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Edited Transcript of EDRE.MC earnings conference call or presentation 9-Jul-20 11:00am GMT

Q4 2020 eDreams Odigeo SA Earnings Call

LUXEMBOURG Aug 23, 2020 (Thomson StreetEvents) -- Edited Transcript of eDreams Odigeo SA earnings conference call or presentation Thursday, July 9, 2020 at 11:00:00am 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 de la Roz

eDreams ODIGEO S.A. - Director of IR

* David Elízaga Corrales

eDreams ODIGEO S.A. - CFO & Executive Director

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Presentation

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [1]

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Good morning, everyone, and thank you all for joining us today for our fiscal year 2020 results presentation for the 12 months ending 31st of March 2020. I'm David de la Roz, the Director of Investor Relations at eDreams ODIGEO. As always, you can find the results materials, including the presentation and our integrated annual report on the Investor Relations section of our website.

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. Good afternoon. Good morning, everyone, and thank you for joining us. Today, I'll give you an overview of our 12 months results. Following this, David Elizaga, our CFO, will take you through the performance of our consolidated financial statements in more detail. I'll then spend time on the adaptability of our business, strategy, innovation, followed by our industry review and outlook.

Please turn to Slide 4, in which I give a summary of our performance to date. The COVID-19 pandemic has had a devastating effect across the globe. It's dramatically reduced the global economy, brought much of the travel industry to a standstill, not to mention the loss of life and its effect on most people throughout the globe. Our primary concern has been to ensure the safety and well-being of our customers and employees, to protect our shareholders' interest and to treat all our key audiences fairly.

In times of crisis, the quality and capability of a team really comes to the fore, and I have been delighted with the selfless dedication and focused approach that the whole of the eDO team has adopted. I firmly believe the measures we have taken in response to COVID-19 are appropriate, and they will stand us in good stead, ahead of many others in the sector, using this as an opportunity to further strengthen our business and to seize upon the right market segments and improve our customer, service and product and ultimately, come out a winner.

Prior to the pandemic, eDreams ODIGEO had been performing well and was growing strongly. For example, bookings in December 2019 were up 11% year-on-year and continued to grow significantly in January and early February before the crisis took hold. At the March year-end, bookings were only 4% below the previous year, a highly respectful result considering the reductions in bookings of 53% in the last 5 weeks of FY '20.

Revenue margin decreased only by 1% to EUR 528.7 million, principally due to the increase in revenue margin per booking driven by revenue diversification initiatives, but, of course, offset by the lower bookings.

FY '20 group adjusted EBITDA reduced slightly from EUR 119.6 million to EUR 115.1 million and adjusted net income amounted to EUR 34.7 million, which delivers a 5-year compound annual growth rate of 21% since the implementation of our new strategy in 2015.

While many travel companies have needed to raise more money or mothball their operations, eDreams ODIGEO has been an outlier. We entered the crisis with a strong balance sheet and EUR 144 million of liquidity at the end of March. Even after the total shutdown and reduction of our bookings of up to 95% year-on-year, we still, at June 30, have EUR 142 million of pro forma liquidity, the same liquidity as at the end of March 2020, despite having gone through the 3 months of COVID-19 impact.

Our strong cash position and adaptable business model has enabled the business to endure the market closure to date and a further prolonged period of closure should that be the case.

We have acted decisively to secure the appropriate liquidity for the business by drawing down partially the cash available to us through our superior senior revolving credit facility together with the company's prudent approach to cash management, which included swift actions to minimize costs; and with the support from governments where we operate in key business partners, we have sufficient liquidity to see this through. This places eDreams ODIGEO in a strong position, not just now but for the future.

Our business has proven to be robust and adaptable. We will talk about this in detail later in the presentation, but in summary, we've a well-diversified product portfolio, and more than 80% of our costs are variable. For example, a decrease of 17% in our Q4 FY '20 revenue margin pro forma resulted in a reduction of a variable costs by 23%, and additional measures in fixed costs and CapEx added additional adaptability and flexibility to our business model.

Let me now talk about Prime. I'm pleased to say that our innovative subscription program, Prime has continued to show strong results. The number of subscribers continues to increase and in FY '20, it had an additional 391,000 subscribers join the program, reaching 556,000 at the end of March. This is up 237% versus 1 year ago.

Overall, we've delivered a solid set of 12-month results and are setting ourselves up to win post COVID-19 world by seizing the right market segments, improving our product and customers' experience.

With that, I'll now hand you over to David Elizaga, who will take you through our consolidated results, and then I'll return talking more about our strategy and outlook.

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David Elízaga 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 6, and I will take you through the financial results in more detail. Clearly, the pandemic had a significant impact in the fourth quarter of last year and on the first few months of the current year, but let's outline the fiscal '20 first.

Revenue diversification has been at the heart of our strategy, and I am pleased to report that it is on track and has been the largest contributor to fiscal '20 revenues. Diversification revenues increased by 18% in fiscal '20, representing 53% of our total revenues. This is the first full year in which diversification revenues have outstripped classic customer revenues. This is a major milestone and endorses the strategy put in place in 2017. This impressive growth offsets our planned reduction in classic customer revenues, which decreased to 30% of the group's total revenue margin in fiscal '20 from 37% in the same period of last year. In turn, the product diversification ratio and revenue diversification ratio have improved. The product diversification ratio increased from 72% to 85%, a 13 percentage point improvement, and the revenue diversification ratio increased from 44% to 53%, a 9 percentage points improvement in a single year.

Moving to Slide 7, which demonstrates the positive progress made against our other 3 KPIs. On an annualized basis and to be expected, our customer repeat booking rate decreased due to the spread of the virus, which is reflected in the stringent way in which we calculate this ratio. However, if we exclude this impact, starting same in the last week of February and we follow the trend from that point until the end of the quarter, fiscal '20 results in a 58% customer repeat bookings rate, that's a 3 percentage points improvement versus the same period last year.

Also, we continue to have further success, increasing the number of customers' booking through our mobile channel. In the last 5 years, mobile booking has risen exponentially from 18% of total bookings to 44%.

Lastly, on KPIs, let's look at the changes to the acquisition cost per booking index, which improved by 9 percentage points year-on-year. This is due to acquisition channel optimization with a focus on app, CRM and Prime.

