DREAMFOLKSNSENovember 07, 2022

Dreamfolks Services Limited

9,400words
144turns
9analyst exchanges
4executives
Management on call
Liberatha Kallat
CHAIRPERSON AND
Balaji Srinivasan
CHIEF TECHNOLOGY
Anurag Jain
CHIEF OPERATING OFFICER – DREAMFOLKS SERVICES LIMITED
Giya Diwaan
CHIEF FINANCIAL OFFICER – DREAMFOLKS SERVICES LIMITED
Key numbers — 40 extracted
rs,
e last two years has been through a very rough ride due to the cumulative impact of multiple factors, from COVID induced lockdowns that stranded international and domestic travel to strict rigid restr
8%
new crop of people to desire, adopt and prefer air travel and increase frequency. Currently, only 8% of the eligible base of credit/debit card user base are accessing lounges. Thus, the headroom for
100%
prise set-ups, et cetera. We have established ourselves as a leading airport lounge provider with 100% coverage of all the lounges in the country and even hold a lion’s share of all India issued card-
95%
d even hold a lion’s share of all India issued card-based access to domestic lounges, standing at 95%. In terms of our global footprint, we have business operations in 536 cities across 121 countries
110%
sumers, provide card-based and digital access, and billing. There's been a strong growth of about 110% in domestic air traffic in H1 FY '23, which has already surpassed the pre-COVID level. Domestic a
60%
'23, which has already surpassed the pre-COVID level. Domestic air traffic has grown by around 60% in quarter 2 FY '23 as compared to quarter 2 FY '22. And we've seen a record high footfall
240%
ngers availing the lounge access and other touch points through us has grown at a healthy rate of 240% year-on-year in H1 FY '23 and 140% in Q2 FY '23. In H1 FY '23, passengers accessing the airport l
140%
d other touch points through us has grown at a healthy rate of 240% year-on-year in H1 FY '23 and 140% in Q2 FY '23. In H1 FY '23, passengers accessing the airport lounges stood at 3.6 million compare
3.6 million
H1 FY '23 and 140% in Q2 FY '23. In H1 FY '23, passengers accessing the airport lounges stood at 3.6 million compared to 1.1 million in H1 FY '22, thus reflecting a recovery in the travel industry growth. F
1.1 million
2 FY '23. In H1 FY '23, passengers accessing the airport lounges stood at 3.6 million compared to 1.1 million in H1 FY '22, thus reflecting a recovery in the travel industry growth. For Q2 FY '23, passengers
1.8 million
y in the travel industry growth. For Q2 FY '23, passengers accessing the airport lounges stood at 1.8 million compared to 0.76 million in Q2 FY ’22. Our number of lounges in India has also grown from 49 as o
0.76 million
growth. For Q2 FY '23, passengers accessing the airport lounges stood at 1.8 million compared to 0.76 million in Q2 FY ’22. Our number of lounges in India has also grown from 49 as of 30th September 2021 to
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Guidance — 20 items
Liberatha Kallat
opening
“However, with the waning off of the pandemic resumption in business travel and the booming event travel trend, we have started to see green shoots over the past couple of quarters and only expect these tailwinds to further increase, boding well not just for us, but for all our stakeholders and players across verticals in the hospitality industry.”
Liberatha Kallat
opening
“As a part of a CSR initiative, we firmly believe that by educating and empowering a girl child, we are facilitating the growth and development of an empowered woman who has potential to contribute immensely to the empowerment of our nation, under Mission Saksham, we aim to provide education and help support to the underprivileged girl children in rural Gurugram.”
Liberatha Kallat
opening
“And as a part of our initiative, we work closely with Government Model Sanskriti Primary School Village Tigra and Seven Shade Foundation project Bagiya, in Gurugram.”
Liberatha Kallat
opening
“These girls need the right kind of backing and a platform to showcase their merit and that is exactly what we at DreamFolks aim to do.”
Giya Diwaan
opening
“Coming to lounges, it is with great pride that I can share that we have tied-up with Aspire Lounges Australia.”
Giya Diwaan
opening
“With this partnership, air travellers can now experience exclusive luxury lounges access to Sydney, Melbourne, Perth and Brisbane as part of 66 Aspire branded lounges globally.”
