Hostelworld : 2020 Interim Results Presentation

2020 INTERIM RESULTS

August Presentation

Gary Morrison	TJ Kelly	Johnny Quach
CEO	CFO	CPO

HWG H1 2020 Summary

Net Bookings		Net Revenues		Marketing & Opex1
1.1m		€12.0m		€20.7m
Net Bookings -67% YoY		Net Revenues -69% YoY		Total Spend -31%YoY

EBITDA2		Free Cash Flow2		Net Cash Position
- €8.3m		- €2.8m		€29.4m
EBITDA H1 2019: +€8.9m		FCF H1 2019: +€9.6m		As at 31/12/19 €19.4m

2 ¹ Marketing & Opex = Administrative expenses excluding exceptional items. Q2 vs Q1 2020 total spend, excluding exceptional items and marketing expenses, reduced by -22%

2 EBITDA adjusted for exceptional and non-cash items / Free Cash flow adjusted for capital expenditure, acquisition of intangible assets, net finance costs and net movement in working capital excluding the effect of exceptional costs

COVID-19 has generated significant trading disruption

Net Revenue Bridge

€17m

€39m

€10m

€12.00	€12.40
	€9.45

ABV 24% decrease driven by:

• Cancellation of longer lead time bookings with higher ABVs
• Underlying bed price decline

€12m

Net Revenue H1 2019

Net Volume effect1

Net ABV effect

Net Revenue H1 2020

-69%

3 ¹ Net Volume effect: Net Bookings (-67% /-€22m) partly offset by Deferred Revenues & Other (+€6m). Other includes accounting adjustments, ancillary services and advertising revenue

Disrupted travel patterns impacted historic marketing investment levels, which we expect to normalize gradually over time

Marketing cost per net booking (€)

			+41%
				€6.54
€4.74		€4.64	€5.02
€3.82
H1 2018	H2 2018	H1 2019	H2 2019	H1 2020

Marketing cost as % of net revenue¹

+39 bps

				76%
39%	34%	37%	44%
H1 2018	H2 2018	H1 2019	H2 2019	H1 2020

Marketing cost per net booking increased by 41% YoY, driven by significant shift in consumer behaviours

• Significant increase in cancellation rates YoY
• Significant decrease in conversion levels YoY
• Slight shift in overall Paid:Free booking mix

Marketing cost per net revenue increasing at higher rate due to the decrease in Net ABV (-24%) YoY

4 ¹ Excluding impact of Deferred Revenue

Significant steps taken to reduce costs and conserve cash since mid-March

Cost reduction and cash conservation		Impact of measures taken

• Reduced variable marketing spend to match near term revenue
• Reduction in staff costs and related cash conservation
• • Reduced working hours, short-termlay-offs and redundancies
  • Availing of Government support when available including deferral of payroll taxes in Ireland
  • Middle management, Senior management and Board deferring a portion of salary by over 9 months
• Reduced other OPEX items, including all discretionary spend and extended supplier payment terms
• Converting >30% of our free cancellation cash liability into credits1, and deferred the residual liability until 1 April 2021
• Final 2019 dividend cancelled

Liquidity measures

• €7 million three-year revolving credit facility and a short-term €3.5 million invoice financing facility
• Placing of 19.9% of issued share capital raised €14.5 million net

Marketing spend (€m)

			-91%
7.7	8.6	6.9
			0.6
Q1 2019	Q2 2019	Q1 2020	Q2 2020

Opex2 spend (€m)

-20%

6.66.9

5.8	5.5

Q1 2019

Q2 2019

Q1 2020

Q2 2020

• €32.9m of cash on hand (€29.4m net of €3.5m short-term facility)

5 1	We offered customers a range of refund options, including credits incremental to the original value of the booking. As at 30 June 2020, total customer deposits relating to bookings made under the free cancellation policy amounted to €3.3 million, of which €2.7 million
relate to bookings already cancelled
2	OPEX defined as Administrative expenses excluding marketing expenses, credit card processing fees, exceptional items and share option charges

