Jayride Group Ltd

ASX:JAY

Earnings Call Transcript

[Operator]

Good afternoon, everybody, and welcome to the Jayride Q2 Quarterly Business Review Investor Conference Call. With me today, I have Rod Bishop, Managing Director; and Peter McWilliam, CFO. You will see we have released 2 announcements to ASX today, and we'll present to both of those releases on this call. The first one is the quarterly business review and the second one is the exciting acquisition of the assets of AirportShuttles.com. Following Rod's and Peter's presentation, we'll then be delighted to open the line for questions. Thank you again for joining us. And on that note, I'll hand over to Rod.

[Rodney Bishop, executive]

Jayride is pleased to present another growth quarter with new markets driving record passengers booked, bringing to a close a solid first half of FY '23 with triple-digit growth and passenger trips booked, net revenues, contribution profits versus the corresponding period and the continued execution of our growth strategies towards our major milestones to support that path to cash flow positive.

The 3 key points to take away from today's call are: first, a solid quarter 2 in line with expectations for North Hemisphere winter low season and above expectations for our trips growth in Asia; second, that we are in growth mode, looking forward to quarter 3 and quarter 4 with Northern Hemisphere summer peak season, continued expansion in Asia and the delivery of major upcoming growth initiatives; and third, today's exciting announcement that we have agreed to purchase the assets of AirportShuttles.com out of bankruptcy and have a great plan to quickly deliver attractive returns.

This is our moment to really capture the opportunity to accelerate our path to cash flow positive with 1 million bus trips booked per year at $10 net revenue each and to become the world leader in rides for travelers. Good afternoon, and thanks for coming. We have 2 announcements out today, and it's a lot to cover. So we're going to go through it really fast with a lot of structure.

On today's call, the structure will be, first, that I'll provide a summary of our quarterly results for quarter 2. Then second, Peter will take you through the detail of our quarter 2 cash flows and contribution profits. And then third, I'll talk about quarter 3 and quarter 4 in 2 parts: first, how the stage is set for our fast organic expansion; and second, about that acquisition of the AirportShuttles.com assets and what that will do for us to leapfrog our growth.

And so our first in a summary form for quarter 2, passenger trips booked grew to 153,000, up 198% versus the prior corresponding period. Net revenues grew to $1.13 million, up 186% versus the prior corresponding period. Contribution profits grew to $559,000, up 234% versus prior corresponding period, and cash receipts from customers grew up to $901,000, that's up 137% versus the prior corresponding period.

Amongst that, some really interesting progress in new regions with trips in Asia up tenfold versus the prior corresponding period. Don't be surprised by net revenue in Asia. During quarter 2 FY '23 in core destinations, that's U.S., Europe, Oceania, net revenue per trip was $9.11, whereas in the new fast-growing destinations, that's primarily Asia but also South America and Africa, net revenue per trip was lower at $4.46. At the tail end of the calendar year, volume came on very strongly in Asia, and it's natural now that we need to optimize that. Net revenue per trip in Asia was less than group average, but we believe that there's no structural reason for that, and that it's just a matter of optimization now that we've got the volume.

In Europe, we had the same challenge. And since launch in Europe, we've successfully optimized that. We now need to repeat this for Asia. And so that finishes the first half with strong improvement in cash receipts from customers and standstill operating cash flows. Comparing first half of FY '23, receipts grew to 2.3 million. That's up 312% from $58,000 in the prior corresponding half. And standstill cash flows grew to a loss of only $118,000 for the full half, up from a loss of $686,000 in the prior corresponding half.

Our vision is to build the world leader for rides for travelers, and we believe still we have this once-in-a-generation opportunity to capture the market during this travel recovery. Our results are a direct outcome of the strategies that we've been implementing, and there's a number of major improvements which we made and which are starting to come to the forefront here. With more scale, we've got greater buying and pricing power. With more automation and systemization, we have greater operating leverage. With our expanded offer of vehicle types and service classes, we have increased conversion through Booking.com and other channels.

