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Edited Transcript of LMN.S earnings conference call or presentation 8-Aug-19 9:00am GMT

Half Year 2019 Lastminute.com NV Earnings Call

AMSTERDAM Aug 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Lastminute.com NV earnings conference call or presentation Thursday, August 8, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Niccolò Bossi

lastminute.com N.V. - Head of IR & of Corporate Affairs

* Sergio Signoretti

lastminute.com N.V. - CFO

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Conference Call Participants

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* Andrea Scauri;Lemanik

* Gianmarco Bonacina

Equita SIM S.p.A., Research Division - European Equity Research Manager

* Hubert Jeaneau

UBS Investment Bank, Research Division - Director and Research Analyst

* Nicolò Pessina

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst

* Patrick Whyte;Skift

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Half Year Results 2019 of LM Group Conference Call. I am Myra, the Chorus Call operator. (Operator Instructions) And the conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to the management team of LM Group. Please go ahead.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [2]

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So good morning and welcome, everyone, and thanks for joining our full -- first half 2019 investor analyst call. Today, we'll be primarily focused on the numbers of our very strong first semester that show the ability of the merger to translate the strategic direction that the company took at the time of the IPO and consolidated after the acquisition was made in 2015 into a robust and sustainable business model. It is 5 semester in a row that we are experiencing an improvement of our business KPIs and we look at this shortly.

We will conclude with a Q&A session opened to all people connected. I'm here today with Sergio Signoretti, our CFO.

Before starting, as a general statement, I remind you to take a look at the disclaimer on Page 2 and on the importance of being cautious in the evaluation of forward-looking statements included in the document.

Now I give the stage to Sergio that he will guide you through the presentation. So please, Sergio.

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Sergio Signoretti, lastminute.com N.V. - CFO [3]

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Thank you, Niccolò. Good morning. Good morning, all. I'll start from the Page 3 of the deck. This is the way in which we represent ourselves to the market. So we have a holding company, a Dutch holding company, listed in the Swiss stock market, which is controlling LM Group. LM Group actually is our core business that is constituted of 3 business units. One is the Online Travel Agency, of which the prevailing brand is lastminute.com. The second is the Metasearch and here the major brand related to the Flight business is the Jetcost. And then and this is a new, because this is an organizational operation that was done this year, we have our Media Company, with the brand of Forward that we have constituted in order to exploit the monetization of the traffic that does not convert into booking on our property and for the market, so not only for last-minute group. Then LM Holding controls a number of venture initiatives, which are listed on the right and which contribute, of course, to the result of the group that we will see in the next pages.

Going to Page 4. So this has been a tremendous semester in terms of growth. Growth is actually happening everywhere, in every segment, and is, as you will see, constituting a big improvement in terms of the key performance of the key -- key performance indicators of the company. We are growing in terms of gross travel value and revenue thanks to the OTA. We had a tremendous growth on the Flight business. Here, we grew 38% more than last year. Remember that the Flight market is substantially stable. So here, we are taking market share. The growth is substantially driven from the META channel, where we have adopted a much more aggressive pricing strategy, which is repaying in terms of higher volumes and higher revenues and higher margins as well.

We are keeping on growing massively on the Dynamic Packages business as well. So we are talking about 39% growth versus last year. And this is thanks to our leadership position in this category. We believe to have a superior content and a superior technology, proprietary technology. In a market that differently from the Flight business is growing here, there is a continued shift from the offline market to the online market. But in this growing market, we grow more than the others.

META division is growing in terms of profitability, not in terms of revenues. But in terms of gross profit and EBITDA. The division is contributing more despite we manage lower traffic, especially on the Flight portion of the META business, as we will see in a minute.

And the Media, newborn business unit, is growing double digit in terms of revenues, leveraging from the higher traffic that we have from around the OTA, but also from the new advertising formats that we offer to external player, that we offer to the market and also leveraging on the integration of an acquisition that was done in the first half of a video content producer, which is called Madfish.

