Good afternoon, everyone, and thank you all for joining us today for our Q2 Fiscal Year twenty twenty one Results Presentation for the three months ending September 30. I'm David de Arlotte, Director of Investor Relations at Itremeso Digio. As always, you can find the resource materials, including the presentation of our results report on the Investor Relations section on our website. I will now pass you over to Dana Dan, our CEO, who will take you through the first part of the presentation. Thank you.
Thank you, David. Good afternoon, everyone, and thank you for joining us. Today, I will give an overview of our Q2 of this financial year's results, current trading to date and what we have done to even further improve our strategic position over the past few months during the pandemic. Following this, David Alicaga, our CFO, will take you through our financial performance in more detail. I will then finish with some closing remarks.
Please turn to Slide four, which gives a summary of our performance during Q2. During Q2, we have improved our performance as the market picked up significantly versus Q1. Yet we also saw renewed softening towards the end of the quarter. Trading shows the strong and rapid turnaround we experienced during the summer period. Trading improved from the April trough at minus 96% year on year in bookings to an average of minus 62% in the '21 despite further travel restrictions being imposed in some markets starting in early August.
Clearly, July to September 2020 was still an extraordinary trading period because of the COVID-nineteen situation and its related travel restrictions. Of note, revenue margin, down 75% year on year in the second quarter of FY twenty twenty one, reaching €34,400,000 and doubling the amount of Q1 FY twenty twenty one. This was driven by a decrease in bookings of 62% and the reduction in revenue margin per booking, which was driven by lower average basket value of bookings due to the COVID-nineteen situation, which results in lower Classic revenue from customers and lower revenue from providers. Marginal profit, which is revenue margin minus variable costs, this stood at €11,500,000 positive. That's a 10 times the amount of Q1 and increasing the variability and flexibility of our cost structure adapting to the new mix of bookings made by customers during COVID-nineteen.
This resulted in marginal profit per booking increasing 2.5 times from the Q1 figure to the Q2, despite revenues decreasing more than bookings. And adjusted EBITDA was a loss of €2,000,000 an 86% improvement on the Q1 FY twenty twenty one figure. Another highlight is how we are managing our liquidity. Through these difficult times for the travel industry, we at eDreams Odigio have managed our liquidity well, which remains strong despite short term trading and acceleration of reimbursements to customers. Because we have a strong liquidity position, we made a proactive decision to accelerate the refunding to our customers who are suffering from the airlines, in most cases taking a long time to refund.
In terms of our liquidity, cash performance was better than in Q2 the previous financial year. Our liquidity position at the September and October stood at 115,000,000 and €117,000,000 respectively, and is higher than March and June figures excluding the acceleration of the reimbursements. The main reasons for this development is the high variability of the cost structure and good fixed cost management. This was offset by proactive decision to accelerate the reimbursement of our customers versus inflows received from suppliers and a decrease in bookings due to higher travel restrictions. Combined, these create a working capital outflow.
We have reduced our average monthly cash burn, excluding working capital and taxes,
from
€13,000,000 to €6,000,000 and we have a strong liquidity reserve. Our no action stress test implies we can run the business at current booking levels through the end of twenty twenty one. And as we have highlighted in our July and August results presentation, we are using this period to improve our strategic positioning. Specifically, Prime is shining during these tough times. Prime subscriptions and share of total bookings continues to grow.
Prime members in the 2021 reached 664,000 members. That's a 71% increase versus the same period the last financial year. Share of bookings or share of total bookings reached 26% in Q2 of this year versus 7% in Q2 of the last financial year. Prime is proving to be successful proposition to customers even in this current depressed market with 100,000 new subscribers alone in Q2 of this financial year versus just Q1 of this financial year. And we are on track to reach 2,000,000 subscribers by 2023.
In terms of current trading, the short term outlook is largely outside our control and driven by travel restrictions and COVID nineteen. October and November numbers are showing minus 67% to minus 73% bookings growth year on year. It remains impossible to predict the future with any accuracy given the uncertainty around COVID nineteen and travel restrictions, and therefore we continue to offer no guidance for this financial year. Now I will go through the points I have just mentioned in more detail in the following slides. Please turn to Slide five, in which we cover our diversification revenue KPIs.
Overall, diversification revenue is proven to be more resilient than classic customer revenue during these times. And our product diversification ratio and revenue diversification ratio have both improved. The product diversification ratio increased from 80% to 87%, a seven percentage point improvement in a single year. Similarly, the revenue diversification ratio increased from 48% to 56% in Q2 FY21. That's an eight percentage point improvement again in a single year.