Looking at the income statement for fiscal '20 on Slide 8. Revenue margin decreased by 1%, principally due to an increase of revenue margin per booking of 3%, but offset by lower bookings of 4%, following a 53% reduction in the last 5 weeks of fiscal '20 due to the spread of the pandemic.

On the cost side, variable costs grew 4%, driven by a one-off provision of EUR 12.3 million for bad debt and other airline risks related to the COVID-19 as well as new variable costs related to the sales of new ancillaries. Please note that the fourth quarter variable costs includes an additional EUR 3.7 million reclass from fixed costs for first 9 months in order to restate for the full fiscal '20 our new reporting classification. Full details in Note 3.2 of the consolidated financial statements.

Fixed costs decreased by 17% due to a decrease of personnel costs, fixed cost savings and lower FX impact this year. As a result, fiscal '20 adjusted EBITDA reduced slightly from EUR 119.6 million to EUR 115.1 million. If you continue down the income statement, you will note that EBITDA decreased by 14%. This was primarily due to the increase in our adjusted items by EUR 11.3 million, primarily due to the provision taken relating to the closing of the Milan and Berlin call centers, which finally cost EUR 9 million, that is EUR 2.5 million below our initial expectations. We have started to benefit from these changes from the fourth quarter of fiscal '20. The full details of the adjusted items can be found in our integrated annual report and in the Excel file.

The D&A and impairment increased, relating to an impairment charge on goodwill and brand for EUR 65.2 million and EUR 8.9 million, respectively, totaling EUR 74 million.

Our overall financial loss decreased mainly due to the assets in fiscal '19 costs related to the refinancing of our debt for EUR 31.4 million and the variation between the coupon of the new 2023 Senior Notes and the old 2021 Senior Notes.

Income tax expense decreased by EUR 12.8 million from EUR 14.2 million in fiscal '19 to EUR 1.4 million in fiscal '20, driven by the recognition of foreign tax credits.

Finally, adjusted net income was EUR 34.7 million in fiscal '20, delivering a compound annual growth rate of 21% since we implemented the change in the strategy in 2015.

Turning now to Slide 9. I will take you through the cash flow statement. In fiscal '20, despite a significant reduction in bookings in March, the group continued to have a strong balance sheet, with a liquidity position of EUR 144 million at the end of March, including EUR 60 million undrawn from our revolver. This placed us in a position of strength before the trough of COVID-19. The bottom of our liquidity position occurred at the end of April. And since then, we have increased our liquidity position and at the end of June, our pro forma liquidity was EUR 142 million, practically the same as it was at the end of March.

Cash position net of overdrafts stood at EUR 83 million at the close of fiscal '20. The cash performance during fiscal '20 was driven by: first, the net cash from operating activities, which decreased by EUR 176.8 million, mainly reflecting: higher working capital outflow of EUR 207 million due to the impact of COVID-19; income tax paid decreased by EUR 1.2 million; there's a decrease in adjusted EBITDA of EUR 4.5 million we have recovered; and an improvement in noncash items, the items accrued but not yet paid of EUR 21.3 million, mainly due to an increase in provisions.

The cash used in investments was EUR 36.2 million, and it increased mainly due to the payment made for the acquisition of Waylo of EUR 6.5 million. And we used in financing EUR 74.9 million, the variation of EUR 143 million in financing activities mainly relates to the drawdown of EUR 109.5 million under revolver, higher financial expenses in fiscal '19 in relation to the refinancing of 2021 Senior Notes as well as the variation between the interest of the 2 bonds.

Let me now update you in 2 topics. One is the change in remittance period of IATA and the implications that this has in our fiscal '20 and will have in our future cash flows. As highlighted at our first half results presentation, IATA 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 15-day remittance period in Italy as of the 1st January of 2020. As a result, both changes have been enforced from the 1st of January, which had a onetime negative impact on working capital in the fourth quarter of approximately EUR 8 million. This is lower than the EUR 30 million that we were anticipating because of the reduction in volumes triggered by COVID-19. However, when volumes return to pre-COVID-19 levels, we anticipate that our increasing payables and, therefore, our inflow of working capital will be lower than it would have been with the former remittance period.

More recently, on the 12th of June, an injunction to prevent the changes have been turned out. The company is analyzing the decision and considering its options.

And second topic that I wanted to update you on is the share issuance. On the 7th of July, in the context of our relocation to Spain, the Board of Directors resolved to issue 8.3 million new shares, corresponding to the maximum amount of shares available pursuant to the authorized capital included in our Articles of Association to serve the long-term incentive plans of the group.

The shares will be delivered to the beneficiaries in accordance with the timetable set out by the Board of Directors at the time the plans were approved and which, generally, are expected to occur on or before the publication of the company's financial results for each reporting quarter, provided that the relevant allocation parameters are met and that will happen between now and February of 2026. Any nonallocated shares at the end of the long-term incentive plans will be canceled. The new shares will be held by the group as treasury stock and therefore both the economic and political rights of the new shares will be suspended.

Turning now to Slide 10. I will take you through the COVID-19 impacts to adjusted EBITDA we expected before the crisis. You can find full detail of most of the moving parts in Note 3.2 to the audited consolidated financial statements. Without COVID-19, we would have expected to end the year with an adjusted EBITDA of EUR 134.9 million, above the top end of our guidance and with a 13% increase year-on-year. However, there have been a number of factors preventing this.

Let me start with the first block in the bridge on that slide, that is related to the volume impact. We estimate that we've had a negative impact of circa EUR 7.6 million caused by COVID-19 into the fourth quarter. This is the EBITDA that we would have generated, assuming a 4% booking growth for -- at the end of the year and a marginal profit in the fourth quarter per booking of around EUR 15.5, which is in line with what we achieved in the same quarter of fiscal '18 when we did a similar volume push to what we would have done in normal conditions in this last fourth quarter.

The second block in the bridge shows we have taken a revenue provision of EUR 9.2 million. Due to travel restrictions, the volume of cancellations has been very high and many in the future continues to be high or unusual, which negatively impacts the commission revenue we get from some of our partners.

The third block in the bridge shows we have provisioned EUR 12.3 million due to the increased risk of bankruptcies from our travel suppliers. The high volume of supply cancellations increases the flight risk of our airline partners, and we may not collect on due incentives and receive customer charge rates and we have provisioned against that.

The fourth block in the bridge shows we have been able to reduce our fixed costs as explained earlier in this presentation via personal costs and lower impact of FX.

