MakeMyTrip clocks $20.3M loss in Q4; air ticketing revenues continue to drop but hotels business sees robust growth

NASDAQ-listed online travel services firm MakeMyTrip (MMT) reported 1.4 per cent decline in its revenues less service costs which stood at $21.7 million for the fourth quarter ended March 31, 2013 over the year-ago period. Overall revenues, however, rose 17.5 per cent to $55.2 million in the quarter.

Decline in revenues less service costs (a crucial metric for OTAs) was led by a sharp fall in sales from its key revenue earner air ticketing, which declined 26.3 per cent (21.2 per cent in constant currency) to $13.14 million. This also declined sequentially representing deteriorating performance in air ticketing.

Hotels and packages, which has higher margins but is a smaller contributor of revenues, saw robust growth 141.6 per cent (146 per cent in constant currency) to $7.7 million. Other businesses, comprising train ticketing and bus ticketing, also declined 12.9 per cent.

Deep Kalra, chairman and CEO of MakeMyTrip, said: "As part of our long-term strategy to grow the hotels and packages business, we significantly improved our annual non-air net revenue mix to over 35 per cent."

The OTA also saw pressure on its bottom-line with a net loss of $20.3 million against a net profit of $6.2 million in Q4 FY12 and an adjusted net loss of $6.5 million against a profit of $3 million in the year-ago period.

Adjusted net loss excludes employee share-based compensation costs, M&A-related expenses, amortisation of acquisition-related intangibles, net change in fair value of financial liability in business combination, net loss on change in fair value of derivative financial instrument and income tax (benefit) expenses.

The company said its personnel costs increased due to increases in annual wages, growth in employee headcount in hotels and package business and due to acquisitions in the previous quarter. Other operating expenses increased 41.8 per cent to $19.4 million in the quarter ended March 31, 2013 from $13.7 million in the quarter ended March 31, 2012, mainly due to an increase in advertisement expenses, payment gateway charges and outsourcing fees.

Air ticketing: The number of transactions rose 13 per cent to 1.054 million during the quarter but revenue from air ticketing business decreased 32.6 per cent (27.8 per cent in constant currency) to $14.1 million in the quarter ended March 31, 2013 from $20.9 million in the quarter ended March 31, 2012. Revenue less service costs decreased 26.3 per cent (21.2 per cent in constant currency) to $13.1 million in the quarter ended March 31, 2013 from $17.8 million in the quarter ended March 31, 2012. Gross bookings grew 16.6 per cent (24.2 per cent in constant currency) year on year, mainly due to an increase in transactions by 13 per cent and aided by higher airfares in the quarter ended March 31, 2013. The company attributed the decline in revenue less service costs to a fall in net revenue margin (defined as revenue less service cost as a percentage of gross bookings) to 5.3 per cent from 8.4 per cent a year ago, mainly due to a reduction in airlines' base commission. Net revenue margin remained at the same level as the previous quarter.

Hotels and packages: The number of transactions rose 97.1 per cent to 167,000 during the quarter. Revenue from hotels and packages business increased 60.8 per cent (67 per cent in constant currency) to $40.2 million in the quarter ended March 31, 2013 from $25 million in the quarter ended March 31, 2012. Revenue less service costs more than doubled to $7.7 million from $3.2 million in the quarter ended March 31, 2012. This was due to an increase of 89.3 per cent (97.7 per cent in constant currency) in gross bookings primarily due to a 97.1 per cent rise in the number of transactions and an increase in net revenue margin from 9.6 per cent in the quarter ended March 31, 2012 to 12.3 per cent in the quarter ended March 31, 2013. Net revenue margin increased over the previous quarter margin of 11.1 per cent. The growth in this segment was further aided by the acquisition of Hotel Travel Group and ITC Group in the quarter ended December 31, 2012.

Other revenue: Other revenue decreased to $0.9 million in the quarter ended March 31, 2013 from $1 million in the quarter ended March 31, 2012, primarily due to lower advertisement income on its websites.

FY13 performance and FY14 outlook

MMT generated revenue of $228.8 million in the year ended March 31, 2013, an increase of 16.4 per cent (29.7 per cent in constant currency) over the previous year. Revenue less service cost was flat at $88.2 million in the year ended March 31, 2013, due to a decline of 14.3 per cent (3.3 per cent in constant currency) in air ticketing revenue less service costs, offset by an increase of 51.4 per cent (65.7 per cent in constant currency) in hotels and packages revenue less service costs.

It recorded net loss of $27.6 million compared with a profit of $7 million in the year ended March 31, 2012. Adjusted net loss was pegged at $6 million in the year ended March 31, 2013 against a net profit of $9.3 million in FY12.

The firm said it continues to remain cautious about the growth in the air ticketing business and has given revenue less service costs growth guidance in the range of 15 per cent to 20 per cent on a constant currency basis, which will result in revenue less service costs guidance in the range of approximately $101 million to $106 million for FY14.