Please turn to Slide six, which demonstrates the progress made against our other three KPIs. On an annualized basis and to be expected, our customer repeat booking rate decreased due to the spread of COVID-nineteen. This is reflected in the strict way in which we calculate this ratio. However, Q2 performance improved meaningfully Q1 FY 'twenty one and is three times greater, moving from 7% to 22%. This has been mainly driven by the success of Prime as a customer proposition.
As a result of COVID-nineteen situation, which is distorting the relevance of this KPI, we have decided to discontinue the reporting of this KPI till further notice. Also, we have really stood out in terms of mobile yet again, which bodes well for the future. In the last five years, bookings through mobile have risen exponentially from 18% of total bookings to 57%. We have always prioritized mobile and have led the industry in Europe. Now in a post COVID nineteen world, mobile will become even more important, which is demonstrated by almost 60% of our bookings are now actually completed on a mobile device.
Lastly, on KPIs, let's look at the changes to the acquisition cost per booking index, which improved by 48 percentage points year on year. This is due to the adaptability and flexibility of our business and the fact that more than 80% of our costs are variable. However, I want to make it clear that this very low level is not sustainable for the long term. As travel restrictions ease, we expect to spend more in online marketing, and this ratio will trend back to more normalized levels. If you can now turn to slide eight, let me brief you on our current trading to date and what we have done to improve our strategic position during the pandemic.
Current trading shows that short term outlook is impacted by travel restrictions. We have seen this by the rapid rebound in bookings during the summer. As travel restrictions ease, trading improved from the April trough at minus 96% to minus 59% in August. This is positive in that in a matter of months, a large portion of the market returned in a very short period of time. Towards the end of the summer, there was a return in Europe to increasing COVID nineteen cases with further travel restrictions imposed by some governments.
This has reduced bookings to minus 73%, which has stabilized more recently. In comparison to the market, our trading suggests outperformance industry gaining market share versus supplier direct due to better quality, more comprehensive content and flexibility and a focus on leisure travel. Please turn to slide nine where I update you on a trading outlook based on analysis from the IATA economics team published on the September 29. The good news is that the leisure customers are still willing to travel if allowed. We saw this in the summer, and we strongly believe that any further lifting of restrictions or the introduction of a vaccine is likely to result in a sharp rebound again.
The announcement of BioNTech and Moderna vaccines, as well as the AstraZeneca announcement this morning, and eight other companies in stage three trials, all this brings forward scenarios of travel returning sooner in 2021, which will favor more leisure travel companies like ours. Before the latest vaccine announcements, IATA survey suggests that over 80% passengers will return to air travel within six months from now. Russia recovered to pre crisis levels due to the news about its vaccine, and China is only twenty percent below pre COVID nineteen levels due to strong domestic demand. Please turn to Slide 10. We are pleased to continue to report strong liquidity, a consequence of our strong business model and active management of the situation.
We have achieved this despite increasing travel restrictions and the acceleration of reimbursements to customers to protect our brands. Given our strong liquidity position, we made the proactive decision to accelerate reimbursements to customers versus inflows received from airlines, which resulted in $40,000,000 cash outflow during the quarter. This resulted in liquidity positions of 115,000,000 and €117,000,000 at the September and October respectively, both of which is higher than March and June figures excluding acceleration reimbursements. We have achieved this through four things. One, high variability of the majority of our costs.
Two, fixed costs and CapEx were reduced. Three, obtaining additional financial resources of 15,000,000 from government sponsored loan due twenty twenty three and four, by reducing our average monthly cash burn, excluding working capital and tax, from €13,000,000 to €6,000,000 Furthermore, our no action stress test shows we can run business at minus 70% bookings year on year through the end of the calendar year 2021. The minus 70% is our average booking performance from March through October. It is important to note the conservative nature of this no test action stress test calculation. It assumes we take no action on fixed or variable costs.
None. No improvement made to working capital nor any improvement in our business whatsoever. If you can now please turn to Slide 11. I'm delighted to talk to you about the success of Prime as a customer proposition. Prime is performing strongly in this weak market.
The number of subscribers has continued to improve and has risen by 100,000 in three months from Q1 to Q2 of this financial year despite all the market conditions. As you can see on the right hand chart, Prime subscription rate and share of Prime continues to grow. Prime members in q two of this financial year grew 71% versus the same period last year. That's growing from 389,000 subscribers in q two f y twenty to 664,000 subscribers in f y twenty one. And the prime share of total bookings almost quadrupled from 7% in Q2 FY twenty twenty to 26% in FY twenty twenty one.
