Jayride Group Ltd

ASX:JAY

Earnings Call Transcript

[Rodney Bishop, executive]

A little bit of technical difficulties there for Michael Brown. So today I'll do the honors. Thank you of welcoming everyone on this call to this Jayride's quarterly business review and Appendix 4C conference call for the quarter that was quarter 1 FY '23. Thank you for coming.

Today, a short call with myself, Managing Director, Rod Bishop; and CFO, Peter McWilliam. The format is a short formal presentation with some images on the screen share, followed by open table for questions and answers. So thank you. And so without any further preamble, I will hand over to myself.

Welcome. Jayride is pleased to present another growth quarter. We've started the financial year well with the continued execution of our growth strategies towards our major milestones. Today, we show quarter 1 as our second consecutive quarter that is both cash flow positive and EBITDA profitable after standstill operating costs. Standstill cash flows were positive $273,000 and standstill EBITDA profits were positive 70,000. And that is continued improvement on the 2 major milestones, which we set out earlier in the year and positions us to continue towards the next 2 milestones, which are 1 million passenger trips booked per year at $10 net revenue each together, of which will make us cash flow positive.

For quarter 1, passenger trips booked grew to 141,000, that's up 117% versus prior corresponding period. Net revenues grew to $1.25 million, that is up 157%. Contribution profits grew to $654,000, that is up 250% and cash receipts from customers grew to $1.4 million, that is up 686% versus corresponding period. And we've achieved this even as Northern Hemisphere summer starts to roll off with most of our pre-bookings in June and July, traveling in August and September as the seasonality starts to ebb, but before the Southern Hemisphere seasonality has yet to build.

So in addition to our strategies to deliver top line growth, we also improved our unit economics with a much increased net revenue per trip at $8.89, improved our refund rates, which are much reduced down to just 20% of revenue, retained our peak contribution margins at 52% for the third consecutive quarter, showed enhanced operating leverage with cash operating costs controlled and exceeded by our growing contribution profits. Contribution profits themselves alone exceeding cash operating costs for the first time ever.

And importantly, with these results, we have continued to win market share. We have continued to outperform the wider travel recovery and global market share is up 238% over the last 24 months.

You'll remember, August to October is typically, seasonally, a little slower for us as the Northern Hemisphere summer calls before the Southern Hemisphere summer builds. And yet you can see that we had more trips traveling in August than any prior month, which shows that we are winning that share.

Our results are the outcome of the work. There's a number of major improvements that we've made that are starting to come to the forefront here. With more scale, we have greater buying power and pricing power. With more automation and systemization, we have greater operating leverage. With our expanded traveler offer, that's the vehicle types and the service classes, we have increased conversion, increased net revenue per trip and especially through Booking.com and our other channels.

We have improved our traveler experience for achieving record customer retention. We're laying the groundwork for exciting European localization in future periods, and we are capturing the new Asian destinations as they pop open at last. So all up, we're growing passenger trips booked and growing net revenue per trip and those are said to continue.

So this quarter simply shows Jayride, again, building on the success of quarter 4 and off to a good start as we start to get things done for FY '23.

As in previous quarters, if there's 1 key message that I'd like shareholders to take away from the call, it's just is the macro environment might be complicated but Jayride is very simple. The business is performing well. Our strategies are working. We're early -- in an early stage and a long-term growth trajectory. And as we continue on that current trajectory that will complete a completely -- sorry, create a completely self-funding growth story.

Our 2 major milestones ahead are: 1 million passenger trips booked per year run rate; and $10 net revenue per trip at which point will be cash flow positive. And so for Jayride for 2 years, we invested for growth so that we are ready to grow now today, now that travel is resumed. And every day, we turn up and we just focus on that. We just focus on improving quality of service, adding new channels, raising completion rates, raising conversion rates and capturing those new destinations as they open.

We anticipated that the growth would bring operating leverage, profitability and cash flows, and we're pleased to report that it is doing so. And now we just need to continue to work. So today, we have this once-in-a-generation opportunity to build a much larger and more profitable Jayride. And I've said that in the past. Today's results, I believe, reaffirm that.