Turning now to Slide 11. I will give you an update on the impact of COVID-19 on trading overall. As you all know, the response to the pandemic have led to a significant decrease in bookings across the travel sector as well as an unparalleled level of flight cancellations.

Before the outbreak in China of the coronavirus, we were seeing solid double-digit bookings growth in our top 6 markets, which represents 77% of our total revenues. The growth in bookings had accelerated during the third fiscal quarter with December growing rapidly at 11% year-on-year.

Post the outbreak in Europe, we saw a year-on-year reduction in bookings of 53% in the last 5 weeks of fiscal '20, which resulted in a reduction of bookings for fiscal '20 of 6% in our top 6 markets, offset somewhat by a 3% increase in the rest of the world markets, resulting at the year-end bookings only minus 4% year-on-year, a highly respectable results.

We estimate the impact on our numbers to be around 0.8 million bookings, EUR 30 million in revenue margin and EUR 20 million in adjusted EBITDA. Excluding these impacts, we would have grown 4%, 5% and 13%, respectively, in line with or above our initial guidance back in June 2019.

And before I hand back to Dana, please turn to Slide 12, which demonstrates how our business model has proven to be a strong cash generator up until the COVID-19. Without the pandemic in fiscal '20, we would have increased our recurring free cash flow by 68% to EUR 82 million. I would like to emphasize that the consolidated financial statements have been prepared on a going concern basis, as management considers that the group is in a strong financial and liquidity position and that prudent management actions since the beginning of the crisis have secured the group's position to ensure a rapid return to full operational effectiveness once normal activity resumes.

The group has access to funding from its EUR 175 million revolver, of which EUR 109.5 million have been drawn down as of 31st of March 2020.

Stress tests have been carried out, assuming significant reduction in bookings from now until the end of the fiscal year '21 with no recovery. No debt repayments are due until 2023. Our lenders have waived the only covenant on our revolving credit facility, achieving further flexibility for the company. We believe the scenarios of these stress tests are prudent and may well be proven in the future to be too cautious.

Despite showing reductions of up to 95% in bookings at the end of March, the group continues to have a strong balance sheet, with its liquidity position at the trough of the COVID-19 cash cycle in April of EUR 81 million and pro forma liquidity at the end of June of EUR 142 million.

I would like to inform you that as of next week, we have notified our lenders that we will be reducing progressively the use of our revolver, as there is no point paying interest on it if it is not actually needed and we have sufficient cash in hand from the normal operations of the business.

I will now turn the presentation back to Dana, who will take you through an update on the adaptability of our business model and the strategy.

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

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Thank you, David. Normally, I give in this section a detailed review of our strategy at the year-end call and discuss our guidance for the upcoming year. Given COVID-19, I will alter this. In this section, I'll discuss the adaptability of our business model given the current environment, briefly review our strategy, and I will discuss the industry outlook and changes due to COVID-19 and how we are responding to these changes and shaping them to our advantage.

With that, please turn to Slide 14, where I give an update on why our business is robust and adaptable, especially in the current environment. We've consistently grown our revenues and EBITDA over the past 5 years. And importantly, our Prime subscription program provides us with a fixed revenue stream (technical difficulty), and we're the market leader in flights in Europe.

Please move to Slide 15. A key point of our adaptability is our cost structure and how we manage that with our business model. More than 80% of our costs are variable with ability to adapt and rapidly reduce fixed costs and CapEx if needed. This is proven by what we've seen recently. We decreased 17% in our Q4 FY '20 revenue margin pro forma and resulted in a reduction in our variable costs of 23%.

In addition, the measures rapidly put in place post the outbreak of the pandemic, resulting in an estimated EUR 28 million of cash savings, decreasing our annualized FY '21 fixed costs, CapEx and cash needs versus the third quarter FY '20 levels.

Let's turn to Slide 16. Our increasing diversification is further building our adaptability. Diversification revenues, our largest contributor, have driven our growth with revenues increasing at a CAGR of 19% between FY '15 and FY '20. This increase in diversification as well as revenues in the rest of the world market is contributing to the adaptability of our business through greater products and services as well as geographies.

Our brands, they're strong. We are the flight OTA with the highest branded average monthly queries on Google in all European countries, which allows for a very effective capture of customers' end demand and resiliency. And our scale advantages make us both a better partner and less reliant long-term on the metasearch versus competitors.

Please turn to Slide 17. We have a strong balance sheet and deleveraging profile, allowing us to take advantage of different markets. Net leverage would have been reduced by 49% over the past 5 years, excluding COVID-19. We have a liquidity position pro forma of EUR 142 million at the end of June, which could be used if needed in periods of slowing demand and which is a rough (technical difficulty) liquidity position at the end of March 2020, even with a dramatic drop in bookings during the [intermediate] period.

Gross leverage ratio being waived for fiscal year 2021 gives us further financial flexibility. Also, we have no short-term financial debt payments and our Senior Notes are due in 2023.

In total, all of these factors together with a well-diversified product portfolio, the benefit of scale and well-spread geography, forms the basis of our adaptable model.

If you can please now turn to Slide 18, in which I start to discuss the basis of our strategy. As you know, eDreams ODIGEO is the scale player in flights in Europe and one of the largest worldwide. This scale translates to advantages in classic flights by having winning content, offering best choice, better price, better margin and better product than being able to invest in the customer experience given our scale and the ability to amortize this across a far larger customer base. And in diversification by offering richer product portfolio, lower marketing costs through the sale of additional products, transferring benefits to consumers and increase the level of data we capture to allow us for targeting.

Underpinning these advantages are 4 clear, sustainable, scale advantages relative to competition. The first one is technology. We are an industry-leading technology company in product development. To demonstrate the scale of this and the speed and focus on innovation, eDreams ODIGEO delivered over 6,000 feature launches on its platform in FY '20, upgrading and improving the speed and proposition for customers now leverage this in a post COVID-19 world.

Two, end-to-end seamless journey. We have been known to have the leading customer satisfaction levels. With airlines canceling up to 100% of flights in an industry set up for less than 1% cancellations and airlines not refunding customers on a timely basis, we believe we can do better by customers. We have the scale to embark on a significant automation experience for customers, providing a true multichannel AI-driven experience that others don't offer.

Three, we use the strength for our brands and the scale consequently means we become less dependent on high-cost channels.

