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

Good morning, everyone, and thank you all for joining us today for our fiscal year 2022 results presentation for the 12 months ending 31st of March 2022. I am David de la Roz, Director of Investor Relations of eDreams ODIGEO. As always, you can find the results 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, David. And good morning, everyone, and thank you for joining us today. What a difference a year makes. Back in May of 2021, a year ago, the market was at minus 75%. Back then, there was hope that vaccines would truly work. And still, a small percentage of the total population had actually received 2 shots, and there were still huge amounts of travel restrictions. Europeans could not travel to the U.S. Within Europe, restrictions were quite severe to travel, and there were questions as to the extent to which individuals would even want to travel. Many of these fundamental questions have been answered. Throughout our past fiscal year FY '22, we have seen the travel market improve and recover significantly. We've seen travel restrictions eased to almost eliminated in most of our main countries, and we have seen a vindication of science and vaccines. Within this, we have seen eDO outperform the market and its competitors by a significant margin. And we positioned ourselves for the future success with our innovative approach, including Prime, the first and leading subscription program in travel, which now has over 2.9 million members, and that's triple just of what we had a year ago. This is tangible proof of the success of our subscription program as we continue to convert a meaningful portion of just our 17 million customers that traveled with us during the last financial year as well as attracting new customers. Today, I'll take you through the key points of our strong set of results, which will include a discussion about the leisure travel recovery, the strength of our industry, our outperformance versus the market and our platform for success and why there are barriers to entry. I'll then hand over to David Elizaga, our CFO, who will take you through our performance in detail as outlined in our financial statements. And then I'll come back to conclude today's presentation with some closing remarks. With that, I ask you to turn to Slide 4, which is a summary of our performance of our fiscal year 2022. FY 2022 was a record year in bookings. We continue to gain market share and we are on our way to exceed our FY 2025 guidance. Some of the key highlights for today's presentation are: First, our strong bookings growth. In FY 2022, bookings were up 286%, which is 10% above pre-COVID-19 levels. Remember, this is in the context of this past financial year being materially affected by both the Delta variant and then the Omicron variant and the travel market has yet to fully recover. Despite the conflict in Ukraine and rising inflation, we still have seen a real resurgence in travel with our bookings in March, 34% above our 2019 pre-COVID levels. April was 52% above. And in May, that's from the 1st to 17th of May, 58% above our 2019 pre-COVID levels. There is no doubt that consumers want to travel. Second, I'll cover in more detail in the presentation that both our Prime and eDO continue to outperform. eDO bookings performance is materially better than the market, around 60 percentage points versus airlines, both regular and low cost. In FY '22, we have more than tripled the Prime membership with an additional 1.8 million new members on top of the same period of last year, and that means we reached 2.7 million members in FY 2022. In May, we have 2.9 million members. Third, in FY 2022, we achieved an excellent set of results. Despite COVID-19 impact, FY 2022 showed good signs of eDO recovery and resulted in strong results. Revenue margin in FY '22 increased 244% mostly driven by the success of ancillary revenues, which has resulted in fiscal year 2022 diversification revenues finishing above pre-COVID-19 levels. Cash revenue margin, however, due to COVID restrictions remain 26% below pre-COVID-19 levels. This included the full contribution from Prime in FY '22, where the average basket size was constrained by travel restrictions. Cash marginal profit stood at EUR 107 million for FY '22, and this is 3x the amount in '21. And cash EBITDA was EUR 44 million positive in FY '22. That's an improvement of EUR 71.6 million in a single year. Fourth, we begin the new financial year exceptionally well positioned, well financed and on our way to our self-imposed FY '25 targets. Why do I say this? Because we have a 3-year guidance which, 6 months on, we absolutely stand behind Greater means greater than 7.25 million Prime members; by the end of FY '25, an ARPU of approximately EUR 80; and cash EBITDA in excess of EUR 180 million. Also because travel is recovering and normalizing, we have an enormous growth opportunity in front of us, underpinned by a solid and scalable platform and a strong balance sheet with refinanced debt. And lastly, we really believe we have the right model, the right people and the right structure to seize and deliver on the opportunities ahead of us. Now I'll move on to covering an update about industry and travel. So please turn to Slide 6, where we outlined that people want to travel more than ever. After the emergence of COVID-19 in early 2020, there was a substantial reduction in travel across the globe. Vaccination programs began in early 2021, and the booster vaccination rolled out in the second half of the year. With the increased protection and significantly less danger to populations, travel began to recover in FY '22. Today, in our core markets in Europe, on average, 80% of the population over 18 years old is vaccinated and total immunization estimated about 70%. Survey after survey showed throughout the pandemic that the demand for travel was undipped, and that there was a pent-up demand to travel again. The only question was when. eDO is a leisure-focused business and fully recognizes that leisure traveler simply can't replace their leisure experience through technology. Walking along the sandy beach cannot be replaced by Zoom. Standing a top of a mountain with a breathtaking view cannot be replaced by Teams. Visiting historical sites for new cities can't be replaced by Hangouts. As breakthroughs in science have progressed, leisure travelers have been returning. The prognosis for leisure travel is encouraging. Surveys of the European Tourism Commission, which monitored European sentiment for travel during the pandemic, concluded the outbreak of the Omicron variant had a limited effect on travel sentiment with 77% of Europeans planning to travel by September 2022. This is based upon the survey of 6,000 Europeans conducted in March '22. Leisure travel plays a special role in people's lives, in their lifetime memories, in their well-being and people are saying they want to continue to travel. Please turn to Slide 7. During the pandemic, the European consumers have saved almost EUR 1 trillion more than they ordinarily would save. This is based on a recent survey -- sorry, a recent study by Eurostat and the IMF. The study also showed that households and nations in Eurozone saved nearly 50% more as a result of the pandemic. This increased savings allows individuals to weather other external shocks better than in the past while trying to return to more normalcy after 2 years of COVID. If you can turn to Slide 8, I will conclude this section on the travel market recovery by showing you how consumer behavior has and is continuing to change as restrictions are eased. Consumers are prioritizing travel over other types of discretionary expense with other types of products and experiences reduced, such as concerts, clothing, dining at restaurants, et cetera, in order to save money for travel. Thousands of respondents in a Toluna survey commissioned by Travelport from 7 countries said they would even be willing to give up some of their favorite things for 6 months or longer in order to travel. This reinforces the point before in which travel plays a very fundamental behavior unlike many other expenditure categories. Please turn to Slide 9. Let me take you through the strength of our industry and how events similar to today have impacted travel in previous cycles. Travel patterns were not specifically affected during more recent conflicts and wars in Western Europe. Historical examples of geopolitical conflict, including the wars in former Yugoslavia, show that Western Europeans continue to travel but adapt their destination to safer locations. As you can see on the chart with the exception of adjacent countries of Croatia and Slovenia, the impact was minor with surrounding markets growing during that period. The recent Ukraine conflict has created some uncertainty. However, if we look at eDO performance, Western Europeans booked more versus pre-COVID-19 levels in April than in March, plus 66% versus plus 53%; and more in March than in February, plus 53% plus 40% respectively, which also demonstrates clearly the same point. Please turn to Slide 10. Demand recovery still remains the largest catalyst for increases in air fares as opposed to inflation. First, it is proven that when oil prices increase, not