To reiterate, the macro is complicated, but Jayride is simple, our business is performing well. Our strategies are working. We are working simply and with purpose towards our next milestones that are 1 million plus passenger trips booked per year at $10 net revenue each that will make us a cash flow positive growth company.

For the remainder of the call, I'll hand over to Peter to talk about cash flows and then I'll take the call back and talk about the outlook and growth made. Then we'll open the room for questions. Thank you very much.

[Peter McWilliam, executive]

Thanks, Rod. This quarter, the company continued to demonstrate that it's a fundamentally improved business, having delivered standstill EBITDA and standstill cash flow positive results for the second consecutive quarter. The results for our headline numbers are: Standstill cash flow of $273,000, down on Q4's $500,000, but importantly, positive for the second quarter running and materially up on Q1's FY '22's $548,000 outflow; standstill EBITDA of $70,000 up on last quarter's $40,000 and substantially up on Q1 from FY '22's $198,000 loss.

Before covering specific areas in detail, let me say upfront, we do not expect cash burn of -- cash burn at Q1 rates. And that we have a range of initiatives in progress and expect it will be a lower number as we scale towards 1 million trips.

Having said that, let's first analyze Q1's cash flow performance. Starting with the chart at the top of Page 2, that's a chart at the bottom Page 2 row. These are the key points I'd like to make. Q1 is our second ever standstill cash flow positive result and was a material beat on Q1 FY '22.

Typically, cash flow moves around a little bit due to grants and seasonality impacts to working capital. These movements are clearly shown in the charts on screen, where the ratio of standstill cash flow is not perfectly correlated with cash receipts from customers.

I want to highlight the quality of the cash flow in Q1. This quarter is the first time -- show the waterfall chart, Rod -- this quarter is the first time our contribution alone exceeds our operating costs. Overall performance was down but the drivers of the movement were decreases in grants and working capital relative to previous periods rather than decreases to operating leverage, which as said, we achieved for the first time this period.

On screen, you can see the quality of the cash flow in the waterfall chart at the bottom of Page 2, where the majority of the cash inflows were from contribution relative to last quarter's waterfall chart.

Let's now take a look at the cash waterfall at the bottom of the page and total cash movement, in a slightly different perspective. This quarter the company deployed $1.2 million into growth initiatives to build on standstill cash flow and standstill EBITDA and move towards our 1 million passenger trips booked per EU milestone. The investments are discretionary and have been rightsized to be commensurate with our available cash resources on our path to overall cash positive.

The net cash outflows for the quarter increased from $273,000 to $1 million, but are set to decrease, again, with a number of finance initiative events set to land in Q2. These initiatives include material improvements to working capital payment cycles with transport companies and travel brands, investigation into new working capital finance facilities, to bring forward accounts receivable of greater than $800,000. R&D tax incentive and EMDG grants of $180,000 expected to be received. If you do a quick math there, you can see that the $1 million burn will come down this period.

Let's now take a look at what is driving the contribution uplift from $566,000 to $653,000 and the standstill EBITDA from $45,000 to $75,000 -- by considering the performance dashboard charts on screen and at the bottom of Page 3 of the quarterly business review. The top left, passenger trips graph shows increased scale, which when multiplied by the improving unit economics in the top right chart, particularly a big jump there in net revenue per trip and the contribution margin in the bottom left chart, these are the key drivers that are driving that contribution uplift. The standstill performance is ultimately driven by these contribution results combined with a relatively stable operating corporate cost line.

Before handing back to Rod, when you look at that bottom right-hand chart there, you should note that there is a small variance in Q1's operating cost base due to a one-off noncash adjustment. The previous results are indicative of future performance and operating and corporate costs remain fixed. In addition, for extra context, we are not seeing any impacts relating to inflation.

I will now hand back to Rod for his outlook.

