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Edited Transcript of EDR.MC earnings conference call or presentation 19-Nov-19 10:00am GMT

Q2 2020 eDreams Odigeo SA Earnings Call

LUXEMBOURG Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of eDreams Odigeo SA earnings conference call or presentation Tuesday, November 19, 2019 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dana Philip Dunne

eDreams ODIGEO S.A. - CEO & Executive Director

* David Elizaga Corrales

eDreams ODIGEO S.A. - CFO & Executive Director

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Conference Call Participants

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* Carlos Javier Treviño Peinador

Grupo Santander, Research Division - Equity Analyst

* Fathima-Nizla Naizer

Deutsche Bank AG, Research Division - Research Analyst

* Guilherme Macedo Sampaio

Banco Português de Investimento, S.A., Research Division - Analyst

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Presentation

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [1]

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Good morning, everyone, and thank you all for joining us today for our first half fiscal year 2020 results presentation for the 6 months ending 30th of September 2019. I am David Elizaga, CFO at eDreams ODIGEO. As always, you can find the results materials, including the presentation and our results report, on the Investor Relations section of our website.

I would like to inform you that there is a possibility to join the Investor Day, which starts right after this call via webcast. So if you're interested in joining, please send an e-mail to investors@edreamsodigeo.com and we will send you the relevant link.

Due to the fact that we will be spending the whole afternoon doing a deep dive on our strategy, this presentation is focused on the results of the past quarter and first half of the financial year. And we kindly ask you that in the Q&A session of this call, you only raise questions on the financial results. For all other strategic questions, we kindly ask you to do them in the afternoon session. Or if you will not join the afternoon session, then please contact us afterwards.

I will now pass you over to Dana Dunne, our CEO, who will take you through the first part of the presentation.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [2]

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Thank you, David, and good morning, everyone. Thank you for joining us today. I'll give you an overview of our first half results. Following this, David will take you through the performance of our condensed consolidated interim financial statements in more detail. I will then conclude today's presentation with our outlook for this current fiscal year.

Let's turn to Slide 4. I'm pleased to say that we have achieved solid results in the period with first half performance in line with our guidance to the market. Bookings returned to growth. In Q2 FY '20, bookings grew by 2% year-on-year and reached 5.8 million in H1 FY '20. That's up 0.4% versus the same period last financial year. This growth in bookings has been accelerating during the quarter with the month of September growing at 3.8% year-on-year. It is worth noting as well that growth in bookings has been achieved after absorbing the SEO changes introduced by Google and our own push of our Prime subscription service, which has a short-term impact of lowering booking growth.

Revenue margin was EUR 281.2 million. That's a 5% increase year-on-year, driven by an increase in revenue margin per booking, which also grew by 5%. Adjusted EBITDA reached EUR 57.2 million. And that's a 9% increase year-on-year. Also, cash position, net of overdrafts, improved by 34% to EUR 91.4 million.

Our results have followed our guidance and reflected the seasonality and investments we made to push our Prime subscription model. For Q2, we guided that expected growth in bookings, revenue margin and adjusted EBITDA will be in line with our full year guidance with quarterly variations due to the timing of changes we made in the last fiscal year.

Results have been in line with guidance, except for revenue margin, which has been better than expected. In H1, revenue diversification initiatives delivered strong results. Revenue diversification ratio increased to 48% from 41% in the same period last year. Product diversification ratio increased to 80% from 64%. Overall, our revenue diversification is very strong, as you can see from our revenue diversification and product diversification ratios.

I'm especially pleased with dynamic packages as well as ancillaries with both growing revenues over 30% year-on-year. At the same time, other products are not showing a satisfactory performance. For example, we recently changed our car provider, and we are not pleased with the performance.

Our industry-leading subscription program, Prime, is proving very successful. The number of subscribers continues to increase and, as of today, has reached 450,000 subscribers. And 4 of our largest markets are already in Prime. In addition, mobile bookings continue to grow and reached 45% of total flight bookings in Q2 FY '20. That's 4 percentage points above the same period last year.

Overall, we have delivered a solid set of first half of year results, which are in line with our guidance. Also, our revenue diversification is paying off, growing diversification revenues at 20% year-on-year and is now 69% larger than our classic customer revenue. I'm pleased to say that our encouraging first half year results means we are on track to meet our full year guidance targets.