In addition, we launched Prime in new markets, UK most recently in November. We also launched new products launching hotels in four of our largest markets being France, Italy, Spain and Germany. Also I'm pleased to say that in our most recent survey with over thousands of responses from customers, prime customers showed good levels of customer satisfaction equal or higher than pre COVID nineteen levels. If you can now turn to slide 12, let me brief you about what we have done in customer service to be on the side of the customer. First and foremost, during these times of high airline cancellations, we have focused on the customer to have this as a key competitive advantage and to encourage customers to come back when travel restrictions are lifted.
These are some of the key highlights on our canceled flight management. 92% of canceled flights have been resolved and are processed. Two, we have invested in significantly increasing our contact center capacity. Three, we have developed automated flight cancellation identifier, which automatically identifies canceled flights and proactively informs customers through all possible touch points and proposes options to the customer. Four, we've contacted all customers who apparently have a solution, e.
G, they've gone directly maybe to the airline, just to ensure that the customer really has a solution. Five, we have informed customers of long lead times by airlines and where possible propose a voucher as an alternative, but always allow customers to choose between a cash refund and a voucher. We want to be on the side of the customer as their advocate and agent. Six, implemented automated processes that provide our customers near real time updates on the status of their refund requests. And seven, we've accelerated the reimbursements to customers versus inflows we receive from airlines.
For those cases where we know future cash reception from the airline is guaranteed. I could go on, but let's suffice to say that we have taken and continue to take actions to help our customers and put us on their side. If you can turn to slide 13. Let me conclude my part by summarizing what are our three key top priorities at the moment. One, Prime.
To introduce Prime in more of our markets, expand to other travel services, and improve its effectiveness. Two, connectivity. Improve the quality of the content by building a content agnostic platform, which will facilitate taking content from many providers and taking even different content, could be a trains, air content, etcetera. And three, customer service automation. Implement an automated customer service system, which is volume agnostic.
So if there were much higher levels of customer demand, the system can automatically handle it with high levels of satisfaction. I'll now hand you over to David Alistaga, who will take you through our consolidated results.
Thank you, Dana, and good afternoon, everyone. If you could all please turn to Slide 15 of the presentation, I will take you through the financial results in more detail. Clearly, the pandemic had a significant impact in Q4 of last year, and this has continued into the first six months of the current year. Let's outline the financial performance during the second quarter of our fiscal 'twenty one. Looking at the income statement for the '1 on Slide 15, revenue margin decreased by 75%.
This was due to a decrease in bookings of 62% and lower revenue margin per booking, driven by lower average basket value of bookings due to COVID nineteen. Customers are booking on average with less passengers per trip and to destinations closer to their homes. As a result, the revenue we get from providers is smaller, and the classic revenue we get from customers is also lower. When travel patterns return to normal, we expect revenue margin per booking to increase from its current level. On the cost side, variable costs decreased by 75%, which is the result of the adaptability of our business model to the new mix of bookings made by customers during COVID-nineteen.
Again, when travel patterns return to normal, we expect the variable cost of booking to increase from its current levels. These dynamics resulted in marginal profit of €11,500,000 positive. Margin of profit again is revenue margin minus all of the variable costs. Those €11,500,000 are 10 times the amount of the first quarter, increasing the variability and flexibility of our cost structure. Fixed costs decreased by 31%, driven by a decrease in personnel costs through a temporary employment reduction as well as IT and external fees, IT savings.
As a result, the second quarter adjusted EBITDA amounted to a loss of €2,100,000,000 which is 86% better than it was in the first quarter of this fiscal year. If we continue down the income statement, you will note that EBITDA amounted to a loss of $3,600,000 This was primarily due to adjusted items in line with the same period of last year. Full details of the adjusted items can be found in our condensed consolidated interim financial statements and in the Excel file that you can find in our website as well. The D and A and impairment increased by 29% relating to the increase of the capitalized software finalized in March 20. Our overall financial loss decreased by 10% mainly due to foreign exchange differences, partially offset by the increase in interest expense related to the use of our revolver and the new government sponsored loan due 2023.
The income tax expense amounts to $1,300,000 in the second quarter, which compares with an expense of 3,300,000.0 in the second quarter of last year, mainly due to lower taxable profits compared with the comparable period, the write off of certain deferred tax assets related to tax loss carry forwards in The U. K. And no movement in the provision for income tax risks and no recognition of a deferred tax asset for part of the 2021 tax losses. Finally, adjusted net income stood at a loss of EUR 19,300,000.0. We believe that adjusted net income better reflects the real ongoing operational performance of the business.
