Wonderla Holidays Limited (WONDERLA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Wonderla Holidays Limited Q3 FY '22 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Adhidev. Thank you, and over to you, sir.

Yes. Good morning, everyone. Thank you for joining us on the Wonderla Holidays Q3 FY '22 Results Call today. Today, from the Wonderla management, we have with us Mr. Arun Chittilappilly, the Managing Director; and Mr. Satheesh Seshadri, the Chief Financial Officer. I would now like to hand over the call to the management for their opening remarks and how -- just a summary on the quarter gone by and the road ahead. Over to you. Thank you.

Good morning, everyone, and welcome to the Q3 earnings of Wonderla Holidays Limited. [indiscernible] started to restore confidence and lift the spirit of citizens to go outdoors and entertainment. And we are pleased to inform that our parks were mostly operational during Q3 FY '22. Our Hyderabad and Bangalore Parks were, in fact, operational for the full quarter, whereas Cochin Park was partially operational. During Q3 FY '22, the company focused on its efforts to provide a safe environment with COVID protocols and uncompromising priority placed on protecting our people. We also paid a heightened attention to protecting our balance sheet to execute cost control initiatives and cash preservation. We've also been following a park plus strategy, wherein we try to bring in crowds to our parks after park hours. So that also has resulted in good footfalls for us. Along with our strategies, we also ran various campaigns and events and a lot of moment marketing initiatives. All these initiatives [indiscernible] seen a strong footfall during the quarter, exceeding about 3.8 lakhs. And for the 9 months, we've exceeded about 5.6 lakhs of footfalls. We are seeing some tremendous pent-up demand and desire in people to venture out again after being confined indoors for a majority of 2 years, part of the 2 years. Coming to our performance. It gives us a lot of pleasure to inform you that despite multiple headwinds, including severe weather conditions, we -- and of the prevalent fear of the third wave led by Omicron virus, we are reporting a very resilient and strong financial performance. We are also reporting better operational numbers in terms of footfalls and ARPU. Our Q3 FY '22 was the best quarter over the last 7 quarters. We are also [ tax ] positive for the first time and at INR 4.5 crores. The gross revenue for the same period was about INR 50.1 crores, and our EBITDA stood at INR 16 crores. Our performance reflects the outcome of our strategic focus on increasing footfall from various segments and our experimentation with new ideas, introducing an area of F&B and non-ticket revenue sources. Sharing updates about the current Q4 in progress and onset of third wave led by Omicron. There have been restrictions which have impacted Bangalore and Kochi Parks. The Bangalore Park was closed for 2 weekends in January and then reopened around 22nd of January 2022, whereas the Cochin Park was remained shut -- was remained -- was shut for about 2 Sundays in January 2022. We are seeing a slight -- we have seen a decline in footfall. However, I think now since the wave has abated, we are seeing recovery in footfalls. And also the restrictions on weekends have been lifted. With overall restrictions losing up gradually, we look forward to steadily moving back to pre-COVID levels of business very soon. We thank you for all your continued support and look forward to seeing you at our parks. Thank you.

Do you move forward with the QA session, sir?

Yes, please.

[Operator Instructions] We have the first question from the line of [ Nikita from Galaxy-E Investment ].

So as you mentioned that [indiscernible] strategy attracting footfalls of more than [indiscernible], how much [indiscernible] planned for this quarter?

This is the operator. Sir, can you hear us?

Yes, I can hear you. Are you able to hear my voice?

Yes. Mr. Arun is connected with us.

Yes. So I think we will keep doing events like that depending on how we see demand. So sometimes it could -- like for example, we did it for Dussehra, and we did it for New Year. So I mean, depending on how the things improve and when we see an opportunity in terms of festival or an event and where we can actually have after hours parks -- after parks, and we will do events like that. So -- but we don't have -- it's because it's something that we are doing new, we don't have a time line for it yet. But maybe in a couple of years, we will have a strong time line for that. So we could -- maybe we could do something for Holi or we could do something for Valentine's Day. But Valentine's Day, we're not doing -- because we are just coming out of the wave and we are not seeing that kind of traction yet, so maybe we will do it -- I don't see us being able to do much this quarter. We might do more in next quarter.

