lastminute.com N.V. (LMN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Half Year Results 2021 of the lm Group Conference Call. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Niccolò Bossi, Investor Relator. Please go ahead, sir.

Hi, everyone, and welcome to the first half 2021 lm Group conference call. Today with me there are our CEO, Andrea Bertoli; and the CFO, Sergio Signoretti. For the next 30, 40 minutes, we will guide you through the most relevant things that happened in the first 6 months of the year, and we will explain the results disclosed this morning via the Adobe press release and the interim report published on our corporate website. We will start with a bit of context and our strengths, then we will have a look at our numbers. Before starting, please take note of the cautionary statement included in the presentation. And now I give the floor to Andrea. So please Andrea. Go ahead.

Good morning, good morning, everybody. It's a pleasure to be here to discuss with you the results of the first semester and how we see the industry, the travel industry evolving after COVID. As you all know, the COVID had a very strong impact on the travel industry and it's bringing a lot of structural changes, not only in the travel industry but in our society. Of course, the results we're seeing today are still very impacted by travel restriction and COVID, especially for the first 4 months of the year. But we saw very good results for June and May when the release of the travel restriction across Europe draws a sharp increase in demand. As you know, we are competing in a very large industry. Pre-COVID the best estimate available placing the travel industry in Europe at EUR 300 billion. That's the principal market for us. A bit less than 50% of this market is online. But the very interesting element that we have seen today is that online transition and shifting from traditional channels to online has been really, really strong for travel and not only for travel, lockdown and all the restriction to people movement forced society about digital channel in a very, very broad manner across all the different sectors in the economy, not only e-commerce has seen a huge spike, but also education, entertainment, public services, working, all the sector, all the human activities have been seeing -- experience a very big increase in digital adoption. And this for our company, I think is a very interesting element that will give us a lot of opportunities in the future. As you might see also on the Slide #6, of the deck we shared for this call. We are competing in Europe. Europe is the second largest market. It's a bit smaller than U.S., but it's still one of the most interesting market globally for travel and is very interesting for online player because digital adoption across Europe is still relatively lower than the level we see in U.S. or also within Europe, also in the U.K. market. So the average is 49% of online penetration but we see a lot of growth opportunities coming from this digital transition that was forced by COVID lockdown. There are different status that have been doing this during the recent months and customer interviews. All of these are telling us that COVID has accelerated by several years on what is digital penetration and online penetration, and even more interesting is that whenever a consumer ask if, when travel restriction and lockdown will end if we go back to the off-line channel, so they will keep shopping online. Travel is the industry where the answer for consumer are more consistent and very strong. They say that they will keep online channel as their preferred channel for booking or searching and booking the next trip. On Slide 8, we have collated some market data about what is total market in Europe for travel. And we are highlighting with the pink line, the fact that the total European travel market is not expected to recover pre-COVID level before 2024, most likely or the consensus is this one. But we are competing just in the online leisure travel. So that's a part of the total market and it's the part of the market, the segment that is expected to recover quicker than the overall market and the consensus is that the leisure and online leisure especially will see pre-COVID level already next year, 2022. We are also showing here on the Slide #8 what was the CAGR of the market in the last 3 years before COVID. That was 2.6% of the overall growth. But our company during this 3 years experience, a 22% CAGR. So this is telling us that also pre-COVID we were on a growth trajectory that was out performing the overall market. And so we believe that also beyond 2022, we could envision growth rate, which is higher than the overall market. And this is possible because we are focused as I said, on leisure travel everybody understand that COVID will have an important impact and a lasting impact on business travel because companies and employees have learned to work. Also, via Zoom or via video conferencing tool. So not all the business travel that was performed pre-COVID will be needed after COVID. So there will be a material impact. But we are focusing on leisure and leisure, as we saw also in the last month of June is a segment that will recover very quickly. And we expect actually a booming demand for leisure travel as soon as the travel restriction will be lifted by