Full disclosure of the adjusted net income can be found in Section seven within the condensed consolidated interim financial statements and notes. Turning now to Slide 16. I will take you through the cash flow statement. In the second quarter of fiscal year, despite increasing travel restrictions and acceleration of reimbursements to customers by $40,000,000 versus the inflows received from airlines, partially mitigated by higher volumes in September versus June, resulted in a working capital outflow of €1,800,000 in the second quarter of fiscal twenty twenty one. The group continues to have a strong balance sheet with liquidity position of 115,000,000 at the September, including the €40,000,000 acceleration of reimbursement to customers versus the inflows received from airlines, dollars 106,000,000 undrawn from a super senior revolving credit facility and the $15,000,000 new government sponsored loan to finance the decrease of negative working capital, placing us in a position of strength as soon as normal activity resumes.
The cash position net of overdrafts stood at $500,000 at the close of September. The cash performance during the '1 was driven by net cash from operating activities improved by €12,000,000 mainly reflecting the working capital outflow just described and income tax paid, which increased by €4,200,000 from 0.9 to 5.1, mainly due to the fact that there were no income tax payments on taxable profits, but we had an advanced payment in respect of an administrative procedure against the Portuguese tax authorities. There was no income tax payments on taxable profits. There was a decrease in adjusted EBITDA by $31,200,000 following the decrease of bookings. And we experienced an outflow in noncash items of €3,300,000 when last year we had an outflow of $2,700,000 The driver of this quarter is that costs linked to COVID-nineteen flight cancellations were provisioned in the year end of fiscal 'twenty, but the outflow of that provision has happened during the last two quarters.
We have decreased cash used for investments by $2,500,000 from 6,900,000.0 to 4,400,000.0 due to the implementation of cost saving measures to minimize the temporary impact of COVID-nineteen. Cash used in financing increased by €40,300,000 from 12,900,000.0 to 53,200,000.0 mainly as a result of the repayment of €54,500,000 of the revolver, offset by the drawdown of the new $15,000,000 government sponsored loan. I will now turn the presentation back to Dana to do the closing remarks.
Thank you, David. Turning to Slide 18. Let me conclude by giving you a quick recap of our overall view. We believe we are positioning ourselves for real success in the post COVID-nineteen world. The strength of our finances, the adaptability of our business model, with the vast majority of our costs being variable and the mitigating actions taken during the pandemic allow us to emerge strongly and well positioned from the crisis.
Our liquidity position at the October was 117,000,000 including acceleration of reimbursements to customers, which could be used if needed in periods of slowing demand. Gross leverage ratio being waived for fiscal year twenty twenty one gives us further financial flexibility. We have no short term financial debt payments, and our senior notes, new government sponsored loan, bank facilities, due until 2023. The Prime subscription program is growing even in this poor market under extraordinary conditions. We have added 100,000 new subscribers since the June and the share of total bookings reached is 26%.
That's four times more than the share in the same period last year. We have kept our teams intact and motivated to compete vigorously and serve our customers well. We are a leader in mobile, product quality and revenue diversification, and we are a true innovator in terms subscription and customer proposition and experience. And we focus exclusively on the leisure travel consumer in markets that have shown a good ability to respond rapidly when travel restrictions start to ease, which following the news of Pfizer, BUNETEK, and even AstraZeneca's vaccine, we hope this is in not too far distant future. Thus, we believe our future is bright.
We will emerge a winner through these unprecedented times. With that, I would now like to take your questions. We will answer the questions sent to us in writing in the webcast. We will take questions on a first come first serve basis, but we will also try to group questions of similar nature. Should we not have the time to respond to all of the questions from the webcast, the Investor Relations team will make sure those are answered afterwards.
Okay. Thank you, Dana. I will start reading the questions that come to us through the webcast. The first set of questions, because there are three of them, come from Chad Garcia of short investments. The first one says, it looks like ex customer reimbursements, liquidity would be 157,000,000 versus $167,000,000 at July.
Is that correct? Yes, it is correct. Those will be the numbers, and it would compare as well to 132 in June and 144 in March. So adjusted for the acceleration in the refunds to customers, the liquidity would be 157, and that would be higher than June at 132,000,000 and March at 144,000,000 The second part of this investor says, can you provide year on year revenue changes by month for the quarter? Unfortunately, not.
We cannot provide this. But if I guess where this question is coming through, I would say that if you're interested in modeling liquidity, a much better proxy for the movements in liquidity is the bookings rather than the revenues. Because the revenues have movements from month to month that depend on provisions or adjustments to previous provisions and therefore is not such a good predictor of the movement in the cash as the bookings themselves. The third part of this investor says, any thoughts on the jump in mobile bookings as percent of total bookings?
Let me take that, David. There's first just a context two parts of the context. Part one is that we have historically prioritized mobile. Not all companies do that. But we have from early on said that we first and foremost want to develop for mobile and then for others as opposed to many other companies doing actually the exact opposite.
