Mondee Holdings, Inc. (NASDAQ:MOND) Q1 2023 Earnings Call Transcript May 15, 2023

Mondee Holdings, Inc. beats earnings expectations. Reported EPS is $-0.07, expectations were $-0.12.

Operator: Good day and welcome to the Mondee First Quarter 2023 Earnings Conference Call. Please note this event is being recorded. I’d now like to turn the conference call over to Jeff Houston, Senior Vice President. Jeff, please go ahead.

Jeff Houston: Thank you, operator, and good morning to everyone. Welcome to Mondee’s first quarter 2023 conference call. With me today our Fonder, Chairman, and CEO, Prasad Gundumogula; and Chief Financial Officer, Jesus Portillo who will also present our results. Also available for questions and answers is our Vice Chairman, Chief Strategy and Business Development Officer, Orestes Fintiklis; and Chief Operating Officer, Jim Dullum. Before we begin, I’d like to remind everyone that this call may contain forward-looking statements including statements about revenue, growth of our business, our management and government plans, and other non-historical statements as further described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Mondee’s growth, the evolution of our industry, our product development and success, our management performance and general economic and business conditions.

We undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to have a material difference from these forward-looking statements are discussed in our reports filed with the SEC and in our press release that was issued this morning. During the call, we also refer to non-GAAP financial measures. Reconciliations of the most comparable GAAP measures are also available in the press release, which is available at investors.mondee.com. With that, its my pleasure to turn the call over, Prasad?

Prasad Gundumogula: Thank you, Jeff. This morning, we are excited to welcome everyone to Mondee’s first quarter 2023 earnings call to discuss our results and positive developments. We will highlight through the call. We appreciate your interest, whether you are a shareholder, a client, supplier, business partner, employee, prospective shareholders or analysts. I will begin today’s call with a summary of our business highlights and strategy, and then I will turn the call over to our CFO, Jesus Portillo for a more detailed review of our financial results and outlook. We will then conclude the session with time to answer a few questions. We are pleased to begin 2023 with strong first quarter results. Mondee continued to deliver profitable growth.

Gross revenue of approximately $700 million was 146% of first quarter 2022, while net revenue of approximately $50 million was 128% of first quarter ’22, even though the international travel market only recovered to about 82% from its pre-pandemic peak. Equally important as our continuing growth trend is that we continue to deliver profitability as we scale. First quarter adjusted EBITDA was $4 million, almost double the same period last year. Turning to Slide 4 and 5. Today, we announced two acquisitions, Interep and Consolid, this follows the Orinter acquisition in the first quarter. Beginning with Interep, which is a leading luxury Brazilian B2B travel company, with a 40-year operating history, it serves upscale leisure travelers and limited corporate customers through a distribution network of 3,100 affiliates and influencers, as well as a network of 5,000 agents.

The company has experienced strong, profitable growth, doubling its net revenues compared to pre-pandemic levels. The acquisition of Interep will further expand and diversify Mondee’s geographic footprint in Latin America, enhance its product offerings and provide a complementary distribution network to that of Orinter, Mondee’s prior acquisition in Brazil, given Interep’s focus in the luxury market and influence and drive in [ph] marketing strategies. This transaction was accretive as we paid just over three times multiple of 2022 adjusted EBITDA. We also acquired Consolid, a leading company in the Mexican B2B2C Air and Ground-Arrangement Travel Market. With an 18-year operating history, Consolid sales and estimated 1,000 customers globally, with concentrations in Mexico and LatAm, through its Consolid and travel fan [ph] plans.

The acquisition supports our continued expansion in Latin America and present several synergistic opportunities for technology and service offering deployments, as well as cross-selling within this very important growth – growing region [ph] The transaction is accretive to Mondee as we paid a four times multiple of 2022 adjusted EBITDA. Turning to Orinter, a high-growth and leading travel provider with a strong presence in Brazil and Latin America. Brazil is the largest and one of the more dynamic markets in South America, offers a natural expansion opportunity. Orinter is a disruptive growth company in a high-growth market, evidenced by its 2019 to 2022 net revenue CAGR of 38%, despite two full years of the pandemic. The acquisition will enable Mondee to broaden the distribution of Orinter’s travel content and leverage our proprietary technology platform and deploy revenue enhancements, such as fintech and ancillary solutions, while optimizing expenses to achieve meaningful top line and bottom line synergies.

