AFFLENSEMay 23, 2022

Affle 3i Limited

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78turns

10analyst exchanges

3executives

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Management on call

Anuj Khanna Sohum

Managing Director & Chief

Kapil Bhutani

Chief Financial & Operations Officer

Rahul Jain

Dolat Capital Market Private Limited

Key numbers — 40 extracted

6.5X

last 5 financial years since FY2018 since our initial DRHP was filed, our team has delivered over 6.5X growth in topline and profitability, a fact which stands further grounded given it was a consis

100%

nsistent y-o-y growth coming across the quarters. Our cashflow from operations increased by about 100% y-o-y in FY2022, a CAGR of about 63% since FY2019. We delivered revenue growth of approximately 1

63%

e quarters. Our cashflow from operations increased by about 100% y-o-y in FY2022, a CAGR of about 63% since FY2019. We delivered revenue growth of approximately 123% y-o-y this quarter and achieved

123%

% y-o-y in FY2022, a CAGR of about 63% since FY2019. We delivered revenue growth of approximately 123% y-o-y this quarter and achieved Q4 Revenue CAGR of 73.3% over the last 3-year period, much ahead

73.3%

delivered revenue growth of approximately 123% y-o-y this quarter and achieved Q4 Revenue CAGR of 73.3% over the last 3-year period, much ahead of the industry growth trend. Inspite of the Q3 to Q4 sea

56.5 million

trend. Inspite of the Q3 to Q4 seasonality, our CPCU business noted a strong momentum delivering 56.5 million conversions during the quarter, an increase of 91.1% y-o-y at a Rs. 51.1 CPCU rate. This took the

91.1%

noted a strong momentum delivering 56.5 million conversions during the quarter, an increase of 91.1% y-o-y at a Rs. 51.1 CPCU rate. This took the total user conversions delivered in FY2022 to 195 mi

Rs. 51.1

momentum delivering 56.5 million conversions during the quarter, an increase of 91.1% y-o-y at a Rs. 51.1 CPCU rate. This took the total user conversions delivered in FY2022 to 195 million. Powered by our

195 million

91.1% y-o-y at a Rs. 51.1 CPCU rate. This took the total user conversions delivered in FY2022 to 195 million. Powered by our ROI-linked CPCU business model and unique position in the industry, we continue t

45%

p industry verticals and India & International markets. Thus, we achieved organic growth of about 45% y-o-y in Q4 across India & International markets and this is significantly above the average in

67%

build a local on-ground presence in newer international markets. The contribution stood at about 67% International and 33% India in this quarter and for FY2022, it stood at about 65% International a

33%

nd presence in newer international markets. The contribution stood at about 67% International and 33% India in this quarter and for FY2022, it stood at about 65% International and 35% India. Our

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Guidance — 20 items

Anuj Khanna Sohum

opening

“Our cashflow from operations increased by about 100% y-o-y in FY2022, a CAGR of about 63% since FY2019.”

Anuj Khanna Sohum

opening

“We delivered revenue growth of approximately 123% y-o-y this quarter and achieved Q4 Revenue CAGR of 73.3% over the last 3-year period, much ahead of the industry growth trend.”

Rahul Jain

“Just wanted to understand from Anuj, the potential of the growth going forward specifically in the light of the pain that you may see from the funding of the startups in the near future as hinted by inputs from some of the large investors such as SoftBank and Tiger Global.”

Rahul Jain

“All of those factors taken into account, what we have delivered in last quarter is the best validation of our resilience that one should expect going forward.”

Rahul Jain

“Therefore, I would not be on the back foot with respect to how the advertiser trends are going, rather we should be optimistic about how Affle will continue to deliver growth going forward.”

Rahul Jain

“If you could shed color on how the tech capitalization and Free cash flows have played out this year and also input on the plans going forward?”

Kapil Bhutani

“There was no overshooting of the expenditure there and we expect good results coming from those innovations.”

Kapil Bhutani

“Our plan for the next year is for about 4% of the revenue to be invested in innovations i.e around 4% +/- 25 basis points variation, would be the plan to invest.”

Anuj Khanna Sohum

“I do not expect any dramatic changes with respect to our ability to earn a bottom-line sensible margin growth performance for the company.”