I would also like to announce that a share repurchase program will be implemented for a total of EUR 10 million. Our overriding objective is to generate value for shareholders, both through share price appreciation and eventually by returning cash to shareholders. As we have said before, we are well positioned to pursue growth opportunities that enhance shareholder value.

At the same time, we believe our current financial condition allows us to continue to pursue these growth opportunities and also to dedicate EUR 10 million of cash to fund the long-term incentive plan for employees of the company. We believe this decision demonstrates the confidence of our Board of Directors and the strength of our competitive position and our strategy going forward.

Moving to Slide 5. Diversification revenues continue to drive growth as the largest revenue contributor with revenues increasing 20% in the first half of this fiscal year. And that represents now 48% of our total company revenues. This impressive growth offsets our intentional reduction in classic customer revenues, which have decreased to account for 32% of the group's revenue margin in Q2. That's down from 40% in the same period last year.

This is the first year in which diversification revenues are larger than classic customer revenues, which is a major milestone for eDreams ODIGEO. With the shift in our revenue model, we have had significant success. The product diversification ratio and revenue diversification ratio have increased to 80% and 48% in Q2 FY '20. And that's from 64% and 41% in the same period the year earlier. That's a remarkable 16 and 7 percentage point expansion in only 1 year.

Please now turn to Slide 6, where you can see the progress we have made in performing against some of our other KPIs. We are continuing to make good progress on our other 3 KPIs as we successfully execute our strategy. On an annualized basis, our customer repeat booking rate has increased by 2% since last year to 46%. As we increase price transparency, there have been some short-term impacts on traffic and the number of bookings. We are confident that this short-term impact will lead to an improved performance through increased loyalty as customers return to make additional bookings, offsetting any initial impact.

We have been seeing this in the segments of our business and that have been using the new price display for more than a year. If we look at mobile bookings as a share of flight bookings, you will see that we have significantly increased the number of customer bookings through our mobile channel. In the last 5 years, we've gone from 18% of our total bookings being via mobile device to 45% of our total bookings.

Lastly, on KPIs. Let's look at the changes to acquisition cost per booking index. Assessing the change in acquisition cost per booking index year-on-year, you can see that has improved by 6 percentage points. This was due to acquisition channel optimizations with a focus on app, CRM and Prime. We estimate that roughly 3% of the percentage points decrease of this quarter are likely to repeat on an ongoing basis while roughly another 3 percent points correspond more to actions which are less likely to repeat.

With that, I'd now like to hand you back to David, who will take you through our consolidated results.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [3]

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Thank you, Dana, and good afternoon, everyone. If you could all please turn to Slide 8 of the presentation, I will take you through the financial results in more detail. I'm pleased to say that we have achieved solid results in the period with first half performance as guided to the market.

Looking at the income statement for the first half of fiscal '20 on Slide 8. You can see that revenue margin has increased by 5% to EUR 281.2 million, reflecting the increased diversification revenue and, as a result, an increase of 5% in revenue margin per booking. This is directly due to the execution of our strategy as we accelerate investment in the transition to mobile and diversify our revenue model.

On the cost side, variable costs grew by 5% as a result of higher merchant costs due to strong growth in Rest of World markets as well as new variable costs related to the sale of ancillaries. Our fixed costs increased by 2% due to higher investment in platform capacity. And as a result of the previous, adjusted EBITDA for the first half amounted to EUR 57.2 million, up 9% year-on-year.

If we continue going down in the income statement, you will see that EBITDA decreased by 9%. This was due to the increase in our nonrecurring items, mostly because of the provision related to the social plans regarding the closing of the Milan and Berlin call centers for a total amount of EUR 6.3 million. I'm pleased to inform you that due to positive results from the negotiations, the total costs related to these social plans will be EUR 3 million below what we initially guided to the market.

We expect cost savings from fourth quarter of fiscal '20 onwards once both call centers are closed at the end of December 2019. Full details can be found in Note 2.2 of our unaudited condensed consolidated interim financial statements. Full details of nonrecurring items can be found in our results report and in the Excel file.

D&A and impairment increased by 28% relating to the increase of the software capitalized. Financial loss decreased mainly due to the cost in fiscal '19 related to the refinancing of the 2021 notes for EUR 31.4 million and the variation between the interest expense of the new notes 2023 at 5.5% coupon and the difference with the 2021 senior notes at 8.5% coupon with a positive impact of EUR 5.9 million in the first 6 months.

