May 12, 2022 – On today’s podcast we talk about travel marketplaces with Mondee CEO Prasad Gundumogula. Mondee is a technology-first travel marketplace with a portfolio of globally recognized brands in the leisure, retail and corporate travel sectors.
On the show, Prasad discusses:
- Mondee’s role as a travel market disruptor and next generation marketplace
- Why he thinks the travel market is recovering on a sustained basis
- Some recent trends occurring in the travel market
- The company’s approach to M&A and its recent SPAC merger
- And more
Transcript:
Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.
Julian Klymochko: Hey Prasad. How are you doing? Calling in from New York. How are things?
Prasad Gundumogula: Pretty good? How are you?
Julian Klymochko: Can’t complain. Nice and cold up here in Canada. I certainly miss New York, but I don’t think it’s hot and sunny there. Today by the looks of it. In any event, excited to have you on the show today, I wanted to kick things off by getting into your history and track record as an entrepreneur, prior to getting into Mondee specifically, what opportunities do you look for when starting or considering a new venture?
Prasad Gundumogula: That’s great. Yep. So just to give you a little background, you know, I came from India, small villages in India, where education is a real privilege and English is a third language. And you know, eventually graduated from a university as a topper. And you know, did my masters in computer science then came to U.S., you know, and took a job for an year, always wanted to do something, you know, different and something in, you know, being an entrepreneur and, you know, doing something out of the box and started my first business in the days of 23 and built and operated and successfully exited two tech companies in the span of eight years in automobile and logistics and consumer retail space. So, we built out, you know, companies and solutions that solved a big problem at Mercedes Benz and [Inaudible 00:1:48] and eventually sold them.
Nothing is planned that, you know, specific to, hey, we have to go with this venture and [Inaudible 00:1:56]. So it’s all driven by the problem of the industries and the various industries and the state they are in. On the surface, it looks, everything is great, and they’re all matured, but when you get into the details of it, each industry and the solutions and, you know, the problems that they face, you know, the technology solves many of those things and it evolves, you know, every few years. So, looking at the problem as the main driver and to come up with a solution and implement it and sustain it, because this journey of entrepreneurship. I have got some great successes and also some failures. And I started a few companies and failed because the effort is same and the ideas are same.
And, but you know what, some of them are too early to the market, market conditions and you know, the maturity of those business models and all, but if you sustain those businesses and you know, and solve the problem of what the industry and the customers and, you know, and I think eventually it’s going to be a huge win and you know, that’s how I take it, then started Mondee in 2011. So, when we started the Mondee we see a challenge there. This travel industry is very big, 2 trillion of market. In 2019 is 2 trillion market but on the surface, everything seemed to be very matured. But if you look into the details, again, 50% of that market at trillion dollars, less than a trillion dollars is online self-service mode.
You know, there was a description in that market back when internet has been introduced and you know, companies have made a major shift and brought the technologies to solve a problem there. But on the other $1 billion market, you know, operated under assisted and affiliated travel, you know, had some travel agencies, the TMCs, the corporations and the gig economy workers, all of the stuff is in the other 50%. There’s no clear leader there, there is no, you know, it is underserved by the technology, a high touch, you know, low tech thing. So, I see there is an opportunity that, you know, the technology can make the difference and the combination of technology and content would make a disruption started Mondee 2011 and fast forward, we became the largest air consolidator in North America. And you know, we built the next generation technology platform and marketplace through which we became the defect operating platform for gig economy, traveler workers.
Julian Klymochko: Right.
Prasad Gundumogula: And you know, we achieved that whole growth through dual engines. One is organic. The other one is inorganic. The organic is through our technology platforms, you know, offering the solutions through our customers and have grown significantly. In the last five years, we have achieved over 40% growth year over year. Last seven years barring, you know, the cold years. So, we achieved their growth. And through the second engine of growth is inorganic that we acquired 14 companies so far and plugged them into our platform and got three to four X returns. And combining the companies that we acquired, we have grown at 63% CAGR between 2015 and 2019. We processed 3 billion of gross revenue in 2019, and with 177 million net revenues, 46 million off EBIDA, this is a company with a high growth, and you know, a profitable business, which is very, very, very unique. If you see the market, you know, either you, you know, make a high growth business or in a very value based, you know, profitable business. So, we are a combination of both. So yeah, that’s where we are.
Julian Klymochko: So Mondee is a travel market disruptor and next generation marketplace. Can you describe to us how some of your customers use the platform?