Okay. And is it possible to give park-wise tickets ARPU?

Satheesh, I don't know whether we usually share park-wise ticket.

We don't share park-wise ticket ARPU, but I can share the ARPU breakdown for consolidated. I can share the -- ARPU is -- we did the average ticket price for this quarter at INR 886. And our retail and F&B was about INR 303. Total ARPU was INR 1,189 And the pre-COVID level, it was INR 934. Q3 '19, '20, ARPU was INR 934. So we have done close to INR 1,200. This is basically because of the walk-in and group mix, we have a better walk-in and group mix this time.

We have the next question from the line of Nitin S Dharmawat from Aurum Capital.

Am I audible?

Yes, you are.

Yes.

Okay. So a couple of questions. You mentioned about the marketing expenses with your -- still some efforts that you're taking. So can you tell us the budgeted marketing expenses percentage of revenue for this year versus pre-COVID level?

Satheesh?

Yes, I can give you some details on that. Okay. The advertising and marketing, we have spent about close to about INR 4 crores during this quarter, okay, for a INR 50 crore revenue and the pre-COVID level, we have spent about INR 8.9 crores. I mean when I say advertising and marketing, it includes all the marketing efforts, the BD, BDPs spent, and everything together was INR 8.9 crores on a INR 73 crores revenue.

Got it. And that is for -- again, for the quarter only, right?

I'm talking about the quarter for [ '19, '20 ], pre-COVID level versus the current quarter.

Okay. Got it. My second question is you mentioned about Kochi being operational partially. So what is the situation now in the month of Jan, Kochi as well as other parks? Are they operating at full capacity or partial capacity?

There were some shutdowns for Cochin in January, but not full shutdowns, just partially weekend lockdown kind of a thing. But now as of February, everything is open.

[Operator Instructions] We take the next question from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

Sir, my question is on the footfall. So you mentioned that you have achieved around 3.8 lakhs of footfall this quarter. So can you just give me the breakup of footfalls for your various parks?

Satheesh?

Yes, sir. I can give it. Okay. We have recorded about 1,76,000 footfalls for Bangalore, 91,000 for Kochi and 1,13,000 for Hyderabad Park; 3,81,000 is the footfall for the quarter.

And this for operating at around 50% capacity in all the 3 parks, right, sir?

There's no restriction on 50% capacity.

There was some restriction, I think, some restrictions, I think, in some parks. But yes, I mean yes, but not for the entirety of the quarter. So it was sometimes, I think in the beginning, there was some restriction in Kerala -- or towards the end, I think there was restriction in Kerala, stuff like that.

Right. So when things were normalized in quarter 3, like when during the festive or before the emergence of Omicron, at that time, what was the capacity utilization for your parks? Was it better than 50%? Because I guess your revenues have now returned to 70% of pre-COVID levels in quarter 3. And Q3 is one of the important quarters for you after quarter 1. So whether the capacity utilization was much, much better in Q3?

Not yet...

Because I think there's still -- I will answer this. Not yet because I think it's still -- there are still -- we have not really had a quarter where we didn't have any restrictions. So in last quarter, there were some decisions like, for example, towards the end, we were told not to have New Year parties in Bangalore. We couldn't do any -- so a lot of some of those events have to be canceled because around New Year is when the new Omicron wave started. Everybody started panicking around end of 2021, right? So we still haven't had a quarter where all 3 of our parks are allowed full capacity.

Right, sir. Right. I understand that Q4 will be -- again, there will be some kind of...

Yes. It will be similar only -- it will be similar. It will not be full capacity. But hopefully, I mean, if there are no further lockdowns, it should be -- I mean, I think that's hopefully seeing the end of the pandemic and things should improve from now.

Yes. So my question was more from the FY '23 point of view, like if we say that now the things would move towards -- there won't be any significant restrictions from here. And Q1 is one of the strongest quarters for you. So considering that -- and you have already mentioned that you are witnessing a lot of pent-up demand, so considering that, do you expect Q1 to be...