And so you've seen over time we really have made meaningful improvements in mobile. And it ebbs and flows from one quarter to another. And it really depends upon how much of our ideas are much more specific to mobile only as opposed to translating between mobile and a desktop device, so to speak. And so that's why we do find some variability in continuous increases of ours. Of late, more of our releases have been more focused really on the mobile based solutions coupled with the fact that I think in the COVID nineteen situation, more people are reaching to mobile.
More of these types of customers feel comfortable on a mobile device in doing bookings on a mobile device in these types of market conditions. I still believe for the future overall, it's going mobile no matter what. You can't go around that. The extent to which the acceleration will happen like in the past quarter is yet to be seen. David?
Okay. I'll follow with the next question, which comes from Tom Givri of BNP Paribas. The first question is what would you expect the working capital outflow in the third quarter to be if bookings were maintained at current levels for the rest of the quarter? Now that is not such an easy question to address. And I'm going to presume that when you say current levels, you mean current year on year performance.
Okay? And there is a seasonality pattern by which normally and absent any rise in last minute bookings in December for Christmas, normally, November and December are seasonally lower than September and October. So by keeping the same level of year on year performance, you would actually have a decrease in the absolute number of bookings. The rule of thumb is that around and we've said this before, around a 10% year on year cap would result in about a €20,000,000 outflow or inflow depending in which direction it moves. And I think we would be below the 10 points.
So probably a range of around 15. But as I say, there are many moving pieces in the cash as well. What happens with the refunds from the airlines? How much do we accelerate or not accelerate versus the customers? So take this as a very directional response, please.
The second question from this investor says, why have you reduced cash to quite such a low level? Well, the reason is that we have about a third of our revolver credit facility which has ancillary overdraft facilities. So we just can draw down immediately from the from the current accounts and just overdraw from them. And we're trying to be really, really optimized around every cost in the company, including the interest cost. And by doing this, we pay less interest on the on the debt that we're using.
And the third part here says, do you have a sense of how your share of the overall OTA flight bookings market developed over the stronger booking period in July? And I think Dana's probably in a better position to respond to this one. Yeah.
There's two points. The first one is just in terms of the data. There isn't, let's say, an easily verifiable market statistic that we can point to for this measure. However, we invest significantly in our own proprietary information in order to be able to come up with an assessment of what it is. And it does look like we've been taking market share during the summer months and even actually continuing into the auto.
All indicators that we see at least are favorable to us. Absolutely. I do wanna qualify that one thing. We are not focused on, you know I mean, a 100% of our energy is not focused on winning in the current market. Right?
The current market at minus, you know, 73%, minus 60% is not the real market. The real game is next summer. Right? The vaccine is coming out. People are coming back to travel.
And we wanna make certain that we are the company of choice for that market. And so that's why so much of our teams are focused much more on long term propositions on making certain, for example, on prime, right, and making certain that prime is really great. Now we've seen how the potential of it, but we have a lot more to come and a lot more to do on Prime still from it. And that's what we're focusing on. On the customer service, you can see how we're focusing on the customer and making certain that we keep a good rapport with our customers, a good brand, for when travel really does pick up as well.
And we also have the customer automation project. And then the third area is around our connectivity. Again, not necessarily a short term payout, meaning right now current trading or the summer trading, but absolutely a longer term payoff for us in that. And so hopefully that gives you context of not only are we taking share in the short term, but we're really focused more on winning as the market returns to a much more normalized market. David?
Yes. Thank you, Dana.
I will go then to the next question. The next question comes from Lenny Sinkowski from Eaton Vance. Dana mentioned acquisition cost per booking will return to more normalized levels post COVID. What do you consider a more normalized level, and what are some of the global travel recovery targets you would look to when assessing when to restart marketing spend? So there are two parts to this question.
The first one, what is more normalized levels post COVID? The more normalized level would be the level pre COVID. So you would need to look at our third fiscal quarter of fiscal 'twenty or the fourth fiscal quarter of fiscal 'twenty, although that one already had about six weeks of COVID effect. So probably the third quarter is the better indicator. And I would take that level.
And over time, that level should decrease somewhat because as the percentage of our bookings from prime members increase and given that the prime members tend to repeat in two channels of acquisition, then they will have a positive influence in reducing the acquisition cost per booking of the aggregate of the company. And the second part of the question that says what global recovery targets we would look at when assessing when to restart marketing spend, The way a platform works is actually more automatic than that. It's not like we're going to give an executive order from the boardroom saying, now it's time to restart the marketing spend because we see that the economy is doing x, y, or zed. Our platform automatically assesses the probability of revenue of each search that we get. And based on that, it automatically assesses how much to pay for performance marketing.