It is also important to note that the income tax expense increased by EUR 1.1 million from EUR 5 million to EUR 6.1 million due to a slight increase of the group's profit before tax. The incremental profit increase triggered incremental income tax at the average group tax rate. Finally, adjusted net income was EUR 20.1 million in the first half of fiscal '20, up 63% on last year. This is as a result of the increase in adjusted EBITDA plus the savings in interest expense, which flow through to the bottom line in case of the adjusted net income.

Turning now to Slide 9. I will take you through the cash flow statement. Cash position, net of overdrafts, improved by 34% to EUR 91.4 million in the first half of fiscal '20. The solid cash performance was driven by net cash from operating activities, which increased by EUR 26.3 million. And that is mainly reflecting the lower outflow in working capital due to higher merchant share, an increase in the average gross sale per booking and working capital optimization measures, mainly focused on the improvement of commissions collection and conditions with credit card suppliers, which was offset by unfavorable geographical and regular versus low-cost mix, which affected the second quarter of fiscal '20.

A reduction on income tax paid. Income tax paid decreased by EUR 3.8 million from EUR 9.4 million to EUR 5.6 million due to lower income tax payments in Spain, which is caused by the fact that in fiscal '19, an overpayment of advanced income tax had been made, which is not the case in fiscal '20, and the implementation of the new schedule in the U.K. from fiscal '20 based on which advanced payments must be made earlier than under the previous schedule and which require higher advanced payments in fiscal '20 than what we had in fiscal '19. There's been an increase in adjusted EBITDA by EUR 4.6 million and better noncash items and nonrecurring items accrued but not yet paid.

Cash used in investment of EUR 14.1 million, which was broadly in line with the same period of last year. And cash used in financing amounted to EUR 14.6 million compared to EUR 34.4 million in the same period of last year. The decrease of EUR 20.8 million in financing activities mainly relates to higher financial expenses in fiscal '19 in relation to the refinancing of the 2021 senior notes as well as a variation between the interest of the 2 bonds. Overall, we finished the first half with a solid cash position, net of overdrafts, of EUR 91.4 million, which is up 34% versus EUR 68.2 million in the first half of fiscal '19.

Let me now turn to a topic related to expected future cash flows. I would like to turn your attention to a potential change in the remittance period to IATA and the implications that this may have in our fiscal '20 cash flow. IATA has announced the elimination of the monthly remittance period in Spain and Italy and the move to a single 10-day remittance period in Spain and a 15-day remittance period in Italy as of 1st January 2020. In Spain, this process has been adopted unilaterally by IATA despite the opposition of CEAV, which is the association representing the Spanish travel agencies at IATA level and, in our view, without legitimate reasons.

As a consequence, the Spanish travel agency association as well as eDreams ODIGEO have decided to bring this case before the Madrid court in order to seek an injunction preventing IATA from enforcing the 10-day remittance period in Spain. Should the injunction not be granted in the first quarter of 2020, the group expects to have a onetime negative impact of working capital in that quarter of approximately EUR 30 million. The decision of the Board of Directors to execute a EUR 10 million equity repurchase has been taken considering this development and is not subject to the outcome of the case in court.

Before I hand back to Dana, please turn to Slide 10 for an overview of our debt position. As a result of our solid cash position, net leverage ratio was reduced from 3.4x in September '18 to 2.7x in September of 2019. In the first half, gross leverage ratio was also down from 4x in September 2018 to 3.6x in 2019, which gives us ample headroom versus our covenant ratio.

I will now turn the presentation back to Dana, who will take you through our outlook for fiscal year 2020.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [4]

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Thanks, David. Please turn now to Slide 12, where I'll talk about our outlook for the remainder of this fiscal year.

We expect overall FY '20 to be a much better year than FY '19. But it will still not reflect all of the business' underlying potential. This is because there are still a number of major markets that are still to reach the necessary 12-month maturity of our new revenue model that requires. Our results in Q2 have been in line with the guidance. From Q3 onwards, we expect bookings -- sorry, we expect growth in bookings, revenue margin and adjusted EBITDA in line with our full year guidance.

There will be quarterly variations due to the timing of the changes that we made in the last fiscal year. As a result, outlook is unchanged. And we expect our annual targets for FY 2020 to be: bookings and revenue margin to increase in the range of 4% to 7% versus FY '19 and adjusted EBITDA in the range of EUR 130 million to EUR 134 million.