Liberatha Kallat
opening
“With the existing clients, we aim to increase wallet share and expand our association beyond airport lounge services to include F&B, spa, meet and assist.”
Liberatha Kallat
opening
“As regards new clients, we aim to expand into new sectors to create customer engagement and provide loyalty management solutions.”
Liberatha Kallat
opening
“Lastly, a major focus area and one in contention is that the geographic expansion which can be already seen with over 1200-plus touch points globally and the tie-ups such as Aspire Lounges Australia partnership.”
Liberatha Kallat
opening
“We intend to replicate a similar successful operating model by leveraging our deep knowledge of industry, technology innovation, process expertise and business model across new high growth markets which include Central and Eastern Europe, Middle East, Africa and Southeast Asia.”
Risks & concerns — 4 flagged
Industry overview, the travel and hospitality industry in the last two years has been through a very rough ride due to the cumulative impact of multiple factors, from COVID induced lockdowns that stranded international and domestic travel to strict rigid restrictions that called for social distancing and extra measures for health and safety, which brought along with it additional costs and also the recovery of players across multiple verticals in our industry.
— Liberatha Kallat
We'll take a cautious view and probably discuss this in detail in our next call.
— Giya Diwaan
Again, here, it's a business sensitive discussion, so we would want to take the little cautious view over here and would not be able to discuss this here
— Giya Diwaan
Ankit we would like to take a little cautious view over here and maybe probably at this point in time would not have a discussion.
— Giya Diwaan
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Q&A — 9 exchanges
Q
Yes. Congratulations on strong results. I have three questions. First is, can you give some idea on the revenue mix, lounge access, meet and assist, F&B, airport transfers, what's the, we know lounge access is the major majority of the revenues come from there, but we'd just like to get an understanding on the other revenue streams, and the unit economics on those? The second question is, if you can elaborate on the first half, versus second half seasonality? Is second half much higher, like probably 55%, 60% of the annual revenues? And would the margin also then be much higher there? And the
Giya Diwaan
Sure. So, I'll start with your first question which is revenue mix. As we discussed that our major revenue comes from lounges and in last couple of years, we have been adding these new services like airport transfers, meet and assist, food and beverages offerings to our users. These services are currently picking up. If you look at the current mix of the lounge versus other services, it is 95% versus 5%. Moving on to your second question wherein you were talking about the seasonality in the first half versus the second half. Yes, if you look at the industry, seasonality plays a major role here
Q
Hi everyone. Thanks for taking my questions and congrats for a great performance. In the PPT, mam you mentioned the total volume for DreamFolks to add 3.6 million pax in the first half of FY23. Will it be possible to share the overall long-term volumes in India, both domestic and international, so that we can basically calculate the market share going forward?
Giya Diwaan
So, this number actually gets published in the industry reports. As per the latest, there is no latest industry report available. So, we will have to wait for the next version to come in the market before we could share that information with you. Okay, but like last published market share was around 68%. So according to your, like it should be similar? We will not be able to comment on that because we don't know the larger number. We only know our numbers. Secondly, will it be possible to give a split of the travelers going to the domestic lounges and international lounges and what will the pr
Q
Congratulations to the team for getting listed and for this maiden con call. My question is on a steady state growth. What can that be over the next four to five years? And if you can explain how you derive that number?
Giya Diwaan
Okay. So, if you look at the industry forecast, that's what we can talk about right now, if you look at the industry forecast and the report published recently it talks about that FY 2023 is going to get back into the pre-COVID level. And from there onwards, especially from FY '21 to '24 CAGR, if we look at that per the latest industry report, it's forecasted to grow at 40%. That's how the outlook is looking in for our industry. So, can we expect the DreamFolks also to replicate that number? We'll take a cautious view and probably discuss this in detail in our next call. But what we can talk a
Q
Hi Liberatha, good morning there is just one question from you and one from Giya. On the international expansion side, can you just talk in some more detail of the updates you have seen over the last few months, any particular change which is likely to happen soon and how should we kind of think about the growth of international business over the next six to nine months period? And Giya, from a Overall broad mix of domestic versus international passenger, if we kind of go back to that 70-30 mix down the line, based on current lounge rates, what's the broad range of revenue per pax which you wo
Giya Diwaan
I request Liberatha to take up your first question on international expansion. So, as you have seen that in terms of the touch points, the way we are actually expanding and with our recent few tie-ups like ASPIRE as well. So yes, as a strategy right now we have been adding more and more lounges and other services as well, including Meet & Assist, Airport Transfer as well into our portfolio. So yes, the plan is to add more such lounges in more cities and more regions into our portfolio, wherein the DreamFolks client's customer can actually avail access and have the benefits across the globe. Se
Q
Yes thanks, First question is when I look at the results for the first half, compared to your profit before tax and operating profit, your cash flow, operating cash flow is like less than a third of that. So, what is happening? Can you explain that? Is that going to be the way it is in the future?