Anuj Khanna Sohum

“We are looking at the next 24 months closely to 9 Affle (India) Limited May 16, 2022 transform it to mid to high teens in terms of its bottom-line performance and that alone should impact the overall bottom line margin performance of the company towards the kind of numbers that we hope to achieve.”

Risks & concerns — 14 flagged

Also, even from the lens where let us say that working with startup is important, but important point to factor in is what kind of startup are we working with and how much credit risk are we going to take from that?

— Rahul Jain

Even if they come with a bigger budget, sometimes we decline it.

— Rahul Jain

We say no and can only take customers based on our credit risk management framework.

— Rahul Jain

If that is your concern, I do not believe there is anything immediately to be worries about because a lot of funding was raised in the previous years, so it is not a concern at the moment for us.

— Kapil Bhutani

Also, certain comments related to the potential slowdown in the budgets given the macro situation that we are seeing.

— Rahul Jain

Are we also seeing any potential impact of these things coming to us at some point in time?

— Rahul Jain

We can have direct control over how much revenue from a particular customer and what kind of risk management & sustainable growth trajectory we take on that basis.

— Anuj Khanna Sohum

I believe we should not have any risk factor concerns with respect to the quality of revenue or the ability to retain these customers or to continue to grow on these customers.

— Anuj Khanna Sohum

From that perspective, can we rule out that we would do any big acquisition in the near future because if we do so then it will drag our financials?

— Vikas Mistry

To give you an example, there was an impact of about 3.2% from last quarter and it was about a third of the impact in Q3, so it is variable to the general price index and the counter impact goes into the foreign exchange calculations on the other income side which are not taken into the EBITDA calculations.

— Kapil Bhutani

It gives me a lot of confidence that we are doing it even with tough macroeconomic conditions and geopolitical risk factors which are there.

— Anuj Khanna Sohum

Therefore, there is no pressure to necessarily go and do something inorganic.

— Anmol Garg

When we find the right target without any pressure and the right strategic fitment that we see will help the company whether in India or internationally, then we will certainly execute sensibly and carefully as we have always done.

— Anmol Garg

There is absolutely no pressure and we will do a sensible inorganic growth plan.

— Anmol Garg

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Q&A — 10 exchanges

Firstly, congratulations on a strong performance in Q4 & FY2022. Just wanted to understand from Anuj, the potential of the growth going forward specifically in the light of the pain that you may see from the funding of the startups in the near future as hinted by inputs from some of the large investors such as SoftBank and Tiger Global. Any input on that would be great? Anuj Khanna Sohum: When we look at the overall outlook on growth, I believe there are two perspectives that one should keep in mind. One is the historical growth performance of our own company and the second is the most recent

Kapil Bhutani

Just to add to what Anuj said, we should also keep in mind the amount of funding that has been raised in the last 1 year due to IPOs or the series of investments in our customers. I believe, there is a lot of gunpowder available for the next two years with the clients. If that is your concern, I do not believe there is anything immediately to be worries about because a lot of funding was raised in the previous years, so it is not a concern at the moment for us. Right. Thanks. An incremental thought on some of the comments made by Anuj like given the situation we are in, we can do better than t

Thank you for taking my question. Congratulations on a great set of numbers. My first question is about the organic and inorganic components. Anuj, I believe you mentioned there was about 45% growth in the organic business. Deriving from that, the organic revenues would be around Rs. 203-205 Crores and the balance from Jampp, right? 8 Affle (India) Limited May 16, 2022

Anuj Khanna Sohum

Yes, that is correct. My second question is that we are hearing there is a lot of talent crunch in the tech space in the IT/Tech industry, so part A of the question would be are we facing a similar kind of heat in our business also? Part B would be that if at all we are facing the heat, does our margin aspiration over the next two years remain the same as per our previous commentary? Firstly, the overall tech stack of Affle is anchored by our tech teams, which are based not only in India but also based in Spain, Argentina, Israel and so on. We have a globally distributed innovation capability.

Thank you and congrats on the good set of numbers. I have a couple of questions. Firstly, what is your net revenue retention in the customers and what is the churn rate? How much of it is coming from VC-funded customers?