[Rodney Bishop, executive]

Thank you, Peter. On to outlook. Jayride's outlook is positive. We're focused on getting things done and delivering the milestones that we said we'd deliver. Towards 1 million passenger trips booked per year run rate at $10 net revenue each at which point we have a cash flow positive growth company. We're positioned to continue to grow to exceed those milestones. So we're looking forward to substantially improve cash flows as we approach 1 million trips per year. So it's 250,000 trips per quarter we need, approximately 100,000 trips per quarter gap from today's run rate. And we'll continue to attack that trip scale and keep you up to date as those extra 100,000 trips each quarter as we bring them home.

Latest trading is positive and it shows you why we're excited to continue to work towards those trip goals with our trip growth drivers. October would ordinarily, as I mentioned before, be kind of a low month seasonality instead in the past month to 22nd October to date, we are run rating above Q1. It's a run out of 145,000 trips per quarter or $580,000 a year. That's still with Australian summer ahead with Asian destination reopenings ahead. And so you'd say that we're looking forward to expanding on that run rate and that Q2 will continue to scale and that we'll see further expansion of passenger trips booked as we progress towards, again, that 1 million trips booked per year at $10 net revenue per each.

And as we're kind of on track to exceeding that over the next few quarters, we feel well set for growth within our current means. In particular, today, we already have the [ client ] requests that we need in order to book that volume. We just need to convert them. And that conversion, that's our wheelhouse, right, improving our pricing, improving our coverage, continuing to ship our expanded offer, that's the vehicle types, the service classes. And in addition, other tailwinds at our back. We have the opportunity to capture the Oceania and Asia reopening as those destinations pop open. We are preparing to launch those further localizations in Europe.

We get to look at growth with Jayride's large travel brand partners like Booking.com and others. We have further improvements to our customer experience and revenue management practices. That's good for retention. It's also good for more net revenue per trip. We get the ability to grow our margins above 50% and then also to deploy those surplus margins into additional customer acquisition, for example, discount campaigns or ad words, preliminary returns from our latest growth investments in sales, marketing and technology. And we get to explore, we have opportunities on a couple of new complementary high-volume channels, which would be incremental to overall profits, all of which lead to further market share gains, high-volume channels and driven by our high-volume channels and our superior value proposition.

So with Jayride's momentum and the substantial market opportunity, our company intends to continue to invest in these growth initiatives within the envelope of our current growth investments. And all things considered, then look forward to more growth from here.

So that ends the formal part of today's call. And in conclusion, I would just recap to say another growth quarter in quarter 1. Our second consecutive quarter that is both cash flow positive and EBITDA profitable after standstill operating costs. Milestones continuing to be met, and we look forward to delivering those incremental trips, growing revenues, improving cash flows towards our milestones of 1 million trips at $10 each and becoming that cash flow positive and self-funding growth company.

I'd like to thank the team for delivering the result this quarter, for everyone on the call for joining us and coming this afternoon to hearing our results presentation. I'd now like to open the room for questions.

[Rodney Bishop, executive]

I think we're doing that without Michael to field the question. So I'll try to field the questions. I'm happy to take any questions.

[James Tracey, analyst]

I've got a question for you. Just first of all, around the cash flow, it seems like you've got a few little drivers of improving it in the near term. One of the things that interested me that you said was around the CapEx. So if you sort of look at operating cash flow and investing cash flows together, it was around negative $1 million in the quarter. Most of that was in CapEx, sort of $600,000-odd of CapEx. Where do you think that will be over sort of next quarter and the quarter after that? It sounds like you're dropping it down. Could you give an indication of how much that will come down in terms of -- just to help understand that cash flow profile as you move from 150,000 trips currently to the sort of 250,000 per quarter that you would need to get to the cash flow breakeven.

