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

Good morning, everyone, and thank you all for joining us today for our first-half fiscal year 2024 results presentation for the 6 months ending 30th of September 2023. I'm David de la Roz, the Director of Investor Relations at eDreams ODIGEO. As always, you can find the results material, including the presentation and our results report, on the Investor Relations section of our website. I would like to inform you that today's presentation will be a bit longer than usual. It will be broken down into two parts. Part one, we'll focus on our results for the first half of the current financial year. Part two, we'll special deep dive into the business, focusing on a follow-up of our performance and our Capital Market Day 2 years ago as well as an update on our progress towards our 3-year guidance. I will now pass you over to Dana Dunne, our CEO, who will take you through our results highlights.

Thank you, David, and good morning, everyone. Thank you for joining us. We are 2 years on from the November 2021 Capital Markets Day. And I'm pleased to be able to say that the Prime model has more than proven to be a success with the results speaking for themselves. The key takeaway today is once again that profit margins and profits are up significantly due to Prime that we continue to show strong subscriber growth and revenues and profit growth. In fact, our cash EBITDA almost doubled over the last 12 months and cash EBITDA margin further improved by 9 percentage points versus the first quarter of financial year 2023. This means that our cash EBITDA margin improved from 9% in Q1 '23 to 18% in Q2 '24. And we added 3.4 million subscribers in the last 24 months and 380,000 in Q2 of FY '24. In total, we are on target to meet or exceed our self-set targets for FY '25. Today, we'll take you through the key points of our strong performance. This will include: firstly, covering the eDO results highlights; second, a discussion about the Prime model and a review of our excellent first half of the year results; third, we'll update you on our strategy 2 years on post our Capital Markets Day; fourth, we'll discuss our investment highlights. And lastly, we will conclude today's presentation with some closing remarks about our long-term growth potential well beyond FY '25. So now let me ask you all to please turn to Slide 4, which is a summary of our performance of the first half of our fiscal year 2024 results. In the first half of FY '24, again, the strength of our Prime model drove significant profit improvement with cash EBITDA almost doubling year-on-year. We remain well on track to meet or exceed our FY '25 guidance. Some of the key highlights for today's presentation are, first, in the first half of FY '24, the significant improvement in profitability, specifically cash EBITDA was up 84% to EUR 63.5 million. That's almost doubling the EUR 34.5 million reported in the first half of FY '23. And the cash EBITDA margin, as said, gained 9 percentage points since the first quarter of FY '23. Cash marginal profit was up 46% year-on-year to EUR 108.9 million, and the margin improved as well, 9 percentage points since the first quarter of FY '23. Prime's percentage share of our cash marginal profit reached 72% of the group total. And this means that now our results are largely driven by subscription. And our free cash flow, excluding non-Prime working capital, was up from EUR 20 million in FY '23 to EUR 40 million in the last 12 months of the first half of FY '24. This means it doubled in the past 6 months and will outperform cash EBITDA growth again in the next 18 months. Second highlight, eDO Prime model is firmly established as a success. In the first half of FY '24, we surpassed 5 million subscribers, reaching 5.1 million, which is a 41% increase versus the same period last year. This, of course, is in the context of the industry moving to a more normalized seasonality patterns. And in the last 24 months, we added 3.4 million new subscribers. And on the 31st of October, our Prime members stood at 5.2 million. Prime cash revenue margin. As we said last time, this is a new quarterly reporting KPI since the first quarter of FY '24. Prime cash revenue margin showed very significant improvement. It was up 53% versus the first half of FY '23, in line with growth in Prime members. Prime share of the total cash revenue margin was up from 38% in the first half of FY '23 to 55% in the first half of FY '24. And growth in cash marginal profit for Prime increased more than cash revenue margin. With an increased maturity of our Prime member base, cash marginal profit for Prime is up 86% versus the first half of FY '23. And as a result, Prime share of cash marginal profit reached 72% of the group total. Third highlight. In November 2021 at our Capital Markets Day, we announced our FY '25 guidance. Now as a reminder, this was during a period in which 0 travel company had a quarterly, yearly or multiyear guidance out there. And this was before Omicron, Ukraine war, double-digit inflation and other macroeconomic issues. So we're 2 years on today, and we are reconfirming our guidance that we had set in November '21. We will meet or exceed our targets. In terms of Prime members, our quarterly net adds run rate is ahead of the implied run rate needed to achieve our FY '25 target of 7.25 million members. Prime ARPU, as expected, is converging with our FY '25 guidance for around EUR 80 per user. In the second quarter of FY '24, Prime ARPU stood at EUR 78.8 per user. And cash EBITDA, our first half of FY '24 results demonstrate that an increasing share of year 2 plus Prime members has a very positive impact upon margins, which doubled year-on-year. Today, numbers reconfirm we continue to be well on track to meet our target of over EUR 180 million of cash EBITDA in FY '25. The fourth highlight you'll hear in today's presentation is about the long term and beyond for 2025 that eDO has strong fundamental growth. This is due to the attractiveness of our segment of Travel, which is leisure. We will continue to benefit from the strong consumer demand for Leisure Travel in which there's a clear structural shift from offline to online for convenience, and, of course, the underlying desire to travel. Also we'll benefit from eDO's ability to further increase household penetration from low levels in the markets in which we currently offer Prime. We'll also expand Prime into new markets, moving well beyond the 10 markets in which we currently operate and enter into new customer segments and further launch additional products and services under Prime. Now let me pass it over to David, who will take you through some of the KPIs of our Prime model and the excellent first half of FY '24 results.