And four, through artificial intelligence and machine learning, in which we are able to invest, we are personalizing the offer and experiences to our customers.

Overall, we continue to innovate and evolve our offer to our focus on consumer needs, industry-leading technology and product development, delivering even greater convenience and experience to our customers and providing them with a seamless journey.

Please now turn to Slide 19. I'd like to review our top priorities, which link to our vision and goals. With the emergence of COVID-19, we believe now more than ever, these are important. Our top 4 priorities are: one, expand our Prime membership program because it's great for customers. Prime customers have higher NPS versus average travel websites. It's great for us. Prime has much higher lifetime value. Prime customers are up to 4x more profitable in 36 months. And it's growing significantly, and we intend to grow it much more from 556,000 members at the end of March 2020 to 2 million by March 2023.

Two, deliver most innovative end-to-end mobile experience. eDreams ODIGEO is the most mobile-penetrated flight OTA in Europe. Mobile offers more personalization opportunities. We have one of the highest app ratings with 44% of our bookings made through mobile devices, which compares with 31% industry average of 2019. Mobile only grows in importance in the COVID-19 world.

Three, diversify and grow revenue and products sold around flights. In FY '20, our dynamic packages and ancillaries continued to show very strong performance, with revenues increasing over 20% year-on-year in both categories. We've also been able to significantly grow the hotels inventory that we source directly from hoteliers and have now successfully integrated Waylo, a company we acquired in February 2020, which enables us to have better access to hotel sourcing capabilities, leveraging AI.

And four, by continuing to increase relative scale. This can be done via organically through taking share and/or entering new or adjacent markets as well as acquisitions, albeit prudency is a key driver of our decision-making.

If you can now turn to Slide 20, I would like to share with you my views about the industry and its outlook. Let me start by saying that the strong long-term underlying fundamentals of the holiday industry remain. The desire to travel, explore and experience the world is undiminished and will return. While you can replace a business trip via Google, Hangout, Zoom or any other types of video conferencing, a leisure traveler can't get the same exhilaration as standing on top of the mountain, lying on a beach or strolling along the streets of a town or city.

Some countries are already open, searches are rising, albeit from a low base. And we anticipate that this will accelerate as more countries ease restrictions. There will likely be ebb and flows in this over the coming year, but the overall desire to travel is there. In addition, there will be substantial change, development and innovation to mitigate the issues surrounding the pandemic. This plays the strength of eDreams ODIGEO.

The dynamics of the airline industry will accelerate the appetite for cheap air travel. Our leading position and ability to combine flights will serve us well and enable us to capture significant share of any new demand. Leisure will recover faster than business travel. Domestic travel in less crowded places will be the fastest to recover. We are already adapting our offering to other transport alternatives across our platform.

Customer service will become even more important. Airlines canceled up to 100% of flights and have not refunded customers in a timely manner. We believe best-in-class omnichannel customer service will be even more critical in a post-COVID-19 world.

Let's turn to Slide 21, where I'll give you an update on our views on why eDreams ODIGEO will win in the post-COVID-19 world. Leisure will recover faster than business travel, and we are primarily a leisure company, not a corporate travel company.

Europe is most likely to manage better COVID-19 and thus show greater growth, and we are a leader in Europe. There will be more domestic, lower-cost travel, and we will be able to provide alternative short-distance transport alternatives. We are strong in this segment, providing virtual interlining, hotels, cars and building a multi-transport platform.

To have a trusted brand and good experience, end-to-end is key. We are strong in mobile app, offer multiproducts and are the only one offering travel subscription program, Prime. On top of this, we are ensuring that we provide a strong customer service in the new world.

If you can please now turn to Slide 22, I would like to give you an update on what we have been doing since lockdown. The first, Prime. In Prime, we've rolled out our Prime core hotels to all 4 key markets. We said hotels are important and we're doing it. Also, we've been testing new displays and propositions, and we're preparing to launch in 2 new markets. We said focusing on certain geographies is important, and we're doing it. Ensuring our Prime customers receive top service. We're doing it.

In customer service, there's several key things we've done. First, we've moved hundreds of our people to support our customers in order to manage the demand from customers given airlines behavior of canceling and not refunding customers in a timely manner. Also, we have been automating our customer service and building a unique omnichannel, which we are progressively rolling out this financial year. And we've been developing a customer-friendly voucher experience.

In content, we've been creating a multi-content platform and integrating a second GDS and has been implementing unique route and fast searching -- fast search offering.

Geography. We've been developing an improved offering for several countries and regions. As you can see, our focus has been to both serve our customers and actions that allow us to win in the post COVID-19 world and ensure we build long-term sustainable advantage for our shareholders.

Turning to Slide 24. Let me conclude by giving you a quick recap of today's presentation. We believe we are positioning ourselves for success in the post-COVID-19 world. The strength of our finances, the adaptability of our business model, with the vast majority of our costs being variable and the mitigating actions taken during the pandemic in our business allow us to emerge strongly and well positioned from the crisis.

We will have sufficient funding available to increase marketing spend to meet the anticipated increase in demand and to capitalize on commercial opportunities that present themselves.

Even in more pessimistic scenarios, we'll be able to protect our leading market position for any speed of recovery in demand. We have a pro forma liquidity position of EUR 142 million at the end of June, which could be used if needed in periods of slowing demand, and we have significant cash on hand.

Gross leverage ratio being waived for fiscal year 2021 give us further financial flexibility. We have no short-term financial debt payments and our Senior Notes are due in 2023.

Overall, our business remains strong. We have kept our team intact and motivated to go after our competitors and serve our customers. As the markets continue to reopen this summer and later on, we are prepared to meet the new challenges head on, be at the forefront of change that is going to occur.

In sum, we believe a bad situation can be a good opportunity. We are strong, have a good business model and customer offering, and we continue to invest in the future to come out a winner from the crisis.

With that, I'd now like to take your questions. As always, we'll answer the questions sent to us in writing in the webcast.

We take questions on a first-come first-serve basis, but we'll also try to group questions of similar nature. Should we not have time to respond to all the questions from the webcast, the Investor Relations team will make sure those are answered afterwards.

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Questions and Answers

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [1]

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Okay. Dana, so we have the questions from the webcast. I'm going to start reading them and I'll read as well where they come from. The first question comes from Juan Peña from GVC Gaesco. He says, I would like to know a little bit of information about current trends in the bookings in June and July, and if you are working under a base scenario for fiscal '21?