all prices are passed on to passengers through increases in airfares. Since January, airfares are up 22%, while oil price has increased by 41%. But airfares are still on average 14% below April 2019 levels while oil price is 58% above. And in addition, capacity expansion by major European airlines for 2022 is expected but is set to be below 2019 levels. IATA Europe forecast for 2022 is expected to be 14% below pre-COVID. So predictions are that airfare increases are more likely not to compensate in full for the increase in fuel prices. Please turn to Slide 11. And last but not least, over the past 40 years and even during recessions, energy crisis, high inflationary environments, et cetera, passenger traffic has mostly grown. While there always is some uncertainty in a future situation with a unique set of factors, based on prior market performance, there were, in fact, only 3 years during the period of 1980 to 2019 in which passenger numbers declined, and the largest decline was in fact, 2.6% in 1991. Please turn to Slide 14, where I will take you through eDO performance. As you can see, the recovery is well underway. In fact, we are significantly above pre-COVID-19 levels in bookings. While there were a couple of months during in which Omicron effected our bookings, our bookings during Omicron never got that much below versus pre-COVID-19 levels. On a full financial year basis, eDO total bookings have been above pre-COVID-19 levels in 8 out of the 12 months during FY '22. We achieved this with record bookings in 1 day, record bookings for 1 month, record bookings for 1 quarter and record bookings for 1 year. Our bookings in March were 34% (sic) [ 33% ] above pre-COVID-19 levels. For April, bookings were 52% above pre-COVID-19 levels. And in May, they've been 58% above. And remember, during this time period, there has been Omicron, Ukraine war and a travel market that has yet to fully recover to pre-COVID-19 levels. Please turn to Slide 15. As evidenced by IATA public data and recent results from low-cost carriers, eDreams ODIGEO has consistently outperformed against the peer industry highlighting the strength and adaptability of our business model as well as our superior proposition to customers. The company outperformed versus regular airlines, IATA, by 62 percentage points and versus LCCs by 57 percentage points in FY '22. This is despite a market that is yet to return to pre-COVID-19 levels. Please turn to Slide 16 in which we discuss Prime results. Prime continues to grow very quickly, adding 1.8 million members during FY '22, which was a weak travel market year. That is 3x more than in the same period the previous year for us. In the middle of May, we reached 2.9 million members, which is a remarkable achievement since both Delta and Omicron variants disrupted the travel market for large parts of FY '22. Please turn to Slide 17 in which we will talk about our diversification KPI. Overall diversification revenue continues to grow, is already above pre-COVID-19 levels and the largest contributor to revenues. Revenue diversification ratio has continued to improve. Revenue diversification ratio increased from 53% in FY '20 to 73% in FY '22. That's a 20 percentage point improvement over a 2-year time frame. Please turn to Slide 18. We continue to lead the travel industry in mobile innovation and have extended our market leadership further. In the last 2 fiscal years, bookings through mobile, which is a top priority for us and a major focus, has risen substantially from 33% of our total flight bookings to 53%. The shift to online and specifically mobile has been accelerated by the pandemic and leaves us in an optimal position to take advantage of future demand. As people return to the office, it is expected that the growth in mobile will lessen. If you could please turn now to Slide 19. Our outperformance can also be seen through market share gains. We used to look in the past at market share within the OTA segment, when we switched to total air travel market for 2 reasons. First, because it is more reliable data, it includes all flights operating within every country. And second, because it's more relevant as it looks at the whole market, and therefore, captures as well share gains versus off-line travel agents and airlines. Since FY '20, eDO has almost doubled its European air travel market share reaching 5.4% of the overall European air market in FY '22 versus 3% in FY '20. As mentioned before, I think this is due to our superior customer proposition, superior strategy and business model and underlying execution. If you could please turn now to Slide 20, I would like to emphasize that we believe, regardless of economic uncertainties, our business model and track record position us to perform better than the industry. Let me share with you some of the reasons why we think we are better positioned. One, thanks to Prime, we offer the best prices and customer experience. Two, because we meet customer needs even more than competitors from depth of choice, the speed of overall experience, after sales, et cetera. Three, because customers will focus on price even more in the context of discretionary income shrinking and we offer best prices. Fourth, in addition to all of that, we have resilience via Prime with almost 3 million plus customers who give us a much higher share of wallet of the travel they continue to consume. Please turn to Slide 22, where I'll take you through why we have a platform for success. The subscription model is well proven and has been around for decades across many industries but not in travel, where we are the pioneers and the global leader. We are emulating other companies like Spotify, Amazon and another number of other subscription-based companies that have highly penetrated large portions of the population. And in fact, they've achieved up to 50% market penetration. Five years ago, we began pioneering a subscription program for travelers. While subscription programs we're taking off in other domains, such as movies, music, et cetera, eDO was unique in applying the model to travel. Five years on, we have launched thousands of product features and functionality tests and changes, tens of thousands of one-to-one interviews with existing and potential customers and reworked every process and system in eDO in order to offer customers a truly great subscription experience. Also, we have created a unique and scalable proprietary platform for future growth, which makes it very difficult to replicate, and we will continue to add this. Over the past 5 years, we have invested much time and resources in developing our unique subscription offering into the successful product it is today. During the pandemic, we continue to invest and develop Prime and have seen remarkable achievements as a result. Customer take-up is very strong, and it has enormous future potential. We are transitioning our business from a transaction-based business to a much higher quality and more appealing relationship subscription-based business with strong growth prospects. Please turn to Slide 23. Making the change from transaction to subscription-centric business requires a holistic company transformation and is difficult to achieve. While others may, can offer a subscription, it is not simply sufficient to offer something. To do well, it requires a fundamental company-wide transformation as well as clear insights, years of learnings in product development and superior execution. The move from transaction-based business to subscription requires to change every single system, process and procedure within the company. and every area in the company needs to be adapted, including revenue management, payments, finance, customer service, marketing, et cetera, et cetera, et cetera. This makes it difficult to replicate for success as opposed to simply replicating for having a consumer offering. Please turn to Slide 24. While other industry subscription programs may have been around much longer than Prime has been in travel, we still are in the early days. The success of the subscription market in other industries is demonstrated by high penetration and their strong top line growth during long periods of time. In fact, over 50% penetration is seen in video-on-demand companies, with compound annual sales growth rate of 37% increases over 10-year period. And they are still forecast to continue to grow at a CAGR of 16% over the next 3 years. For us, the subscription market has a very large addressable market, and we have used very realistic assumptions. eDO at the end of FY '22 has only 1% penetration and 2.7 million subscribers. To put this in context, we are targeting to achieve only 4% penetration by FY '25, which implies a CAGR of 25% in cash revenues over the next 3 years. We believe this is a very realistic assumption because in the market in which we have been operating the longest, we are already at 3% penetration. In this market we are still, today, achieving all-time growth rates. So we are, in fact, accelerating versus the early years as opposed to plateauing. With over 225 million households alone in Europe, we have enormous growth potential, and we have barely scratched the surface. Now I'll pass you to David, who will discuss in more detail our financial results.