Thank you, Dana. If you could all please turn to Slide 6 of the presentation, I will take you through some of the KPIs of the Prime model and financial results in more detail. On a run rate basis, we are ahead of the required pace to achieve our target of Prime members and the run rate needed for the next 6 quarters is less than the one we achieved in the past 4 quarters. Please note that the net adds of Prime members are influenced by seasonality on a quarterly basis. For example, the net adds of Prime members in the first quarter of fiscal '23 were positively influenced by the Omicron catch-up effect as more people were looking to book travel closer to some of departure dates. Net adds during that period increased because of that. Similarly, when there are less people in the market looking for travel, such as in the third quarter, which is a seasonally low quarter, net adds of Prime member was overall less. That is why it is important to look at our net adds over multiple quarters, and we are on track to your guidance of 7.5 million members by March of '25. Please turn to Slide 7. Profit margins were up significantly due to the growing maturity of Prime members. This has resulted in strong improvements in profitability during the last fiscal year. In the second quarter of fiscal '24, cash marginal profit margin in our Prime segment continued to improve. It increased to 36% on a 12-month basis from 31% in the first quarter of '23. That is a 5 percentage points improvement. Cash EBITDA also improved substantially. In the second quarter of fiscal '24, cash EBITDA margin more than doubled to 18.2% versus 8.8% in the first quarter of fiscal '23. This is an improvement of 9 percentage points, well above the first quarter, the second quarter, the third quarter and the fourth quarter EBITDA margin of fiscal '23. If you please turn to Slide 8. Let me remind you that when looking at Prime versus non-Prime, we still think it makes more sense to look at our business on a last 12-month basis as Prime is in annual subscription business and seasonality affects the amount of net adds in a particular quarter and the non-Prime part is influenced by seasonality patterns in most respects. Our KPIs reported today show strong growth and significant marginal profit uplift as maturity of our Prime members increased. Strong characteristic of subscription companies is strong growth in cash revenue margin and cash marginal profit. Our performance in these areas demonstrates this clearly with a 54% share of cash revenue margin and 64% share of cash marginal profit in the last 12 months to September 24 being delivered from Prime members versus 42% and 54% a year ago. As we now have a much larger proportion of our Prime members in the second and subsequent years of membership, the level of profitability of Prime continually improves. Please turn to Slide 9 of the presentation. In the first half of fiscal '24, we delivered strong growth in cash EBITDA and substantial improvements in margin as the maturity of Prime members increases. In the first half of '24, cash revenue margin is 12% higher than in the same period of the previous year. Cash margin profit and cash EBITDA improved 46% and 84%, respectively. Over the past year, our subscribers grew by 41% to 5.1 million. In addition, 59% and 72% of our cash revenue margin and cash marginal profit in the quarter, respectively, are now from Prime members. As guided, the maturity of Prime members is the most important driver for profitability, and this has resulted in strong improvement in profitability as we have more Prime members renewing their memberships. Cash marginal profit margin increased 7 percentage points to 31% in the first half of '24. Cash EBITDA margin in the first half of '24 also achieved very substantial improvements and is stood at 18% versus 11% in the same period of last year. That's a 7 percentage points advance. Cash EBITDA was up 84% year-on-year to EUR 63.5 million, which compares to EUR 34.5 million in the first half of '23. Please turn to Slide 10 of the presentation. Revenue margin, excluding adjusted revenue items, increased by 13% to EUR 327 million, mostly driven by an increase in the Prime side of the revenue margin, which is up 67%, following the successful expansion of the Prime member base. Prime revenue margin growth rates were offset by the non-Prime revenue margin, which decreased 19% versus the first half of '23 as the first quarter of '23 was positively impacted by the catch-up of the Omicron bookings. Prime revenue margin growth rates were offset by the non-Prime revenue margin, which decreased 19% versus the first half as the first quarter was again impacted. The variable costs were broadly in line with the first half of '23, despite higher revenue margin as maturity of Prime members increases and reduces of our acquisition costs. Overall, the first half of '24 has seen the improving trends we saw during fiscal '23 continue and significant improvements in profitability as we have more Prime members renewing their memberships. Fixed cost increased by EUR 5.5 million, mainly driven by higher personnel costs as we scale the business. As a result, adjusted EBITDA was 36.1 million, a material increase versus the same period of last year. Adjusted net income was a EUR 2 million loss in the first half of '24. That's a meaningful improvement versus a loss of EUR 19 million in the first half of 2013. This was mainly due to the second half '24, not having the revenue adjustment in Prime of EUR 7.9 million when we changed the estimates and a EUR 10.5 million of higher tax expenses in Spain on higher taxable profits. Turning now to Slide 11. I will take you through the cash flow statement. In the first half '24, we ended the second quarter with a positive cash flow from operations of EUR 73.7 million, following the growth of our business. We had a working capital inflow of EUR 31.7 million, again, driven by the growth of our business. We remind you that in the first quarter of '23 the higher inflow in working capital was positively impacted by the catch-up effect of the