Going to Page 5. We are translating this revenue growth into margin. So what happens, as you will see also later on, is that we are keeping on generating continuous efficiency, both in the variable cost area and in the fixed cost area, keeping substantially stable our overall cost base. This brings to the duplication of the EBITDA 1 year from -- to the other. So we are reaching EUR 35 million business EBITDA at the end of half 1, which is more than double of what we experienced at the end of last -- at the end of first semester 2018, and we have scale. So the control of our cost base drives the business EBITDA margin at 21% versus 12% at the end of first half of 2018.

In terms of absolute numbers, we are talking about a performance that is even better than what we had at the end of the full 2018. So our adjusted EBITDA at the end of first half is EUR 32 million, which is substantially at the same level of what we did in the full year last year. And we are closing the first semester with a net income of EUR 12 million, which is 50% above the full year result of 2018.

If you go to Page 5 -- 6, sorry, you see what is the graphic representation of the growth and of the scaling that we are experiencing. On the first part is on the left part of the chart you find the growth per semester in the 5 past semesters starting from first half 2017. So here, it's clearly demonstrated how starting from the first half of 2018 we are growing significantly in terms of revenues and that is driven not only from the Dynamic Package, but also from the Flight segment starting from the second half 2018. So we are growing 35%, if you consider the combined 2 years. But what is even more impressive is the right part of the chart, so where you see the EBITDA growth per semester where we are substantially threefold. The EBITDA of first half 2017, if we consider the results that we are showing now, with more the duplication of the EBITDA margin, which was 10% a couple of years ago and now is 21%. So it's a combination of revenue growth from the OTA and control of our fixed cost base and variable cost base, which is leading to these results.

If you go to Page 7, you find the comparison 2019 versus 2018 in terms of net revenues and business EBITDA for the various business units, where you see that the growth is in the region of 19% of the overall revenues, where the OTA part is the most significant. So EUR 133 million versus EUR 103 million. Overall, EUR 166 million versus EUR 139 million. And the translation in terms of growth of the business EBITDA, which is on the right-hand side of the chart, where if you concentrate on the OTA piece here we have a more than double the EBITDA versus what the situation 1 year ago. So I would say EUR 35 million versus EUR 17 million of business EBITDA. This is a tremendous improvement.

If we focus on the OTA, which is Page 8, in terms of revenues and business EBITDA, here you see that the EUR 133 million of revenues are absolutely equally split between Flight and Travel & Leisure. In Travel & Leisure, as I said, Dynamic Package is the most relevant piece. And here, you see that the Flight part is growing double digit, approximately 40%, as I was commenting before, which is one of the most relevant good news. Again thanks to a revised pricing strategy that we are adopting on the META channel. In terms of business EBITDA, I already commented. So the OTA is growing up to 21% from the 12% that we had in first half 2018.

If we go to META, Page 9, here we are slowing down in terms of revenues. This is actually only related to Jetcost, so to the Flight part of the business, where we had done a choice of concentrating more on the profitability rather than increasing more and more the revenues. Whereas on the Hotel part, which is the green part of the pie -- of the bar, we are more than doubling. So the Hotel META business is going very well. We are generating here higher margins in terms of gross profit and in terms of EBITDA. Controlling our marketing performance spend in order to, again, be more profitable versus growing necessarily the revenues on the Flight part. And there is also the fact that we had a 19% increase of business EBITDA versus last year. So EUR 5.7 million versus EUR 4.8 million, which was the result at the end of first half. Also here, we are improving in terms of the EBITDA margin. So now, we have, let me say, an EBITDA margin, which is, again, in the region of 20%, both for the OTA and for the META. META is at 24% today versus the 17% at the end of the first half of 2018.