Hostels are steadily re-opening over time

COVID-19 messaging		Hostel availability

▸ ~17.7k hostels listed on HWG platform at year end 2019

▸ We estimated ~9% of these hostels have closed down1 as of 30/6, partially offset by new signups to the HWG platform

▸ We also observed a 25% reduction in the number of hostels on our platform with availability for the next 7 days at 31/3 (compared to year end 2019), improving to a 15% reduction at 30/6

6 1 Hostels that are no longer available on any platform

Trading recovery heavily linked to easing of travel restrictions

• Modest increase in demand as travel restrictions have eased

• • Growth in domestic bookings since June (in those countries that lifted domestic travel restrictions)
  • Growth in domestic and short-haul bookings into Europe from July
• Very gradual but steady improvement in cancellation rates and conversion rates from significantly stressed levels in Q2
• Slight shift from Dorms to Private rooms
• Overall : Observed recovery "profile" tracking changes in travel guidance, corroborating Customer survey data which indicated customers would travel as soon as they are able to do so

Q3 tracking

slightly ahead of Base Case1

Pace of recovery mirroring change in travel guidance

Trading

volumes

and

economics

slowly improving

7 1 Base Case referred to in the Equity Placing RNS published on 24 June 2020

Continued progress on Roadmap for Growth

CLV1 vs CAC2

Optimisation

Core search experience

Improved booking

experience

Migrate website to a progressive web app

Promo configs & 3rd party platform connectivity

Hostel Tools &

Ecosystem

• Consolidated tracking, attribution and bidding tools within Google product suite (unplanned item)
• COVID-19forced a recalibration of CLV models given changes to booking patterns since March
• Spend allocation/optimisation based on CLV/CAC re-started in July
• Continued integration of additional real time signals, delivering more personalized search results
• Testing velocity decreased due to a reduction in traffic/bookings (COVID-19 related)
• Test and learn roadmap will continue during 2020 and beyond
• PayNow launched, allowing travellers to pay 100% upfront on non-refundable rates with participating hostels
• Google Pay/Apple Pay options launched for travellers selecting PayNow option at checkout
• Change booking live, allowing travellers to change existing bookings (partial refunds/payments)
• Legacy website replaced with a progressive web app
• Benefits include significantly faster page load speeds, especially on mobile
• New platform free of legacy tech debt, which will enable faster A|B testing
• Additional rate plan promotional features launched in H1'20 (e.g discounts on minimum length of stay)
• Launched "flexible NRR" rate plan, allowing customers to avail of lower NRR prices with an ability to change dates
• Continued 3rd party platform connectivity enhancement (PayNow support, Resell Beds feature)
• Extranet: steady stream of enhancements shipped (calendar view and promotions page)
• Goki/Counter showing positive momentum despite COVID-19 landscape
• Work underway to integrate these platforms within core platform

Ongoing

(COVID-19 reduced

testing velocity)

Ongoing

(COVID-19 reduced

testing velocity)

On track

(phased launch

during 2020)

On track

(ongoing optimisation)

On track

(ongoing optimisation)

On track

(Ongoing)

8 1 CLV = Customer Lifetime Value

2 CAC = Customer Acquisition Costs

Continuing to execute on our growth strategy despite COVID-19

Vision: Deliver Experiential Travel

Next 12 mths

Next 12-24 mths

Grow competitive experiential Inventory

• Continue to strengthen core platform
• Integrate 3rd party activities inventory
• Integrate additional unique/branded in-destination experience inventory
• Increased organic investment
• Acquire complementary "bolt on" experiential travel marketplaces with unique inventory

Build Social features:

• Rebuild traveler profiles
• Share Trip Details
• Launch social feature MVPs
• Increased investment in Social features

9

Summary: short-term outlook remains challenging, but well positioned to emerge from the crisis stronger

Latest trading trends

• Overall bookings are still significantly down YoY, but changing weekly as booking confidence improves
• Very gradual but steady improvement in cancellation rates and conversion rates from significantly stressed levels in Q2
• Supply side holding up well despite adverse market conditions
• Current trading slightly ahead of the Base Case referred to in the Equity Placing RNS published on 24 June 2020