With our improved traveler experience, we're achieving record customer retention. We're laying the groundwork for exciting European localization, including multilingual. We're capturing Asian destination markets as they pop open, having a focus on yield optimization now to bring those Asian destination unit economics in line with group average.

So in summary, quarter 2 is a solid result as planned in Europe and ahead of plan in Asia on trip volume, in line with strategy to get ready for Northern Hemisphere peak summer season. And so it's setting the stage for expansion in Q3 and Q4 with Northern Hemisphere summer, the ongoing Asia recovery delivered a number of growth initiatives and the acquisition of the assets of AirportShuttles.com. We're positioned well and looking forward to a good quarter 3 and quarter 4.

For the remainder of this call, we'll talk together with Peter about our cash flows and contribution profits. Then I'll talk to the outlook and growth ahead, and then we'll open the room for questions. Over to you, Peter.

[Peter McWilliam, executive]

Thanks, Rod. Today, I'm going to cover off on standstill cash flow, standstill EBITDA and the key performance drivers. At the end of the presentation, I want you to take away that our quarterly results are in line with our expectations. We have successfully completed the capital raise to strengthen our balance sheet to self-fund our strategy. For a short period of time, we will be elevating our growth investments to capitalize on growth opportunities in coming quarters and that we are on a path and that we're accelerating towards cash flow breakeven.

So from the cash receipts chart on Page 2 of the quarterly business review. Quarterly cash receipts were up 137% and -- in Q2. And for the half year, they're up 312% up PCP. The cash -- the chart shows our consistent half yearly improvements. We believe it is most appropriate to focus on the half year given the travel market seasonality.

Moving to standstill cash flow table on Page 2. The company generated 187,000 of surplus standstill cash flow over the last 12 months. Q2's standstill cash flow and working capital on cash receipts were seasonally impacted but are expected to strongly reverse in coming quarters. The new disclosure shows the relationship between net revenue, increases in working capital on cash receipts as well as standstill EBITDA trends.

Moving to the cash waterfall chart on Page 3. The company required $118,000 of standstill cash outflow to trade the underlying business in H1. The company is temporarily, or for a short period of time, accelerating deployment of growth resources following the capital raise with $2.5 million net of R&D deployed for H1. We have a focus on capturing market share ahead of Northern Hemisphere summer, with the belief we can hit key trip and cash milestones with effective deployment. The business finished the period with $5 million of cash on hand following the capital raise.

Let's take a look at the key cash initiatives delivered on Page 3. They're not currently on screen, but I'll just cover off on them. This quarter, we improved our capital efficiency by securing an attractive $1 million financing facility that can be drawn down at our election and that can fund any working capital requirements of the underlying business. It can scale as we scale. We also renegotiated transport payments to be paid at month end rather than at start of the month. Both of these initiatives are going to improve our capital efficiency and the ability to trade off a lower cash base going forward.

Let's now take a look at standstill EBITDA. Q2 standstill EBITDA increased 69%. And in H1, it increased 91% PCP. Standstill EBITDA losses improved to $57,000 in H1 with increases -- with increased scale and operating leverage showing in the performance dashboard charts on the screen.

Driving the standstill EBITDA result. Let's take a look at each of the individual drivers. Passenger trips. Passenger trips defied seasonality with strong gains in Asia and other emerging markets. Accessing new customers in new markets and having compelling product for existing customers will drive retention and superior unit economics in future periods.

Net revenue per trip. Net revenue per trip for the half was $8.11. Net revenue per trip increased 170% in H1 PCP despite being 4% down in Q2 PCP. The net revenue per trip for mature markets is $9.11 in Q2, and in Asia and emerging markets was $4.46. The higher percentage of volume from Asia and other emerging markets created headwinds on our net revenue per trip in Q2 but did not impact the H1 result materially with it being up.