Then Page 10 is dedicated to Media. Media here is growing 35% in terms of revenues, EUR 11 million versus EUR 8.4 million. Remember that Media gives back to the OTA business approximately 70% of its revenues. So the contribution to the OTA is the one that you see at the bottom part of the left side of the graph. So EUR 7.4 million versus EUR 6.1 million last year because, of course, Media leverages its revenues based on the traffic, which is generated on the OTA properties. And after paying back to the OTA, this amount is substantially at breakeven. So it's at EUR 800,000 negative business EBITDA versus EUR 1.4 million. This number, of course, is restated. So if you go back to 2018 presentation, you will not find this, because the Media business was included into the OTA. So here, we have restated the numbers for 2018 in order to make it comparable in terms of the business model with the current situation. So Media business will be a breakeven already in the second semester. Will improve actually, because we forecasted to be substantially at breakeven at year-end, having paid back, again, approximately 70% of its revenues to the OTA P&L.

Cruises, Page 11. Remember, cruises is not included in the perimeter of the core business. So we have carved it out for the presentation purpose. It's only a factor here. I mean, we are growing as well. We are growing 14% in terms of revenues, EUR 3.3 million versus EUR 2.9 million. And we're growing EUR 100,000 in terms of profitability, EUR 500,000 versus EUR 400,000, is a business which is smaller, of course, but demonstrates that the growth is also here, especially in Italy and Spain, which are the 2 core markets where we operate.

Then going to Page 12. Here is a representation of how we control our cost base. Here, of course, we are talking about only the fixed part of our cost base. The variable part is in the gross margin. But also on that part, there are significant savings and significant efficiencies that we have generated in the past 2 years. And so we are substantially in line on the EUR 500,000 above what was the cost base in first semester of 2018. And if you look on the right, you see the percentage of the incidence of the fixed cost base on the revenues, which, therefore, is decreasing double digits. So we are 18% less in terms of the known HR piece, so the combination of the IT expenses, the overhead and the other G&A. And we are 16% less versus last year in terms of HR cost on incidence of revenues. And this is actually not by chance, it's something that we control. We control much more, let me say, strictly and closely versus the past and is the reason for the boost of EBITDA that we have experienced in the past 2 years.

Going to Page 13. Page 13 shows the cascade. So how we reach the net income from the business EBITDA. So starting from the EUR 35 million, we deduct the corporate cost, which is the cost related to the part of organization that does not contribute directly to the core business. So part of the staff functions like finance, legal and technology, which are not necessarily attributable to the 3 business units. Then we have negative contribution of the venture group of companies for EUR 1.1 million. Here, cruises contributes positively, as you saw in the previous slide. The negative contribution is generated from Destination Italia. Destination Italia is a venture that we have with Banca Intesa in order to promote inbound B2B traffic in Italy, which is losing EUR 1.6 million in the second -- in the first semester of this year. So halting the losses versus the year before, where we plan to be at breakeven in the second semester, and we also plan to be at breakeven next year.

So the EBITDA adjusted, taking into account EUR 1 million previous year's adjusted, is EUR 31.9 million, so EUR 32 million versus EUR 10.3 million last year. So we have threefold the EBITDA adjusted versus last year. We are registering EUR 2 million of extraordinary items, mostly related to redundancies and to, let me say, some M&A activities that we have done in the first semester, mostly related to the smaller acquisitions of Madfish and Qixxit, which have been communicated through specific press releases. This takes also into account the IFRS 16 factor in terms of revaluation of the rental cost for the leases that we have adopted as every company does in 2019.

So in terms of reported EBITDA, IFRS EBITDA, we are more than tripling the results versus last year, EUR 30 million versus EUR 8.4 million. And this is basically the major milestone which lead to a EUR 12.2 million net income versus the breakeven position, which we registered at the end of the first half 2018.

What else? The cash profile at Page 14. So we are closing the semester at EUR 118 million versus EUR 87 million, which was the corresponding number at the first half 2018. So we are talking about EUR 31 million more cash in the same observation period with cash flow from operations, which is driven by the reported EBITDA IFRS, here is represented the net of the IFRS 16 adoption. And the EUR 40 million net working capital contribution. Remember that we are in a structurally negative net working capital position because we cash in from our customers at T-plus 1 as well as T-plus 2, and we pay between 14 and 60 days afterwards our supplier. So the more we grow, the more we generate cash.