The transaction was accretive with the 2022 price to EBITDA multiple of approximately four times. These acquisitions come on the heels of our acquisition of Orinter at the end of January. It was our first acquisition in Latin America and further expand and diversify Mondee’s geographical footprint, product offerings and distribution networks. Going forward, we plan to continue complementing our organic initiatives to expand our operations in Central and South America, while also exploring opportunities in other regions, such as Europe and parts of Asia. We intend to leverage our platform and marketplace to achieve sustainable growth and enhance our position as a leader in the travel industry. In January 2023, Mondee introduced the Mondee Expert Influencer Affiliate Network program, which collaborates with new travel companies, experts and influencers to enhance current customer offerings and travelers’ experiences while increasing distribution and reach.

In furtherance of this program in April we announced a new partnership with TISSINI, utilizing this program with a micro network of 55,000 U.S. Hispanic women. Mondee is aiming to align with gig workers and influencers to help airline and hotel partners find and develop new channels, such as TISSINI, which represent a new value-added channel for both suppliers and Mondee. Not only are we introducing new channels, but we are better servicing organizations that already participate in travel. Our business to enterprise, B2B segment performed very well. For example in this first quarter we added a number of customers, including a sizable enterprise customers, serving millions of close group travelers that brings significant existing flight and hotel volume to Mondee.

Within two months of going live, our seamless booking experience with privately negotiated content were able to significantly increase the number of joint flight and hotel transactions, meaningfully exceeding that customer’s expectation. The company’s clear performance is partially based on the tailwind effect of the continuing international travel recovery. This is attributed to market share gains, with expansion into product segments beyond flights and hotel such as enhanced ground transportation options and special [ph] improvements in diversified revenue streams like fintech and ancillaries. On Slide 6, to look at the major industry trends impacting Mondee’s business. While first North America domestic air was fully recovered into 2019 levels in the first quarter, international travel, which is our main business was just 82% of the 2019 pre-pandemic levels.

China, which reopened for inbound travel in January 2023 is now recovering, and we expect to experience more rapid recovery of our North America outboard travel to China in the back half of 2023, given the lead time necessary for travelers to typically plan and schedule Asia destination trips. Pandemic-led labor shortages and concerns in fleet capacity, which led to basic undersupply in air and hotel in the first year’s post pandemic are expected to gradually abate as we move through 2023 and beyond. Mondee’s modern tech platform continues to evolve and become more and more appealing to the Gen Zs and Millennials, whilst purchasing power and influence is increasing. On the headwind side, while we expect higher supplier prices to abate this year, recessions here may impact both operating costs and business demand in the short to medium term.

However, Mondee is well positioned to mitigate these headwinds through its tech platform and value-based content. Next, on technology. Mondee continues to enhance and expand the reach of its tech platform, facilitating 665,000 transactions in the first quarter ’23, representing 144% of first quarter 2022. Each transaction could include multiple flights and hotels, vacation, rentals and ancillary solutions. Diversified solutions are providing higher-margin revenue streams and driving higher take rate. Next, and excitingly, we are pleased to have recently strengthened our leadership team. First, we were thrilled to welcome Jesus Portillo to the Mondee family. He’s a seasoned global finance executive with more than 20 years of financial experience, including leading global acquisition integration, implementing, turbulence [ph] of fleet controls and procedures at WPP and most recently as a Global CFO of ThriveDX.

He joined Mondee to lead the finance function of the company during our next phase of expansion. Jesus brings a proven record of delivering results and creating value and we are very excited to work with him to accelerate Mondee’s sustainable growth. We are also excited to welcome Meredith Waters as General Counsel. Her experience and knowledge will be invaluable in helping us navigate the complex legal landscape of the travel industry and supporting our continued growth. Meredith has 15 years of corporate life experience, including serving as Senior Legal Counsel at Apple and as a corporate attorney at Kirkland & Ellis. As we continue our evolution to streamline public company position for extraordinary growth, we will continue to add top level experienced talent to our executive ranks to oversee the smooth execution of our plan and expansion.

I will now pass the call over to Jesus for a review of our financial performance and outlook. Jesus?