Thank you, Dana. If you could all please turn to Slide 26 of the presentation, I will take you through the financial results in more detail. Despite COVID-19 and significant disruption from both the Delta and Omicron variants, which affected good portions of fiscal '22, fundamentals showed signs of an eDO recovery during the fiscal year. Revenue margin in fiscal '22 increased 244% versus the same period of last year. This was due to bookings being up 286% and the reduction in revenue margin per booking of 11%. This reduction per booking turn is driven by some of our revenue sources, which actually derived from the prior period as per accounting rules. And when bookings almost triple, that newer amount is divided by a much larger booking figure and results in a reduction for bookings. The impact of COVID-19 restrictions resulted in cash revenue margin being 26% below pre-COVID-19 levels including the full fiscal '22 contribution from Prime. This was because the average basket size was constrained as a disproportionate number of consumers are booking short-haul due to the continuing uncertainty and restrictions with less passengers per booking and thus lower booking band. Variable costs increased by 268% due to the increase in bookings offset by a decrease of variable cost per booking of 5%, mainly driven by call center cost reaping the reorders of the automation we implemented during the pandemic. Overall, fiscal '22 has seen consistently improving trends and a return to profitability. Cash margin or profit stood at EUR 107.4 million. That's 3x the amount we achieved in fiscal '21. And cash EBITDA was an encouraging EUR 44.2 million, an improvement of EUR 71.6 million in just 1 year as we had a loss of EUR 27 million in the previous period and 1/4 of the way towards our target of EUR 180 million. Adjusted EBITDA was slightly positive at EUR 3 million despite the Delta and Omicron variants disrupting the travel market during a great portion of fiscal '22 Adjusted net income was EUR 52.3 million loss in fiscal '22. If you could all please turn to Slide 27 of the presentation. The KPIs here show a strong growth in Prime cash revenue margin and marginal profit in the last 12 months due to strong growth in Prime members and average revenue per year. Our ARPU grew by 55% versus fiscal '21 and stood at EUR 88 per month already above our 2025 target. However, we do not expect these levels to be sustainable, and we maintain our long-term guidance of EUR 80 per user. Current levels are very influenced by the large increase in Prime members during last year. And the corresponding large gap between Prime members at the end of the period, which are what's driving the subscription fee portion of the apple and average [ Prime members ] used for the denominator in the calculation. Strong growth in cash revenue margin and cash marginal profit has led to 40% and 50% of our last 12 months cash revenue margin and cash marginal profit, respectively, now coming from Prime members versus 33% and 57%, respectively, just 1 year ago. I would like to point out why Prime share has reduced as the marginal profit level. It is because the increase in first year members has been very large during the fiscal year, and profitability of Prime members increased substantially from the second year onwards as the acquisition cost reduces very significantly. Once we start to have a larger proportion of our Prime members being in the second and subsequent years of membership, the profitability of the Prime side of the business will improve. Please turn to Slide 28 of the presentation. During the pandemic, we have continued to invest and innovate on our subscription offering and have seen remarkable results. Over the past year, our subscribers grew by 203% to 2.7 million at the end of the fourth quarter. In addition, 40% and 50% of our cash revenue margin and cash marginal profit, respectively, are now from Prime members. The success of Prime is clear on our total bookings in the fiscal year already, 10 percentage points greater than pre-COVID. Cash revenue margin is still down 26% as travel options for customers have been constrained due to travel restrictions in place due to Delta and Omicron variants. Cash marginal profit and cash EBITDA have more room to recover due to the large increase of Prime members in the year and profitability to Prime members, I'll remind again, jumps from the second year onwards. In fiscal '22, the growth in the increase in deferred revenue driven by Prime has accelerated, driven by strong growth in Prime members. We have added 1.8 million more new members than in the same period of last year. And it has amounted that deferred revenue to EUR 41.2 million, and that is up 284% year-over-year. In fiscal '21, the increase in deferred revenue amounted to EUR 10.7 million. As guided in the result presentation of the last quarter, with the Omicron effect lasting until the end of January, the increase in deferred revenue in the fourth quarter was lower than in the quarter ended December due to the 1-month lag in recognition of the subscription fee. The fourth quarter included 2 full months of Omicron effect, while the quarter ended December only had a month of Omicron effect. In the quarter ended March, the increase, as expected, was lower, amounting to EUR 7.9 million versus EUR 13.5 million in the second quarter and EUR 14.7 million in the third quarter, respectively. As a result of the positive contribution from Prime, we are very pleased to say that cash EBITDA with the full Prime contribution was EUR 44.2 million in fiscal Q2. That's an improvement of EUR 71.6 million in just 1 year. Turning now to Slide 29. I will take you through the cash flow statement. In fiscal '22, despite the significant disruption, net cash from operating activities ended the year with an inflow of EUR 118.7 million, following a working capital inflow of EUR 115 million. The improvement versus the same period of last fiscal year was driven by increasing demand for leisure travel as well as our very significant market share gains from March '22 compared to March '21, better EBITDA and noncash items, which are items accrued but not yet paid, and an increase in Prime deferred growth. We have managed our liquidity position well, a consequence of our strong business model, [ excellent ] management and EU bookings performance. We have used $27 million of cash in fiscal '22 for investments. That is $5 million higher than fiscal '21 due to the increase in our development capacity and therefore higher capitalization of software development. Cash used in financing amounted to EUR 51 million compared to EUR 69.5 million from financing activities in the same period of the previous year. The variation by EUR 18.6 million in financing activities mainly relates to the capital increase of EUR 75 million and the lower reimbursement of the revolver by 29.5%, partly offset by the reduction of EUR 50 million on the senior notes; the payment of the cost, as I said, with these transactions for 19.5% and the drawdown in full of the EUR 15 million government-sponsored loan in fiscal '21 and the repayment of EUR 3.8 million in fiscal '22. I will now turn the presentation back to Dana to do the closing remarks.