FY 2020 outlook

No formal guidance

• Outlook for travel industry remains uncertain; however, demand is expected to improve through Q3 and Q4, albeit net bookings will remain at significantly reduced levels when compared to 2019

Scrip Dividend

• Board is proposing to issue new ordinary shares by way of bonus issues in lieu of a cash dividend, equating to 1.0 € cent per share, subject to shareholder approval

Beyond FY 2020

Emerge from current market conditions in a materially stronger position

• Continue "accelerated" roadmap delivery and increase spend on customer acquisition

Accelerate strategy when normal travel patterns resume

• Deliver enhanced business model strength with the potential for higher revenue growth rates and accretive margins

10

APPENDICES

11

Key Metrics

		Unit	H1 2020	H1 2019	YoY
Bookings	Gross Bookings: HW Group	m	1.4	3.8	(63%)
Net Bookings: HW Group	m	1.1	3.5	(67%)
	Average Booking Value (Net)	€	€9.45	€12.40	(24%)
Revenue	Net Revenue	€m	12.0	38.8	(69%)
Net Revenue (excl. deferred rev.)	€m	9.8	43.3	(77%)
	Deferred Free Cancellation Revenue	€m	(2.2)	4.4	n/a
	Adjusted EBITDA	€m	(8.3)	8.9	n/a
Profitability	Adjusted EBITDA	€m	(69%)	23%	n/a
Adjusted (Loss) / Profit After Tax	€m	(10.6)	6.2	n/a
	Adjusted (Loss) / Earnings per Share	€m	(9.3)	6.4	n/a
Cash	Adjusted Free Cash (Absorption) / Flow	€m	(2.8)	9.6	(129%)
Adjusted Free Cash (Absorption) / Flow Conversion	€m	(33%)	108%	(131%)
Shareholder	Return on Capital Employed	%	(8%)	4%	n/a
Returns

12

Income Statement

€'000	H1 2020	H1 2019	▸	69% decrease in Net Revenue to €12.0m (H1 2019: €38.8m)
Revenue	12.0	38.8	▸	Exceptional costs for the half year of €3.0m. These were

Administrative expenses	(20.7)	(30.1)
Exceptional costs	(3.0)	(1.3)
Depreciation and amortisation expenses	(6.9)	(7.0)
Operating (Loss) / Profit	(18.6)	0.4
Financial income	0.0	0.0
Financial expenses	(0.1)	(0.1)
Share of results of associate	(0.1)	-
(Loss) / Profit before tax	(18.8)	0.4
Taxation	0.8	6.1
(Loss) / Profit for the period	(18.1)	6.5
Adjusted (Loss) / Profit measures
Adjusted EBITDA	(8.3)	8.9
Adjusted (Loss) / Profit after Taxation	(10.6)	6.2

primarily costs associated associated with a group-wide staff restructure, costs associated with the realignment of our Product and Technology teams and merger and acquisition related costs (H1 2019: €1.3m)

• Adjusted EBITDA loss of €8.3m (H1 2019: €8.9m profit)
• Fixed asset depreciation €0.5m (H1 2019: €0.6m). Depreciation of Right of Use leased assets €0.8m (H1 2019: €0.5m). Amortisation of capitalised development costs €1.1m (H1 2019: €0.8m). Amortisation of acquired intangible assets €4.6m (H1 2019: €5.1m)
• Overall income tax credit of €0.8m (H1 2019: €6.1m) comprises a Group corporation tax credit of €0.3m (H1 2019: tax charge of €0.8m) and a deferred tax credit of €0.5m (H1 2019: deferred tax credit of €6.9m)