the government and travel will be -- again easy for the people. We have a very important competitive advantage in terms of technology because the way we offer and bring to market holiday packages for our customers is unique in the current market situation. All our offering is sourced in real time. So every time a customer runs a search on our properties, we go to the different supplier and provider of flights of hotel of ancillary services like transfer. And we put together in a real time, the package that can be relevant, affordable and easy to use and to book for our customer. The technology behind this is quite complex. We started developing it in 2011. So there is more than 10 years of investments in this technology. And we believe that this is an advantage compared to the approach that most of our competitors are using that is building the cash in advance of packages -- so it's called the prepackage approach. The reason is that with the real-time search, you can build a package, which is really dynamic and really flexible. You don't need to define upfront what we charge the destination we want to offer, which are the departure rate you want to offer, which is the length of stay of the packages you want to offer to our customer. We let the customer decide on which day for which destination for how many days that they want to travel and to go on holiday, and we build the package, really tailor that to the individual are requested by each customer. We believe that this technology is unique in the European landscape. And we believe also that this advantage is proven by the fact that we've been signing during the last few years, different partnership agreement with some big players in the OTA landscape like Booking.com, Holidaypirates that are using our technology and Kiwi that are using our Dynamic Holiday Packages proprietary technology. But we have also now some hotel chains that are adopting the same technology and the same approach. So we've been -- and we are live as of today with a four very important hotel chain, they're all Spanish because they're very focus on leisure travel and attracting customers from all over Europe to Spanish destinations. So we are working with Melia that is globally one of the most important hotel chain in leisure travel. Palladium and PlayaSol that are two leading operating chains in Ibiza and we are in discussion also with some other players in this scheme. So we really think that our technologies is unique in the fact that different players, important players in the industry have adopted it. Is proof of the advantage that we have in this area. The other advantages that I want to pinpoint is the fact that we are really well diversified across Europe. On the Slide #10, you have a view of what is our mix of revenues by region -- by your region. As you see back in 2012, so before the position of Lastminute.com, the group was very focused on Southern Europe, with Eastern Europe representing more than 50% of the business and Spain and other markets adding a smaller part. In first half 2020 and a similar loss in 2019, so before COVID, we had U.K. in the first market because of that -- thanks to the acquisition of Lastminute.com. And then we had a very balanced mix across the different geographies. We believe that this geographical reach gives us an advantage in the current market condition because we are able to capture the demand in the different markets when the demand is there. So we saw in the first half of 2021, U.K. had a very cautious approach to the U.K. government had a very cautious approach to travel because of the concern regarding COVID. So the share of the U.K. market has dropped from 24% to less than 20%, but this drop was compensated by the growth we experienced in the German market where we were able to capture a lot of the demand that was possible, thanks to the decision of the German government to allow travel to [ New York ] and the most important beach destination of for the German market over the eastern period and now in the summer. So the footprint across all the geography, it's giving us economy of scale because the technology that we are developing is leveraged across multiple markets, so we can address a much bigger demand. And it gives so -- us also resilient because we are not dependent on a single market dynamics. Last, but not least, consider that we are competing in the holiday package segment, were we are very focused on holiday package segment. And this is a highly regulated market, where there are very important requirements, regulation that are protecting consumer travel package Directive is the most important law across Europe for this respect. And to operate in this segment, you need the license, which is different by market in most of the case, and you need the bonding and guarantee that the consumer will not lose their money in case of a disruption in the travel. And we are the only one European OTA, that is actually as of today, fully bonded in license in all the main market in Europe. And we opened also in the last month of the minor market, so we can say that we are now really in a position to address the whole European market for online leisure travel. That said that, I would leave the word to Sergio, our CFO, who will present our results and give you also some highlights of the economic and financial of the group.

