Mondee Holdings, Inc. (NASDAQ:MOND) Q4 2023 Earnings Call Transcript
Mondee Holdings, Inc. (NASDAQ:MOND) Q4 2023 Earnings Call Transcript March 14, 2024
Mondee Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to the Mondee Fourth Quarter 2023 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference call over to Jeff Houston, Senior Vice President. Jeff, please go ahead.
Jeff Houston: Thank you, Elliot and good morning to everyone. Welcome to Mondee’s fourth quarter and full year 2023 conference call. With me today is Founder, Chairman and CEO, Prasad Gundumogula; and Chief Financial Officer, Jesus Portillo, Executive Vice Chairman, Orestes Fintiklis; and Chief Operating Officer, Jim Dullum will present our preliminary unaudited results and be available for questions-and-answers. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, including statements about revenue, growth of our business, our management and governance plans and other non-historical statements as further described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Mondee’s growth, the evolution of our industry, our product development and success, our management performance and general economic and business conditions.
I would also like to point out that the fourth quarter and full year 2023 results are preliminary and subject to final audit. We undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to have a material difference from these forward-looking statements are discussed in our reports filed with the Securities and Exchange Commission and in our earnings press release that was issued this morning. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. Listeners are cautioned not to place undue reliance on any forward-looking statements. During the call we also refer to non-GAAP financial measures.
Reconciliations of the most comparable GAAP measures are also available in the press release, which is available at investors.mondee.com. With that, it's my pleasure to turn the call over to Prasad.
Prasad Gundumogula: Thank you, Jeff. Good morning, good afternoon and good evening everyone, and welcome to Mondee's fourth quarter and full year 2023 earnings call to discuss our results and significant developments. We are pleased to report that net revenues and adjusted EBITDA for 2023 surpassed full year guidance with Q4 and full year 2023, the highest on record in the 13 year history of Mondee for both metrics. 2023 gross bookings of $2.6 billion grew 19%. Net revenues of $222.3 million grew 39%. 2023 adjusted EBITDA was $21 million, another record and almost double 2022's level. This strong year-over-year growth was fueled by product and geographic expansion of our marketplace, industry-leading technology advancements, and sustained leisure travel demand.
This translated into gross bookings growth and take rate expansion, which has doubled since pre-pandemic levels to 8.7% in 2023, up from 7.4% in 2022. In the fourth quarter, take rate was nearly 10%. Looking into the future, we are focused on achieving the following near and long-term goals, enhanced profitability and free cash flow. We will achieve this through sustained transaction volume growth, take rate improvements and implementing cost control measures. Expand travel marketplace. Our marketplace is growing in terms of geography, products such as packages, hotels, events and activities, as well as new era distribution partners. Indicatively, Mondee's entire business pre-pandemic was Air-Only, whereas for 2023 Air-Only represented only 57% while hotel, packages, FinTech and other represented 43%.
In terms of origination geography during 2023, Mondi expanded within North America and into South America. Maintain technological leadership in AI. Mondi remains committed to being a leader in travel industry AI. Our significant investments in Abhi, the first AI-powered travel platform launched in mid-2023, have established a strong foundation. We are continuing to innovate and push the boundaries of AI in travel. Moreover, as Jesus will detail later, the company is focusing on optimizing its capital structure in the coming months with a new long-term loan facility. As an initial step, we have extended the maturity of our current term loan to March 31, 2025. I'll now turn the floor over to Jim Dullum, Mondee's Chief Operating Officer, who will discuss market trends and Mondee's marketplace expansion.
Jim, over to you.
James Dullum: Thanks Prasad. Good day everyone. Turning to our market outlook and external drivers to our gross bookings growth, for the industry overall, 2023 was a very mixed bag of robust post pandemic recovery, but also headwinds from regional armed conflicts and a great deal of economic uncertainty. It is worth, emphasizing that Mondee's business model flourishes in such conditions of volatility. On the demand side, travelers seeking cost effective options aligned nicely with Mondee's offerings. On the supply side, uncertain economic conditions lead to more potential excess capacity, motivating suppliers to offer better deals through opaque channels like Mondee. This enables us to target our marketing to specific consumer groups while providing travelers with enhanced, customized itineraries, trends that are perfectly suited to Mondee's AI capabilities and leadership.
Furthermore, a substantial majority of our business caters to international leisure travel, which continues to benefit from recovery and growth in certain markets like Latin America, China, and the Middle East. Looking more to our own business, we continue enhancing our marketplace, where Mondee is steadily increasing its market share within the $1.1 trillion assisted affiliated travel market through focus on adding content and distribution expansion. In terms of content diversification, you may recall pre-pandemic, as Prasad mentioned, Mondee was almost exclusively offering discounted airfares. In 2023 Air-Only net revenues accounted for 57% while Packages were now up to 21%, Hotel-Only at 11%, FinTech at 6% and the Other category including SaaS, insurance, ground transportation and other ancillaries was at 5%.
These adjacent products and markets not only significantly expand Mondee's total addressable market or TAM, but also contribute to the impressive rise in our take rate. Moving on to distribution expansion, we leveraged our AI technology platform to continue growing our robust marketplace of 65,000 travel experts and new era distribution partners such as local community and social media influencers, and to provide their travelers with access to personalized content and localized experiences. As we interact with these cohorts, we continuously gain valuable feedback, allowing us to refine our platform, our monetization, and our content localization strategies. In the area of B2B partnerships beyond our expert led distribution, our B2E or business-to-enterprise partnerships have witnessed a net revenue surge year-over-year.