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

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Juan, and in terms of bookings, let me start with the pretax. At the darkest moments of the COVID-19 lockdown, we were at minus 95% and that brought us somewhere in April. And then as of, let's say, starting in about early to maybe mid-May at the latest, we started seeing it, if I can say, kick up from that low point. And week on week on week, it's been growing from that low point to, let's say, roughly in early July, it was getting to the low minus 60% basically. It does vary country by country, market by market, region by region, but that would be the overall aggregate, and we see week-on-week, it continuing to improve on it.

David, anything you want to add on that?

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

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No. I can maybe address the second part of the question, which is, if we are working under a base scenario for fiscal '21. We actually have a breadth of a scenario. We're looking at 4 different scenarios, and we are prepared to react from a management point of view to any of those. And then we monitor the trading very closely and see in which scenario we are and therefore, what type of -- what actions we are going to take, but there is not a base scenario that we're looking at.

The evolution of the bookings we have witnessed that it is very linked to the evolution of the pandemic itself and the measurements from the different governments and their health authorities as to what type of movement is permitted, and we see that when more movement is permitted, we see more bookings and more of our customers traveling. We just monitor the situation.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [4]

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With that, let me move on to the next question, which is from Guilherme Sampaio from CaixaBank BPI.

Could you please update us in terms of recent trading?

That part, we've answered already, but he's asking as well for potential changes in the competition environment?

Let's just read them one by one. It's okay, it would be easier and then we respond to one by one.

So potential changes in the competition environment?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [5]

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Yes. So change in the competition. It is difficult to say, quite frankly, from the outside in. But what we do see is not all players, pre COVID-19 fully participating now in the marketplace. And it looks literally like different ones. So we see a bunch of competitors that we had before that aren't really very active in there for you to speculate why, there that could be mothballing their operations, conserving their cash, et cetera, et cetera. There's a couple of other players in very high expensive channels that are very much trying to just buy bookings at it. And again, I would say that this is very much of a short-term phenomenon. We need to see it play out over time. I think the longer-term trends will be that some -- there will be a consolidation in the marketplace. And there will be some players that won't be around, let's say, in a year or so from now.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [6]

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Okay. Let me then continue with the other questions from Guilherme Sampaio. The next one is, could you please provide further details on the significant reduction in fixed cost this quarter? And how should we think about fixed cost evolution in the coming quarters?

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David Elízaga Corrales, eDreams ODIGEO S.A. - CFO & Executive Director [7]

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Well, the fixed costs of the fourth quarter have a number of things in that. Some of them are one-off reductions in fixed cost and personnel that we were able to do. There was a second part, which was a lower impact of FX in the quarter, which is not something that you can forecast that is going to continue going forward. And then we also encourage everyone to look at the new classification of fixed cost versus variable because over the last year, we have migrated progressively all of our usage of capacity to the cloud. And now it's very much a variable expense and depends on the amount of searches that we need to power from our customers. And therefore, we have reclassified those costs over to the variable side.

If you think -- which I think where you're going to the fixed cost going forward, I refer you to exactly the same thing that we said in our trading statement in the month of April. We are going from a former level of about EUR 80 million of fixed cost per year, and we are currently executing on a level of about EUR 60 million per year in the fixed costs, and we've done other reductions in CapEx as well. But since you're talking about the fixed cost, I responded to fixed cost.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [8]

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The next sub question from Guilherme Sampaio is could you provide further color on the several provisions made this quarter?

So let me take a second stab at it. If you look at the particular line of presentation with the bridge, I think that's the best way to look at it easily. The first block of it is concerning (technical difficulty). There are a number of commissions that we get from our providers, the providers that have to do with the net bookings that we do. Usually, there's not any major difference between the gross and the net bookings because the level of cancellations in the industry is less than 1%. So it's really not noticeable. However, in this situation, we've seen a very, very high level of cancellations. So revenues that we had accrued in the past for bookings that happened, but had a departure date later on, either during the month of March or in the months of April, May, June, we've taken permission for those cancellations and the revenue that, therefore, we need to take out off our financial statements. That will be the first block.

And the second block in terms of provisions, which is those EUR 12.3 million that you have there in the bridge of Page 10 as well. Let me refer to provisions that are at this time on the cost side, not on the revenue side. And they have to do mostly with airline risks that we suffer. Airlines, as you know, are going through a very tough financial situation, although it is improving with an increase in bookings and the support from many of the government, but we still believe that a number of them may go under. And when those airlines go under, we suffer a couple of main risks. One is the commissions that we have accrued from them will eventually not get paid, and therefore, it's like a bad debt. And the other one is that they will not be able to face some of the refunds that they still need to do to the customers, and we may suffer a charge offers.

And then the last question from Guilherme, what amounts of revolving credit facility was utilized at the end of June?

It's the same amount that was drawn from the month of February-March, which is about EUR 109.5 million, which is still the amount that we have drawn today. Although, as I said during our prepared remarks, starting next week, we will start to reduce progressively this amount of revolver that is strong.

That finishes with the questions of Guilherme Sampaio.

Let me move now to the next block of questions come from Carlos Peinador from Santander. It says could you elaborate on the reasons for the very strong decrease in the fixed costs 24.6% in the fourth quarter?

I believe I have just answered that to the previous analyst.

Which base could we consider in fixed cost for next quarters?

I believe I have answered this as well.

Could you comment on the trend that you have seen recently in the business in the last week of bookings?

I think Dana has covered that as well. I see a lot of alignments of the questions that we are getting from different analysts. Have you seen different trends within your main countries?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [9]

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Yes. In terms of the trends in the different -- in the main countries, I'm just talking, I think, it would be slightly yes. The real driver of, let's say, trends for countries in the COVID-19 world short-term is really a combination of 2 things. The one is the government's lock -- sorry, the government's easing of lockdown restrictions and coupled with the level of the pandemic itself in the country. And that really does, let's say, affect or drive it. For most of our core markets, they are reasonably good from that aspect, meaning that most of the countries are starting to progressively ease restrictions -- lockdown restrictions and most of the country, main countries for us, have reasonably low level of new cases of coronavirus also. And so that does look favorable.