Thank you very much, Andrea. Good morning to all the audience and welcome to our first semester investor call. So I will start from Page 12, just as a premise. As you know up to now we have tended to represent the key operational performance of the company with the concept of business EBITDA, which was actually -- which is the combination of the EBITDA generated from the 3 business units, the Online Travel Agents, the Metasearch business and the Media business, but in order to better represent and better show what is the overall business performance, we are now introducing the concept of adjusted EBITDA, with a couple of major differences, which is highlighted into the slides. And one is related to the revenues and margins generated from bookings that our clients do using the vouchers that we've issued in order to face the pandemic. We will have a focus on the vouchers campaign later on. Here, what we are going to do and have started to do from the first half figures, this includes these figures in the adjusted EBITDA discounts for approximately EUR 3.7 million higher margins in first half 2021. In parallel, we are now including into the adjusted EBITDA, part of the cost of the organizational machine of the company, which is mostly related to those staff functions, which are not directly attributable to the 3 business units like a piece of the legal department, like a piece of finance and so on. And also the EBITDA generated by the Cruise's business, which is the only, let me say, ventures where we have the majority, which is now included into the adjusted EBITDA. Net, we are talking about EUR 2.7 million costs included into the first half 2021. So the combination of the 2 items is, let me say, plus one versus the former business EBITDA concept. Just another couple of comments. So all the effects arising from the COVID-19 disruption, so the cost of the cancellations that we have experienced and up to a lesser extent versus last year, we are still experiencing and also the eventual misredemption generated from the vouchers that we've issued are consistently monitored below the adjusted EBITDA and obviously, within the reported EBITDA according to the international accounting standards. One last comment, all the figures that you will see from now on compared versus 2020 have been prepared restating the 2020 according to the accounting principles that we have changed at the end of 2020 and were reflected into the full year 2020 financial figures, especially regarding the consolidations and voucher treatment. You will find in the back half of the presentation and also in the interim report, a table, which is explained in detail where the restatements is affecting the figures, which are fully comparable. So going to Page 13. The message on Page 13 is that we start, as Andrea was saying before, to see from Q2, a significant strong recovery of the business, which shows that then the company when the demand is back is able to recover it. It's better is able to exploit it in order to grow again. This is very evident versus Q2 2020 and versus also Q1 2021. And if we start from the left, talking about the gross travel value, gross travel values at the end of first half has been EUR 461 million versus EUR 686 million in first half 2020. Remember, first half 2020 was affected by two record months: so January and February 2020, so you see it very clearly in the Q1 comparison, quarter-on-quarter comparison for the first quarter we are at minus 79%. January and February here where last year at a plus 20% versus the year before. But from the second quarter, there is a very significant recovery as you see. So we are 3.5x higher than what we were in Q2 2020. A similar trend is consistently represented at revenues level first half revenues are EUR 50 million versus EUR 83 million last year, so it's a minus 39%. I would say here, the trend in terms of the quarter-on-quarter comparison is similar to the one commented before. I would like just to add that the 6 percentage points of low or -- of higher gap versus last year are mostly due to the fact that, of course, the flight business has been affected by the fact that it's very difficult to fly long haul. So basically, everything we sell is regional. And so there is a lower marginality of versus the revenue per booking in -- which was last year also in the first two months, affected by a certain long-haul percentage. But if we go to gross profit level, we see that in the first half, we closed at EUR 24 million versus EUR 33 million last year, so at a minus 28%. And so we recover 10 percentage points versus the gap in revenues. And what is very interesting is the comparison in terms of gross profit incidence, gross profit percentage on revenues, which this year is 47% versus 40% last year. Here, we have the results of, I would say, a better, more efficient pricing strategy and also of the mix of sales, which is more and more affected by the growth of holiday packages. Holiday packages have recovered very significantly, especially, I would say, in Germany and France, as Andrea was saying, starting from the end of April, starting from the beginning of May. And of course, this is contributing positively to our profitability and is affecting positively our marginality as shown in this slides.