[Rodney Bishop, executive]

Yes, absolutely. So yes, James, you're right. So our plan is to self-fund our own growth strategy. And we have plenty of levers, lots of optionality, lots of control. So as we're working towards that 1 million trips goal at $10 net revenue per trip and at that point, to be cash flow positive, it's our growth investments have been correctly sized, we believe, to be self-funded at that point. I know the growth investment amount that we make is discretionary. We just think that it's, again, given the traction that we've got correctly sized. Also, it's delivering the things that are being built are providing incremental trips, and so keep continuing to make that investment.

So when you kind of step it forward, if you can imagine that, let's say, 250,000 trips in the quarter, $2.5 million kind of net revenue run rate, 50% contribution margin more than funds the operating and corporate cost and begins to fund, again, the entirety of the growth investment. There's a few other things to note there. The first would be, as we continue to grow scale, we'll continue to grow the working capital flows that we take as trips come on and we tend to carry the float, that is the working capital benefit that accrues to us every quarter or tends to increase. And it's the contribution plus that working capital benefit, these 2 sections here are pictured on the screen that provide the funding for the entire growth investment we're making.

So if you step forward from here and just kind of consider those 2 things, burn rate comes down overall as the contribution and surplus out of the operating business funds the growth investment.

Probably peaking at a little bit more context to that, I'll just add 1 more point, which is to say, also looking at around about, I'd say, up to, maybe not precisely, up to $1 million worth of additional cash initiatives that we've got set to land over the course of the coming quarters. And that's the R&D tax intend of receipt. We're working on tightening payment terms from travel brand partners and also we've got the ability if we want to take some sort of working capital financing facility. We have, in the past, used that. It's an option for the future as well if we need it.

[James Tracey, analyst]

Okay. And just around that CapEx point you made, do you anticipate that the growth in the contribution and the working capital elements, i.e., those 2 green things you circled earlier, will sort of rise to match the CapEx or the CapEx is going to be brought back a bit or you just going to see how you go in terms of the sales and then managing accordingly?

[Rodney Bishop, executive]

It's a good question. So the question is, am I primarily talking revenue growth or cost conservation. At the moment, I believe the costs are correctly sized the revenue growth Eclipse's cost and we become cash positive on today's cash. Let's say I got that wrong, then we have the ability if we need to taper that growth investment. At the moment, that's not plan A. Plan A is simply that we're experiencing rapid growth, and that's enough.

[James Tracey, analyst]

Yes, that makes sense. And just a sort of a final technical question just around -- that chart -- the next slide, Slide #5, just the OpEx there $698,000 and the contribution $653,000. So contribution is slightly lower than the OpEx, yes, the standstill EBITDA is positive. I mean I just want to understand the delta there, is that some kind of R&D rebate income, which is coming in? Or is it just you're stripping out the one-off cost element from that?

[Rodney Bishop, executive]

Yes, there was one row of other income there, sorry, Peter, I think that was $114,000 of other income?

[Peter McWilliam, executive]

Yes.

[James Tracey, analyst]

Yes, okay, that's a balancing figure. So perfect. Cool. And just the other thing around -- yes, just looking at the trip numbers, I think sort of might have been earlier. I don't know if you got it broken out by geography, but it looks like Asia, I understand the commentary said Asia is now above pre-COVID levels. And I think in the quarterly trip numbers, it might have been slightly below -- so I think, maybe in the sort of latest trading as is doing a bit better. Could you just talk about what you're seeing there and what the drivers of Asian performance there?

[Rodney Bishop, executive]

Very happy to, for some reason, I didn't prepare that image. So here it is. You should now see it on screen. Yes, it's a very important point. Okay, so on screen picture is our passenger trips growth around the world. A few things to note. So you see European seasonality starting to taper a little bit as we approach kind of September all of our pre-bookings for the period across summer have already been made. And so that came down a little bit. And that's what you'd expect from seasonality. U.S. held up despite the same because we have some good growth there with new suppliers and new channel partners. But the key story that really exciting one for me is Asia.

The full story in just one minute would be to say, in 2019, we launched both Asia and Europe for the first time. And Europe reopened first, and then you can see it's gone to round about fivefold multiple of where it ever was pre-pandemic. And that's on the basis of the platform that we built and the supply that we build, the channels that we built pre-pandemic, they are all in place and then the travel industry recovered and all of a sudden Jayride is 5x its size in the region.