If there are no other -- yes. I think -- sorry, I think if there are no other further restrictions, I think we should do better than pre COVID. But again, we don't know, I mean, what is going to happen and if there is a new wave or something, right? In fact, when Omicron started, everybody said the wave will happen only in February, March, but the wave happened only in January itself. So I don't think we can predict -- still, I don't think it's come to a normal stage yet. We are still in -- still going through the pandemic. So it will be hard to predict.

Right. And sir, in this quarter, we did operating margins of around -- EBITDA margins of around 29%, which is very strong considering the business environment and the way the business is shaping up, looking at the [ vulnerability ]. So if we have done 29% EBITDA margin and if things normalize in Q1 or maybe FY '23, should we expect margins to go up to around 30%, 35%, what you used to do in the historical -- historically?

Yes, sir, because it all depends on the footfall. The better the footfall, the capacity is there. Once the footfall improves, the EBITDA margin will improve.

Absolutely. And sir, one last one, if I can. In Q3, which was one of your strongest days where the footfalls were [indiscernible] and if you can share that number.

I'll give it to you.

Yes. Sorry, yes. So I was saying -- the call drops. So as I was saying, we still don't know how it's going to play out, but it looks like all the signs are showing that there won't be much restriction. And if there is no other major variant of concern or things like that, I think we should be -- have good footfalls going forward.

And sir, on the number -- footfall number, which was one of the strongest day or a weekend where you have seen footfalls hitting maximum in Q3?

We have taken about more than 6,000 numbers in Bangalore Park on a particular day. And the date in October.

And that was how much of that particular day capacity?

See, each park for us can easily do about 9,000, okay. And we have also handled beyond that. And so on that particular day, our maximum footfall was in Bangalore Park with 6,300 numbers, close to 6,300 numbers. And overall footfall was about 10,000 on 15th. And 16th of October, we had about 11,700 footfalls.

That is overall for all the 3 parks?

All 3 parks together. And again, Bangalore was the highest with INR 6,200.

Yes. So that is wonderful to hear. So we can consider -- we can -- from this, we can indicate how the demand is shaping up for you, so that's wonderful to hear. And all the best for your future quarters.

[Operator Instructions] We have the next question from the line of [indiscernible] Capital.

I have basically 2 to ask. Number one, what is your park-wise mix of tickets to non-ticket spend for this quarter? And secondly, the third wave [ resizing ], how -- what would be your immediate medium-term plan for the coming quarters?

So our mix of ticket and non-ticket is about 75%, 25%. And I mean, obviously, we are in a recovery mode again after the third wave, so we need to like ramp up footfall. But usually, Q4 is not really a very strong quarter for us, so we don't do too much of -- there's no -- I mean, it's also an exam quarter, so a lot of kids have exams and things like that, so not really a very strong quarter. But we also do -- we will -- depending on how we see footfall trends emerging, and I think they're emerging quite well. We will do different marketing spend. But mostly, we don't do too much because we usually do -- we save that for -- towards the end of the quarter when we are -- when our summer season starts. So it's not -- we don't do that much in Q4.

We have the next question from the line of Manoj Dua from Geometric.

In the last 7, 8 quarters, we were battling with pandemic and so it was a different battle. Now assuming that pandemic is over in terms of [indiscernible], is it the right time to ask what new initiatives this company is thinking going forward [indiscernible] to add? What about the Chennai Park? So a little bit forward looking at what you can do [indiscernible], that's my only question.

Yes. So I mean, like I said before, once the footfalls are stable, and I think they are getting there almost, I think we should be able to look at new projects. So we are definitely looking at Chennai and our park in Bhubaneswar. I think maybe by the end of this quarter, we will finalize which one of these we'll take it forward in the next financial year. Most likely, I think we will start off with our Orissa project. And I think we will -- when there is a final announcement on this, we will definitely keep you updated. And Chennai also, I think we are still working with the government to see whether we can remove the deadlock on this. So as and when there is news, we will keep you updated.

[Operator Instructions] We have the next question from the line of Meet Jagani from PS Associates.

Congratulations for a good quarter compared to last 7 quarters. So my question is, are we sticking to our expansion plan starting from April 2022? Or shall we still wait for seeing how the pandemic evolves?