Thank you, David. If you can now please turn to Slide 31. Let me conclude by giving you some final remarks. We strongly believe that we are positioned for future success with our innovative approach. The reasons for this are: one, we are in pole position in an attractive market. eDO market is sizable, growing and attractive in eDO's position in the right segments online and leisure. Please turn to Slide 32 of the presentation. The second reason is within travel, eDO is a global flight leader, excluding China, and over 3x the size of the second player in Europe. Please turn to Slide 33 of the presentation. The third reason is eDO has demonstrated the ability to capture new customers through the Prime program while converting existing customers. Prime is the #1 travel subscription program in the world, and over 60% of our prime customers are new customers and have not used an eDreams ODIGEO product during the last 3 years. This endorses that the Prime proposition is attractive not only for existing customers, such as our 24 million-plus customer base which booked with us over the past several years, but also for new members, too, all of which helps explain why we are capturing and building market share. However you look at it, Prime is successful, delights customers, grows our market share and is mutually beneficial for our consumers, the company and shareholders. Please turn to Slide 34 of the presentation. In summary, we are well positioned, well financed and on our way to meeting self-imposed FY '25 targets, which are: Prime members over 7.25 million, prime ARPU of around EUR 80 and cash EBITDA in excess of EUR 180 million. We believe eDO has huge potential, which will drive superior returns for shareholders, excellent service for customers while at the same time transforming and really revolutionizing the industry. With that, we would now like to take your questions.

We will answer the questions sent to us in writing in the webcast. We will take questions on a first come, first serve basis, but we will also try to group questions of similar nature. Should we not have time to respond to the questions from the webcast, the Investor Relations team will make sure those are answered afterwards.

Okay. Thank you, Dana. I have already here a very interesting set of questions, so let's get to them without further delay. The first set of questions comes from Chadd Garcia from Schwartz Investments. I'm going to read them one by one because I think if I read them all together, you will probably not remember. So let's start with the first one. Do you have any investment expenses running through your income statement? If so, can you quantify them?