What else need to be said in the M&A section of the cash flow? The EUR 3.6 million are mostly referring to the 2 acquisitions that we have done in the first semester and to the repayment of one of the installments related to the acquisition of Comvel, which was the company bought from the ProSieben Group at the end of 2018. We have done EUR 500,000 purchases of shares, some of the relevant to be honest in the first semester that we have registered here in the cash flow. And we have a negative repayment of EUR 11.8 million financing, approximately EUR 1.8 million is related to the installments of the medium-term financing related to the funding of the Partial Self-Tender Offer that was concluded 1 year ago, and EUR 10 million is the repayment of a short-term facility loan that we have obtained at the end of last year in order to fund the low seasonality cash needs and that we have repaid in January this year. So EUR 118 million is the cash, EUR 76 million is the net financial position, which is considering the financial liabilities, which includes EUR 50 million of the IFRS 16 effect on top of the medium-term financing renewal for obtained for the Partial Self-Tender Offer funding.

What is relevant I think is to talk about the guidance, Page 15, because based on these -- in these results, we are confident to substantially uplift the results that we were targeting when we met last time in Zurich, commenting 2018 full year figures. So here, we target to be above EUR 320 million in terms of revenues versus EUR 300 million, which was the guidance that we set before. We are targeting a significant uplift of the business EBITDA. We said EUR 52 million, EUR 54 million in Zurich. Here, we are confident to reach between EUR 68 million and EUR 70 million for business EBITDA, which is EUR 57% above last year, 30% above the previous guidance. And to reach an adjusted EBITDA of $63 million to EUR 65 million, which is double versus last year, that's 42% versus the guidance that we raised in March this year.

This is it, I would say, in terms of the representation of the key figures. So I would say that with Niccolò, we are absolutely open to answer to any question that you guys may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Nicolò Pessina from Mediobanca.

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Nicolò Pessina, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst [2]

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I have 3 questions. So the first one on the Metasearch business. I see that revenue growth is negative in first half of the year. So you mentioned efficiencies of a trading machine in the press release. I would like to better understand what it means? And what we should expect in the second half of this year? In particular, is this trend going to continue, so we should assume this is a one-off for 2019 and the business will go back to growth as usual from the next year?

Second question, on the marketing costs, they are now below 40% of the top line. I wonder if this is something that will continue also in the future? If this is something that you find to be sustainable or it could have a long-term impact on your competitive positioning? Is it something shared also by the other players in the industry so there is less competition and less need to invest into marketing cost?

And final question is on the free cash flow generation, which remains strong and also the cash position is very large. So is the management considering to pay a dividend or to go ahead with a new buyback eventually?

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [3]

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Thank you, Nicolò.

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Sergio Signoretti, lastminute.com N.V. - CFO [4]

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Thank you, Nicolò. I will go through the question on the Metasearch. Yes, we are experiencing this year -- first of all, I would say, we have compared 2 different periods in the sense that first half of 2018 was a semester in which of the Metasearch business that we boosted the growth of volume with significant increase in marketing spending, mainly in France, where we have a leadership position. This year, we are trying to do a different stuff and trying to have a focus more on profitability. I would say that this is not like a test, of course, is something that we are, in any case, trying to do in order to evaluate how efficient could be our machine in terms of driving of traffic. We are experiencing a tremendous growth in terms of profitability. What we are experiencing on the other hand is a declining in terms of revenues, which is probably higher than what expected. So we are now trying to balance, let me say, our approach and find a way to recover even the revenue growth. I do not expect this revenue growth to come in the second half of this year. We are launching some initiatives in order to, first of all, differentiate our business model, which is today, let me say -- I would say primarily or 100% center driven, digital market driven. So we are putting in place some action that will have a medium- to long-term effect, and that will contribute to see our Jetcost revenue growing again, not in the second half, as I said, but from 2020 again.