With that, I would now like to open us up to questions. As David said, we would like to focus questions on first half results and keep the strategic questions for the investor strategy presentation that follows immediately after this presentation. We will start with questions from the audience and in our office, followed by one on the phone. And if there are additional time, we will answer the questions sent to us in writing on the webcast.

For the webcast, we will take questions on a first come, first serve basis, but we will also try to group questions of similar nature. Should we not have time to respond to questions from the webcast, the Investor Relations teams will make sure those are answered afterwards. So if I can ask the operator, if you could please open the conference for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Guilherme Macedo Sampaio, Banco Português de Investimento, S.A., Research Division - Analyst [2]

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Guilherme Sampaio from CaixaBank BPI. I would like to make a question regarding cash flow evolution during this quarter. If you can provide more color on what happened to working capital. You had a pretty similar variation in working capital last year. But if I recall correctly, it was due to a significant decrease in the level of bookings because you're implementing your change in price display program this year, if you can provide more color to be useful. And then in terms of recurring cash flow generation for the whole year, you mentioned that you have this effect from IATA change in payment terms. But excluding this, how do you see cash flow evolution during this year?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [3]

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David?

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [4]

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Okay. So I'll take both questions. I don't remember you have introduced yourself. For the benefit of people on the telephone and the webcast, this question comes from Guilherme Sampaio from BPI CaixaBank.

So our cash flow evolution in the second quarter, you've seen that it's been more positive than it was last year. It is still a quarter which has negative cash flow implications from a working capital perspective because of seasonality. But within that, the outflow has been much, much smaller, and that is due to, I would say, 3 main positive factors that offset some negative factors. On the positive factors, first, we have bookings in last year. Second, those bookings, on average, are coming with higher amount of basket value of those bookings, okay? So that helps us to generate more cash as well. And the third factor is that we have been successful in some working capital optimization measures, which has to do more on getting the cash quicker from our inflows and trying to get it out a little bit slower on the outflows.

There are things that we do with credit cards and things that we do on getting the commissions from the hotels and other providers quicker than we did before. The negative factors come from the fact that this is structural, right? Every year, there is a little bit of market share gain of low-cost providers from the regular providers. And there's also a bit of more international flows. And those international flows reach us a little bit later than the more European flows, let's say. That's for the second quarter.

For the recurring cash flow generation for the full year, I think what you can expect is, if I start from the top, you're going to have the EBITDA in the range that we set on the guidance, which we just reaffirmed. Then on the working capital, you need to differentiate 2 different factors. One is the ongoing evolution of the business. We continue to have guidance for the bookings to be in the range of 4% to 7% growth. And with that, you should expect some inflow of working capital, let's say, for the ongoing business. Then you have the potential, which is not confirmed, of this IATA change that we have questioned in court. And it's binomial. If we get an injunction granted from the court, there will be no effect. If we do not get the injunction granted, then it's a onetime EUR 30 million out, okay?

Taxes, in line with what you have seen previously. CapEx, you can expect to be very close to the EUR 30 million that we've been spending on an ongoing basis. And you see that for the first 6 months, we have EUR 14 million. So we're perfectly in line to get there. And then you have interest expenses, which are quite easy to forecast, right? You should have around EUR 27 million, EUR 28 million of interest expenses composed of EUR 24 million of the payment of the 5.5% of the EUR 425 million of debt. And then you have a bit more on payments for the revolving credit facility and the leases that the company has in parallel. Have I answered your question? Okay, excellent. We have another question in the room, please.

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Carlos Javier Treviño Peinador, Grupo Santander, Research Division - Equity Analyst [5]

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Carlos Treviño from Santander. So David, as a conclusion from your previous comments, excluding the one-off from the IATA topic, we should expect that working capital could improve for the full year on annual basis. Is that okay, that assumption?

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [6]

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Yes. Sorry, I just remember now that there is one more factor that I didn't mention in the question to complete the cash flow. You have some outflow. I don't know if it will be the full EUR 10 million because it depends on actual volume traded in the stock exchange, but we will invest in repurchasing shares. So that's one other factor that affects the cash flow for the year. Sorry for the interruption, Carlos.