If I may add, I think it's important to highlight that we are now generating more than 70% of our gross profit from nonflight services. So the way we started 5 years ago, focusing a lot on the nonflight segment and the acquisition of Lastminute.com was strategically aimed at rebalancing our portfolio of sales, focusing more on hotels and holiday packages. The acquisition of BackBid in Germany was focused on increasing our share of -- to operate packages in the German market, which is the largest market in Europe for travel. So all the initiatives, acquisition but also the focus in the development of our platform focusing our commercial activity as really rebalanced the mix of sales back in 2014, 90% of the contribution was coming from flight. Today, it's less than 30% contribution of the nonflight segment, which, as you know, is a very low-margin competitive segment of the travel industry.

Thank you, Andrea. So if we go below gross profit, so Page 14, starting from the fixed cost. Here, we see quite [ evidently ] what is the result of the cost reduction program that we already commented a number of times, and that was launched during the initial phase of the pandemic. So we are talking about EUR 22 million versus EUR 33 million in first half last year, so approximately EUR 10.5 million less, 32% less. Of course, this includes also the government subsidies that we received for the values of our Loves schemes in the various markets where we operate, which are still active in most of the countries. Of course, the comparison versus first quarter 2020 is particularly impacted by that because in Q1 2020, the pandemic crisis raised in May, as you may remember. We will detail more the EUR 10 million in a subsequent slide. But this is very important because it completely offset the lower gross profit versus last year, which again was due to the very good results in January and February pre-pandemic. So that if you turn to adjusted EBITDA, the figure is that we are now finally back to positive in the first semester, EUR 1.5 million versus minus EUR 1.7 million last year, and what is even more important is the second quarter figure. So in the second quarter figure, as you see, we are at plus EUR 7 million versus minus EUR 6 million last year and versus minus EUR 5.5 million in Q1 2021. So we are back to a positive EBITDA generation in Q2. And as we will see later on, we are back to profitability at bottom line level from the month of June. In terms of net results, we are closing first semester at approximately minus EUR 18 million, a loss of EUR 17.7 million versus restated the number of 2020 of minus EUR 30 million. So we have EUR 12 million better that's comparable figures of the first half 2020. Out of the EUR 18 million, EUR 13 million are coming from first quarter, only EUR 5 million are coming from the second quarter, which, again, as I will show you later on, includes a positive June bottom line. In the Slide 15, we clarify where the major differences versus last year restated of EUR 30 million loss comes out. So basically, as you saw before, there are -- there is an impact of EUR 10 million of lower gross profit generated by January and February last year, which is more than compensated by the cost reduction programs and on the fixed cost, lower base of EUR 10.5 million. Then as you may remember, at the end of last year, we have sold the majority of Destination Italia, adventures that we were having -- we are still having with [indiscernible] where now we are a minority shareholder. This was impacting the last year figures and is not impacting anymore this year figure for an amount of EUR 2 million. And then the major other item is the much lower impact of cancellations, which is included into the extraordinary items for EUR 8 million. As you may remember last year, we commented a number of times we had a huge impact, more than 800,000 cancellations received within the 2020, which then affected most of the loss of last year. So if you remember, we lost EUR 62 million out of that half of the loss was related to the cancellation impact. In first semester, we have a gap up versus last year of EUR 8 million, which is significantly reducing and improving the overall figures. If we go to Page 16, we comment a bit more were the EUR 10 million -- EUR 10.5 million of lower cost base comes from. So if -- and here, we also see what is the magnitude of the cost reduction program versus pre-COVID. So we are talking about a 46% lower fixed cost base versus 2019. And what is interesting is isolate what is the part related to the, let me say, a real cost reduction actions that we have implemented, which is the one represented with blue color, the lighter and darker. So if you look, for example, at the overall savings, we are talking about EUR 7.5 million lower cost base versus 2020 and EUR 10 million lower cost base versus 2019. So we are talking about an annualized saving of approximately EUR 20 million, which is consistent with what we already represented in the last investor call in March versus the COVID situation. Both on the HR cost, we are approximately 200 people less versus what was the headcount pre-COVID. And on the operating expenses side -- on the operating expenses, we have approximately reduced of 50% the overall square meters available in the various offices, in the various facilities where we operate. We have adopted the full smart working model that now will evolve towards an hybrid smart working model, but we don't need any more or the room or the desks facilities and positions that we were having before. We have done a number of actions also on the IT side, so that we closed at EUR 8 million versus EUR 14 million which was the pre-COVID figure. On top we have the government subsidies, which is represented in the pink part of the slide. We are talking about EUR 10 million in first semester 2021 versus EUR 7 million in first semester 2020, which, of course, we're not counting the first quarter. So the initial subsidies were obtained from the end of March when we apply for it starting from Switzerland. So this gives you the perspective of what are the actions, what is the magnitude of the efficiencies that we have generated in the operational machine that we will go -- we will keep on having going forward. So it's not something that ex sector the government subsidies, which, of course, sooner or later, we'll end depending on the level of recovery of the market. All the other part is something that -- all the other part -- some part of that, I would say, Andrea, approximately half of the EUR 20 million. So at least EUR 10 million will be something that we'll keep having going forward. One more comment