In the hotel sector, we are experiencing a different situation in the sense that, of course, Hotel business was very small. When we bought Hotelscan in 2017, it was a company that in 1 year recorded EUR 1 million revenue. Last year, EUR 5 million. This year, we are targeting EUR 9 million. So it's in a trajectory of growth, which is really, really significant. It's a different business in the sense that the logics of the Hotel business and Flight business in the Metasearch are different. We are present in 38 countries with the Hotel business. It's a very global business. And so as you can see, we are able, in any case, to push growth on one hand and focus on profitability on the other hand. What I expect for 2020 is to have a more balanced trend in terms of both revenue and profit for both businesses. In terms of marketing, I don’t know, but maybe...

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Nicolò Pessina, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst [5]

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Maybe different from that.

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Sergio Signoretti, lastminute.com N.V. - CFO [6]

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So basically, I would say that in terms of marketing strategy -- I mean, first of all, marketing is made up of 2 type of marketing investments. So the biggest portion is related to the performance marketing, which is the most relevant investment that we do. So here, we are growing 15% versus last year in terms of investments. Here, we need to invest. We need to invest more and more because we need to be competitive. We need to be competitive in a competitive market. So in every segment, we keep on invested in SEM and -- in order to reinforce our competitive position. What we are doing is slightly decrease the investment in the nonperformance marketing cost, as you see also from the attachment of the interim report. There is one chart which is quite clear. On that -- and this is the result of the strategy because the feedback of the performance marketing investments is significantly higher than feedback in -- of the nonperformance marketing, one. So the traditional communication expenses in the traditional advertising formats.

So overall, if you combine the 2, we are spending more than last year, but we are shifting the investment from one basket to the other because we believe that the returns are higher. Then the reduction in terms of incidents versus the revenues, to be honest, is more driven from the very big boost of the revenues than from the overall pot of money that -- again, considering the overall material spend, that increased versus the first half 2018.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [7]

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Yes. On the -- on dividend.

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Sergio Signoretti, lastminute.com N.V. - CFO [8]

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On your third question, on the free cash flow, the cash generated and the possibility to pay dividends in the future, we are discussing this internally. This remain a story of growth and internal investments more than a story of release of dividends.

But if we will be able to reach our target this year with net earnings that will probably, even if we didn't show any guidance on that, but will probably be higher than EUR 20 million, of course, we will be open to discuss this internally seriously and, in case, decide something for the next year. Yes.

We have no constraints, on one hand. On the other hand, we want to be -- we want to make sure that, first of all, all things are properly managed from a business perspective. Cash is needed for business before deciding to pay dividends. But let me say we are in a condition to be -- to discuss this and to think about the possibility to do it.

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Operator [9]

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The next question is from Gianmarco Bonacina from Equita.

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Gianmarco Bonacina, Equita SIM S.p.A., Research Division - European Equity Research Manager [10]

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I have 2 questions. First is one on the dynamic packages. You have been successful in developing this product bought on the B2C but also on the B2B market. So if you can update us, especially in this B2B pipeline, if you have new, let's say, potential contracts you are discussing and if we can expect some new partnership in the manufactured B2B in the next 6 to 12 months.

Then a question on the lm venture. You moved the cruise business here. If you can elaborate a little bit more on this and if you can expect in the lm venture side of the business some disposals over the next 6 to 12 months.

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Sergio Signoretti, lastminute.com N.V. - CFO [11]

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Okay. Thank you for the question. So related to the direct B2B business, the cooperation with Booking.com is still in place. You know that Booking.com has chosen us as their provider, to offer the flight plus hotel services to their customers. That is in place. That is keeping on with, I would say, mutual satisfaction from both. Of course, this is a minor piece of the growth that we are having. So the biggest part of the revenue growth is related to, of course, the organic piece.