The yields optimization team is already working on these new markets. We've had to do this each time when we open up a new market, except previously, we didn't actually have a yield optimization time. So we've got more skills there, and we expect to get better results faster.

Contribution margin. Jayride's contribution profit margin increased to 49% from 42% in Q2 and to 51% from 40% in 1H on a PCP basis. We retain a policy to invest our expected surplus margin above 50% back into customer acquisition. We are constantly optimizing refund rates and other variable costs so we can free up surplus margin to be invested into more customer acquisition.

Finally, operating costs. The existing cost base has avoided inflationary cost increases to date. The company did add some new functionality where we're specifically targeting yield optimization and customer retention following the recruitment of the new Chief Growth Officer. This new cost has increased our fixed operating cost base by about $100,000 a quarter. And you can see that slight increase in the line on the chart on the right.

Before handing back to Rod, I'd like to summarize once again where I see us at. Q2 has been another solid period for the Jayride team, where we are executing in line with our plans. Our ability to secure the AirportShuttles assets at the purchase price paid, so it shows just how cash strapped and under resourced the competitive landscape is.

We have cash in bank, and are currently accelerating growth deployment to capture market share ahead of our Northern Hemisphere -- ahead of peak Northern hemisphere season. And to capture this market share -- when we will capture this market share, it will push us towards the key milestones and help us accelerate towards cash flow positive. Thank you. And back to you, Rod.

[Rodney Bishop, executive]

Thank you, Peter. On to outlook. Our outlook is positive. We're positioned for growth in passenger trips booked, net revenues, contribution profits plus improved cash flows into the second half of FY '23. In latest trading, December was Jayride's largest ever month for passenger trips booked with 53,500 trips booked. And in January, we had a run rate of 50,400 trips booked per month. That's 150,000 per quarter. And all of that is prior to the start of the Northern Hemisphere summer peak season, which will just build upon our current platform.

So first, I'd like to talk about our positive outlook on organic growth; and then second, about our new acquisition and the assets of AirportShuttles.com. Within organic growth, in order to capitalize on that expected seasonal uplift in Q3 and Q4, Jayride is investing in market expansion and its expanded travel offer to improve acquisition, conversion and retention.

In particular, Jayride expects to deliver a whole series of new deliveries this quarter ahead of that Northern Hemisphere summer season. That's the launch of Jayride's brand refresh as previewed at our 2022 AGM, the continued expansion of our Europe growth hub with related activities, including new trading and multilingual capabilities to support Europe low-class sales and support, specific activity to optimize the conversion rates and yield in Asian destination markets to bring net revenues per trip and contribution margins in line with group averages, continued deployment of surplus contribution into acquisition, continued improvements in service quality through operating enhancements and continued improvements to traveler satisfaction and retention initiatives, including, for example, the enhancements to Jayride's membership platform and travel agent portals.

Altogether, this helps us progress to our 2 major milestones ahead, that is, average net revenue of $10 per trip and growth of trips to 1 million trips booked per year, at which point we should be cash flow positive. Now towards these goals, what we should see is further growth in trips in Asia is that reopening continues. We should see increasing yield on our Asia trips as we optimize our supply base prices coverage. And then also we'll see the expansion in U.S. and Europe as that northern summer hemisphere peak season lands. And as those key initiatives that I mentioned this quarter launched.

So with this momentum and the substantial market opportunity, we intend to continue to invest in selected growth activities. And I think, as Peter noted, of note, in Q3 and just as we've seen in Q2, we will run a slightly elevated level of investment from within our cash reserves to accelerate delivery of those initiatives in order to complete their deployment and conclude their investment this quarter, ready to book travelers ahead of Q4's Northern Hemisphere summer peak season and also so that, that cost has rolled off by Q4, so the profit and contribution from those bookings drop to the bottom line and towards cash flow positive.