Omicron period bookings. We have managed our liquidity position well, a consequence of our strong business model, cash generation and active management. At the end of September '23, the liquidity position was strong at EUR 237 million. We have invested EUR 23 million in the first half of '24. That's an increase of EUR 6.8 million as we capitalize the development of software was done. Cash used in financing amounted to EUR 16.7 million compared to EUR 50.3 million in the first half of '23. The difference of EUR 33.7 million relates to the absence in '24 of 3 elements that happened in '23, the repayment of the revolver by EUR 45 million, the payment of cost associated with the refinancing of EUR 3.4 million, offset by a revolver drawdown of EUR [ 15 ] million. Let's now move to our strategy performance updates. In the 2 years that have passed since November '21 Capital Markets Day, there have been lots of movement in the market. We have had Omicron, we had the Ukraine invasion, we've had flight disruptions, we've had high inflation, but our investment thesis remains exactly the same. Nothing has structurally changed for that, and we're fully on track and reconfirm our fiscal '25 guidance. Please turn to Slide 13. Let me start with our first KPI, which is the Prime members. We are very confident we will achieve the 7.25 million subscribers in fiscal '25 as we have a large addressable market and very realistic assumptions. We are ahead in terms of net adds. The reason we were confident in exceeding the 7.25 million subscribers by March '25 is because the addressable market is huge and we have very realistic in asserting assumptions. More than 70% of the new Prime members we get are new customers. This indicates the product is equally attractive for travelers who did not transact with us in the past and that is a huge enough market. Our assumptions are very realistic. The implied penetration rate needed to reach 7.25 million members by fiscal '24 is 2.5% in the 10 markets in which we currently offer Prime. This is assuming no additional markets launched. In the market we have been operating in longest, which is France, we are already at 5.2% percent penetration and the rest of the markets, excluding the U.S., are at 2.1%. Furthermore, on average, in the rest of the market, excluding France and the U.S. in which Prime has been live on average for 3.5 years, we have an average penetration of only 2.1%. Please turn to Slide 13. Prime has demonstrated the ability to capture customers even during major macroeconomic events, during COVID, Ukraine war, flight disruptions, high inflation, Prime continues to attract new subscribers in large numbers. Over the past 2 years, we have added 3.4 million new Prime members. If you could now please turn to Slide 18. Our second KPI that we set 2 years ago is ARPU. 2 years on from the Capital Markets Day, the prime ARPU is on track to meet our fiscal '25 guidance as well. Prime ARPU, as anticipated and guided in the second quarter of fiscal '24, increased to EUR 78.8. This is converging towards our target of EUR 80 per user. Main reason for the ARPU rising is because of the increased usage of the program and increased [indiscernible]. Let's now move to a third KPI and target, which is cash EBITDA, which is well on track to reach the EUR 180 million by fiscal '25, as we announced back in November of '21. Cash EBITDA starting to show as expected the designed results. Consequently, profit margin and free cash flow are also increasing as the Prime member base matures progressively. If you look at Slide 20, as you may remember because we showed this in the first half of fiscal '23, the strategy update. So one year ago, this slide shows you the breakout of our subscribers between year 1 and year 2 onwards and outlines how cash margin or profit margins increase as Prime members become more mature. You will recall that in year 1 of a customer's membership, we do incur considerable customer acquisition costs. However, from the second booking and after renewal, the profitability increases and there's no meaningful CAC thereafter so that percentage changes so too does the average company cash marginal profit. On the left-hand side is last year's Prime customer year profit margin mix of year 1 and year 2 with 61% and 31 -- sorry, and 39%, respectively, of the cash revenue margin. So you take the margin figure, multiply by the actuals figure revenue derived from the Prime members in first year versus second and subsequent and you obtain the aggregate cash margin profit for the Prime side of our business, which was 31%. On the right-hand side, we show the same mechanism but for today's figures. You can see clearly that the percentage of revenue coming from year 2 plus members increased from 39% in fiscal '23 to 63% in fiscal '24, the aggregate margin increases in a mathematical way from 31% to 36% today, a 5 percentage points increase in a single year. Conceptually, as a portion of year 2 plus members increases so do our margins since year 2 members have very low CAC. Thus, as you can see, margins will continue to increase progressively from now to fiscal '25. If you could please turn to Slide 21, it is important to highlight that as cash EBITDA continues to grow, our free cash flow, excluding non-Prime working capital, grows even more. And as you can see on the slide, it doubled in the past 6 months and will outperform cash EBITDA growth again in the next 18 months. And just to be clear, this analysis excludes any uses of cash applied to either reduction of debt or repurchase of equity. The reason for this outperformance of cash flow versus cash EBITDA is that while the increase in margins from a higher share of year 2-plus members will lead to significant growth in cash EBITDA. On the other hand, CapEx, interest and taxes will remain relatively constant. As a result, free cash flow will outperform cash EBITDA growth again in the next 18 months. I will now turn the presentation back to Dana to cover our long-term fundamentals and do some final closing remarks before we open the webcast for a Q&A session.