Prasad Gundumogula: So, as I mentioned there are two sides of the market. One is the self-service online mode, which is the $1 trillion. The other 1 trillion is assisted affiliated travel, which is a closed user group. The suppliers you know, offer some special private fairs and private rates to this market because of its closed nature, not to the public market and the customers are the travel affiliates, the agencies, the home-based agents and, you know, corporations and all. So, we have more than 50,000 customer base who are using our platform and you know, serving to millions of consumers every year. We have 5.5 million transactions processed in 2019. And we are servicing to a marketplace as a platform, as a technology platform and a content hub. So, we provide them the products that are unique, uniquely priced and you know, available to this market. And we do it through a modern marketplace platform and you know, and which is very unique in the market today.
Michael Kesslering: Can you talk us through a little bit about how you generate revenue? What your revenue model is? Is it similar to other marketplaces like Uber, where there’s a take rate that you take? Or how does that work?
Prasad Gundumogula: Yep. So, we have the marketplace, we processed more than 3 billion of gross revenue in 2019. We have a take rate. In 2017, our take rate was 4.2%. In 2019, we are at 5.4%. And, you know, 2021, and we have added a new revenue stream. The historical revenue streams are the customer, you know, markups and the supplier economics. But we added the new revenue streams such as the FinTech revenue, the subscription-based revenues and antler revenues and all. That increased the take rate from, you know, 5.4% to 9.8% in 2021.
Julian Klymochko: That’s good to know. Now, a company like Mondee and all travel related entities, obviously at a difficult time going through COVID, you know, 2020, 2021. What gives you the confidence that the travel market is recovering on a sustained basis? And are you seeing any recent trends that support that thesis?
Prasad Gundumogula: So, the travel market, you know, has been recovering very well, especially 2021 and the first quarter of 2022. So, there are two markets. One is the leisure market, and the other one is the corporate. The corporate travel is growing, you know, or recovering slowly compared with the leisure market. The Leisure market recovering fast. And we operate primarily into the leisure market by the way. And the estimate was, we forecasted travel to recover in 2023 and 2024 at 2019 [Inaudible 00:11:32], okay. And with the recent trend that what we have seen it actually, you know accelerated very fast in the recovery in visa travel in the last, you know, two quarters, despite the Omicron out there, the end of last year and January but February, March, and the current months are going pretty fast.
Julian Klymochko: That’s interesting. Didn’t know now, still touching on the travel model and the business model that Mondee has. From a competitive perspective, how does your business model compare to that of say like an Expedia in one of those, you know, massive established players online?
Prasad Gundumogula: Sure. So, as I mentioned to you, we are a marketplace, right. I mean, there are marketplace out in the market, but they’re all too dimensional. You know, the largest OTAs or the B2B companies out there, they, you know, take their content from suppliers and offer it and sell it to the consumer customers or consumers out there. But we operate as a technology platform in a three-dimension world. The first one is that we only sell our content to closed user groups. When I say closed user groups, you know, they can be a corporation that can be through a travel affiliate. It can be through a gig agent. It can be, you know a membership organization. So, we reach to the consumers through this closed user setup. So, our three dimensions that we have, the first one is the distribution. We service to the close user group compared with, you know, any of the OTAs who, you know, broadcast to the entire world, you know, by spending a lot of marketing dollars to get you know, any end consumers, okay. That’s one big difference.
Because we offer our solutions to the close user group consumers. So, we get access to some special, exclusive private content for all the products that we offer. And we, you know, not only we have the public and published content, what [Inaudible 00:14:14] send. We have these private phases and private rates of this suppliers that we offer through our customers through this close user group. And in addition to this published and private content, we have the user generator content. So, we, you know, we created a very powerful cloud sourced content curation, and servicing hub. That’s the new dimension that we introduced in the market where, you know, the end travelers, or even the gig economy workers curate the content, and they service the customers using the local expertise that they have, which is very different than what is available in the market today.
For example, if you are planning for a trip, you know, you take, you know, you go to [Inaudible 00:15:20] and buy an, you know, buy a ticket, and then you go to another, you know, a hotel company to go and, you know, take the, you know, hotel transaction, and then, you know, go to TripAdvisor for a, you know, reviews for the hotels. And then throughout the report you need to do you, you know, rely on Google to check, you know, all the places. So, it’s, you know, the end consumer rates, the content, and yet the trip experience is not guaranteed. So, what we have done is that we, you know, provided this curated content through a crowdsourced, local knowledge, local expertise, local experts with the knowledge of the specific areas. So, they provide this content, and they service the customer based on the traveler needs. So, our platform connects this supplier, you know, private content to end travelers through these intermediaries or through this close user groups set up and provide them a service hub to help them, you know, getting this curator content and services based on their needs. So that’s what we do and how we are different from the market today.