We are in talks with other players, but in terms -- to extend the B2B2C business model and revenue streams. But so far, Booking.com is the only one, and let's see what happens in the future. We are talking with Kiwi as well, which is another player which is interesting -- which is interested in our technological services for the Dynamic Package.

Then regarding the LM Ventures. I have one comment here on Destination Italia. Destination Italia need us to be very, very fast at breakeven. So I mean the plan is that we are planning the breakeven for the second semester of this year, and we are planning breakeven for next year. So we are not talking, and we are not thinking about the disposal, but we are thinking about an industrial turnaround, which is still in progress and the need to be finally materialized, let me say, by maximum 1 year from now. Because being at breakeven in the second semester means that we close the year with EUR 1.6 million negative EBITDA, which is what we are forecasting in our guidelines figure that are -- just been represented. Next year, planning to be a breakeven.

So we are not thinking about the disposal. We are thinking about a combination of industrial turnaround and commercial and cost base action in order to turn them into positive. I don't know Niccolò whether you want to comment on cruises.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [12]

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Yes, yes. On Crocierissime, it's the -- I think very easily, very simply. Crocierissime is a complete autonomous business from the OTA one, in the sense that is driven by completely different logics.

Just take into account, for example, that more than 90% of bookings are finalized by phone with an operator, which is a completely different model compared to the OTA one, the class to allocate one on flight, on hotel, on Dynamic Packages, where everything comes online. So it's a way to make it really autonomous from a management perspective in the sense that we are not trying to create any kind of potential synergies between cruises and the other businesses under the umbrella of lm group. While OTA, META and Media can work together in order to create efficiencies and synergies from a cost perspective and even a revenue perspective.

Crocierissime is an autonomous business, and for that reason and for consistency, we have decided to move it out from lm group perimeter and putting it on lm venture. It's not, I think, a way to say that Crocierissime is something that we are thinking to sell shortly. Of course, as you mentioned before in your question, it's a way to manage this in a more efficient way.

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Operator [13]

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The next question is from Andrea Scauri from Lemanik.

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Andrea Scauri;Lemanik, [14]

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Sorry if I make this question. I don't know if you have already elaborated, but I joined late in the call. What is the trend that you are experiencing in July and August? I mean is it still very supportive as it was in the first half of the year, in terms of bookings?

And second question, about the dividend. You mentioned that if these are the results, you are open to pay dividend. When should we be aware about your decisions about the dividend?

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Sergio Signoretti, lastminute.com N.V. - CFO [15]

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Yes. Thank you for the question. Regarding -- I would answer regarding July. August is -- I mean July up to the first week of August, I guess. So we are actually even better than the first semester. So we are 27% higher versus last year in terms of revenues, July only, July and the first week of August. And 40% above in terms of gross margin. So we are absolutely in line with the trend, even slightly better than the trend of the first semester. So we are -- that's why we're absolutely confident to have a very solid third quarter in terms of figures, both in terms of revenues and EBITDA, which is consistent with the guidance figures, again, that we have represented to you. So this trend is consistent with the quarterly projections that are included into the range of guidance that we mentioned.

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Andrea Scauri;Lemanik, [16]

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If I may, if this is the trend, are there any chances that you match the upper end of the guidance?

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Sergio Signoretti, lastminute.com N.V. - CFO [17]

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I think so.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [18]

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Regarding the dividend, we have not planned any kind of decision today. It depends on how the business will go in the second half. We are confident, as Sergio said, regarding the possibility to achieve the guidance. If so, I would expect that in the fourth quarter of this year, we will discuss this at the Board level, and we'll decide what to do. There are the conditions to discuss it for the first time, in my view, but I don't know honestly what will be the decision. Of course, we have had some preliminary discussion about that, so that's the reason why I'm saying that we are open to discuss.

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Andrea Scauri;Lemanik, [19]

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Sorry, a couple of follow-up question for me. The cash, where is it invested? Are there any instrument that you use to invest the cash?

And the second question, Destination Italia, you said that your target is to match the breakeven in '19 or '20. If not reached this target, how much would it cost to shut down the business?