Thank you, David. As you can see, 2 years on from our Capital Markets Day in November 2021, we're well on track to meet or exceed our FY '25 guidance and a huge potential beyond FY '25. In addition, we want to share with you some other KPIs that underpin our strong long-term fundamentals of our business. Please move to Slide 45. As you can see, subscription models have proven to be hugely successful over the years. In fact, the subscription model has been proven to be highly successful in a wide variety of industries, such as Costco for supermarkets, Netflix for video streaming and on and on and on. In 2017, we launched our Prime subscription program. Until then, we were like all other travel companies. We were transaction-based with a transactional relationship with our customers. No one had a subscription-based model in travel at that time until us. We now have proven it can be very successful with Prime having more than 5 million subscribers and adding in the last 24 months, 3.4 million new subscribers with good healthy margins. As a result, today, we're a different company. No longer are we a transaction company like all other travel companies. Instead, today, we have 75% of our cash EBITDA driven by subscription. And we benefit, therefore, from the predictability of results, lower susceptibility to external impacts, higher customer loyalty, et cetera. Our subscription business is getting bigger and bigger every day, month and year. And consequently, we manage and run the business now as a subscription business. Please move to Slide 24. As you can see, Prime is a superior value proposition for customers, an important KPIs customer advocacy, which leads to sustainability and growth. Prime has proven to be a superior value proposition, and this has translated into leadership in customer satisfaction. Without strong customer advocacy, we could not have grown so rapidly. As you can see, our NPS scores have continued to increase since our Capital Markets Day 2 years ago, when they were already extremely high for travel-related products. Please move to Slide 25. Related to this, as you can see, eDO is a leader in customer satisfaction. Another way to look at customer advocacy is via third-party surveys like Trustpilot. Trustpilot is a review platform where people around the world rate their experience in different businesses from 1 to 5. It shows that we rank meaningfully better to customers than any other OTA and/or major airlines across all of our brands. If you could please move now to Slide 26. eDO has a very strong employee engagement, which we are super proud of. Today, 90% of eDOer's recommend eDO as a great place to work. And Forbes describes eDO as Spain's best company to work for in both 2022 and 2023. Please move to Slide 27. Prime provides a win-win proposition for our customers in eDO. As you can see on this slide, Prime members visit us more often and have higher repeat bookings than non-Prime members. Please move to Slide 28. We have achieved and will continue to achieve significant value creation for eDO through Prime. The success of our Prime subscription model is demonstrated by our high growth in a number of members, together with the value it creates and a business with higher LTV and lower CAC over the long run. We continue to achieve an LTV to CAC ratio of between 2 and 3, which is calculated over a 24-month period, excluding the second renewal. Other companies use 36 months instead to look at value creation. And if we were to do that, our LTV to CAC would be even higher. Please move to Slide 29. The new eDO is more stable and predictable business. As I've said, today, we have 75% of our cash EBITDA being driven by subscription with all the benefits of being a subscription company. The share of Prime is expected to represent more than 80% of our total cash EBITDA in FY '25. Let me leave you with one final closing remark before we move to the Q&A. So please turn to Slide 31. 2 years on from the November 2021 Capital Markets Day, we have made significant progress and truly transformed us. Since then, 50% of the time has passed until the completion of our target date of March 2025 for our guidance. On the Prime member side, we have achieved 61% of our FY '25 target. And on the cash EBITDA side, we have achieved 62% of our target. This is yet another way to show that we are absolutely on track to meet our guidance for FY '25 and that we have transformed eDO into a subscription company with already 5 million subscribers and growing. If you could now please turn to Slide 32. I will conclude with our strong fundamental growth potential beyond FY '25. The long-term potential beyond FY '25 is huge. Prime is only currently in 10 countries. It is a transaction model, we're in 44 countries. Thus, over time, we will continue to expand Prime to many more countries. Also within each country, where Prime is currently offered, we are nowhere near the normalized household penetration Prime. So this will provide us with, again, a very large material growth. Third, the many successful subscription companies evolve into more segmented offers by customers and product segments. So these two also provide significant growth opportunities. Overall, eDO is now a much higher quality business with the pivot to our subscription model. This delivers loyal and repeating customers, resulting in more and more profitable and predictable business. We are delivering high underlying profitability and a huge growth potential. In summary, Prime has proven to be a success and is now firmly established. It delivered significant uplift in profit margins, which will continue. We believe we have the right model, the right people and the right structure to seize and deliver on the exciting value-creating opportunities ahead of us. All of this will drive superior returns for shareholders, excellent service for customers while at the same time transforming and revolutionizing the travel industry.