And then in addition, we are very pleased to announce this morning a new complementary inorganic growth strategy with the acquisition and the news that we have agreed to purchase the assets of AirportShuttles.com. We've been investigating acquisitions of complementary assets in our market for a long time, and we're pleased now to have this one here. Acquisitions, in general, are a good complementary strategy for Jayride Group. Jayride has a unique competitive advantage of the best transport supply. And so for us, acquiring new incremental paths to market will be a major strategic opportunity.

And so for this today, we're announcing the acquisition of the AirportShuttles.com assets, including their domain name, which was the best top level domain name for airport shuttles, a key element of the service that Jayride offers to travelers today. This is a good asset. It's a strong strategic fit for Jayride. We've got a clear path to integrate it, and it was purchased from bankruptcy proceedings on compelling terms.

It's a unique opportunity. We know these assets very well. We've tracked them for a long time until we now have today's opportunity to own it. By acquiring this asset, we get to add incremental and contribution positive ride bookings to Jayride Group that enhance our scale, especially in North America and that accelerate our path to cash flow positive.

So what is it? AirportShuttles.com is a website that sells airport shuttles to consumers in the U.S. Website visitors search, find rides, which they book and from which we can earn revenues. Until February of 2022 at the onset of the pandemic, Jayride was the exclusive supplier to AirportShuttles.com. The website had integrated the Jayride API and all those travelers, I mentioned, were booking Jayride rides exclusively up until the point that we ended that relationship at the onset of the pandemic, which we only did in order to reduce our credit risk.

So we know the value of the asset and the value of the traffic to Jayride very well. And the path to integrate the assets is very clear because we intend to keep the airport shuttles website in place and simply reimplement the Jayride booking system in order to resume that exclusivity and reinstate that previous revenue model, thereby monetizing the traffic and making ride bookings there once more.

So these ride bookings are interesting. They feature low cost of customer acquisition through our organic search channel that is the most significant channel to AirportShuttles.com. Also they will be prebooked, which helps to grow our cash flows, [ should enhance ] our negative working capital cycle and we get the opportunity to retain new travelers again to travel with the group. This strategy is intended to deliver quick and accretive returns to Jayride shareholders.

The website comes with some existing traffic, which we can quickly monetize. But further, it provides us with another platform to go to market with our world-leading supplier coverage to acquire and convert and retain more travelers. We spent USD 215,000 on these assets, which includes just all of the technologies, but no team members or other fixed costs. And after integration, we don't anticipate any material increase in fixed costs to maintain the asset. And so we see a very short path to generate a positive return on investment from the contribution profits that this generates. All things considered, we look forward to more growth from here.

So that ends the formal part of today's call. In conclusion, just to recap the 3 points I'd like to take away from the call are: first, a solid quarter 2, in line with expectations for Northern Hemisphere winter and above expectations for trips in Asia; second, that we are in growth mode, looking forward to quarter 3 and quarter 4, Northern Hemisphere summer peak seasons, continued expansion in Asia and the upcoming delivery of these major growth initiatives; and then third, today's exciting announcement that we have agreed to purchase the assets of AirportShuttles.com out of bankruptcy with a plan to deliver attractive returns. And that these things accelerate our path to cash flow positive towards our milestones of 1 million plus trips booked per year at $10 net revenue each and to become the world leader in rides of travelers.

I'd like to thank the team for the results this quarter and for everyone on this call for spending some time this afternoon with us. And I'd now like to open the room for questions. Thank you.

[James Tracey, analyst]

James Tracey from Veritas here. I've got a couple of questions for you. First is on this acquisition of AirportShuttles. Can you give an indication of what you think the payback period could be?

[Rodney Bishop, executive]

We aren't providing any particular outlook with it, but I would note 3 key things. Firstly, it's a very clear fit to our strategy that is a path to market for our transport content that we already have. And it is a very clear path to integrate that is the booking systems integration that we already had in place with them pre-pandemic to re-enable that, so reintegrate that supply. So it's very clear how that will work. And so lastly, when we think about the return on those trips on that traffic, we think a very compelling price we've managed to purchase it for at only USD 215,000 for the whole asset.