So it's something that happens automatically in the platform. That's one of the reasons why it is so flexible on the way down as well because there are machines doing it automatically. I look now at the next question, which comes from Martin de la Concha of XIG Capital. It says revenue in the third well, it mentions the revenue for the last four quarters. And it says in the fourth quarter of fiscal twenty, we saw $100,000,000 unwind of working capital.
Why did working capital not unwind even further in the following quarters as revenue decreased? How is it possible that negative working capital buildup in the first quarter when revenues have decreased to 16,600,000.0 Well, I think here I'm going to quote myself a little bit earlier today in that revenues are not a good indicator for the evolution of the working capital. Bookings is a much better indicator of the movement in the working capital. You will remember that in the last six weeks of fiscal 'twenty, so two weeks of February and four weeks of March, there was a very dramatic drop in the number of bookings. And we pay on average to our airline, which is a principal provider for working capital inflows on a two week period.
That means that when there is a reduction in the number of bookings, the unwinding of the net working capital happens just two weeks after. So already in the month of March, it was when we suffered the biggest drop in our working capital. Then after that, as bookings started to improve, even if the revenue year on year for that particular period was a big drop, as long as you have more bookings than in the period prior, you are going to be receiving an inflow of working capital and vice versa. So this is the way that you need to look at our working capital movements. The next question comes from Jonathan Morgan of CQS Management.
And it says, what are you seeing so far in November as European lockdown restrictions have become effective?
Debbie, let me take that one. Overall, I think the the market has stabilized pretty much. So in November, we our average is around seventy three percent. There's lots of variabilities on it today, and that's normal even without COVID, so to speak. So it's much more important to look at it on, let's say, an overall, let's say, or several weeks basis.
It really has stabilized on that. We don't see any deterioration, at least for for right now where we are in November. Again, I cannot predict, the the the future, you know, from a short term point of view about it. But overall, it seems to to have been, roughly stable. David, anything you want to add on it?
No. I think you've covered it. Yeah. Let me go then to the next question from an investor, which comes from Pierre Mondeil of ODDO BHF. And it says, do the accelerated reinvestments lead to high credit risk given the financial situation of airlines?
Thanks. And the answer to that question is no because we do the acceleration when we already have certainty that the airlines are actually going to refund us. The way the process works in trying to summarize a lot is we process with the airline the refund, and at some point through the different information systems airline by airline, there's a moment in which they approve a certain refund of an individual booking, and we receive that signal. But the actual cash we receive two to three weeks later depending on the methodology of cash transfer. So when we accelerate is for refunds that have already been approved but where we didn't receive the cash already and therefore we suffer no credit risk.
The next analyst that is asking is Carlos Trevino from Santander. And it has a few questions, so I'm going to take them one by one. It says, could you elaborate on the evolution of your liquidity position in August and September? It dropped from $167,000,000 in July to 116,000,000 in September, Even considering $40,000,000 in reinvestments to customers, I would have expected a positive contribution from working capital in those months due to the recovery in bookings, minus 59% year on year in August, minus 63% in September versus minus 63% in July. Okay.
So let let me let me tackle that one. In August, there was certainly an inflow in working capital because the number of bookings was higher than in July. In September, there was however an outflow in working capital because the number of bookings was lower than in August. And therefore, you have one movement in one direction, another movement in another direction. However, you also have other things happening during those periods.
You have the 40,000,000 outflow, which happened mostly in August and September. And and you have noted that that will already take you from one fifteen to one fifty five. But, for instance, the payment of interest, the payment on the bonds happens half yearly, and it happened in August for $12,900,000 You also had outflows during the quarter of things that we had provisioned in the books in our March financial statements. So when we took provisions for GDS incentives, returns and other type of revenue from providers, those we took the provision in March, but the actual outflow happened partly during the first quarter and partly during the second quarter. So there are many moving pieces in there.
Try to make the answers super expensive, I'm happy to give you additional further detail in a one on one meeting afterwards. The next part of your questions is could you explain in more detail the dynamics behind the severe year on year drop in variable costs per booking, especially considering that the acquisition cost per booking has likely increased sequentially to 52 from 48 in the previous quarter. Okay, on that part, just as a reminder to everyone, within the variable costs, you have several components. You have the acquisition cost, which is the bigger one, but you also have the call center costs. You have merchant costs, and you have other variable IT costs per booking.