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Carlos Javier Treviño Peinador, Grupo Santander, Research Division - Equity Analyst [7]

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That's fine. Okay. So 2 more questions from my side. And Dana, you had said that bookings in September -- growth in bookings in September was 3.8%, improving the trend in Q2. I would like to ask you for the evolution moving forward. Have you seen specifically any impact from incremental concerns on climate change, specifically in Northern European countries? Have you seen any impact of this in your business? And also, I would like to ask you about any impact from change -- recent change from Google, well, in this policy.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [8]

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Yes. Absolutely, Carlos. So the first one would be -- is about some of the changes or some of the talk that's been going on about climate change and whether it's been restricting demand or demand has gone down. I haven't seen any. And that's been more of a Northern than, let's say, Southern European topic. But when I look at just our Northern results in just those market, there hasn't been anything that I can discern materially from it. But again, there's seasonality in it. We're in a low point of the season. November is actually the lowest month of the entire year for bookings. But when I try to go through with, let's say, limited forensics right on it, there's no material -- there's no impact that I can discern from it right now.

I think your second point of your question was about the impact of Google on it. And so I think a couple of points about this. The first one is that the Google change has been, in a sense, indiscriminate, meaning it's affected everybody throughout the industry. And actually, not just in our industry but other industries as well. But it has absolutely impacted everyone. What you see within our results and within, let's say, even the 3.8% bookings growth in September is that Google effect, right, meaning it has had an impact upon us. And we have, in a sense if I can say, weathered that impact. That's what you see within our results. Now you see some others, other players in our industry that have announced and you see the results that have had a far larger impact on it. And so obviously, then the question will be, well, why? And I think really in the Strategy Day, in the strategy presentation, we're going to talk much more about that.

But if I can just summarize kind of in 30 seconds is that we have spent a lot of time over the past couple of years or several years to really build a diversified channel strategy, right? Because if you remember, when I first took over in 2015, that was probably the first topic I talked about was we are going to diversify and not be dependent upon anybody else. And then related to that is we're going to build great brands and great products and services so that customers want to come to us directly. And therefore, we're not so dependent upon third parties. And again, in the investor presentation, we'll share with you more data and more stuff about that. But that kind of gives you the little summary of about why I say that there -- yes, there has been effect on us, but maybe it's not the material effect that you've seen on some other players or participants in the industry.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [9]

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We have another question in the room.

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Fathima-Nizla Naizer, Deutsche Bank AG, Research Division - Research Analyst [10]

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Nizla from Deutsche Bank. A couple of questions from my end as well. Dana, you mentioned the Google change. Could you explain what -- perhaps what else drove the 5% increase in the variable costs for booking that we do see in the Q2 results? Was there anything else beyond that, that we should be aware of? The second question is on your diversification revenue growth. Could you give us some color as to which products really drove the growth here? And are you doing more to sort of encourage this product development? Some color there would be great.

The last question is also related to Google. I mean on the hotel side in the U.S., we are seeing some sort of -- not concern, but at least some instances where Google is getting into the OTA space a bit more on the hotel side. Just wanted to understand when it comes to flights in Q2, have you seen anything of that development on the competitive side of things from Google and how the competitive environment has been overall for you?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [11]

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Absolutely.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [12]

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So let me take the first one on the variable costs.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [13]

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Okay. Yes. And then I'll take the last 2 and you can add on the second one as well after I finish if you want.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [14]

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Okay. So on the variable cost, I want to first make a distinction because you're -- I understood in the way that you phrased it that you think the variable costs are driven by the Google change. And they're not because you need to look at the acquisition cost per booking index. In that acquisition cost, you have the -- all of the performance marketing costs, right, including Google. And that one has come down by 6 points. So that's not the factor driving the variable cost increase.

Variable cost increase has 2 main reasons. One has to do with the Rest of the World business increasing. And as the Rest of the World business increases, the percentage of merchant cost, fraud cost that we have is higher than what we get in the standard European countries, which are in our top 6. The second reason is we keep selling more ancillaries. Some of those ancillaries come with a variable cost. And you see that the product diversification ratio has gone all the way up to an index of 80%. And those are the 2 main things driving the variable cost increase, right? And now for the other 2?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [15]

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So for diversification, I think you were talking about kind of the product mix and what I see driving it. Again, the preface is we'll go much more in-depth into this in the strategy presentation, so I'm just going to try to do this quite briefly. But you're absolutely right. It's a mix of products. And some products have done very well and some haven't met my expectations just quite frankly. But you've seen overall the growth that we've been achieving in this area. Products that have been going very well for us would be dynamic packages, for example, would be one. That has been really growing in kind of anywhere, depending upon the quarters, but anywhere between 20% and 40%. So we're getting really good, very material growth in this product set. And for us, that's one of the most important quite frankly, strategically. So I take a lot of comfort from that one doing really well.