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Sergio Signoretti, lastminute.com N.V. - CFO [20]

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Destination Italia, we need to reach the breakeven in the second semester, I said. So for this year, we plan that the loss will be in the region of the year-to-date figures that are included into the first half result. So next year -- therefore, next year, they need to be a breakeven as well. So this is the plan that management is -- has prepared, and that is the objective that we are targeting. So we are rather in the industrial phase in order to let them be at breakeven rather in the -- let me say, plan b, mode that you were mentioning.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [21]

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Regarding cash, remember that we are in the seasonal business. So the EUR 118 million is the -- normally the top figure, considering the seasonality. We have -- in the second semester or especially in the fourth quarter, the cash, if you see the monthly trend and if you see the quarterly trend goes, down due to -- especially due to the, let me say, working capital cycle that we have. We are not considering this cash in order to be invested, also considering what I was mentioning. So part of the cash will be utilized to pay the suppliers.

At the end of last year, if I remember correctly, the cash figures were in the region of EUR 60 million. This year will be, of course, higher because the EBITDA generation and the working capital improvement that we plan to do -- that we have done actually in the first semester and that we plan to do in the second in terms of diluting and expanding the -- improving, let me say, our [PTO] days, we'll give a potential benefit. But we don't have plan to reinvest this cash in any financial instruments.

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Andrea Scauri;Lemanik, [22]

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And can you provide -- I mean looking at the working capital cycle among the quarters, could you provide a target of the financial position by year-end?

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Sergio Signoretti, lastminute.com N.V. - CFO [23]

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No. This, we don't disclose.

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Andrea Scauri;Lemanik, [24]

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Why, sorry?

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Sergio Signoretti, lastminute.com N.V. - CFO [25]

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No. I mean I can give you if you want. That -- just a second. This is normally something that we didn't -- that we don't disclose to the market. But consider that, it will be anyway higher than the cash position that we are considering the EBIT -- the delta EBITDA.

So if you want to make a calculation, you can consider the delta EBITDA that we -- that we will have versus EBITDA of last year, and that will be the improvement in the cash position versus the cash position at the end of 2018.

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Andrea Scauri;Lemanik, [26]

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Okay. If I make my own calculation, give or take, should it be something in the region of EUR 30 million delta?

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Sergio Signoretti, lastminute.com N.V. - CFO [27]

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Yes.

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Operator [28]

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(Operator Instructions) The next question is from Hubert Jeaneau from UBS.

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Hubert Jeaneau, UBS Investment Bank, Research Division - Director and Research Analyst [29]

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I have 2. The first one is maybe a little bit high level, but could you give me a sense of what really has fundamentally changed in the flight business given the very strong recovery? Just trying to understand if there is kind of a base effect from the recovery and kind of how sustainable is the improved growth rate? And given that you're outperforming your peers in the market, what are you doing differently?

The second question is around the shift in marketing spend. If I understood correctly, you're shifting a little bit from brand -- kind of brand awareness to performance marketing and wondering around that if there are maybe improvement in conversion rates or what's kind of driving the -- why the change?

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Sergio Signoretti, lastminute.com N.V. - CFO [30]

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Thank you for the question. So regarding flights, as I said before, we have completely revised our pricing strategy, mostly on the META channel, in order to be more competitive, in order to be more competitive to the final customer. This is based on, I would say, an 18 months' work in terms of business intelligence, data scientists work in order to, let me say, try to increase, let me say, the (inaudible) rate and the penetration of all the value-added services that we sell together with the flight to the final customer. In order to more than recover, in terms of bookings and revenues, the competitive advantage that we give to our customers through the sale of ancillaries and value-added services.

So this is grounded. This is a work done in a scientific way, let me say, and this is proving to be very successful. Because at the end, this is bringing up volumes. This is bringing up bookings. This is bringing up gross travel value. It's bringing up revenues. It's generated traffic, which is, let me say, utilized in order to cross-sell this higher traffic towards Dynamic Packages, Media and every other pieces of the business. So it's -- let me say, a commercial strategy based on a scientific approach. And therefore, we believe it's a competitive advantage.