As a reminder, Mondee targets enterprises and membership organizations by providing its unique technology platform and inventory access to these closed user groups. I'll now turn it over to Orestes Fintiklis, Mondee's Executive Vice Chairman, to discuss our widening technological leadership and focus on increased profitability and cash flows. Orestes?
Orestes Fintiklis: Thank you, Jim and good morning everyone. As Jim mentioned, we have been widening our technological product lead and further AI integration. Mondee remains a leader in travel innovation through pioneering AI solutions like Abhi, our unique platform that combines expert trained, generative AI with conversational interfaces and comprehensive booking and itinerary management. Upon its launch in the summer of 2023, Abhi established itself as the first fully integrated AI travel assistant. This groundbreaking technology can explore trip ideas, take real-time traveler input, create itineraries, book travel, manage itinerary changes, and even generate customized travel guides for both travel experts and their clients.
By introducing Abhi, Mondee created a new category. Going forward, we remain committed to not only enhancing the capabilities of our proprietary large language model LLM, which continuously learns from our unique travel expert data and millions of daily searches, but also to pushing the boundaries of the entire field. We will unveil more details about these advancements in the coming quarters. Turning to our heightened focus on profitability and cash flow generation, Mondee is not merely disrupting the travel market, it is achieving this while maintaining and enhancing strong profitability. Committed to long-term shareholder value, we are redoubling our efforts to boost adjusted EBITDA and free cash flow in 2024. Year-over-year, the company has nearly doubled its reported EBITDA from $12 million in 2022 to $21 million in 2023.
During the past year we also completed five acquisitions. Going forward, we are focusing on realizing further organic growth and synergies through seamless integration and lucrative cross-selling opportunities. I now yield the floor to Jesus, our CFO on this day of his birthday, for a review of Mondee's financial performance and outlook. Jesus?
Jesus Portillo: Thank you, Orestes and hello everyone. As I go over our Q4 and 2023 results, I would like to point out that all growth rates for 2023 are on a year-over-year basis unless otherwise indicated and the results are subject to final review by our auditors. Let me start with our financial highlights. We continue to generate a strong performance throughout this fourth quarter, producing record quarterly and annual net revenue and adjusted EBITDA, evidence that efforts for sustained growth and improved profitability are producing results. Our gross bookings were $619 million in this quarter, up 24%. This growth was driven by a 56% increase in the number of transactions. For the full year 2023, gross bookings of $2.6 billion grew 19%.
Our net revenue increased 78% to reach $61 million. This growth in net revenue is the result of higher growth bookings combined with our continued improvement in take rate. Our take rate of 9.9% was ahead of our expectations, and up 44%. As with prior quarters, this improvement in take rate was driven mostly by the growth of higher margin products and the diversification of revenue streams including FinTech and ancillary services. Full year 2023, net revenues of $222 million grew 39%, while take rate of 8.7% grew 17%. Turning now to expenses, our operating expenses increased 49% compared to our net revenue growth of 78%. Sales and marketing as a percentage of net revenue decreased from 75% to 62%. The main reasons for this improvement are the AI-driven optimization of marketing credits to our B2B distribution network as well as reductions in performance marketing spend in our B2C business.
As a result of our strong net revenue growth and our efficiencies in sales and marketing, adjusted EBITDA grew 338% from $2 million to $7 million. Adjusted EBITDA margin was also up 146% and reached 11.4% in this quarter as we continue to put more emphasis on operating efficiencies and profitability. For the full year, adjusted EBITDA was $21 million, up 77% with an adjusted EBITDA margin of 9.5%. On a GAAP basis, our net loss was $13 million, which included $11 million of noncash and/or nonrecurring items, including $3 million of stock based compensation, $3 million of intangible assets amortization and $3 million of change in fair value of acquisition earn-outs among others. For the full year, GAAP net loss was $60 million a year-over-year improvement of 30 million.
Looking now at our balance sheet, at the end of this quarter we had $34 million in cash and cash equivalents and $162 million of total debt compared to $48 million and $155 million respectively at the end of September 2023. The reduction in cash reserves was primarily due to debt service and changes in net working capital in line with revenue growth. We are advancing on the refinance of our term loan to increase duration and improve terms. We expect these to optimize our capital structure, adding value to our shareholders. In the meantime, we have executed an amendment with our current lenders extending the existing loans maturity to March 31, 2025. During the quarter, the company raised $11.3 million in preferred stock, $10 million of which was used to repurchase Mondee common shares as part of our inaugural share buyback program.
In terms of cash flow, operating cash flow was negative $10.6 million compared to a negative $9.9 million in Q4 of 2022. For the full year, operating cash flow was negative $24 million compared to negative $10.6 million in 2022. This lower cash flow was primarily driven by a higher interest payment of $5.7 million, mainly due to conversion from peak to cash interest, a change in net working capital of $6.3 million and payments related to the LBF divestiture of $7.7 million. Adjusting for these, operating cash flow would have improved by $6.3 million year-over-year. Turning now to our 2024 guidance, we are forecasting net revenues of $250 million to $255 million representing growth of 14% versus 2023 expected net revenues, measured at the midpoint, adjusted EBITDA of $30 million to $35 million representing growth of 24% versus 2023 expected adjusted EBITDA measured at the midpoint.
In closing, we're excited about our year end results and the momentum in the business. Let me now turn it back to Jeff for Q&A. Jeff?
Jeff Houston: Hey, thanks Jesus. Elliot, we are ready for questions now.
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