Thank you, Dana. With that, we would now like to take your questions. We will answer the questions send to us in writing in the webcast. We will take questions on a first come first served basis. We will try to group questions of similar nature. Should we not have time to respond to questions from the webcast, the Investor Relations team will make sure those are answered afterward. And now let me just go through the list of the questions that we have here. Okay. The first set of questions come from [indiscernible]. And we have here. First question is eDO is less competitive on ancillaries as compared to flights where eDO is almost always the cheaper. Is being able to discount ancillaries further linked to the hotel products, i.e., the greatest package value, the more discount or something else? More to read. There are several questions. I'm going to read them one by one. And I think that will be clear for everyone in the call.

Absolutely. So delighted to answer it. Let me first say, look, we have millions and millions of flights on sale at any one point in time. So the way in which we do it and look at this is we actually scrape ourselves so that we can have an analytically robust view on what really is our prices and compare them to other entities that we may want to. And we do that both on many types of offerings with that. When you look at including bags and seats, we still in, let's say, about the majority of cases come up with about having the best or among the best prices that are out in the marketplace. In addition, I should say that if you look at the attachment rate, not just for us, but in general, industry data in terms of how may people take bags and take seats, it's actually a minority of people that -- customers that actually attach a bag and a seat on it. And even though -- and then when it gets to just the flight, I mean, we are -- as you've seen, we've published that before, massively, massively, overly competitive on it. I think the question was also about cars and hotels. We've released data on that as well. So I would just encourage this investor to go look at our website and you see the data in terms of cars and hotels. And you'll find that, again, our prices are extremely attractive as well. But let me just bring this out into a broader context so that we don't get too caught up on the price, which, by the way, I would argue, find someone else such better than us as an entity as a whole, okay? But again, you have to think about this not -- you have to think about it from a customer point of view. That is the key. And we, again, have published data that shows that the number one reason why customers actually take Prime is for the customer experience and for all of the additional things that we do for our Prime customers. Price is actually number two. So you need to be focusing on the right thing in terms of why customers are taking it. Now when you look at it, we've also -- as you see during my part of the presentation, I went through NPS figures that are extremely, extremely high for travel and actually across most industries that there are. You saw the customer satisfaction, and you've seen our growth rate. There's just absolutely no way we could grow without lining customers at this type of run rate. Now I think there was a next question that was asking also about an update on hotels. And so let me just say that we do believe that there is a real material opportunity within hotels for us. Good growth thing for us. We've proven that the Prime product offering is very attractive multiproduct offering, meaning it offers clients, it offers cars, offers hotels, et cetera. And then it's absolutely attractive and provides us good growth opportunity. And so we have been investing in our hotel product, our hotel offering to customers. And we will continue to invest in this area over the next several years as well because we see this as being something that's very good for both our shareholders and our customers. David, let me pass it.

Okay. The next question still [indiscernible] investor says there was an increase in marketing spend in the second quarter versus the first quarter. However, when we look at fiscal '23, the second quarter marketing spend was lower than the first quarter. Any reason for this?

Yes, the reason we've mentioned several times during the call, when you look at fiscal '23, you need to keep in mind that the first quarter was abnormally high, what we call the post-Omicron quarter. So again, first quarter to have everyone on the same page, is the months from April, May and June. Omicron happened in Europe between January and February mostly. So a lot of the bookings for summer departures, that normally take place in January and February in fiscal '23 happened in April, May and June. So April, May and June was abnormally high. So yes, marketing spend was higher because it follows demand, right? That is the way of seasonality of the market. So let's say, the comparison Q1 to Q2 evolution in fiscal '24, you need to have that into account that we are back to normal seasonality, right? If you allow me the expression in previous years, we've had COVIDality more than seasonality, right, whether volumes were higher or lower, dependent on when the different waves of COVID were happening when people was allowed out of their homes, they were traveling or booking travel regardless of the time of the year. We're now back to much more normal seasonality -- in much more normal seasonality, the Q1 and Q2 follow a relatively similar trend. It depends which one is bigger from one year to another depending on where Easter falls, but they are broadly the same and that didn't happen last year. That's the reason for that -- for that change.

The next set of questions come from Juan Pena and he is from GVC Gaesco, Just would like to understand decrease in the cash margin and profit margin in the quarter, considering that Prime cash margin profit is growing significantly. Could we consider as a one-off behavior? Should we assume future increases in total cash marginal profit between 30%, 35%?