Giya Diwaan
So, one part of the cash flow is definitely the receivables, right. So that's a normal growth based on the growth in the revenue. And however, the interesting part you might have noticed is that we have a negative working capital cycle. Now as a classification also I'm sure you might be able to get to see net cash and cash equivalents. However, the investment portion as per the reporting standards gets reflected in other parts of the balance sheet line items. So, though you would see the balance in the bank account here as a net cash and cash equivalent whatever investment we have made in the
Q
Yes, hi. Thanks. And congratulations to the entire team. Just one quick question, could you just give us some color and a flavor of our non-lounges revenue mix? As of now, it is just 5%. You kind of explained that there are a few things which you are doing. And if you can give us some sense that how this mix will change in the next three years to five years, and what is your optimum comfort zone, and how do you want to take this forward? Because we kind of understand the lounge part of the business, but the non-lounge part of the business, how do you see that evolving?
Liberatha Kallat
Sure. So, the thing is that I would say that lounge would still be the larger part of the revenue in coming years as well. However, yes, the way we would see it, the other services, the way it would contribute, I would say in a couple of years, maybe two years to three years down the line, the trend would certainly change from which is 5% now to maybe 15% in coming years. Okay, so you mean to say that even our lounge businesses will keep growing the pace at which we are looking at it, but the non-lounge will grow at much faster pace and that's why the mix will be tilted and that will improve.
Q
Hi. Thanks for taking my question. Congrats on a good quarter. I think my first question is around in the international monetization. Let's just say, if we categorize our direct clients directly into whether they are banks or whether their card networks. In your experience and estimation, how would you say that the pick-up or offtake of our services and revenue would differ if our revenue was either led by banks or by card networks? How do you think the offtake would differ?
Giya Diwaan
Ankit we would like to take a little cautious view over here and maybe probably at this point in time would not have a discussion. Maybe in the later calls, we can have these discussions in detail. Sure. I understand that. Thank you. The other question would be on do you have any estimation on, you know, in the domestic credit card circuit, what is the average actual usage of free lounge access versus what is permitted? Do you have any statistics around that basic thing? So, Ankit yes, if I were to look at a matrix where you are talking of actual usage versus permitted that may vary from vario
Q
Yes, Madam. So, I have only one question, something related to what one participant asked about the cash flow. So, if I look at March 2022 balance sheet and September 2022 balance sheet, there is an increase of almost INR 70 crores in the trade receivable part and as against that, in the trade payable part, there has been increase of INR 55 crores. So, trade receivable has gone up by INR 70 crores and trade payable gone up by INR 55 crores and I think that’s where the INR 15 crore negative cash flow has happened. So, you said that you basically paid it later you first receive and then you pay
Giya Diwaan
So that is how the cycle function that the cycles for receivables are longer than the cycles for the payable. So, what is cycle for receivable and what is for payable? I think we would not be able to get that much into detail. However, the way we function with our stakeholders is that based on the number of cycles which we agree for the payable for our operator is definitely longer than what we agree with our clients and that’s the reason we are getting to see INR 70 crores versus INR 55 and this growth is purely based on the growth in the revenue. No, growth in revenue is completely acceptabl
Q
Thank you everyone for joining us in this earnings call. We at Dreamfolks Services Limited will continue to expand on the initiatives undertaken and progress made over the past few years. The strong position that our company has been in over the years will only further solidify with streamlined, efficient operations and incredible talent pool delivering high quality offerings and further strengthen the deep relationship and network built over the years. Once again, the presentation, earnings release and results have already been posted on the company's website and stock exchanges. Please feel
Management
Speaking time
Giya Diwaan
36
Bhavin Shah
15
Ankit Pande
14
Liberatha Kallat
13
Jeevan Patwa
13
Moderator
11
Balaji Srinivasan
9
Depesh Kashyap
8
Anurag Jain
7
Jehan Bhadha
5
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Opening remarks
Liberatha Kallat