Anuj Khanna Sohum

The way to look at our revenue from a customer lens perspective is not just the retention figures because we have not disclosed it but we have shared the direct customer revenue coming from the E-F-G-H category. It is already about 74% of the revenue which means that there is no middleman involved in that revenue coming to us. We can have direct control over how much revenue from a particular customer and what kind of risk management & sustainable growth trajectory we take on that basis. In terms of the further aspect at these industry verticals which have a disproportionate contribution to us

Thanks for the opportunity. Anuj, thanks for your explanation on what is happenings with Jampp and which is good to hear. I hope that there will be a turnaround in its story. Just wanted to understand that when we say turnaround, what exactly do we mean? If you can take us through a top-level view of how we go about the turnaround of the acquired companies?

Anuj Khanna Sohum

The first thing is to focus on deeper data science, insights and integrate the full muscle of the tech stack and platform to benefit not only the advertisers and customers but also enhance the margin & scalability of our business and platform. Second is the discipline, the discipline and focus on not just growth but on the unit economics of that growth as well. How much do we charge on the CPCU rate? What is the inventory & data cost? How do we make sure that all line items of the financials are handled with great discipline and good governance? I believe these are already happening in each of

Thank you for the opportunity. One question for Kapil. Just wanted to get a sense of the employee cost outlook. Firstly, going forward will ESOP cost impact come in Q1 also? Secondly, any outlook on the employee cost in subsidiaries in Argentina because right now the inflationary environment is quite high in Argentina?

Kapil Bhutani

Firstly, the impact on Argentina was there in Q3 also but the impact was higher in Q4 and that is why we segregated the number. However, we would like to mention that the impact at the PBT level is nullified by the counter accounting into the foreign exchange gains coming in Other Income. But, it has an impact on the EBITDA level as it changes the EBITDA ratio. On the PBT line item, the impact is minuscule, say 0.1%-0.2% up and down. On the expense line item, if you 15 Affle (India) Limited May 16, 2022 compare it expense-to-expense, there can be some differentials on that front and we will ke

Thanks for the opportunity. A couple of questions. Firstly, from the outlook on the changing Google policy, can we expect any changes in the CPCU rate once the policy is implemented? Secondly, as we are operating in different geographies - US, Latam and Europe, what is your outlook on the demand in those geographies? Also, now that we have been saying that we expect about 30% to 35% of industry growth into the Indian ecosystem, what growth can we expect from Latam and US? Can a similar growth be expected from these geographies as well?

Anuj Khanna Sohum

Right, I believe the first question on outlook with respect to Google is a two to three-year forward question. My take on that is there will be a lot of adoptions from consumers who will accept consciously and give permission and consent to ad-funded apps they trust. Companies like Netflix or all kinds of apps will be there, some will be well-known names, some will be lesser-known names and 17 Affle (India) Limited May 16, 2022 millions of apps are out there. But the consumers will selectively give consent to quite a several apps they would want to try and use on their devices. It is because t

Thanks for giving me the opportunity; I just have one question, any progress on (inaudible). Any color on that?

Anuj Khanna Sohum

Sorry, Pritesh, you were not audible, but it seems like you are asking about our strategy in emerging markets. Is that correct? Yes, that is correct. I would like to build the answer towards a larger understanding of most of us on this call today. Affle is one of the only companies in the marketing tech & ad tech space that is so deeply anchored on emerging markets and emerging verticals as our strategic emphasis and focus. If any investor anywhere in the world who wants 19 Affle (India) Limited May 16, 2022 to invest in the emerging markets in the digitally connected devices linked growth pla

Sir, two small questions. Firstly, if you could shed some color on the organic part for the full year FY2022?

Anuj Khanna Sohum

For the last three quarters, we have always given a clear commentary on our organic growth on q-o-q and y-o-y basis. I do not have full year statistic with me at the moment, but it will be fair to say that our organic growth has been consistently above industry average growth trends. In that sense, the fundamentals of our business are deeply anchored in every single reporting period that we have talked about. I would say that the organic growth has been consistently above industry average growth rates especially in the last financial year. Thank you. Last one. Given the last acquisition that w

Hi, Anuj. When you talk about organic and inorganic growth in terms of your formal structural narration, for how long do you categorize it in acquisition business growth and at what point of time do you start labeling it as organic growth. Both in terms of structural formal narration vis-a-vis in your mind?