Look, when you look at these margins, it is always helpful to look at the last 12 months numbers in the aggregate. And I made that comment during the presentation. And I think it's important to look at that because you manage to skew away from potential seasonality patterns that could distort the numbers a little bit. If you look at the numbers on a last 12-month basis and you look at the evolution of that, quarter-by-quarter, you look at Prime, you would see that the first quarter of '24, the aggregate margin was 34%. When you look at the second quarter, the one that we just published, the aggregate margin is a little bit above 36% . This is again for Prime side of the business and on the last 12-month basis. That's the one that really gives you the evolution, right? And you go away from noise that can come from seasonality. Now on the second part of your question for the -- you talk about the total cash marginal profit margin and you mentioned a range between 30% to 35%. We're now at about 30%, and we will make progress towards the 35% as more quarters past. But I think it's not going to be 5 percentage points in the next 2 quarters. That's too much. It will be less than that, but you will be seeing increases in the cash marginal profit. Now let me take this opportunity to make a broader comment about seasonality how it plays out. But at the beginning or in the previous question, we were talking about COVIDality versus seasonality. We are back to normal seasonality. Normal seasonality entails that the period of time that we're in right now. The quarter from October to December is the lowest quarter of the year. And the quarter from January to March, which is our fourth quarter or the first half of the quarter is, again, a high seasonality quarter. So what everyone should expect is that the revenues and the number of Prime adds in the quarter end of December is going to be lower than what we just published for September. And for the quarter ended March, you will again go into much bigger numbers because you're again in a high seasonality period. When you go down to the aggregate cash margin or profit margins, which was the original question of Juan is what I said, for now at levels of 30%, you should expect the numbers to grow progressively over the next couple of quarters. And I want to also use this opportunity to remind everyone what's going to happen just below that because just below that, you have the fixed costs. We have said and we said it already 2 years ago that we are increasing the size of our talent -- IT talent capacity, okay, which is what allows us to develop new products and services to our customers to improve the Prime product to be able to launch in additional markets, our Prime program to be able to have new services like hotels and so on and so forth, right? If you look at the numbers for our financial statement, you will see that over the last 12 months, we have increased our total workforce by 35%. That is a phenomenal amount. We're very happy that we're able to attract a lot of talent. But the cost of that increase in personnel hasn't flown through the P&L yet because all of those employees have not been around for 12 months, and therefore, you're not seeing it in the P&L yet. For the first half of fiscal '24 that we just published, you can see that the fixed costs were a bit more than EUR 45 million, okay? What you should expect for the second half is a higher amount of that. You should expect an amount, which is around EUR 51 million, to complete the year in around EUR 96 million. So I delighted that you put that into your models and put together with the comments that I made on seasonality in Q3 versus Q4 and the expected evolution of the cash marginal profit, I think it gives you a pretty good picture of how to think about the development going forward in both Q3 and Q4.

The next question comes from Chadd Garcia of Schwartz Investment. He says you have a substantial cash balance. Are you starting to get paid decent interest rates?

Which I wish. For people who don't know Schwartz Investment is based out of the U.S. In there, the interest rates are higher than in Europe, and they're not only higher for the interest that is paid, but also for the interest that is received on the normal bank accounts. That phenomenon hasn't panned out yet in Europe. The majority of the banks in Europe for euros are not remunerating the bank accounts in any significant way. And also, yes, it is true that we have a nice cash balance for -- the balance sheet as of the 30th of September of '23, but that is not the average cash balance. The cash balance moves a lot during the month and a lot during the quarter. So you shouldn't expect to suddenly see meaningful interest income in our financial statements. Also keep in mind that, as I said in the previous answer, the period that we're walking in right now, the one from October to December, is a period of slower seasonality. That means that we will have during that period seasonally an outflow of working capital. And therefore, you should expect the cash balances to decrease from here to December and then to increase again from January onwards.

The next set of questions come from Nizla Naizer of Deutsche Bank. The first one says, do you have an increase in personnel cost? How much of that is due to wage increases versus addition of employees? Which parts of the business are you investing in?

So I think I advanced the answer to your question in the previous question, which is that the driver has been the increase in personnel, right, with an increase of 35% of the workforce over the last 12 months. That is the main driver. And as I said, it's not yet reflected on the last quarter the real amount of ongoing fixed costs that we have. I just referred to. It -- you should expect for the aggregate of the second half to have a fixed cost of closer to EUR 51 million comparing to the EUR 45 million of the first half. And that takes into account everything. That takes into account of the new personnel and everything else that is moving in the fixed cost. As for the areas of the business that we're investing in, the majority of this personnel is what we call IT talent, which is not only software engineers, that's a very good portion, but it's also the people that work with the software engineers because you have a lot of product specialists that work hand-in-hand with the software engineers and are the ones that design what needs to be developed. So they go in tandem, right? And then we apply that to a lot of other things. One other relevant group of people that we hire as well is people that work in the same groups, we call them pods internally with the engineers -- software engineers and the product people, which are the data scientists, who are the ones that examine all the data, help them to produce new algorithms, get the learnings from the algorithms into the new developments and so on and so forth.

The Second question from Nizla says, any color you can give us on how Prime retention rates have evolved in the last 4 years? Does it change from market to market?

Yes. So I think David touched on this kind of briefly in the sense of saying that we don't provide churn. And if you look at most B2C companies out there that have a subscription model, they don't provide that an ongoing basis. But what we did do is we provide that once we also showed I think maybe at the -- again, memory might be sliding me, but I think it was in the last presentation or before, we showed that actually, if anything, our churn rates have gotten better, ever so slightly marginally, we also show kind of surrogates for that, which is NPS, which is customer satisfaction, they all get to the same thing about do customers really believe that they're getting value for money? Do they believe that it's a really good experience? And as you can see that even what we've shown today, they are extremely, extremely high, right? And the promotability is very, very high. Let me just make some other commentaries that some people may not be so well aware of. We don't advertise Prime outside. So you won't see kind of YouTube TikTok adds on Prime or anything else like that or on Facebook, et cetera. So what it means is that one of the big, big drivers for us and our subscription growth is word of mouth, referrals, right? And so again, we couldn't achieve these numbers, these growths without customers really liking Prime, telling people because that is a large portion of our new subscribers just coming from friends, family, just simply saying to someone, hey, you really should use Prime, I use it. And that is a big way in which we get a lot of new customers for that.