So the most important investment that we do in our business, actually, the investment in the new -- acquiring the new Prime members. Like we have gone over in the Investor Day extensively, the margin of a Prime member in the first year is very more when compared to the second and third year and actually, let's say, dilutes the overall margin of the company. We talked at the Investor Day of a sensitivity can apply to fiscal '25 in which we said that if, during fiscal '25 we had a stable number of Prime members during the year instead of continuing to grow during the year in Prime members, that the cash EBITDA margin would increase by 8 percentage points, which talks about the level of investment and the risk in the P&L in terms of future growth. We can do a relatively similar exercise for fiscal '22. In fiscal '22, we have grown from 800,000 members to 2.7 million members. If we had grown to just double going from 800,000 members to 1.6 million members, our margins would have also increased by 8 points. We had a cash EBITDA margin of 10.4%. When you divide EUR 44 million of cash EBITDA by the EUR 424 million of capital revenue margin, that 10% would have been 18% if we had only doubled the number of Prime numbers to 1.6 million instead of reaching 2.7 million. So I think that answers the question.

The second question is booking. [indiscernible] discussed this week offering flights in 40 countries and selling dynamic packages. Have you tested your app versus their app? Do you have any concerns?

Let me put this in 2 parts. The first one is around bookings app and just bookings right off. And bookings, we've actually been in the flight market for -- in the DP market as well. DP is dynamic packages for at least 4 years, maybe coming up to 5 years, but it's that type of time frame. So they've been there for a long period of time, and you see that flowing in a sense through our results as well. Of course, we tested the app. I mean we tested the app not just this last week or the last month or et cetera, et cetera. But we constantly test not just them, but all of our main competitors -- and let me actually just stress, some of the best and most innovative stuff from an e-commerce online experience is not necessarily done in the travel industry. So we do and our teams are actively always looking out at the best outside of travel as well. And those can be across the globe, and there's a lot of really great innovation that happens on it from that point. The next one, if I just move on, I think Chadd had another question about the push into hotels, and why don't I take that one as well? We answered this at the Capital Markets Day in November, which we said over the next couple of years, we are absolutely going to be improving our hotel offering and experience in that and that we're actively improving on that from that point of view.

I think there's another question by Chadd about headcount as well. What is the progress on increasing your headcount?

We're actually on track. And again, to provide context for everybody on the call, we said that we would over the next 2 years grow by 50% our headcount because we had a very large amount of organic growth opportunities and we detailed out where those organic growth opportunities were. And so that would be, therefore, the headcount increase was very important for it. So coming back to Chadd's question about being on track, absolutely. We've broken it down by month-by-month targets in terms of the amount of increases that we want to get to in terms of not just quantity but quality of people is exceptional important for us, and we're absolutely on track for that one.

I think I'm going to think the next one. The next one is given the strong performance, is it safe to say that your financial targets are now conservative? Let's remind first what the financial targets are, which are targeted for fiscal '25. The most important number in there, given that where we truly are as a subscription company, is the target of 7.25 million members. And since we issued the guidance, which was 6 months ago at our Investor Day, we have grown at approximately 400,000 Prime members per quarter. So it's a good strong performance in making progress towards 2025. The EUR 180 million of cash EBITDA for that year is strongly linked to that number of Prime members and the ARPU that we've already said that's going to stay relatively constant. I think there's a lot of uncertainty ahead. We don't know exactly what the market is going to do, both from health conditions and from macroeconomic conditions. I would say that since we issued the guidance 2 important things that happened, which is one, the Omicron wave and the other one is the war in Ukraine. And we publicly said today that we stand behind our guidance, and I think that's already a very strong statement. There will be time enough to see if we increase the guidance, but at the moment, we stand by that number. And then the last question from the same investor is, what is the timing of increasing your presence outside of Europe? And what are your thoughts on the competitiveness of your offerings outside of Europe?

Absolutely. So we've -- we are in 44 countries right now, and so we're very competitive, and you see that in our growth rates as well. If I move this then to Prime specifically, Prime is in a couple of non-European countries, and it's been doing very well. And matter of fact, in the Capital Markets Day back in November, we actually shared with you the results of one of those markets, which would be the U.S., the largest travel market in the world, and so I'd refer you to that. There's a slide on the performance, but it's very, very meaningful, and it's very good. And it's a lot of -- provides a lot of growth opportunities for us. At the Capital Markets Day, we said we would actually move and invest in improving our proposition materially in the U.S. because it was a minimum viable product, and so we would step up and move it to a much more robust, much more European-like offering for it because that gives us great growth opportunities in the global travel market there. And we also said that over the next couple of years, we would go to, let's say, a handful of additional new markets as well for us, meaning new in the sense that we're already in that market in a transaction-based approach, and we would start offering our Prime product. And that is still the plan to do that over the next couple of years.

The next set of questions come from Nizla Naizer from Deutsche Bank. The first one says there was a view that customers are traveling for summer, but with inflation likely to persist, the fear is that beyond summer 2022, the urge to travel will be constrained as people save up. What is your view on this? How has travel performed in the past doing a recessionary environment? Can you still like take market share and grow bookings? So what I would say is the following, and I think this message was in 2 or 3 places in our presentation. So let me just review that. We don't know exactly what's going to happen in the fall and in the winter. It depends on many things. What we do know is that our performance has been ahead of the industry for very strong reasons that actually sustain. Our product continues to be better that the products of many others. Flying is a very attractive proposition to consumers. And in a context in which inflation is high and discretionary income shrinks, it becomes even more important to offer good prices to consumers. And we have seen that, for instance, in the worst of the pandemic, the attractiveness of Prime was not diminishing and the rates at which we were adding prime members were also very strong. So we have a lot of confidence that we're going to continue to perform strongly vis-a-vis the market. With inflation increasing, we also showed data. We've looked at the data of the last 50 years in terms of number of passengers, and there's only been 3 occasions in which the number of passengers decreased and the year that it decreased the most, it was 2.6%. And I think if you compare that to the situation that we have lived with COVID, it looks like help and the ability to travel [ by ] government has a lot more impact on the amount of people traveling than any macroeconomic swing that you could see. And I would also remind you of the fact that one, Europeans in general are sitting on EUR 1 trillion of savings and that there is evidence coming from surveys saying that people is willing to forgo other consumer discretionary expenses before they forgo travel. And we've seen some, for instance, of the results of the retail operators, which are already softening. And as you can see in our results and also the results of many of our competitors, the results of travel on verticals are not softening yet. So inflation is already hitting in other sectors, it is not hitting travel.