There's other ones in as well. We do very, very well, for example, in bags and seats. We do very, very well in some products that we've created ourself that most others don't have. And so David even touched on those, where some of them bring some additional variable costs. But net-net, they have a real benefit to the customer and a competitive advantage for us as well. And we'll show some of those in the investor presentation. It would be -- we've had some good growth in some newer types of products that we've just recently launched. And we've just started on ground transportation as well. And so that has been doing really well. I would say, definitely, on the flip side of where ones that haven't met my expectations is quite frankly on the car. Car is an important segment for us. We have changed provider for that of us. And I'm just not pleased with the performance that we are seeing in this area at all. And so it is one that I'm disappointed in the results on. We have a very, very small, small portion of our business on the old traditional packages. Most of it we sold off, one we held. And that has just been declining and running down for that. And I think that would be the main one. Is there anything else that...

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [16]

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No. I wouldn't add anything else to what you say.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [17]

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Okay. Good. For then the Google one, for Google Hotel...

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [18]

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The Google Hotel behavior like an OTA.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [19]

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So let me distinguish. A hotel booking, so to speak, and a flight booking are very different ones in the sense of the complexity. And we do both, remember. Because now as -- for recent years, we've actually been getting directly into the hotel market and we do hotel bookings. And so we can see very easily. A flight booking is far more complex. You have many intermediate systems and different content in different systems. So you really have to connect with lots of different systems, meaning multiple GDSs, consolidators and aggregators, directly with some airlines. There's lots of different ways just to make sure that you have the right price, the right content for it. Then similarly, you have different payment systems. We talked about this one payment system just for Spain, IATA. But France has different terms, right, which is different from Italy, which is different from Singapore, which is different from -- the complexity is just very, very substantial. And it takes a lot of effort and a lot of resources.

Now Google at least has said publicly repeatedly over the years, including even, I believe, this financial -- this year, they have said that, "We do not want to be an OTA," right, and particularly in the flights market of it. And so I take, let's say, some comfort from that and knowing the complexity of what there is to do. What I do think Google will do and is doing is definitely being a distribution partner like, let's say, a KAYAK or like a Skyscanner. And there's a couple of different models that you can do in that one. There's a general click-out model. And then there's what's called -- some people call it like a facilitated booking, which is a part of what they've been experimenting on in the U.S., for example. And in the U.S., even hotels would fall more into that type of model than really a formal like OTA type of model.

In the strategy presentation, we'll actually show you some of the results and how we have much better speed. There's a much better customer experience. And it wouldn't just be us, but it would be as an OTA versus this type of, let's say, pass-off type of model. And so if I look at it from a customer's point of view, while it may be advantageous from a Google point of view, from a customer point of view, it's not necessarily the best customer experience that there is as well. And so we do use Google as a distribution point. And we welcome that like anybody else. But I think in terms of being an OTA, it's far more difficult for it. And again, we'll take you through that in the strategy presentation with real examples and numbers. Other questions?

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [20]

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We don't have any more questions in the room. I think we now move to the phone if there are questions on the phone.

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Operator [21]

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(Operator Instructions) We have no questions registered at this time.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [22]

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Okay. In that case, let's move over to questions on the webcast. We have a question from Julia He of Napier Park. And the question says: Have you seen any shift of market share from metasearchers to Google channel in airline and in hotel? And if so, how will that affect your acquisition cost as I suppose Google is more expensive than metasearchers going forward?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [23]

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Yes. So first of all, there isn't good, let's say, industry data that's out there that's reliable to be able to talk about all different participants' market share accurately. So it would be fair to say that it just wouldn't make sense for me to start to speculate about the shift between, let's say, KAYAK, Skyscanner, Google, et cetera, on this.