The third -- yes, the third question from Nizla is, how do you view the potential for growth beyond fiscal '25? And any color you can give us on revenue potential and margins?

Look, as to the growth of fiscal '25, we're very, very optimistic about that. And I was going to say almost looking forward for that to get, but let's take things step by step. Let's deliver on the 7.25 million members and let's deliver on the EUR 180 million of cash EBITDA. Now the driver for growth beyond fiscal '25 is the first one and the most important one is everything that has to do with the number of Prime members. That's what really drives our numbers. And what we have is an enormous opportunity of continuing to increase household penetration where we already are, right? And I gave the numbers during the presentation. We need to get to 2.5% on average. There's a lot more that you can do at the 2.5%. You look at our most mature market, which is France. We're already at 5.2%. There's no reason why any other main markets could not get to level similar to the one of France. Then the second area of growth...

Sorry, let me just you stop here and also France is growing at a really fast rate. It's growing at, I think, about its historic high or equal to its historic high. So even this 5.2% is not kind of in the high growth rate. It's not a count by any means. It will continue to grow. If you look at other subscription services around Europe for, let's say, more mature services, the levels of penetration of households depending on which ones you look at rate between 20% and 50%. So there's a reason why we need to stop anywhere near the 5%. So that was the first dimension, increasing household penetration in the markets where we already are. The second access of growth is going to -- with the Prime product to markets where we're not present today. We have 44 transactional markets. We only have 10 subscription markets. So there's a very large opportunity there as well. And then the third one is around product offering, right? We started the product with just discounts on Primes, then we moved on to discounts on hotels, then we moved on to discounts of cars and then packages. At the end of the day, the subscription is like a basket in which you can put lots of additional products and services. And there are opportunities to offer more products and services to our customers. And as they obtain more value, there's room for them to share a portion of that value with us as a provider of the subscription. So there's plenty. Now as to specific numbers of what revenue growth and EBITDA growth one should expect beyond fiscal '25, I think it's a little bit too early for us to give you a specific number. When we get closer to the date, we will give you more specific views on it. But as I said, let's take this step by step, let's deliver on the 18 -- on the next 18 months on the 7.25 million and EUR 180 million of cash EBITDA.

The next question comes from Fredrik Sundber of [indiscernible]. And he says, what was the reduction in profitability in non-Prime in the quarter?

A lot of that is seasonality. And actually, if you look at the profitability per booking would be the marginal profit. But looking of the -- Q2 of the previous year, you will see that it is in levels which are relatively similar to what we have published. Also I need to warn people that as we move forward in time and the size of the non-Prime in our P&L becomes a smaller, it's also going to be more prone to variability from quarter to quarter. And also, from a structural point of view, we would expect. So despite these variations from quarter to quarter, we would expect that the non-Prime side of the business over time decreases in average profitability. The reason for that being that the "better customers" within the transactional side of the business, we would expect them to eventually become Prime members and therefore, move to the other side of the P&L. We still have a good portion of the people that is only transacting with us that come from few channels of acquisition or [indiscernible]. Over time, we would expect those to progressively migrate to the Prime side of the business. So that what is left in the non-Prime is mostly devoted -- in which we need to spend a meaningful amount in marketing to get them to transact with us. And therefore, the average profitability on that side of the business to come down over time.

The next question comes from of [indiscernible]. So could you provide more drivers -- more details on the drivers for the especially good evolution in fiscal Q2 of, one, working capital and, two, Prime deferred revenues?

Okay. So I'll take it one by one on the working capital. I think it is useful if you look for working capital purposes and the performance of first half of '24 to first half of '23. And that is more representative of the evolution of the business that if you just compare Q2 to Q2. The reason for that is what I've mentioned a couple of times already during today's call. If you look at specifically in the Q1 of last year, April, May, June, there was an abnormally high level of bookings there, which were catch-up bookings from the Omicron period. So Q2 last year was negative in working capital because it went from abnormally high number of bookings to more normal number of bookings. This year, we didn't have that spike in the Q1. So the evolution of Q1 to Q2 was more "normal" I would say. So I think it is better to look at the aggregate of the first half when you look at our working capital. The driver of that inflow is the increase in the size of the business is very, very clear. Now on the Prime deferred revenues, the first quarter of this year was unusually low in the number of Prime deferred revenues because we had the effect one time of the change in estimates going from the recognition of the revenues depending on usage to the recognition of revenues, which is gradual. So I would say the increase in deferred revenue that you had in the second quarter is more representative of the type of increases in deferred revenue that you see going forward and not really like the first quarter of the year.