Good morning, everyone and thank you for joining our first ever earnings conference call to discuss the operational and finance performance for Q2 and H1 FY '23. This has been a momentous quarter for the company with a listing on stock exchanges. Launch of new initiatives, adding new partners and relentlessly working on being future ready, while providing our customers the more seamless and smooth experience of access to lounges and other touchpoints on their journey. We would like to thank all our shareholders and other market participants. Being our first interaction with the capital market participants and investors at large, post listing on the stock exchanges, I would like to take some time to establish who we are and what we do for those who might be uninitiated and new to our company. Industry overview, the travel and hospitality industry in the last two years has been through a very rough ride due to the cumulative impact of multiple factors, from COVID induced lockdowns that s
Anurag Jain
Thank you Liberatha. Good morning, all. A bit more detail on the operational highlights. So our platform and services portfolio allows card networks, card issuers and corporate clients to build bespoke solutions addressing disparate aspects of the airport services for their consumers. Card networks and card issuers can avail of any of the services and may provide complimentary lounge access and complimentary access to other services to the consumers as part of their offering under eligible credit and debit card programs and we enable this access across services. Corporate clients, they also leverage our solutions to extend benefits to the user base as part of their consumer and employee engagement programs. As part of the diversification strategy beyond the financial services sector, solutions have created ancillary revenue opportunities for airlines and OTAs, by enabling them to cross-sell and up-sell our services to their ticketing customers. We focus on the operators who provide the
Balaji Srinivasan
Thanks, Anurag. So, I'll just give you a flavor about our technology platform. So, what we do is that we provide clients the option of providing their end consumers different mechanisms to access certain airport-related services like lounges and all the other services that we spoke about on the call. What are the more traditional mechanisms like credit cards, debit cards, forex cards, et cetera, or also our DreamFolk's membership card, or via digital solutions such as mobile applications, and all of that is enabled using our hybrid technology. Our entire DreamFolks platform is proprietary and has been developed in-house. The platform and the technology is cloud-based and it allows lounges and other operators to check the benefits of the consumers based on the cards, memberships, or vouchers, and also allows access to the different facilities based on the benefits or integration as per our clients, such as banks or networks, processes, and their systems. Our platform actually comprises
Giya Diwaan
Thank you Balaji, and a very warm welcome to one and all attending this earnings conference call. To lay the picture out in terms of some metrics, we currently have 125-plus operational airports in the country and total 60 lounges. As per industry reports, the number of airports is expected to reach 295 and a number of lounges would cross 200 by 2040. Thus, with increase in number of airports, number of lounges, growing air travellers and an increasing propensity in them to use lounges, with a simultaneous increase in the size and offerings of lounges, not to forget the rise in number of card users, DreamFolks is well poised for growth with dominance. On the company front, we are proud of the fact that during this time of upheaval too, we have managed to stay afloat, be profitable, without letting go of any of our employees and instead we have emerged stronger, hungry for growth, rewarded our employees for their support and continue to stay strong, firmly marching on our path towards h
Liberatha Kallat
Thank you, Giya. So, taking you forward for the way forward for our business. Our next phase of growth is centered upon three levers; cross-selling and up-selling to existing clients, acquiring new clients in existing and new sectors and via geographic expansion from a purely domestic focus currently to an international focus in pre-determined geographies. With the existing clients, we aim to increase wallet share and expand our association beyond airport lounge services to include F&B, spa, meet and assist. Synergistically, we have a deeper integration of client system with the DreamFolks platform leading to recurring revenue and thereby maintenance, 100% of coverage of airport lounges. As regards new clients, we aim to expand into new sectors to create customer engagement and provide loyalty management solutions. Another focus area is to focus on customer engagement and loyalty solutions for corporate clients and build specific solutions for loyalty companies, e- commerce companies,
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