The second question from Nizla from Deutsche Bank is how should we think of bookings growth, revenue and adjusted EBITDA in the next financial year?

Well, that's pretty much giving guidance for the next financial year, which we are not doing. So I cannot talk about absolute numbers. I can talk about, let's say, directional performance of 1 of those 3 lines and on the sales, right? So bookings grow, we don't know what it's going to be, like it's going to depend on all of the things that I said before. Cash revenue margin should grow more than bookings as long as the patterns of travel continue to return to the patterns of travel that existed pre-COVID. And the growth of the cash EBITDA, certainly towards the end of the year, and we would expect it to be higher than the growth in the cash revenue margin because the weight of the first year Prime members over the total amount of Prime members is going to diminish versus what we had in the last 12 months, in which that proportion has been very, very skewed with 1.9 million members coming in the last year versus a total of 2.7 million. When that proportion start to be less biased towards first year Prime members, then the margins will perform in an accelerated fashion.

The next question is, how many bookings does the Prime member make on average? And do you see all the Prime members booking more on average?

What I can say about that is that what happens with Prime members and we've gone over this in the past as well as opposed to what happens with the non-Prime members is that they basically give us their share of wallet. They give us all of the bookings. And on average, we made this data public at the Investor Day, they tend to do 2.7 more bookings with us than the non-Prime member. That's the ratio that one should focus on. As to the older cohorts versus the new cohorts, that's not data that we make public until now, and we're not going to make it public. But there are no material differences. The next question is how our Prime churn rate is moving. And which markets are you seeing the most traction in? In terms of the churn, the Prime churn is stable. We haven't seen any material difference versus what we've disclosed to the market so far. In terms of the performance by market, the performance by market is quite uniform and the actual number of Prime members that we have per market or would you say the penetration that we have on a given market depends pretty much on how long have we been offering from -- in that market. If we've been around for longer, there's a bigger penetration. If we have been around for less, then the there is a smaller penetration.

The next question is, why is long-haul time taking longer to recover? Have airlines returned to full capacity in terms of their own offering to consumers?

Well, on COVID it's taking longer to come back just because there continues to be restrictions and uncertainty. If you're a European and want to go to U.S., and we know this very well because with the [indiscernible] in the U.S. in the next week and where there as recently as 3 months ago, you still need to do a PCR test 4 hours in a tent. Asia is pretty much [ approached policy ]. Latin America is nowhere close to the levels of, let's say, acceptance of tourists and stabilization of the disease that we see in Europe. So until the conditions, let's say, normalize and people have more certainty, the airlines are not going to put more capacity in those long-haul rounds and the consumers are also not going to go, one thing follows the other. And capacity, they have not returned. For the second part of your question, have they returned to full capacity in terms of long offering to consumers? Not yet. We actually have shown data in the presentation, you will see that in there that the capacity return has been much more swift in the case of the low-cost carriers, and some of them actually have bigger capacity than they had before pre-COVID. The regular carriers are still behind, and they haven't put all of the capacity back, although they have announced that they're going to continue to make progress in terms of additional capacity. And last question that we have from Nizla, the strong bookings growth you're seeing at the moment, how much of that is driven by Prime as the bookings? The growth has been very consistent across both Prime members and non-Prime members. And if you see the percentage of revenue that we have from Prime members is around 40%, which is not usually so similar to the 1 that we had before. With that, we move to the next participant in the call which is [ Francisco ] from Exane BNP. The first question says, do you think Prime membership will accelerate in the coming quarters? Or on the contrary, you are enjoying a novelty effect that will ease in the coming quarters?

I think there's 2 parts to this. One part is the product standing still part, right? Meaning, there's no change in the product, and there is -- it's driven very much in terms of the travel market. So for example, when we saw Omicron hit, and therefore, the travel market kind of people coming in to travel lessened right, in, let's say, end of November, December, early January versus October. Then simply, there's less people out there looking and there's less, let's say, in a sense, new Prime members that we get from that. Obviously, when it opens up more and people feel more comfortable, then there's more people out there traveling and we get more Prime members. And you've kind of seen that in our growth rates in terms of Prime on a quarter-by-quarter basis, but particularly on a month-by-month basis as well. So when you look at kind of, let's say, our Q4 versus if you do the delta of what we told you in the end of February we had, and we're telling you now at the end of May we have, we're back up at about EUR 500,000, right? Whereas in Q4, we had less than EUR 500,000, that was highly -- it was affected by Omicron in that. And so that's how you should be thinking about going forward on a steady-state basis. But we don't stay still, right? We will continue to improve our product and continue to improve the geographic expansion of it, et cetera, and so we do expect that we will continue to grow in the product.