about June only. So before Andrea was already talking about the level of recovery that we had -- this is shown on Page 17. So this is very, very important. I mean, here, we are still at a minus 39% versus pre-COVID in terms of revenues.But if you look at the right picture at the right hand, we are in line in terms of bottom line results. So I mean this is quite impressive. So EUR 4 million generated in the single month of June. And the fact that we go from minus 39% to basically being in line is due on one side to the fact that we have a higher gross profit percentage generated from the mix of holiday packages, which have restarted and very, very significantly, as also in before from the end of April. As Andrea was saying, that represents approximately 3/4 of the profitability of the company in terms of contribution margin today, so that the gross profit on the percentage point is 49% versus 42% pre-COVID. Then there is the impact of the cost reduction program, which is additional 20 percentage points from gross profit to adjusted EBITDA level. So in terms of profitability here, we are at EUR 4.9 million in the single month of June versus 5.5% of June 2019, which corresponds to a 26% EBITDA margin versus 18%. And then we have also the impact of lower cancellations that we already mentioned and also lower depreciations due to the working hour reductions, which affected our capitalization in the development teams in 2020, which brings the net result is absolutely in line with June of pre-COVID. I think it's very, very relevant to show the comparison now versus what was the pre-COVID picture. One comment about the voucher campaign. As you remember, Page 18, we said a number of times last year, we implemented a massive cash protection program, which was not only getting money from getting financings in some cases, guaranteed from the states, but was also and probably even more importantly related to the voucher campaigns. So we have been very bold, very aggressive in launching the so-called Everyone Loves Vouchers campaign last year in order to manage our customer base, in order to dilute the refunds in terms of cash impact because of course customers use voucher when they can travel. And these generation has not been -- and the effect has been not just, let me say, a positive impact of cash, but also a very significant impact in terms of upsell. So today, for a face value of EUR 100, the customer spent EUR 150 on average for each vouchers distributed. So there is an upsell effect which is starting to be evident in our P&L and which is also included into the revenues and margin rebooking figures that was commented in the beginning. So out of 100% of voucher issue last year, 40% has been already utilized, converted up to the end of June. So 60% is still outstanding. But based on what is the pattern of utilization, which is the fact that between 7% and 10% of the monthly gross travel value is paid through vouchers, we expect approximately 95% of the outstanding vouchers to be fully utilized within the end of this year. And again, there is a positive P&L effect which is the combination of the incremental margin generated from the bookings and from also a part of revenue generated from the misredemption when the voucher expire and the customer doesn't use it at the end. In terms of cash, Page 19. Page 19 represents gross and net cash, net of the loans of the financings that we have taken in the last 18 months, so starting from the pre-COVID situation. As you see, we are at, I would say, record level, over EUR 150 million, EUR 154 million of the end of the semester, which corresponds to approximately EUR 58 million in terms of net financial position in terms of net cash. If you compare it to the figures of June last year, which is also correct in terms of comparing the high seasonality period, we are higher, EUR 20 million. So we are comparing towards EUR 133 million and EUR 33 million in terms of net financial position last year. This is significantly higher than what we were having in the first quarter end, which was EUR 120 million in terms of gross cash and EUR 11 million in terms of net financial position here. Of course, it's very evident the impact of the recovery from every April onwards. As you know, the more the business grow, the more cash we generate, we have a structural advance of cash due to the fact that we [indiscernible] from our customers, at T+1, T+2 versus when the booking is made, and we pay our suppliers with the fair [ payment ] terms depending on the various type of suppliers, flights and the hotels. Of course, from now on, from, I would say, July onwards there will be a progressive decline of cash, which is absolutely normal, based on seasonality. So we should expect a curve in the second semester which should be similar to the one that we had in the second semester of 2020. But we start from a higher start point and this level of cash, of course, keeps us -- put us in a very, very comfortable position also considering the potential which I would say are much less likely than before, but potential further impacts of eventual new variants arising on top of the delta one, which we cannot exclude until when the planet population, because of course, it's not only Europe, will be more and more vaccinated. One last comment on Page 20. Page 20 shows what is the growth of the cash versus first quarter 2021, so EUR 79 million, almost EUR 80 million is the cash impact of the recovery, which is huge, quarter-on-quarter. In the quarter, we have refunded net to banks, EUR 12 million. We have refunded net cash to customers, EUR 7 million, this is net also of the money that we have recovered from our suppliers. Our customers have utilized vouchers for approximately EUR 21 million. This is included into the figure, into the percentage figure of the utilization and conversion that I was commenting before. So that we arrived to more than EUR 150 million as of the end of the first half, which, again, Page 21, corresponds to EUR 58 million in terms of net cash, net of the EUR 86 million loan that we have in place with our key banks and which have, as we said, a number of times, a medium-term, repayment terms. So also in terms of schedule of repayment, they are absolutely in our fraction over the next 3 to 5 years. This EUR 58 million net cash is double than what we were having at the end of 2020, is higher than what we are having -- almost double than what we were having in June last year, and as I so -- as we commented before, and is approximately 5x higher than what we are having at the end of the first quarter. So I think I'm done. So thank you very much, and we are open, as always, for questions.