But again, those are really the bigger drivers. We can choose countries, and I think we all know them, where there have been and/or instead of let's say, very few new cases, there are lots of new cases, and that affects absolutely travel demand and/or similarly lack of easing of lockdown restrictions as well.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [10]

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The next question from Carlos is which dynamics do you see in the current business environment in your revenue per booking in the fiscal '21?

And what we see is, let's say, something very similar to what we had before with one difference, which actually increases the revenue margin per booking. And it is the effect of Prime on a more reduced number of bookings. As you know, we have this 0.5 million subscribers, some of them come from 1 year ago, 2 years ago, and they come and they renew the subscription, and that creates a fixed amount of money for us. And that takes amount of money divided by a smaller number of bookings on a per booking basis, it's higher.

So let's say that we have from that, like a cushion of the fixed revenues, than when you look at on a per booking basis, optically, it looks higher. But it is certainly a very welcome and good stable source of revenues.

Have you seen any change in Prime renewal dynamics in April to June of '21?

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

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Yes. We haven't is the short answer. I think what many of us would have hypothesized pre COVID-19 is that when you go through a lockdown, and particularly the lockdown period was at least 3 months to 3.5 months for many people, one would expect that every day, renewals are coming due and that the customers would opt out and would opt out at a much greater rate than historically. And that's just not the case, what we've seen. It's been a real testament to the Prime program that there has not been a material change in terms of the renewal rate or churn rate, if you want to refer to it, through the coronavirus.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [12]

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Could you anticipate the number of prime subscribers at the end of June?

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

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I'm looking at David. And I can, I know it, but I think probably we're going to have to wait until the end of August call to say what it is.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [14]

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I think you're going to like the answer, Carlos, but let's just give some discipline here and give you one more reason to join us at the end of August from a Sunny Beach.

And what are the reasons to integrate a new GDs that this mean a change in your supply strategy?

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

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Yes, good question. Let me answer the first, the strategic one, which is fundamentally, our strategy has been to make certain that we use our scale to bring the best content, which can be choice, which can be price, which can be bookability to our customers. And we felt that with this period of time right now, it was worthwhile to integrate another GDS player to provide yet another choice. We use aggregators, we used consolidators, we used GDS, et cetera, et cetera, we just thought it would be good to bring in another one at this point in time to give us further diversity and help us ultimately with our goal to provide the best for our customers in it.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [16]

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Okay. That finishes the questions from Carlos Peinador of Santander.

We have now a block of questions from Nizla Naizer from Deutsche Bank. The first one is, we're trying to reconcile your liquidity at the end of June, does this mean bookings to start improving in May and June meaningfully versus April? So you saw some benefits from cash coming in from these bookings?

That is absolutely correct. Yes. That's exactly how it happens. Like we said many times in the past, the working capital dynamics of our business are one which when the volumes reduce, it has an outflow, and it is evident in the cash flow that we published. But at the same time, once the booking start to increase, even if it is from a low base, it starts having immediately a positive effect in the cash levels as well, and that's what we're seeing in the trading.

The second question from Nizla is, IATA expects passenger air traffic to be down around 50% this year and then grow by around 50% next year versus 2020, would that be a reasonable assumption when looking at the OTA bookings developments as well?

Let me take that one. First, I think we all need to be mindful that IATA is an industry association of airlines and only airlines. And that they're in a particular situation in which they're trying to raise funds from a number of governments around the world. In their reports that 50% reduction that they see for calendar year 2020 is composed of, of course, many months. If I look at how that is supposed to be trading right now for the months of June and July, it was expecting a decrease of 80% year-on-year. And like Dana was saying earlier in this question-and-answer session, what we're seeing is in the low 60s, negative percentage year-on-year, which is a significant difference between them and us. There are many things that could affect this. One is that IATA is normalization of regular airlines, and there are regular airlines and the low-cost airlines. This second block is a more nimble group of competitors that has a lower cost point, and therefore, are able to operate in, I would say, more circumstances than the regular ones at a profitable level.

The second is that the regular airlines have a mix of leisure and business passengers. And as you know, we're solely concentrated on leisure, that is our customer. And back then I was saying as well, you can substitute a business meeting with Zoom, you cannot substitute having your feet touching the sun in the reach with Zoom, this doesn't work, right? So there are many things could go into that, but I hope I'm answering your question.

The third question from Nizla is, is the airline market is going to be more domestic going forward? How does eDreams offering compare?

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

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Absolutely. So let me combine the 2. First about just consumers flying behavior. We do see more, let's say, short haul, both domestic and short haul than long haul, but we definitely see quite a lot of long haul. While the imbalance may be slightly shifting, it is not an absolutely massive shift one. So just the kind of the thing about the domestic thing.

Second is that within domestic and short haul, people still do fly in the markets, and we absolutely offer that to them. Beyond that, over the past several years, we have really diversified our product portfolio so that we are not a flight-only one. And so absolutely. So if you look at now of 100, let's say, standard flight tickets we sell, we sell 85 additional products and services beyond that. And a good portion of that is, for example, car, right? So we absolutely have car rental. We have hotels as well in there that creates -- that accounts for a very significant portion of it. And then we're also adding in other types of form of transport as well to participate in that. Because at the end of the day, we are a travel brand, right? And a travel platform for people and customers and have incredibly strong brands.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [18]

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The next question from Nizla, I believe, has been answered already, just how our chart rates on Prime. And the following one has also been answered, it is about the level of fixed costs in absolute terms in fiscal '21, and I've responded to that one.

The last one from Nizla. Could you comment on the relationship with the GDS? Is there a minimum amount of bookings you have to send their way each year? Is there a penalty, if you can announce?

Well, I would turn it around a little bit. What we have is incentives to sell more, rather than penalties for selling less. And the amount of revenue that we accrue depend on an estimate for what we need to do. And in any case, this type of targets are not single-year target, they are multiyear targets. And I'm afraid I cannot say a lot more because there's commercial sensitivity as to the exact details of that. But I am confident that our current financial statements reflect purely the actual revenue that we think that it is fair to assume from the GDS.

With that, we finish with the questions of Nizla. We go to the next investor, and sorry if I mispronounce this. (inaudible) have we tried to access eco loans in Spain? If not, why not?

Yes. We have. And we have accessed in a relatively small amounts because we did not think we need it more. But when we talk about our liquidity pro forma at the end of June, is because it includes, and you will see that in the notes to our financial statement, it includes a EUR 15 million facility, and we got the pro forma because it was actually cashed out 2 days ago at the beginning of July.