In terms of kind of ways to think about that, the website has a certain amount of traffic. Historically speaking, we did receive a certain amount of revenue for every website session. And so a way that you could model the outcome, you could take a look at what traffic you might expect it to have over the coming 12 months, what revenue you might expect us to derive from that traffic given all of the supply that we already have in place.

[James Tracey, analyst]

Yes, makes sense. Yes, I mean when I did that calculation, it looks like it's going to pay back within a year or so. So it's pretty decent, so okay, cool.

[Rodney Bishop, executive]

I'd add also, it's -- in addition to the platform, we have the ability to focus on growth there as well. Eventually, it doubles our consumer-facing website opportunity. We can be doing paid marketing, organic marketing, traveler retention. There's many things that we can do once we have that asset in hand. And initially, it will be AirportShuttles.com. And in the future, maybe it will be AirportShuttles brought to you by Jayride. You could integrate the member system. There's quite a lot of places you could take it, so we look forward to growing it from here.

[James Tracey, analyst]

And you did mention before that in the past, it's been the top domain for airport shuttles specifically in the U.S. It looks like sort of from my Google searching, it maybe slid down in the rankings a little bit. What's your plan to sort of get it back to where it was?

[Rodney Bishop, executive]

Yes, and beyond. First of all, it's a great natural language domain for AirportShuttles. And although its business was pre-pandemic, 70% in the U.S., we are a global company with supply globally. We think we can apply that dot-com domain name to other destinations too. So we think this has really global opportunity, starting with the U.S. and expanding beyond that. I'd just note that we have a dedicated team or specialists for exactly this problem, and they'll be committing their full energy to growing AirportShuttles alongside Jayride together over the next period.

[James Tracey, analyst]

Okay. And there's a couple of initiatives that you talked about at the AGM, the brand relaunch and multilingual. I'm hoping you could give us an update on where we're at with those.

[Rodney Bishop, executive]

Yes Happy to. The brand launched that James mentioned we teased at our November AGM. We're doing a complete rebrand of our entire platform to make it more compelling and a more professional-looking label that has benefited especially for not just leisure travelers anymore but also business travelers. We expect this to have a material increase in trust, increase in conversion rate, increase in traveler retention. That's scheduled to go out in the coming days. It is ready. We're just doing final tests, and we look forward to then trading on that for the rest of the quarter.

In addition, multilingual is a major opportunity for us going into the European summer. And what this will be is not just multilingual in the back end with trading teams and support teams, but also on the front end with a full multilingual website. I'll note AirportShuttles.com is already multilingual as a website. We'll now be adding that to the Jayride.com website, too. And look, I mean, starting with European languages, that's set to go out sometime later this quarter.

[Operator]

[Operator Instructions]

[James Tracey, analyst]

I've got another question just in the absence of anybody else asking them. Just around the net revenue per trip in the latest quarter, it sort of took a step backwards a little bit unexpectedly mostly because of Asia. You launched the business in Asia, and you haven't optimized the yields there yet. I mean how quickly do you think yield optimization can improve that Asia net revenue per trip and then also that the group net revenue per trip up to $10 target because I was tracking really nicely up until the latest quarter. It sort of make sense as to why that particular quarter was different.

[Rodney Bishop, executive]

Yes. Thank you, James. It was like drinking from a firehose a little bit in December there with Asia trip growth. We're getting a lot of trips, especially through channels like Booking.com that needed further optimization. But we took the approach simply to capture them in the first instance. There's no structural reason why Asia trips should command less net revenue to our group than other regions because of the way we contract net rate and then price to market at retail prices. We're free to set our retail price forever.