Jesus Portillo: Thank you, Prasad. And thanks again to our audience for attending. We’re proud of the company’s first quarter financial performance, particularly the continued growth of adjusted EBITDA profitability. Gross revenue of approximately $700 million was 146% of first quarter of ’22, while net revenue of $50 million was 128% of first quarter ’22, even though the international travel market only recovered to about 82% from its pre-pandemic peak. Take rate, which we define as net revenue divided by gross revenue, continued to be in line with our expectations. Take rate for the first quarter was 7.1%, a substantial increase from 2019’s pre-pandemic level of 4.2%, driven mostly by the success of our diversified revenue streams of ancillary and fintech solutions.

Over time, we expect take rate to continue trending upward as a higher portion of our revenue comes from a greater mix of hotels and soon cruises, events and activities, complementing the stickier and higher-margin transaction add-on revenue from ancillaries, fintech and subscription. Furthermore, we’re happy with our overall business plans. We had over 665 million transactions in the first quarter of 2023, up from 463 million in the first quarter of ’22. Turning to expenses. GAAP sales and marketing as a percentage of gross revenue decreased to 5.4% from 5.7% in the same quarter last year. G&A as a percentage of net revenue was 9%, up from 6.2% a year ago as we incorporated new public company expenses. Adjusted EBITDA was $4 million, almost double the same period last year.

Note that reconciliation of GAAP to non-GAAP are available in today’s earnings release. On a GAAP basis, the net loss was $13.3 million compared with net loss of $7 million last year. On a non-GAAP basis, adjusted net loss was $5.5 million versus a loss of $5.1 million last year. Net income loss included approximately $9 million of noncash and or nonrecurring items. Looking at our balance sheet, at the end of first quarter we had approximately $60 million of cash and $150 million of debt, compared with $79 million and $134 million respectively at the end of December 2022. This $36 million increase in net debt was due to cash used for acquisitions, as well as an increase in our debt facility by $15 million [ph] Turning to our 2023 outlook and guidance.

We now project net revenue to be in the range of $240 million to $245 million, representing year-over-year growth of 52%, measured at the midpoint. Adjusted EBITDA is still expected to be in the range of $40 million to $45 million. In summary, we believe that Mondee is in a strong financial position that will enable us to capitalize on the continued reopening of the international travel industry and in future organic and inorganic growth opportunities. I will turn it now back over to Prasad. Prasad?

Prasad Gundumogula: Thank you, Jesus. We are very pleased with our first quarter and are excited for the rest of 2023 and beyond. Mondee is truly transforming the travel industry with its modern tech platform, connecting airlines, hotels and vacation rentals with millions of users through an expanding network of travel experts, gig economy workers and social media influencers. Additionally, our comprehensive solution provides suppliers with a one-stop shop to reduce excess capacity and offer store distribution networks, not only unique privately negotiated value content but also fully fintech solutions and ancillaries, unlike the online broadcast distribution channels to market and B2C travel platforms. We work collaboratively with suppliers, which strengthens their revenue management systems or strategies.

Our content, technology and distribution uniquely positions us to continue disrupting the $1 trillion assisted and affiliated travel market. Thanks for attending our first quarter earnings call, and we look forward to your ongoing support.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question for today comes from Darren Aftahi from Roth MKM. Darren, your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Tom White of D.A. Davidson. Tom, your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Mike Grondahl of Northland Securities. Mike, your line is now open. Please go ahead.

Operator: Thank you [Operator Instructions] Our next question comes from Brett Knoblauch from Cantor Fitzgerald. Brett, your line is now open. Please go ahead.

Operator: Thank you. That concludes the Q&A for today. I’d like to turn the call back over to Jeff Houston, SVP.

Jeff Houston: Thanks, Alex, and thanks to all who tuned in for our first quarter 2023 earnings call, whether it was here on the live call, the replay or by reading the transcript. We appreciate your interest in Mondee and welcome the opportunity to further connect with you. If you have any questions or would like to learn more about Mondee, please don’t hesitate to schedule a call with us. To help facilitate meetings. We plan to attend the following investor conferences upcoming in May and June. First is the JPMorgan Global Technology Conference in Boston on May 22 through 23, then the Stifel Cross-border Conference in Boston on June 6, William Blair Growth Conference in Chicago on June 7 through 8, the Cantor Tech Conference in New York on June 14, and the Roth MKM London Conference on June 20 through 22. You can get more information at our IR website, investors.mondee.com, or send us an e-mail at ir@mondee.com. Thank you.

Operator: Thank you for joining today’s call. You may now disconnect your lines.