[Operator Instructions] The first question comes from the line of Gianmarco Bonacina with Equita.

A couple of questions for me. The first one on the vouchers, if you can confirm the amount. Not clear I read in the report, it seems it's like EUR 76 million at the end of the first semester. And which is the level you expect to reach by the end of the year in terms of usage. Also, you mentioned you expect a decrease in the net cash by the end of the year. If you can give us an estimate of what you expect for net cash for the end of the year? The last question I have is on the slide on Page 17, where you showed the solid performance for the month of June. I guess this includes, as you mentioned, the government subsidies. So it would be fair to assume that net of government subsidies, basically your performance is broadly in line with that of the volume, so basically down about 30% year-over-year. And also on these government subsidies, what visibility you have for the second half of the year?

Yes, Gianmarco. We try to start from that, and then we can [indiscernible] Andrea. So you were asking about vouchers. So we've represent it in percentage terms. So the outstanding vouchers as of the end of the first semester are EUR 80 million out of the EUR 136 million, which, as you remember, because we already showed you in the last investor call, it was the amount overall issue. So out of the EUR 80 million outstanding, we expect basically 90% to be converted, redeemed or anyway expired considering the expiration date within the end of the year. So this is the first point. Now regarding cash, in terms of gross cash, we -- of course, we will have a seasonal absorption in the second semester, which should bring us any way in a position of at least EUR 100 million, EUR 110 million as of the end of the year, with a consequence, let me say, reduction of the net cash, continuing that most of the repayment will be due from 2022 onwards. In terms of of June, June month, we have highlighted in the box, which is related to the EBITDA margin for the 26%. The fact that this is, of course, including government subsidies. So if you exclude the government subsidies from the EBITDA of June, we would be, as it is written in the note at a 19% EBITDA margin back to the 17.9% of June 2019. So we would be a little bit higher than that.