Where that comes then through in terms of opportunities, we see places now where we have volume, where we can go back to transport companies with buying power and negotiate cheaper cost prices. We see places where we're getting volume at a retail price that is considerably better than the next cheapest open. And so we have the ability to do a little bit of markup if we choose. So these sorts of optimizations are available to us. We're very familiar with them. Pete notes we have now a dedicated team that does exclusively this.

We ran this approach in Europe when we did the European expansion. And I think you can note the success in Europe as, James, you pointed out the net revenue per trip has been sequentially quarter-over-quarter increasing every quarter since, I think, 2-plus years now. And so we look forward to applying those strategies to the Asian bookings. We've already started. We're getting early signs of good success. We need to keep going, in particular, Asia trips, because it has not stopped either. So every single day, there's more opportunities to go to new places and enhance.

[James Tracey, analyst]

Right. And just on the seasonality, where you've got that chart up there of the regional trip numbers, you can see that U.S. sort of led the recovery, it's plateau-ed a bit. Europe has come back a little bit. Obviously, there's some natural seasonality at play there. What do you expect to happen, I suppose, in Europe and the U.S.? And obviously, you've got this new acquisition in the U.S. as well. I mean what's the potential for those markets?

[Rodney Bishop, executive]

In general, kind of Q1 into Q2, you start to see a bit of a step down in Northern Hemisphere market. So you can see that there in FY '22's Q1 and Q2, a bit of a decline in U.S. and a bit of a decline in Europe because it is winter. And so they are less desirable destinations to travel to, remembering that this is all about the destinations served. When you look at this Q1 and Q2, note first that the U.S. actually stayed stable for 3 consecutive quarters despite Europe -- despite winter rather. That is a good sign. And then Europe kind of performed as you'd expect, which is with around about a 30% decline from Q1 into Q2.

In terms of where we can go from here, I think it's no surprise that European destinations are very seasonal. High season is much higher than low season. And you can kind of see the growth that took place here from Q2 into Q4. Some of that was pandemic recovery, yes, but the rest of it was just natural seasonality, 22,000 up to 70,000 trips. So we're starting here again from Q2 at around about 2x of the baseline, and we're looking forward to seeing how high we can push it.

[Operator]

Would anybody else like to ask a question? Please take yourself off mute and introduce yourself. We got plenty of time to address any issues you might have.

[Rodney Bishop, executive]

I've got 1 -- actually 1 question came in here on the chat from Shuo Yang. What is your mix of B2B and B2C net revenue in Q2? And what is your ideal mix longer term? And does it change post today?

Thank you, Shuo Yang. Mix of B2B and B2C. In general, it's not a thing we disclose is the channel splits. We are about a 50-50 mix of B2B and B2C in terms of travelers coming through labels like Booking.com versus those coming through the jayride.com website. The acquisition of AirportShuttles.com is a B2C acquisition, so that will, in the short term, assuming that it's successful at driving volumes increase our B2C component, but also all the time, every quarter, we're both optimizing existing partners to get more volume from them and also signing new partners, new labels, new travel brands, new travel agencies.

In terms of kind of idealized mix, I like the mix of B2B and B2C being about even because it gives you optionality, and it also allows you certain parts to then, I guess, convert a customer that was B2B once, maybe have the opportunity if you provide good service to retain them directly next time. And so I do like a mix. I do like it to be about half-half, but I do note that the AirportShuttles acquisition is B2C.

[Peter McWilliam, executive]

Okay. Looks like you're getting off the good behavior, Rod.

[Rodney Bishop, executive]

Thank you, everyone, for attending this -- our quarter 2 quarterly business review and Appendix 4C conference call and also on the topic of the AirportShuttles.com's acquisition. A lot covered today, we went really quickly. And so just to summarize 3 key points to take away from today are: First, a solid Q2, setting up for growth in quarter 3 and quarter 4 and also the purchase of AirportShuttles.com out of bankruptcy with a great plan to deliver attractive returns.

Thank you very much for your time today and look forward to staying in touch as we get towards our February results release, which will be on the 23rd of February. Thank you.