So it is effectively the other elements of the variable costs that have performed significantly better in the second quarter versus the first quarter. Several reasons here. One, the call center cost is variable. That is variable over a longer period of time because it means that you put more or less positions into the call center. With a level of bookings in the second quarter, which was about three times the level of bookings in the first quarter, we're not increasing the cost of the call center, but on a per booking basis is meaningfully lower.
In terms of the merchant cost, the merchant cost is a proportion of the actual euro amount of the bookings. We made reference during this call and in our presentation that we have seen a different mix of bookings in which customers are booking less passengers per trip and customers are booking to destinations closer to their homes. That results in a lower euro amount of the basket. When you have a lower euro amount of the basket, you also have a lower merchant cost per booking. And in terms of the variable costs of IEP, we're doing a very fine job, I would say, at reducing them even more.
And within the variable costs, especially when you do the comparison year on year, you have a situation which is that certain of the revenues that we did not collect, for instance. You know that we discontinued the service of cancellation for any reason in January. When you do the year on year comparison, you don't have that revenue, but you also don't have the provision for cancellation of bookings that we used to collect. Collect. Let me move on to the other questions from the same analyst.
Could you elaborate in your plans to improve the quality of your contents? Then I think this is
Yeah. David. Yeah. Yeah. Happy to do that, David.
Let let me divide it into two parts or two types of content. The first one is air content. We are investing in getting air content from more types of sources. And so you could imagine that, you know, there's many different types of sources. So we could get them from more GDSs and also pseudo GSs.
And so it just simply requires a set of developments that we would do in order to be able to get that and then optimization on that and setting certain types of rules in order to extract in the best possible manner. And that also allows us to trade off one source versus another source's content to see which would be the best for us. And so that's a number of things that we're investing in on those things. We can obviously absolutely also direct connect with some airlines, and we have the resources and scale to be able to do that. And so that's some things that we are actually considering doing.
When we believe the conditions are right for us, we would consider to do that. And if not, then we do it through other sources. And then the second part would be the non AIR types of content we're also investing in. So as you know, for example, we go directly to hotels and we have our own content that we ingest at hotels and we continue to expand that, particularly in this market. There's other types of content as well beyond that.
You could imagine trains or other types of ones as well that we do start to to ingest within our platform as well. And that just provides our customers and our shareholders more optionality around our business, going forward in the future. David? Yes.
There there is we still have a a few more questions from from Carlos. Would this mean that you could go through more NDC direct connections with airlines on top of your current ones with American Airlines and Lufthansa?
Yeah. So so, again, I tried to address that in the previous question, but but it it means that we could. Again, if the conditions are right, you know, and we believe that there's a good win win here, then we would. Absolutely. There are, though, many paths and many ways of getting content.
And then the last one is last one from Carlos is you wrote off certain deferred tax assets in The UK in the quarter. Do you see risk of further write offs in your asset in your tax assets? And simple answer, no. The next question comes from Juan Pena from GVC Gaesco. Good morning, and thank you for taking my question.
I know that there is not much time to analyze it, but I would like to know if you see any significant increase in the number of bookings since the announcement of first Pfizer and after Moderna, the good results in the vaccine studies? Could you give us any figure of that? I I think that Dana already answered this when he talked about the training of November. So I I just referred to that answer before. The next set of questions come from Nisela Neisse from Deutsche Bank.
First part is on the accelerated reimbursement, how confident are you that suppliers will reimburse you? Well, I think I've addressed this this question previously from from another investor. Have you stepped up marketing to Prime? Are you offering any new options to help drive the acceleration that we are seeing in the subscriber numbers? Have you reduced the price of the subscription?
Dana will take this one.
Thanks, David. We are not currently really investing in marketing. And I think you see that also by kind of our, you know, acquisition cost index where you see just the absolutely dramatic drop in it. So I can confirm that, you know, we're really not spending money on marketing. I think that what's happening is a couple of things, one of which is is really Prime is very successful.
And particularly now in these tough times, you know, in the COVID market conditions, we see some really good relevance between the customers and our proposition. One is the prices are great in Prime. And so if you think about it, people are struggling economically and will be struggling for quite a while. And Prime offers just amazing prices. And I'm not just talking about on air, but on hotels as well now.
We've rolled out hotels. So when you think about your total trip, right, to go someplace, you know, Prime offers amazing savings to people. The second is with the uncertainty within the the, you know, the airline industry and with COVID nineteen and people wanting to cancel, most of our, bookings and offers are flexible. Right? So they offer some form of flexibility of change in it.
And customers, depending upon how they wanna contact us, prime customers, we offer a special customer service just for Prime customers that, in a sense, they go right to the front of the queue. They have a special Prime team. And so their answer rate is phenomenally quick. And so just com the combination between price, between flexibility and service, you put those three together, and customers really, really like that. And we see that in our survey results, which I tried to touch on a little bit in the text of my presentation, where, you know, the survey results, are really, really strong in terms of customer satisfaction.