How will the subscription product change given that bookings will take a while to recover even in that case scenario?

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

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There are several things. And I think you saw it through the presentation that I talked about Prime and some of the things that we're doing on Prime. We have expanded now Prime to hotels. And we had done this first in one market, and we ran it for about probably 4 months to see the results. And the results were very good. And so then we've now rolled it out to all of our other Prime markets. So it's absolutely kind of not a flight-only product, but, a, let's say, a travel product, so to speak. We have not increased the subscription rate at all on the product, on Prime subscription whatsoever. It's just now that you get more benefit. You can now get very substantial benefits on hotels by being a member of Prime as well. And so if you add up flights and hotels, that is very significant, and we'll be looking to expand this further and further during the course of this year.

There's -- besides that, obviously, service is extremely important. Through the whole lockdown, we've prioritized and have really given strong service levels to Prime customers. Obviously, airlines still need to refund the money at the end of the day for that, but we have absolutely done that, and we're doing other things as well in the customer servicing front to make sure that we absolutely search them. We have several other ideas about expanding Prime as well, and they're just competitive sensitive. And so I just can't disclose them now if any of them work because we continue to always test and any right ideas, then at a future point in time, I may very well announce them.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [20]

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And the last question from this investor is, how is working capital developing with a week-over-week improvement in bookings? Is the speed of working capital flowing in a range you would have expected?

I believe I have answered most of this already, but yes, it is the working capital inflow coming in at the rate that we expected for the level of bookings that we're seeing in the business. Like Dana was saying, the booking has started to pick up during the first 2 weeks of May, and we've seen a progressive increase week after week on that. We've also said in line with that, the trough of our liquidity position at EUR 81 million was at the end of April and since then we increased now to 142, and that comes in hand with an increase in the business. So yes, it's absolutely in line.

The next block of questions comes from [Katherine Lee] of Morgan Stanley. The first one is about the evolution of the bookings, and we've answered that. The second one, could you break down liquidity and how you see it evolving into next quarters?

The breakdown of the liquidity at the end of June that we announced of EUR 142 million is very similar to the breakdown at the end of March. It's also about EUR 80 million of cash and EUR 60 million of additional availability under the revolver. And how we see it evolving? Well, let's say, the total number depends on the bookings and we're making no statement on the bookings at this point. And as to the breakdown between the 2, we've -- I've also said several times today that starting next week, we will start reducing our existing drawdowns and the revolver.

The next question is, what is the breakeven roughly of bookings unit this year before needing new money? And were you to need new money, what would be your options? Equity raise, et cetera?

Let me try to tackle this in a slightly different way. If the bookings were to stay like they are right now, we would need absolutely no additional money. If there was to be a second wave, and we want to be very negative and we say that we're going to return to levels like the worst of the pandemic, which would imply a total lockdown again in the vast majority of Europe, we would have enough liquidity to survive for almost a year, okay? And I want to give confidence to all of our investors that we are in a very sound and good position. But the reason we have not raised financing like many of our competitors have done in any significant way is because we believe we don't need it, and it's based on very prudent assumptions and lots of analysis.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [21]

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And these were all shared with our banks who decided to waive our covenants to give us a 12 month...

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

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A 12-month waiver with no additional injection of capital, which is different from almost every other competitor that you see out there. But in order to secure the waiver, first, they need to raise capital and second, they will impose alternative covenants to the waived covenant, and we have no alternative covenant being imposed on us.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [23]

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The last question from this investor is, was diversification revenue driven because classic revenues, usually, airline revenue was normally low or is it here to stay, can you please clarify again what drives the diversification of the revenues?

So if you look at the disclosure in detail, we disclosed not only the percentage, we also disclosed the absolute values. And I would encourage you to look actually at the trajectory over the last few years, because the trajectory is exactly the same now and what you've seen for the last quarter and for the last year. We have intentionally reduced our classic customer revenues, that's part of our strategy, and we have intentionally increased. So the percentages are right because of both movements. If you look at in absolute value, there is more increase in diversification revenues, but there is a decrease of classic customer revenues, but that is absolutely expected and absolutely pursued by us.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [24]

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The other one you may want to look at is just the KPIs in terms of the product diversification ratio and the revenue diversification ratio, and you can see them over time. So today, we disclosed our product diversification ratio is basically 85%, and that basically means that of 100 flights sold, we sell 85 additional products and services on it, right? If you go back a number of years ago, it was in the low 20s, right? So that's a very material increase, and it's (technical difficulty) growing and growing at -- well, relatively, let's say, constant rate.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [25]

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The next question comes from (inaudible) it's about bookings evolution since the close of the fiscal year?

So it's been answered.

The next question comes from (inaudible). What is the latest cash position you can share with us?

Well, we just shared end of June, 7 days off. And it's about the evolution of the bookings, again.

How much is your revolver drawn down? Is there probably headroom available? And do you need waivers?

I think we have also answered all of the above.

And the next set of questions come from (inaudible). Can you please elaborate, repeat on what you said about the share offer?

I guess it is about the share issuance that we've done. We haven't offered shares to expand on the investors. The share issuance is a technical mechanism to fund the long-term incentive plans from here until February to 2026, and those shares are directly into treasury and excluded for political and economic rights and will be used to provide shares to the beneficiaries of the long-term incentive plan over the next 6 years. So it's not offered to the public externally.

There's another question, it's about bookings between April and June, which has been answered as well. And yes, that's it.

Then the next investor (inaudible) Asset Management. Can you remind me the maturity of your revolver credit facility is 2023? Are you looking to extend maturity or sign a new financing agreement?

Not at this point. We're not good, I would say, market conditions that would either result in reduction of the coupon or the interest expense, and we don't see the need to expand in the current market positions the maturity either.

The next question comes from Keaney of CreditSights. Can you give us an update on your revolver drawn evolutions?

I responded to that.

What was your maximum drawdown?

EUR 109.5 million. And we are getting that constant, and we're going to start reducing next week.

Next investor is Luis Delgado from Citi. Could you please give us an idea of what the average booking rate versus last year was in the first quarter of '21? And how about current levels? And indication of how much revolver is drawn by the end of June?

And I think we've responded to all of this.

Question from Alexander (inaudible) of Barclays. Could you please repeat your comments about first quarter '21 and going forward, and especially your expectations about working capital moves? If I understand correctly, you were saying that you were expecting lower working capital improvement than anticipated?