Sergio, if I make comments. Excluding the working hour reduction in subsidy, I think it's not a fair comparison because remember these are subsidies that we received to pay our employees because they are not working. We -- thanks to the subsidiary, we decided not to cut more than what we did our work force and to keep more people employed than we need for the current level of business. And these people are on average, let's say, working at 50% of their normal working hours in the current month. So if we would not have had the government subsidy, we would have to fire more people because we don't need all the people that we have currently in the company to run this level of business, but is still 40% lower than what we wanted pre-COVID. So of course, it's something that is not there to stay. They are confirmed until the end of September, and we will be most likely extended further in business does not recover to the full level that we have before COVID. But the economical impact, I think, is similar to what we have been workforce reduction program, but we got to put in place in case of no subsidies from the government. And this is a special group for economies where the state has been really supporting companies, so like in plants in Switzerland and Germany but also the U.K. market for the first time ever, we introduced a [indiscernible] scheme because all the governments were aware that shock demand should not translate on a quite short term related market. So they put in place a number of initiatives to make sure that the employees could retain the job and companies in fact to [indiscernible] more people than that is manageable for the society for the company in general.

The next question comes from the line of Andy [indiscernible] with Z Capital.

I have a few questions. First, can you talk about the current environment and what your assessment is of the second half of the year for the market as a whole? I know everything is quite fluid, but your view on travel in Europe would be certainly interesting to hear.

So as you said, the market is very fluid. I can say that July closed a bit lower than June, but substantially on a similar level. Although it started higher, the swing we are seeing are very much related with any news that goes on newspaper and on television. Whenever government goes out with a statement that encourage people not to travel or actual concrete action to reduce traveling, we see softer demand. The moment the government or news about the pandemic is positive, you see an increase of the number. So I think we expect a positive Q3 because we will see July that has been a bit lower than June but still positive, although this is currently strong. And in September, we expect a good month because it's, let's say, the end of the summer season, and we expect some markets like the U.K. market that can have a strong September. Then the big question mark for everybody in the industry is what will be Q4. As of today, we are not in a position to make any judgment or giving any guidance of what Q4 could look like. I am personally optimistic because all the last data we are seeing, both in terms of vaccination rollout throughout Europe, which is -- which keeps running very strongly. And data that we are receiving from some market in some countries, about the delta variance impact and progress. You might have read that in India, which is a huge country with a huge population, the delta strike is over. They went from 400,000 new COVID cases per day to 40,000 currently with a very low vaccination rate in the population at below 5%. So it looks like even without the vaccination, the COVID is somehow becoming [indiscernible] and not having such a big impact on population, but this can change also tomorrow. So I'm not optimistic but I'm not in a position to give any guidance about Q4 because it's still very difficult to see what we have after summer.

That was helpful. On your gross profit margin, which climbed to 47% in H1, you said it's June two more packages which have a higher GP. Is that the only effect? Or is there an effect in it that hotels and other partners are offering you more generous terms and rates which has they desperately in need for you to fill their hotels to bring some traffic and then probably given you more cash for that?

No. We are passing to the consumer all the great offers that are coming from our supplier because it's true that open air and airlines are currently very aggressive. We are working a lot with our partners to bring to market a very special offer lastminute [indiscernible] were very active in this segment because it's DNA of the brand to find the best deal for our customer. But I would say that all the benefits that is given to us from the supplier's platform to the consumers. The increase profit -- gross profit margin is mainly driven by two elements. One is that, as I said, the flight segment contribution is now less than 30% of the total contribution. So progressively, we are generating more and more savings from high-margin products and less sales from low-margin services. And this is, of course, improved EBITDA average, the weighted average gross profit margin. And we are also seeing a better marketing efficiency at the moment. We are really not pushing really strong on the marketing spending because the situation is still as you just commented it's still very improved. And we don't think it's the right moment to push full throttle the marketing spending. So the marketing spending on revenue, it is a few points lower than what it was before COVID and what we also saw last year. And this is because we have been able to retain all the brand equity and all the direct no-pay traffic is still very solid. So our company represents more than 40% of total sales that are coming from no-pay channel. And relatively we're saying a bit less on the paid channel, so my [indiscernible] and affiliation of other channels where we buy the traffic.