We made the same launch in Asia. And so where I see Asia here expanding, albeit from a low base, and I mean, James, you note that it's kind of commensurate with as high as we ever got pre-pandemic. In latest trading, it is now higher than pre-pandemic, latest weeks are the highest ever. And it's coming off a low base, but it is a kind of a geometric growth. It feels almost too bullish to say that we could have the same sort of thing as we just experienced in Europe, happened again in Asia, except right now, that's the read, right? It is looking exactly like the European reopening story again, but written large again for Jayride in Asia.

The ways that, that feels is reopenings that are starting to get immediate traction. So Japan, Hong Kong, Taiwan reopened in October. It feels like Bali, which is a key destination for Australian travelers, it's already Jayride's top destination by passenger trips already this month. Fundamentally, we're quite optimistic there. It's still the same travel reopening story as we've been watching for the last 3, 4 quarters. It's just going to play out in Asia over the next period.

[James Tracey, analyst]

Okay. That's good. Another thing you mentioned, I think, maybe on the last call, you're talking sort of -- in terms of the longer term agenda, it's foreign language website for Jayride. Currently you cannot be really have English customers or people need to be able to read English to be able to book with Jayride. And presumably, in Europe and Asia and other geographies and lots people that don't speak English, so you're missing a lot of customers, even though you've got relationships with suppliers in those geographies. So do you have any sets, particularly in Europe, where I think maybe that's the biggest additional opportunity, how much of the addressable population in Europe doesn't speak English or isn't comfortable with using an English site to book their travel into Europe?

[Rodney Bishop, executive]

Yes, it's a very good point. Jayride's business at the moment is only English language, and it's a clear gap. All major OTAs go multilingual because once you've sourced supply in a destination, you may as well sell it to different traveler audiences. Right now that European business, which is, as I've said, at a multiple of pre-pandemic was all sourced U.K. travelers to Mainland Europe. But as James notes, if we've got transfers in Spain, we might as well be trying to sell them to a Spanish language audience.

And so we mentioned around about a month ago now, the appointment of Darren Carbine, our new Chief Growth Officer, London-based, to build our growth hub in Europe. And the #1 thing that led to that decision is increasing localization and regionalization of our product into European source markets.

We're starting with Spanish language. We're going to roll out languages incrementally, just one by one. To give you a feel for where we can go with that, Booking.com has 45 languages. We don't need to reinvent the wheel here. It's just about copying what other online travel agencies have done in the past. We're starting very practically. We're starting with back-end systems, transport team members, customer support team members. We'll probably start selling through off-line channels rather than on the website and then move to the website over time. And once you've unlocked 1 language regionalization, you've kind of got your playbook and you just keep rolling that out.

In terms of the potential increase to TAM in Europe, I'd suggest it's probably about an eightfold increase. So we're probably looking at something like 12% to 15% of the total addressable market is English language that we should be going after the rest of it. And so again, in terms of, I guess, near to midterm strategies, things that we think are going to drive significant trips growth towards that 1 million trips goal, European regionalization is one of the top ones.

Happy to take other questions. All right. Look, you all know me, feel free to e-mail me if you have any further questions. I'm happy to take a phone call and look forward to speaking with you again in the future.

I guess probably just to conclude, I just reiterate, Q1, another growth quarter, focused on getting the work done for FY '23. This has been our second consecutive quarter that was both cash flow positive and EBITDA profitable after standstill operating costs. And as we continue to add our next 2 milestones of 1 million trips at $10 each, that creates a cash flow positive company. And we have the legs to get there within coming quarters. So looking forward to presenting to you and telling you about how we're going to go and find those incremental trips. Again, there's a lot of drivers there, be it Asian reopening or European regionalization, and we look forward to bringing those trips on. So thank you very much for your time. We'll talk to you soon.