Related to marketing spend, it's more a matter of, let me say, an evaluation of the returns. So here, it's very easy. It's much easier to measure the return of the marketing performance investments. It's not so easy to measure the return on investment of the traditional advertising campaigns. Therefore, I mean, we are not talking about the massive shift, okay, one category to the other. We're talking about a few million euros. But the experience tells us that in terms of measurability, the various investment from the digital channels and the performance marketing investments are paying back, in general, better. So it's a return on investment-based decision.

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Operator [31]

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The next question is from Patrick Whyte from Skift.

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Patrick Whyte;Skift, [32]

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Patrick here. I'm a journalist on the call, but I want to try to ask the question anyway. I just wondered if you had any updates on your potential further M&A activity over the next 6 months. And what are your plans there? Are you quite happy with what you have at the moment?

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Sergio Signoretti, lastminute.com N.V. - CFO [33]

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Thanks for the question. In terms of M&A activity, we are always very active, as you know, on the market in order also to identify potential -- not necessarily big, but small companies that can provide content or technology or services that can be, let me see, and improve our overall offer to the market. So there are a huge potential targets that you're looking at now in the META business. We're talking about, I mean, not big companies; okay, in order to expand our geographical footprint out of the markets where we are present today.

We are also looking at potentially entering the Asia Pacific market in terms of the flight business. And then of course, with this performances, we are in a position of -- look potentially in the medium to long term to be also in a position of doing something bigger in a market which, in our view, will go towards further consolidation.

But in the, let me say, short term, yes, there are some deals that we are looking at industrially, more aimed due to the geographical expansions of the OTA and the META business out of Europe.

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Patrick Whyte;Skift, [34]

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And then just a follow-up question, if I may, about the travel market in Europe. You've got -- I'm just wondering if you're seeing any benefit from the struggles of the likes of Thomas Cook who have been struggling in markets. How are you kind of capitalizing on that? Do you think -- and just in terms of the broader holiday market, how are you seeing things over the course of the summer?

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Sergio Signoretti, lastminute.com N.V. - CFO [35]

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Yes. I mean rather than talking about Thomas Cook specifically, I think there is a general trend, which I was commenting before, about the fact that the packages market is mostly certainly, quite significantly shifting from the traditional operator to the online operators. So that we see it with reference to the, overall, let me say, growth of the online piece, okay?

So we are leveraging on that in the U.K. We are leveraging on that in Germany as well. Less evident, I would say even in Spain. But in the U.K. and in Germany, it's quite evident. So yes, we are leveraging on this trend. As I would say, also the other players which are active in the packaging business and also in flight business.

On the packages world, I think that we are even better than the others, both in terms of content, GDS flights, low-cost flights, hotels directly contractualized, banks. So we have a number of potential combinations that we offer to the customer, which is we believe higher in terms of content, in terms of capability to join and to match what are the customers' needs and the proprietary technology that we have developed.

So specifically related to Thomas Cook, I would not necessarily comment. But in terms of general trend, yes, we are leveraging on this shift.

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Operator [36]

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(Operator Instructions) There are no more questions at this time. Would you like to conclude the call?

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Sergio Signoretti, lastminute.com N.V. - CFO [37]

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Yes, I would say so.

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Niccolò Bossi, lastminute.com N.V. - Head of IR & of Corporate Affairs [38]

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Yes. Thank you very much for everyone for joining the call. Next time, we will have an official release of result, will be the third quarter results beginning on November, then the full year at the beginning of 2020. We will have a current update, as I said, at the beginning of November. And let's wait for this moment to confirm the guidance and have new updates on the business and the factors that we are experiencing with the trend of the [travel] peak season.

Thank you very much to you all.

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Sergio Signoretti, lastminute.com N.V. - CFO [39]

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Thank you. Bye.

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Operator [40]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.