Well, it's obvious when you see the plus 27% versus 2019 in August that it has not been impacted by delta. The next question comes from [ Karan Samtani ] of Citi. The first one is, would you comment what percentage of the bookings in August are for travel in fiscal '21? I guess the infrastructure he means fiscal '22, which is the year in which we are. And I would say that the vast majority, the time to departure of the bookings has one of the effects that we've seen during COVID and we've commented on this in the past, is that we've seen a material shortening of the time to departure of the booking. So the vast majority of the bookings in August have been for travel in August. The second question is, are these bookings cancelable? And it will depend on the conditions of the fares of the airlines. The airlines are now having more fares which are cancelable to provide an incentive to the customers to book, but not all are cancelable. But what I would like to clarify is that even when a booking is canceled, the fees that we make on the booking, which we make for the intermediation, the fee is taken. There is no, let's say, negative revenue, if you will, for the effect of the cancellation. And the third one is, do you require to give bondholders a 30-day call notice before refinancing your bonds? Actually, I have to confess that I don't know that by heart. And I would need to refer to in terms of the indenture, which in any case, it is a public one, and you can check it in our website. So sorry that I don't have the answer right now for you. The next set of questions come from Mateo Salcedo, Spread Research. And the first one is, any update on the timing of a potential bond refinancing? I would say, no update at this time. Nothing has materially changed since the last quarter, and it's pretty usual that I get this question every quarter. We will continue to monitor opportunities. The volumes are trading more or less at par. If we were to refinance right now, we would be refinancing with 2 years to maturity at par normally at a slightly higher cost on a coupon basis than we would -- we are paying right now. So we will continue to monitor the market status for opportunities. The second one, excluding Prime deferred revenues, do you expect to be EBITDA positive on an adjusted basis in the current quarter? I would say, yes. I've already said that during the month of June, individually, we have been EBITDA positive. And since then, in July and August, the performance of the business has improved versus the month of June. And let's see what September brings our way. And the third one has already been answered, which is a question about the average basket value in July and August. The next question comes from [indiscernible] of ODDO BHF. And they have a question about the average basket value of bookings. What is the share of long-haul bookings out of total bookings? And what was the share of long-haul bookings before the pandemic? Well, that exact amount is not one that we disclosed. We didn't disclose it before the pandemic, and we haven't changed that policy. But I mean, of course, that the long haul has reduced the most. If I was to characterize what has happened is that long haul has reduced or if you will, to be more precise, what we call intercont, we divide between 3 portions. It is domestic bookings. There are continental bookings, which is the biggest portion. Our main market is all of Europe, if you will. And perhaps once you fly 2 hours in Europe, you're very likely to be in a different country. So the biggest chunk is the continental bookings. And then there are the intercontinental bookings. The intercontinental bookings was the smaller of the 3 before, and it's now actually rather small because the majority of those are situations in which it's only allowed absolutely essential travel and for citizens to return to the countries. So that has been the one that has rippled the most in exchange for more domestic and more continental than we were seeing before the pandemic. That is the last of the questions that we have for today. Thank you very much for all of your interest, a very good and long list of questions. And before we conclude the call, I would like to inform you that on Wednesday, 17th of November, we will be hosting a conference call for the first half results for fiscal '22, and we will also be hosting an Investor Day. So please save the date, we would love to have as many of you as possible. Like Dana has said during the Q&A session, this will be an opportunity for you to understand in more detail our business, our strategy going forward, meet more of the team, you will be able to meet several of us in person and see our operations and what sets us apart from the competitors. In the meantime, we will be very happy to receive your questions via our IR team or the investor e-mail address, which is [email protected]. Thank you very much.

Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for joining.