The second question from this investor is, can you help us to reconcile the 88 ARPU figure with the revenue margin on Prime members? That's a very easy calculation. If you go to the money which we show the breakdown of the revenue margin -- of the cash revenue margin of EUR 424 million, 40% of that corresponds to Prime members, so EUR 171 million. You take the EUR 171 million, and you divide it by the average number of Prime members during the year, which was 1.9 million, and you get to 88. The next set of questions come from Carlos Trevino from Santander. The first one is, could you elaborate on the reasons behind the 5.3% year-on-year growth in the variable cost per booking? Well, the most important driver of that, as touched on in the presentation a couple of times is the further investment in the Prime acquisition right? When you have 1.9 million members being of last year, those ones require more investments in marketing. And that will erode when they become second year members, third year members, et cetera, et cetera. The second one from the same participant is how has the average basket value evolved recently? Have you seen any improvement? And the average basket value increases as a factor of 2 different things. One thing is the airfares for, let's say, equivalent type of travel. So how much does the domestic airfare on average cost? How much is the continental versus the intercontinental airfare? The other factor to increase the average basket sizes is the actual type of travel that people do, how many passengers in a reservation, are they traveling long haul or short haul, how many days are they staying at the destination, so on and so forth. So the average basket value is increasing lately, but it is increasing mostly because the airfares are increasing. The airfares are still about 14% below where they were pre-COVID. But if you look at the evolution over the last 3, 4 months, they've been increasing on a sustained basis. So average basket value is increasing. That helps for the cash picture, right, because we manage more cash. It does not help yet for the profitability per booking in the sense that each individual booking on average is getting a little bit more complex, but not as much as it would if the increase in the basket size was coming solely from the bookings. And the last question from this participant is, how do you see your revenue per booking evolving this fiscal year? Well, we expect that the -- I think I responded partially to this in the question from Deutsche Bank. To the extent that the booking patterns recover, we would expect that the revenue per booking increases. And at the same time, we do expect to increase as usual, the account of additional products and services that we offer to our customers. The next set of questions come from [indiscernible] from [ Para ] Wealth Advisors. The first one is quite a question. You spent EUR 354 million in variable costs or EUR 565 million in revenue margin pre-COVID. In fiscal year '22, you spent EUR 316 million for a revenue margin of EUR 383 million, which is a drive in operating leverage. Why? Well, it's the mix of 2 things. One, I just touched upon, why is there a higher variable cost of bookings. And the other one, I think we've touched upon as well. There's also a lower cash revenue margin for booking versus pre-pandemic for the reasons of booking patterns being, let's say, simpler on average bookings than they were before the pandemic. The second question from this investor is it seems like marketing cost per booking rose about 12% quarter-on-quarter. It is hard to compare as average booking value also increased around 8% which implies [indiscernible] from more lucrative products. However, as Prime grows, when can we see the marketing cost per booking number decreasing or as you attract customers from cheap channels or track repeat customers? But this is exactly the point that we're just touching upon. The first year of a Prime customer, we've actually spent the marketing cost to acquire that customer. And at the same time, we have provided to the customer very important discounts on the booking. The second year, they tend to come direct to us and therefore the marketing cost per booking -- sorry, per customer decreases substantially. And therefore, our margin, which you're referring to the operating leverage increases a lot. So the biggest driver for that is how many Prime members of the first year that we had as a proportion of the total Prime members. That is what you should look at to understand that question. The next question comes from the Benoit Charles of [ Hope Hills ]. Can you please share why Moody's withdrew its rating? Well, it's relatively simple. We increased our number of rating agencies covering us before the refinancing. We went from 2 agencies to 3 agencies and added Fitch. And we're not willing to pay to 3 of them, and we thought that the one agency that was having the least understanding of the evolution of the travel market and our position within that was Moody, so we discontinued paying them and they discontinued rating us. That's easier done. The next set of questions come from [ Biren Jordan ] of [ Care Capital ]. Revenue margin and revenue margin per booking has been quite a bit lower than pre-COVID levels. Is that due to lower prices, transaction values or price competition in the sector? It's mostly due to transaction value. And based on what I've been saying during today, I think it's more precise to talk about lower complexity of the average booking and is there price competition in the sector? Yes, there is price competition in the sector and competition is increasing as the general situation in the travel market improves. There are also more players, which are, let's say, rebuilding their competitive efforts. But it is much more important, the mix of the bookings and the competition effect. And the second question is, is that likely to recover or stay at this level due to Prime discounts? We do expect an improvement in the revenue per booking in the next few quarters coming from the improvement in the booking mix and the type of bookings that people make. At the same time, like I said on our previous question, we are going to continue to offer additional products and services to our customers. And we will as well continue to offer very interesting discounts to our Prime members. And remember that if you look at this over really the longer term, the one metric that you need to look at is the ARPU of the Prime members. And we've said that the 88 are going to trend down to the 80 because we expect to give substantially more discounts to customers, and we are going to basically reinvest the new revenue per booking that we get in traditional products or services into more discounts to our customers. The next question comes from [ Luigi ] from [ Allspring ]. What percentage of your Prime members will be in the second or third year in fiscal '23? Well, that's like asking me how many new Prime members are going to add in fiscal '23. Well, you know how many we start, right? You know that we started with 2.7. So those 2.7 members will be the old customers next year. And since we don't disclose either the churn or the addition of the new Prime members per year, I'm afraid that I cannot give you that visibility today. The second part of the question from some investors is, do you see marketing costs in the first half of '23 in line with the pre-COVID level? And they're going to be reasonably in line with the pre-COVID level. Yes. I would say that, that would be a relatively fair statement to make. If you review our guidance, you will see that the marketing cost as a proportion of the revenue or the variable cost in general, by time we get to fiscal '25 is going to be lower because of the effect of