No. Not exactly. I think on the bookings and the movements of working capital, we've covered that a lot. What I said is that the change in the IATA remittance period that we announced was going to happen in our first half results from the 1st of January, actually happened, but the impact of that, which we said was going to be about EUR 30 million, actually ended up being EUR 8 million. That is a one-off effect, and it happened by March 2020. What we said is, from here on, what we expect with the evolution -- the positive evolution of the bookings is increases like we are seeing of our cash position and inflows of working capital. What we said is that those inflows of working capital with a 10- and 15-day remittance period in Spain and Italy are lower than they would have been if we have remit experience of 30 days, which is what we had prior. But we don't expect any additional negative effect coming from that. It's all in already.

Lin Solomon from Carlyle Group. Have you seen any Prime cancellations? I think we've responded to that as well.

And of the EUR 9.2 million and the EUR 12.3 million provisions, are these entirely noncash adjustments?

Let me take them one by one. The EUR 9.2 million, they are noncash at the end of March, but they will be becoming cash gradually over the first 60 days or over April and May. About the EUR 12.3 million of bad debt or airline risk, they're certainly not cash at the end of March '20. And they could become cash if we are right on the amount of the provision, but the speed at which they will become is very uncertain, right? It will probably be several months until it happens.

Talking about the net working capital position at the end of June, and have you seen the position improve since May?

I'm not going to give at this time, the net working capital position at the end of June. We need to close the financial statements exactly to do that. And they're, of course, not closed now, but I would be very happy to share that data with you at the end of August.

And have we seen the improvement in May?

Yes, absolutely, like we said.

Next question comes from Thiemo Bischoff of Robus Capital. Quoting a portion of our integrated annual report, we have not always received or provided the service that our customers expect, will you or have you lost customers?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [26]

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I think if you remember, I was saying that customers have not gotten paid in a timely manner by the airlines. And this has been a real angst and a real problem of supporting the frustration for many customers. And clearly, it can be for some individuals a significant amount of money and under these economic conditions, name will be desperately needed for it. And so I can't say we have taken certain measures towards customers to try to, both manage their bookings with the airlines, to manage themselves and to try to maintain a good position with them. But I do recognize that a lot of customers are very frustrated by it.

We have prided ourselves always of having the best reputation from surveys in the industry for customer satisfaction. That's where we want to be, and that's what we do aspire to be. And so we are taking measures that I've talked about in the presentation to ensure that we do keep that position going forward, particularly in the COVID-19 type of world.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [27]

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Next question from the same investor is about the EUR 15 million government sponsored loan, where exactly does it sit in the corporate structure? Is it secure or unsecured? And what margin and maturity does it have?

It sits at the level of one of the operating subsidiaries like eDreams, the main Spanish operating subsidiary. It is a secured loan. And it has a maturity of 2023. And the margin is slightly cheaper than the margin that we have at the revolver. It has LIBOR plus 250 basis points.

We have questions now from Shuo Yang of Microequities Asset Management. Is prime membership on autorenewal and the customers need to opt out to cancel the membership? Are there any -- yes, that's the question because I don't think the second one isn't really.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [28]

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Yes. So what happens is, 30 days and a few days before renewal, we notify a customer that is coming up for renewal and that we will be renewing them unless they would like to cancel from it, and we tell them how they can cancel from it. And then at the end of that day, on the day of renewal that we do we renew that card in it. There's also -- if you know, there's also a lot of customers during the year change their credit card. So if you think about if a credit card lasts on average, let's say, 3 years, but you'd say, on average, within a given course of the year, 1 -- every year, about 1/3 have changed their credit cards as well.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [29]

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Are there any acquisition opportunities you would consider, whether it adds technology directly contracted inventory or geography?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [30]

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Yes. I think it's too early to tell. I think pre COVID-19, we definitely saw this as an important strategic block of the company. I think just given the fact that there's been a pandemic, there's been a lockdown by the industry, prudency has been something that we've always managed to even pre COVID-19 and we felt that just before the lockdown, we felt we were in a really good situation, and so we could contemplate it. I think just given now, we would be much more circumspect looking at acquisitions. It's not to say no, but the hurdle is just grown so, so dramatically of it for a couple of reasons. It's not just our position, but more -- but also equally is, we're spending shareholders' money, and we want to make sure that we get a return for our shareholders, not for someone else's shareholder, right?

And given we know that a number of players are very weak, we would be looking at it very carefully to see do we need to pay this money now for that business that may not be worth that much in the future. So again, it's not just our bar of prudency, but it really is making certain that it will be the right allocation of our capital. And I think right now, it's more to play out for it and play for time.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [31]

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The next question comes from [Carl Smith]. What was the rationale for drawing eco loans when there was availability under the RCF? Could you confirm the nature of the eco loans, are they secured, unsecured?

Well, the rationale is that increasing liquidity at a cheaper cost than what you already have, make up -- in our view, makes all the sense in the world and on a long-term basis as well. So getting a government-sponsored loan at the rate which is cheaper than what you pay, not due until 2023, we think it's actually a very good deal for the company.

And I've already answered that it is a secured loan.

And last question that we have comes from (inaudible) of Tresidor Are you charging customers a service fee for facilitation, refunds and vouchers, et cetera? If so, how much it will be?

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [32]

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Yes. That's easy, right? And in fact, what we actually are doing is, depending upon the customer circumstance, I'm not trying to link it to a previous question about customer royalty. There will be instances where we even make goodwill gestures and do a number of other things for customers.

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David de la Roz, eDreams ODIGEO S.A. - Director of IR [33]

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Okay. There's just one follow-up question from (inaudible). Did you say that the EUR 15 million loan was cashed out at the beginning of July?

Yes. That is correct. It was cashed at the end of this week.

And with that, thank you, everybody, for joining the webcast and for all of your very interesting questions. Before we conclude the call, I would like to inform you that on Thursday, 27th of August, we will be hosting our conference call for the first quarter of our fiscal '21, which, like we do on the first and third quarters, we'll have only a limited financial review. In the meantime, we will be happy to receive your questions via our internal relations -- sorry, Investor Relations team and the investor e-mail address, which is investors@edreamsodigeo.com.

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Dana Philip Dunne, eDreams ODIGEO S.A. - CEO & Executive Director [34]

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With that, thank you all and stay safe and travel.