So that's what I believe it really is down to much more than that, and we haven't been doing marketing. Now in the future, as the market would come back and kick off, it absolutely does allow us to be able to do much more around the marketing front in the future. David?
Yep. And the last two questions from Misla. The first one, reduction in variable costs. What are the measures you have taken specifically to lower this? I think I've responded to this already.
How much of this decline would continue next year? Well, are portions of this that will return, as I was saying, to start with on the acquisition costs as the revenues increase, I would expect the acquisition cost to increase. And on things like the merchant cost, the average basket value returns to normal levels, then I would expect those costs to increase as well. Have you had to restructure your employee base? And the answer is no.
We are taking some measures as allowed by regulators to reduce working hours and pay from our employees. Currently, it is the employees are only losing 10% of their salary, but we have not restructured anyone. Which markets were the most And
and sorry. David. David. David. David.
Yeah. Just to be clear, not all employees. We have a big portion of our employees on a 100%. So it's only a portion of employees, actually. And I think we we've taken this decision to really make certain that, you know, couple of things.
One is is trying to find a win win, meaning from our customers' point of view to have people really focus on working on making sure that we really serve our customers right. And so we've moved lots of people around, you know, to make sure that we're on customer, related items. The second is is also is to making certain that we're building for the future as well, and for when the market really comes back, and doing this in such a way that, you know, that is right also with our values, within the company. We have a highly motivated, edu culture within the company. David?
Yeah. The last part from Nisla was which markets were the most resilient in q two. And the answer to that is that the two markets that performed better than the average of the rest of the markets were France and Italy during the second quarter. The next question comes from, again, Tom Givney of BNP Paribas. The will the 40,000,000 acceleration of customer refunds effectively reverse as refunds are fully worked through and airlines pass cash for these to you?
Well, actually, what we're seeing in the market is that the dynamic of cancellations that give rise to the need of a refund has continued after the first wave. There was a big chunk of cancellations in March and April in which virtually almost 100% of the flights were canceled. But ever since then, the airlines have continuously gone on a dynamic of scheduling more flights than they're actually effectively flying afterwards. So the cancellations keep coming in. So therefore, we will have to, let's say, service our customers appropriately with this dynamic in continuation.
The next question comes from Raul Alfueza, private investor. With low levels of cash and equivalents, do you consider drawing from your credit facilities? And if so, how much? I I would say that this is a very, very dynamic situation. And we draw and then draw.
This is a like the word says, this is a revolving credit facility. So we draw money and return money on a very frequent basis. So several times during the month according to the cycles of inflows and outflows. When do you expect to reach normal levels of activity? Well, I think the answer to that is depending on the evolution of the pandemic and the restrictions to the liberty of people to move around and travel.
So I cannot really give you a specific answer. We have a number of scenarios and we monitor the situation on a continuous basis and manage according to those. The next question comes from Fredrik Sundberg of Tresidore. Please, could you clarify your statement no action stress test suggests we can run business at minus 70% through end of calendar 'twenty one? What does this mean from a cash flow perspective?
Well, what it means from a cash flow perspective is that the way we run the stress test is that we take no further management action versus what we are doing right now. So the only thing that we input into the model is that level of continuous decline of 70% on a month by month basis versus those same months before the pandemic, so in 2019. So we do not cut further fixed costs. We do not cut further the CapEx and so on and so forth. That's what no action means.
Will you be cash flow neutral including working capital and interest at these levels? Well, the thing about the if if you're continuously at 70%, there's no there's not much working capital movement. There is a mix according to the seasonality of the different months, but there's no working capital movement. Now just to remind everyone, if you're at 70% and you come from 80%, there is a working capital inflow. If you're at 70%, but you come from 60%, there's a working capital outflow.
So actually, it's not a it's not a linear answer that we can give to this. It's unfortunately a much more complicated model to run. And there is another question from Andre Klotz of Jefferies. Can you please explain the $40,000,000 reimbursement and how confident you are in Ireland paying you back this? I think we've answered this actually twice already.
So, therefore, we currently have no other questions. And I think that we are going to then finish the conference call for today. Thank you very much for attending and for your all of your questions. We would like to inform you before concluding that on Thursday, February 25, we will be hosting our conference call for the third quarter of fiscal 'twenty one. And in the meantime, we will be very happy to receive your questions via our Investor Relations team or the investor e mail address, which is investorsidrips.
Ego dot com. Thank you very much. Thank you.