Michael Kesslering: And then that’s really interesting in terms of the strategy with user generated content. Do you have any metrics you’re able to share on, how that affects things like churn or ability to cross sell different services? Anything more that you can share on that and how it impacts your underlying business?
Prasad Gundumogula: Sure. So, we are talking about initially we started selling the airline tickets. Okay. And then we added the hotels. Then we added the ancillaries, but on the cross sell side of it, because the people, the trends of the industry is changing and the end travelers, they’re looking for more travel experiences, the personalized content, and they’re looking for, you know, getting that content in the form that they like to consume, you know, on a mobile chat or, you know, places where they can see that and they’ll be able to make the decisions.
As we are making the journey on our platform as the travelers are looking into the information and they discover the areas that they’re interested to get there, you know, to get their travel experience that they’re looking for and connect with the, you know, agents or, you know, the travel affiliate in which that they can, you know, get their services. So, we used to have an attachment rate of, you know, 8% the ancillaries, okay. With the, you know, user generator content and the additional, you know, curator content that we are offering. The cross sell has increased. And we reach to 14 to 16%. The attachment rates are increased and the, you know, the cross selling upsell opportunities is increased. And it created the reputation from the business that we do from this customer. So, the customers that we service today are lifetime value customers and the LTVs are, you know, are high and the churning that is less than, you know, 3% on our platform.
Julian Klymochko: Now, switching gears, you recently announced a going public transaction through a blank check company Ithax Acquisition. Was wondering, what are your thoughts on the process thus far as you go through the going public transaction, the merger with this SPAC, and what are you seeking to accomplish once you are a public company?
Prasad Gundumogula: So, as I mentioned, we have two areas of growth. Organically using our technology platform. We have plans to, you know place these three-dimensional marketplace and servicing to a gig economy, travel workers and gig travelers. So, you know, that and the other side of the growth is on the M&A Acquisitions. And we built our business on both of these engines, you know, for all these years, right. So, in order to proceed with our plans, we think that the public where it’s the right fit for us. And we look for, you know, going to an IPO, and then we came across the SPAC process and the SPAC play [Inaudible 00:20:50], you know, acquisition crop, and the people who has come from that company has done some experience in hospitality and you know, the cloud industry and you know, for us, the time to market is critical. So, we choose to go to IPO through the SPAC route. And, you know, and the proceeds of those you know, funds, we have over $240 million interest in the Ithax Acquisition. And we raised a 50 million pipe. For operating business, we are already, you know, we are profitable historically. And during COVID 19, we got hit by the market but now we are back, you know, to break even, and then making money.
Julian Klymochko: Certainly, if M&A is on your radar, which it has been historically. And you want to do more of that in the future than having that publicly traded currency via your listed shares is the way to go. So that makes a lot of sense. Now, I did want to get a sense of how things are going in the background specifically, we have seen some SPAC mergers, perhaps get delayed. I think the sec may be having a bit of a backlog, because there’s so much going on there. Have you seen like your schedule pushback? Are you still operating on the timeline with respect to this merger on closing when you initially guided to?
Prasad Gundumogula: I think we are going in you know, with planned timelines here. We are scheduled to [Inaudible 00:23:05] the transaction and trading public in Q2 of this year. It’s going well. And we filed our S4, and we completed our audits and we made an announcement for 2021 numbers. We meet our numbers significantly. The travel market is recovering and then we are taking a good market share in our business that we are doing. So, I think everything is going well at this point of time.
Julian Klymochko: Yeah. Sounds like everything is on track for that Q2 closing. Currently the SPAC trades under the ticker symbol, ITHX and once you guys complete the merger, you’ll have the ticker symbol, M-O-N-D, Mondee, love the ticker. So, thanks so much Prasad for coming on the show today, wish you the best of luck and, you know, hopefully can trout the platforms for some much-needed travel in the near term. So, thank you and appreciate your time.
Prasad Gundumogula: Thank you so much. All the great questions and you know and thank you for having me here.
Julian Klymochko: Alight. Bye everybody.
Prasad Gundumogula: Yep. Bye, bye.
Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.