Okay. And the third question would be about the competitive environment. What can you tell us -- how you perform versus your most important competitors now in H1? And what are the developments you're seeing in the sector, like changes in the strategy at competitors like eDreams of its planned subscription or other things? What one can tell us about that?

We are still waiting to see the report when they will be published. So we don't have any insight on the actual performance of our competitors in this moment. What we have been told from our partners, from our suppliers is that we are performing better than the average. That doesn't mean that there is no one better than us in the market. But on average, airlines and hotel providers are telling us that they have been able to rise again in May, June recover better than most of our competitors. In terms of strategy, we have done a few years ago [indiscernible] was well communicated to the market. We focus on a dynamic holiday packages where we had technology, proprietary technology that we believe is a clear competitive advantage. And we believe that the segment of holiday packages is a huge market in Europe, not the U.S. where the concept of holiday package is not developed, but Europe is a huge market where we see some fundamental changes, so the huge shift from offline to online distribution, the flexibility that dynamic holiday package compared to the additional offer in [indiscernible] the fact that traditional tour operators are very healthy on assets. They own airplanes. They own [indiscernible] hotel properties. They have a very healthy balance sheet. We are very live with on [indiscernible] asset, we just distribute and put together what is available at the moment in the market at the best of the best destination for each single customers. So we think that this is a very attractive segment where we are competitive [indiscernible] and where the dynamics of this sector are favorable for the Q1 plan like I said. Other competitors are still focusing more on the flight segment like [indiscernible] as you know according to the news, so there some good results with subscription program. I think it's a very interesting concept that we are studying, but it's a different strategy and the current situation. If we look at more of our competitors in the dynamic holiday package segment, we see some very strong competitors in the U.K. market. You might know on [ Individuals ] is a public company, you might loveholidays, which is a private company owned by private equity. So there are very strong and very good player, but the difference is that we focus just on one market that were done by the European reach. And in the current market conditions, it's a single market focus can see it is advantage while the normal condition, of course, it can drive better results because we don't make to manage the complexity of being active in many different legislation and consumer segments as we do. And longer term, we believe that leadership position in the European market, which is a lot bigger than just one single market, it's a good decision that we are making.

Okay. And last quick question, the EUR 10.6 million in extraordinary items. What do you said exactly can split that up for us?

Yes. I take responsibility. To answer to this, there are more than EUR 8 million, which is related to the long tail of COVID cancellation. So basically EUR 2 million -- approximately EUR 2 million is the impact of the new cancellations that we have received in 2021. Again, remember, last year, it was more than EUR [ 30 ] million on the overall 2020. EUR 6 million is the long tail of last year cancellations in terms of costs that we are taking when we cannot recover demand that we have refunded already to customers either because we are principally organizes packages. They have consent the packages and so we, as you know, need to refund them the regardless of the fact that we have recovered the money from the suppliers or when we have received charge slips from our customers that we cannot recover for supply. So I would say EUR 8 million out of EUR 10 million is the impact of long tail cancellations.

[Operator Instructions] The next question comes from the line of Baptiste de Leudeville with Kepler Cheuvreux.

I have a few questions. First question is about the bookings. Is it possible that you give the bookings the gross travel value for the month of June, so I can compare with 2019? That's my first question. Second question is about the B2B business, the white label business. Can you just develop on the proportion of this business compared to the global business in terms of mix revenues? And also specify the business model, the profit-sharing model and et cetera. The third question is about can you give some example of upselling because you talk about the upsell, thanks to vouchers. So can you elaborate on that? What kind of [indiscernible] you managed to do? And the last question is, actually, you mentioned my -- in the last questions from the other person -- other analysts, you mentioned a company on top of on the beach, and I didn't write the names. So can you repeat it, please?