the Prime membership and many of those come in second, third, fourth year. Fiscal '23 is in a trajectory between where we are today and where we'll be there. Next question is from Mateo Salcedo from Spread Research. Have you seen any change on the booking mix, maybe an improvement on the long-haul bookings since restrictions are eased or have they remained rather unchanged? I think I answered they are going to raise. I'm not going to repeat that answer.. The next question is [ Bruce Ivory ] from JD Capital. Could you please comment on your bookings post to the summer season and into winter of 2022? I think there's a little bit of a confusion in the background of this question. Different to how the hoteliers for the airlines themselves report volumes. They refer volumes strong in the case of airlines and actual stays in the case of customers. So they're able to tell you, we have these many bookings that have not yet flown or that have not yet stayed. But in our case, we provide our services at the time of booking, right? We intermediate at the of booking. So I know how many of my bookings that I've already reported that are already in my financial statements are going to flow later or are going to -- sorry, to fly later or are going to stay later, but I do not know how many bookings am I going to get in the winter or the fall. The next set of questions come from Guilherme Sampaio from Caixa Bank. First question is, even if less relevant, could you disclose your market share in the [indiscernible] sector for comparability purposes versus prior references or at least some color on market share evolution? Well, we're really discontinuing that, as we said during the presentation. The market share has increased very substantially versus the number that we reported in the past if we are to believe those numbers. But as we also said, one of the reasons that -- 1 of the 2 reasons that we are discontinuing that market share is that we think it is a lot less precise, it's less reliable because the way they allocate the source that we use, the way they allocate clients to each individual country depends on the nationality of the Earth as opposed to all of the clients being purchased by customers of a certain geography. And therefore, we think that it is getting more and more leisure like, but there is a meaningful improvement. Why do you think that your share of mobile bookings have declined despite the improvements seen at an industry level? Well, I think you're looking at 2 very different mechanics. We have consistently had a very significant gap in terms of mobile bookings versus the industry. Normally [ 50, 30 ] points of gap that in terms of our penetration versus the industry, and we continue to have it. We are, let's say, at the forefront of that evolution. So for us, the evolution, let's say, from the recent past is an evolution that is marked by the fact that people have returned to the offices, and they're doing now less bookings on their mobile devices than they were doing at the moment when they were not in the office and they were just staying at home. So for that, they have declined 3 points, but we continue to have a very large gap versus the other ones. The rest of the industry is just trying to catch up, frankly. So for them, the effect of more people going to the office, they don't notice it because they are at a much more immature level of penetration of the mobile device for them. The third question is several players in the travel sector expect to reach until the summer peak pre-COVID revenues in the leisure segment. When do you expect average basket value of bookings returning to pre-COVID levels? So but the other players in the travel sector, and particularly if you look certainly at the players that again report on a flown basis or that report on a stay basis is what I said before. Of course, for them, the peak is at the time that the passengers fly or the time that the passengers stay. So it's not entirely comparable. About the average expected time for booking to return to pre-COVID levels. I'm going to rephrase a little bit, right? Because what is really relevant for us from an economic point of view is the complexity of those bookings being the same as it was in pre-COVID levels. We already said at the Investor Day that the assumption that we are taking is a conservative assumption, but it will still take 2 full years. So until the end of fiscal year '24 for those travel patterns to fully return. And the fourth and last question from this investor, could you provide the share of Prime contribution for the cash EBITDA? It's the same as it is for the margin of profit because the methodology to distribute the fixed cost is as a proportion of the margin on profit. So it's the same. The next set of questions comes from [indiscernible]. All other things being equal, what would increase in cash EBITDA be in fiscal '23? We're reflecting increased profitability of Prime members in year 2. Well, I think this is actually very, very similar to the to the response that I gave to the very first investor, which is, one, to say, look, if we have a more reasonable proportion of our customers being first year subscribers as opposed to second, third, fourth year subscribers, what would our margins be. And we said, look, if we had just doubled the number of Prime members from 0.8% to 1.6%, our cash EBITDA margin would have increased by 8 points from 10% to 18%. The next question is from Anton Zhereshchin from King Street. On the topic of Prime investments, I thought had mentioned previously that you have not been marketing Prime. Has this changed? It was not the average [indiscernible]. It is true. We are not doing TV or big off-line campaigns on Prime. So we're not telling people, hey, we have a subscription program. We tell people to come with us. And then when they land in our website or open our application, they see the relative attractiveness of being a subscriber versus not being a subscriber, but we don't advertise Prime. Why we say that we invest in increasing our number of Prime members it is because we make an investment in marketing for the customers to do that first visit to us and a very large proportion of those become Prime members. And in that first year to those Prime members, we've given very large amounts of discounts that we have not given to the non-Prime members. The distribution really is people knowing that we are a subscription company is still word of mouth.

Yes, exactly. So a lot of people come to us through word of mouth. And then of the ones we don't market Prime. We don't mention Prime. You won't see it out there. There's not, let's say, Google ads out there, et cetera, et cetera, right? It really is -- and we don't put our prices out there, right? It really is the customer just comes to us and then through coming to our site because someone has told them about Prime and so they're already looking for a subscription or they're coming just looking for, let's say, a flight and then we walk them through a process in which either they're exposed to both a transaction and equally a subscription, and then the customer makes that choice.

So with that, those are all the questions that we have in the webcast. I'm going to thank everybody for joining us in the webcast. And before we conclude the call, I'd like to inform you that on Wednesday, the 31st of August, we hope that people hop into the beach, take a vacation and you fly expensively. And of course, you become Prime members if you're not already. We will be hosting our conference call for the first quarter of fiscal '23. And in the meantime, we'll be happy to receive your questions via our Investor Relations team or in the investor e-mail address, which is [email protected]. Thank you very much. Have a nice day.

Thank you.