Anuj Khanna Sohum

Your question is about how many years do we expect to focus on acquisition as a growth strategy as well as organic growth? Can I get to the essence of your question? When we acquire something, if it is at a relatively incipient stage in its journey and therefore, the growth which comes from into revenue or profit maybe is from a stage of evolution. You mentioned that in the last quarter almost about 65% of our business has come from organic activity that we have done over some time 21 Affle (India) Limited May 16, 2022 and about 35% come from acquisition. At what stage an acquisition in your m

Thank you so much everyone for attending the call. All your questions were insightful. I enjoyed the earnings call and the Q&A session today. I wish all of you 23 Affle (India) Limited May 16, 2022 well and as I have always mentioned that Affle is “Built to Last”. We are here for the long-term and you will hear a lot more from us as we go along and evolve as a company into the great corporate citizen that it already is. We will continue this time to build Affle into an institution. I look forward to all your questions, and support and wish all of you well. Take care!

Management

Speaking time

Anuj Khanna Sohum

Moderator

Kapil Bhutani

Rahul Jain

Mayank Babla

Arun Prasath

Bharat Shah

Aniket Pandey

Pritesh Thakkar

Vikas Mistry

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Opening remarks

Rahul Jain

Thank you Deeksha. Good morning everyone. On behalf of Dolat Capital, we welcome you all to the Q4 and 12M FY2022 conference call of Affle (India) limited. I take this opportunity to welcome the management of Affle (India) Limited represented by a Mr. Anuj Khanna Sohum who is the MD & CEO of the Company, and Mr. Kapil Bhutani, who is CFO of the Company. Before we begin with the discussion, I would like to remind you that some of the statements made in today’s conference call may be forward-looking in nature and may involve some risks and uncertainties. Kindly refer to slide #25 of the Company’s Q4 earnings presentation for a detailed disclaimer on the same. I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thanks and over to you Anuj!

Anuj Khanna Sohum

Good morning everyone and thank you for joining the call today. I trust all of you are keeping in good health. Affle delivered another quarter of landmark performance to conclude FY2022 as our strongest growth year, anchored on our entrepreneurial culture, tech innovations and sustainable value creation powered by our Affle2.0 Consumer Platform Stack. I am incredibly proud that in the last 5 financial years since FY2018 since our initial DRHP was filed, our team has delivered over 6.5X growth in topline and profitability, a fact which stands further grounded given it was a consistent y-o-y growth coming across the quarters. Our cashflow from operations increased by about 100% y-o-y in FY2022, a CAGR of about 63% since FY2019. We delivered revenue growth of approximately 123% y-o-y this quarter and achieved Q4 Revenue CAGR of 73.3% over the last 3-year period, much ahead of the industry growth trend. Inspite of the Q3 to Q4 seasonality, our CPCU business noted a strong momentum deliveri

Kapil Bhutani

Thank you Anuj. Trust all of you are keeping in good health. Continuing our growth momentum of clocking over 120% y-o-y growth in last two quarters, Our Q4 FY2022 revenue stood at Rs. 3,151 million, a strong growth of 122.6% y-o-y. We concluded the financial year with a revenue of Rs. 10,817 million, a growth of 109.3% y-o-y, driven by robust contribution from organic growth and from Jampp. Our reported EBITDA for the quarter stood at Rs. 587 million, an increase of 70.2% y-o-y while for FY2022, EBITDA stood at Rs. 2,135 million, an increase of 63.8% y- o-y. Kindly refer to our note on Hyper-Inflation Accounting with respect to our step- down subsidiary in Argentina, given on slide 5 of our Earnings Presentation. In regards to that, our adjusted EBITDA for Q4 FY2022 stood at Rs. 607 million at a margin of 19.3%. As you are aware that our third quarter in any year is the highest quarter due to seasonality. However, the cost of operations in Q4 is generally equal to Q3 and hence the EBIT

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Affle 3i Limited

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