The second part of it is that the question is just how you're actually thinking about Google. I mean if we're having the meta conversation and how Google is doing or for having, let's say, the SEO conversation, right? If I think about it in terms of the meta conversation, it would be fair to say that Google is coming from a place of almost nothing to you have 2 very established players in there, in that distribution market, right, KAYAK, Skyscanner, and then many other players that are smaller that have been around for 5 or 10 years for this. And so I would just expect that Google is increasing, right, in this in terms of what they're getting for it.

Now in terms of our cost position, we use any and all. We're very open to using third-party providers. We don't -- yes, we build great product and a great business and we want customers to come direct to us. But we absolutely will also use third-party providers. So we use the ones like KAYAK, Skyscanner and we use Google and Google Flights. And so we do get some of that. Therefore, you see in our total acquisition costs what it is. And it's fair to assume that one of those has been growing, right? And you've seen our total acquisition costs. So I think saying that suddenly one is going to be more expensive than the other is probably a bit difficult to say quite frankly. David?

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [24]

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I'm trying to see if we have any more questions coming on the webcast. Yes, we have additional questions coming from the webcast from a fixed income investor, Thiemo Bischoff from Robus. The first question is: Classic supply revenues increased significantly in the first half compared to the previous year. What is the key reason? And is this over-proportional increase in relation to bookings sustainable?

I'm going to take them one by one because otherwise, it's going to be too much of a mess for people listening to this. The main reason for that is -- and this is not new. On a regular basis, we get in touch with our providers and try to optimize and leverage our scale in getting better conditions in the type of volumes that we're able to provide to those providers. I mean it is -- that's the framework in which you need to look at that.

Is it sustainable? I would say, for the rest of this year, for sure. And then over time, there are many instances going into that types of bookings that we take. Are they long haul? Are they short haul? In which countries? From which type of providers? So it's making an exact description of how it's going to evolve going forward. It depends on business trends that we don't control 100%.

Then the second question is: Revenues in Germany, Nordics and U.K., please give me some color on the development in these 3 regions and countries. Is the U.K. still troublesome?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [25]

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So I mean let me just take that just briefly. The U.K. market, for a number of years, has not performed as well as others' markets. And while I can't correlate it to anything, the strongest hypothesis would definitely be Brexit, right? Because the U.K. market was growing pre Brexit announcement and then had basically a short, good period of time when the currency readjusted for the U.K. But then since then, it's been a market that has been of more, let's say, dampened-down demand would be the best way to picture it.

Our results within that context in the U.K. have been good. But our results, if I just compare our results on an absolute level of other markets, they have absolutely been better in other markets, right? And again, I think that is because of the market as opposed to because of us, right, for the U.K. For the other ones, Germany and the Nordics have been reasonably good markets for us. I think you were asking over the past couple of years. They varied from time to time. But Germany has been absolutely a very strong market, where we really have performed very, very well and continue to perform very well in that market.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [26]

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The third part of the question from this investor says: Revenues in the Rest of the World, is there any specific region or any specific country where the growth comes from? Or is it rather widespread?

I'll take that one. I would say it is -- in Rest of the World, we have a collection of more than 30 countries, right? So usually, it is very widespread. There are some of those in which we have more of a track record, and therefore, the growth is on a larger base. So there are some countries in Latin America, like Mexico, for instance, which is large, or some other countries in Europe that don't belong to the top 6, like Switzerland, that is also a very good market. But in reality, it's a very widespread performance. And you can have individual situations in which some countries go up and other countries go down.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [27]

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I think just the last point I should make that I forgot to make, which was just in Germany, all of my context was with -- I was adjusting for the change in our price display. So obviously, when we did change our price display in Germany, there was a onetime step-back of our performance in that market. But both before and ever since then, we have been doing very well.

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David Elizaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [28]

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That was the last question coming from the webcast. So with that, I'm going to thank everybody for joining the conference call, the webcast and here in person in the room.

I would like to inform you that there is the opportunity to join the Investor Day, which starts right after this call -- well, actually at 12:00 via the webcast. So if you're interested in joining, please send an e-mail to investors@edreamsodigeo.com, and we will send you the relevant link.

And before we conclude the call, I would like to inform you that on Thursday, the 27th of February, we will be hosting our conference call for the third quarter results fiscal '20, which as we did with the first quarter, will only include our financial review. And in the meantime, we will be very happy to receive your questions via our Investor Relations team or the investors e-mail address, which is investors@edreamsodigeo.com. Thank you very much.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [29]

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Thank you.