The next question comes from [indiscernible] of PGIM. Sorry, this question has already been asked. So I'm going to move on to the next one [indiscernible] of BNP Paribas. The first one says how long the additional Prime revenues of EUR 27 million should be recognized? 1 year?

The EUR 27 million that you're looking at is the increase in Prime deferred revenue. And that is the amount that we have already recognized in the quarter. The amount that is spending to recognize, you will not find in the P&L, you will find it in the balance sheet. And there is a specific note in the financial statements, in which we show the breakdown of the deferred revenue and how much of that belongs to Prime. And that is an amount of EUR 134 million. And that EUR 134 million will be recognized over the next 4 quarters, okay? Now the -- it is more helpful and it is -- we recommend everyone to do it is that they follow for P&L more the cash metrics, in which that effect is already outside of the equation.

Sorry -- your second question is, can you remind us what is the fee that Prime members pay? And is that annual?

Well, it depends a little bit from country to country. It's not the same in every country. But in most countries, it is EUR 55, that is paid upfront for a 12-month period.

What is your Prime member base linked to 7.25 million by 2025? How did you arrive to that number?

Well, the 7.25 million is actually the target for March of '25, and we got to that number through a detailed bottom-up process of looking at market by market where we're going to deploy, the expected penetration that we would have in those markets, and that led us to the 7.25 million. That's how it's done. It depends a lot on the number of households that you have in each one of the markets in which we deploy and then expect the penetration of the households in those markets.

Also can you reconcile the cash flow to the cash EBITDA?

Okay. If you look at the cash flow statements that we published in the presentation, that cash flow statement starts with noncash EBITDA, but it starts with adjusted EBITDA. And then when you go 2 or 3 lines below, you see a line that is change in working capital for EUR 31.7 million. That change in working capital of EUR 31.7 million includes inside the increase in deferred revenue of the EUR 27 million that we just talked to you and yourself mentioned in one of your previous questions. So that's how you reconcile it.

What is the advantage of a Prime customer versus a non-Prime?

So let me -- I'm happy to take that one.

Okay.

Look, there are -- I think we've kind of touched on it through a number of the questions, so I'm going to try to just pull this together quite briefly. The customer pays upfront. Let's say, on average, about EUR 55, depending on the country, and that's paid upfront. And as a result of that, you get 12 months' benefit, and these benefits are kind of price and non-price. Under the price one, we've talked about this. These are great prices in terms of flights, cars, hotels, dynamic packages. And then there's also a lot of promotions, special exclusive offers that we only give to our Prime members as well throughout the course of the year. On the nonprice side of it, again, I think we've touched on this already that we do a number of things for our Prime customers that really delight them. And you can see, I think we touched on with one of the questions that actually the number one reason why people really advocate promote and love Prime is around the nonprice elements of this that everything that we do around the customer experience, around servicing those customers. And there are so many little things that we do to try to really make sure that our customers really feel good, comfortable, delighted and differentiated, so to speak.

Okay. Let me move to the next question we have, which is from Paul Simenauer of BNP Paribas. It says given limited prepayable debt and low coupons on your senior notes versus the market, will we be more focused on returning cash to shareholders right now?

Okay. I think that is a broader question there. So that's a capital allocation question. And as I said previously on this same call, in the 3 months to December, it's a cash disruption phase because we have an outflow of working capital. But once we have December, we will again build out cash and we can get an idea about the amount of discretionary cash that we have on the balance sheet. What the management and the Board intend is not to leave cash idle. So there will be an investment of that cash. And that will be some distribution between repurchases of shares and repurchase of that, even though there is not prepayable debt, given that our debt is publicly quoted, we can go to the market and buy that debt just as anyone else. And it's a good investment because it's trading below par. So it would result in a specific interest expense savings to the company on a cash basis. Now what amount exactly and what proportion is the decision not to be taken at this time but at the time of execution. So after we passed the working capital cycle, and it will depend on the price of securities at that point in time.

Next question comes from [indiscernible] Capital. Can you please remind us which products and services are provided directly by eDreams and which are supplied from partners referring to accommodation and flights for rental insurance, et cetera?

Yes. Happy to answer that, David. So look, we're -- as everyone knows, we're extremely large and flexed. And we, in fact, offer over 700 airlines to our customers through a variety of needs. When you think about our scale, we actually have many ways of procuring this inventory, many, and complicity, triplicity, et cetera, of the inventory. And also, I should say everybody is clear on it, we don't take inventory risk at all. This type of platform allows us to ingest content from multiple providers, and we take a similar approach in hotels. And on a case-by-case basis, we decide what is in the best way to source inventory for a given category so that we ensure we need to invest way our -- the needs that a business has, that customer has and that, obviously, is the right thing for shareholders.

Okay. That is the last question that we have right now on the line. So I'm going to thank everybody for joining us in the webcast. And before we conclude the call, I would like to inform you that on Wednesday, the 28th of February, we will be hosting our conference call for the third quarter of our fiscal year '24 and results presentation. And in the meantime, we will be very happy to receive your questions via our Investor Relations team or in the investor e-mail address, which is [email protected]. Have a very nice day and rest of the week.