No, I think we are reasonably confident that, I mean, the worst is over, so we are definitely kickstarting all our expansion plan. As and when there are updates, we will keep you posted like I just said. We don't have anything to announce right now, but whenever there are updates on this, we will [indiscernible].

Because if we go with the Orissa Park first, will you take this [indiscernible]?

We can't hear you. I couldn't hear the question.

Suppose if we go for the Orissa Park first, as you mentioned in the last question, should it also take 2 years for completion of that park for going [indiscernible]?

It will take about 2 years, roughly 2 years is the time line for us to complete one project.

We have the next question from the line of [indiscernible] who's an individual investor.

Yes. Actually, I just want to know whether we are going to participate in the auction for Imagicaa that is going to happen in this month.

Sorry, I didn't hear that clearly. Can you please repeat it?

Yes. I just want to ask, like are we going to participate in the Imagicaa auction that is going to happen in this month?

Probably not because I think it's a very -- I think there's too many issues with that -- for us, that doesn't look very attractive. We are not willing -- we are not going to invest directly in it. If some [indiscernible] or somebody else invest, we are willing to help them with it. We are not going to invest directly in it. I mean that's not what we are looking at right now.

But [indiscernible] given that they have given [indiscernible] very big and it will actually give us an opportunity to expand to the [indiscernible].

Yes. But I think it's too -- I mean, there are too many issues with the project. And operationally also, there are issues. And I mean there are -- I mean, so -- I mean I don't know whether we'll be able to take over something like that. And also -- their footfall trends also have not been very encouraging. Even during the pandemic, they've not been able to get their numbers decent. So I mean, I don't know. It doesn't look very exciting for us. And in fact, the last [indiscernible] wanted to take over that asset, they have themselves backed out of it. So that doesn't give us a lot of confidence that -- unless somebody willing to take up the assets, we can help -- we can be an operator. But I don't think we will enter as an investor in it.

We have the next question from the line of Adhidev.

Yes. Arun and Mr. Seshadri, if you could just tell us about any inflationary pressures which are there in the business. I understand we have been in, obviously, cost savings more because of the pandemic. But when things fully normalize, how are you looking at your employee cost and other operational expenses versus pre-COVID on an absolute basis?

I think as the pandemic abates and our operations slowly ramp up to full operations, I think our costs also will go up and inflationary pressures will be there. But like we have been able to demonstrate in the last quarter, our ticket price also quite elastic, actually, we increased our ticket price, I think, almost by 30% last quarter. And still, we had good footfall. So in that sense, I think we are in a good space. We are not really concerned about inflationary pressures on our business.

Okay. And do you expect some maybe getting into maybe second half of next financial year or whatever, the ARR growth outpacing -- sorry, our ARPU growth outpacing the [indiscernible] costs? Is there some further the margin expansion possible as compared to pre-COVID levels?

Hard to say that because the main difference is we are doing a very different strategy for our marketing compared to before 2020. So it could happen, but we are not really sure how the margin expansion will happen. But I think, like I said before, the moment footfalls improve, and sentiment improves, our margins will expand. So in that sense, we are hopeful, but I cannot put a definite number on it.

Okay. And my final question is on the marketing strategy. Obviously, you had to rely on the digital format a lot in the pandemic. But now that things are opening up, so just qualitatively, how are things different -- how different are things going to be going ahead over the next 1 year?

I think a lot of this will be permanent. We realized that digital marketing is the way forward for us. So we are -- we have not really spent anything on traditional media in the last almost 2 years now, and which is a huge change for us in terms of our marketing strategy. So we are still learning the digital world as such because it's still a new area for us, but there is a huge area that we can learn, and I think we can strengthen our position in the digital world quite easily. And also for our target audience who are usually young kids and young adults, digital marketing is definitely the way of the future. So I don't think we'll go back to a traditional method any time soon unless there is a few change in the way the people behave, which I don't think will happen.

Sure, sure. So that is very helpful, yes. That answers my question.

Thank you. As we do not have any further questions, I would now like to hand the conference over to the management for closing comments.

Thank you all for participating in the Wonderla Holidays Q3 FY '22 result update. We wish you all the very best, and please stay safe and take care. Thank you.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.