13

Cash Flow Statement

€'000	H1 2020	H1 2019
Adjusted EBITDA	(8.3)	8.9
Exceptional costs	(3.0)	(1.3)
Working capital movement	9.6	2.1
Net interest/ income tax paid	(0.0)	(0.5)
Capitalisation and acquisition of intangible assets	(2.2)	(0.5)
Purchase of property, plant and equipment	(0.1)	(0.1)
Loss on disposal of property, plant and equipment	0.0	-
Acquisition of investment in associate	0.0	-
Free cash (absorption) / flow before financing	(4.0)	8.6
Dividends paid	-	(8.6)
Lease liabilities (IFRS 16)	(0.5)	(0.6)
Proceeds from issue of share capital	15.2	-
Issue costs paid	(0.7)	-
Proceeds from borrowings	3.5	-
Net (decrease)/increase in cash and cash	13.5	(0.6)
Opening cash and cash equivalents	19.4	26.0
Closing cash and cash equivalents	32.9	25.4
Free cash (absorption) / flow before financing	(4.0)	8.6
Exceptional costs paid	1.2	1.1
Adjusted free cash (absorption) / flow	(2.8)	9.6
Adjusted free cash (absorption) / flow conversion	(33%)	108%

• €7.5m increase in working capital movement is primarily due to €7.0m increase in creditors due to cash conservation measures taken including the warehousing of payroll taxes
• Capitalisation of intangible assets vary depending on technology projects meeting the criteria of IAS 38
• 33% Adjusted free cash absorption for H1 2020 (H1 2019: Adjusted free cash conversion 108%)

14

Balance Sheet

€'000	H1 2020	H1 2019	▸ Cash balances of €32.9m (net cash €29.4m)
(2019: €19.4m)
Intangible assets	105.6	112.3
Investment in Associate	2.6	-	▸ Net decrease in intangible assets driven by
Other non-current assets	12.9	13.6	amortisation
Trade and other receivables	2.4	5.3
Cash and cash equivalents	32.9	25.4
Total assets	156.4	156.6
Total equity	128.5	133.8
Lease Liability	5.4	4.8
Deferred tax liabilites	0.1	0.2
Deferred free cancellation revenue	0.6	7.3
Creditors, accruals and other liabilities	16.6	10.4
Deferred Consideration	1.8	-
Borrowings	3.5	-
Total equity and liabilities	156.4	156.6

15

Liquidity

Cash position movement since 31/12/2019 (€m)

Chart Title

	Net Cash excl. June Capital Raise		Equity Raise		Debt Drawn down

19.420.1

3.5

14.5

= 32.9

15.214.9

31/12/19	31/03/20	31/05/20	30/06/20
Category 3	Category 4
Category 1	Category 2

16

H1 2020 Geographic Mix

Booking by Nationality

Africa 1%	Asia 7%

UK 15%

South America

7%

Oceania 8%

North America

27%

Rest of Europe

36%

Booking by Destination

UK 5%

Africa 2%

South America

13%

Asia 26%

Oceania 13%

North America

14%Rest of Europe

28%

17

Disclaimer

• NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO ANY JURISDICTION IN WHICH SUCH DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.
• This presentation has been prepared by Hostelworld Group plc (the "Company") for informational and background purposes only.
• The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ("relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments.
• This presentation does not constitute or form part of any offer or invitation to purchase, sell or subscribe for, or any solicitation of any such offer to purchase, sell or subscribe for, any securities in the Company nor shall this presentation or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it comes should inform themselves about, and observe, any such restrictions.
• The Company is under no obligation to update or keep current the information contained in this presentation or to correct any inaccuracies which may become apparent, and any opinions expressed in it are subject to change without notice. Neither the Company nor any of its respective directors, officers, partners, employees or advisers accept any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith.
• The presentation may contain forward-looking statements. These statements relate to the future prospects, developments and business strategies of the Company. Forward-looking statements are identified by the use of such terms as "believe", "could", "envisage", "estimate", "potential", "intend", "may", "plan", "will" or variations or similar expressions, or the negative thereof. Any forward-looking statements contained in the presentation are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialise, or if underlying assumptions prove incorrect, the Company's actual results may vary materially from those expected, estimated or projected. Any forward-looking statements speak only as at the date of the presentation. Except as required by law, the Company undertakes no obligation to publicly release any update or revisions to any forward-looking statements contained in the presentation to reflect any change in events, conditions or circumstances on which any such statements are based after the time they are made.

18