AFFLENSEQ1 FY2023August 17, 2022

Affle 3i Limited

9,456words
49turns
8analyst exchanges
3executives
Management on call
Anuj Khanna Sohum
Managing Director & Chief
Kapil Bhutani
Chief Financial & Operations Officer
Aniket Pande
ICICI Securities
Key numbers — 40 extracted
128%
r, highest conversions and highest CPCU rate ever. We delivered revenue growth of approximately 128% y-o-y this quarter, comprehensively beating our Q1 CAGR growth trend of 67% over the last 3-year
67%
wth of approximately 128% y-o-y this quarter, comprehensively beating our Q1 CAGR growth trend of 67% over the last 3-year period. Our CPCU business noted a strong momentum delivering 61.9 million
61.9 million
th trend of 67% over the last 3-year period. Our CPCU business noted a strong momentum delivering 61.9 million conversions during the quarter, an increase of 96.7% y-o-y at a CPCU rate of Rs. 52.1. We witne
96.7%
ss noted a strong momentum delivering 61.9 million conversions during the quarter, an increase of 96.7% y-o-y at a CPCU rate of Rs. 52.1. We witnessed accelerated broad-based growth in ad spends driven
Rs. 52.1
ivering 61.9 million conversions during the quarter, an increase of 96.7% y-o-y at a CPCU rate of Rs. 52.1. We witnessed accelerated broad-based growth in ad spends driven by our unique ROI-linked CPCU bu
45%
ed growth in ad spends driven by our unique ROI-linked CPCU business model, having achieved about 45% organic growth (which was well above the industry average growth trend) and coming across our t
75.1%
stry verticals. This has strengthened our moat and our Direct customers contribution has grown to 75.1% of our revenue in Q1 FY23. We continue to unlock innovative consumer experiences for the advertis
rs,
e of 10 Directors led by an Independent Non-Executive Chairman and will include four Women Directors, that is 40% of our Board. During the quarter, Affle was awarded Data Protection Trustmark (DPTM)
40%
ctors led by an Independent Non-Executive Chairman and will include four Women Directors, that is 40% of our Board. During the quarter, Affle was awarded Data Protection Trustmark (DPTM) certific
120%
and hope all of you are keeping safe and well. Continuing our growth momentum of clocking over 120% y-o-y growth in the last three quarters, Our Q1 FY2023 revenue stood at Rs. 3,475 million, a robu
Rs. 3,475 million
tum of clocking over 120% y-o-y growth in the last three quarters, Our Q1 FY2023 revenue stood at Rs. 3,475 million, a robust growth of 127.9% y-o-y and 10.3% q-o-q, contributed by both organic growth and Jampp.
127.9%
n the last three quarters, Our Q1 FY2023 revenue stood at Rs. 3,475 million, a robust growth of 127.9% y-o-y and 10.3% q-o-q, contributed by both organic growth and Jampp. Our EBITDA for the quarter s
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Guidance — 14 items
Anuj Khanna Sohum
opening
“We delivered revenue growth of approximately 128% y-o-y this quarter, comprehensively beating our Q1 CAGR growth trend of 67% over the last 3-year period.”
Aniket Pande
qa
“We have seen that in US television networks and news, so I believe publishers also will be feeling the impact of slowdown in the advertising market.”
Aniket Pande
qa
“The last query will be, does our entire pipeline continues to remain strong given we are more focused towards conversion model.”
Anuj Khanna Sohum
qa
“Within that, digital spends will be way more protected than the traditional ad expense.”
Anuj Khanna Sohum
qa
“Therefore, if Affle is delivering them ROI linked conversions and thus potentially the revenue, it will be almost wrong for them to say, okay, we are going to reduce the number of conversions that we are getting from consumers.”
Anuj Khanna Sohum
qa
“Now, I believe the impact of this sort of change will be that we will see much greater conversions and engagements with the users in any case on the more meaningful rewards linked conversions vs.”
Anuj Khanna Sohum
qa
“The consumers in emerging markets are deeply connected on the mobile device and going forward on other connected devices as well.”
Nikhil Chandak
qa
“So if you could explain what will be the exact impact, assuming the same happens in 2024 or 2025?”
Anuj Khanna Sohum
qa
“Having said that, even those whose business is on the browser, I believe that by the time Google is going to implement cookies, as in replace cookies, they will implement something that will be even more effective and efficient for advertisers and advertising than the cookies.”
Anuj Khanna Sohum
qa
“In the next year and the next two years, there will be a lot of areas of improvements, how to scale up, how to bring more efficiencies, how to charge the advertiser a bit more while the inventory & date cost stays the same.”
Risks & concerns — 9 flagged
We have seen that in US television networks and news, so I believe publishers also will be feeling the impact of slowdown in the advertising market.
— Aniket Pande
Now, I believe the impact of this sort of change will be that we will see much greater conversions and engagements with the users in any case on the more meaningful rewards linked conversions vs.
— Anuj Khanna Sohum
Affle's business has almost, not even like 1% to 2% impact of anything to do with the browser.
— Anuj Khanna Sohum
Is it because of a decline in the margins of India business?
— Anmol Garg
Secondly, we don't see this as a decline itself because India had a nice Q4 FY2022 as compared to international, India event did not show any major dip in Q4 FY2022 vs.
— Kapil Bhutani
If we see the impact of Apple's IDFA and the recent macro environment, one thing which is picking up quite smartly is this plan of putting out first party ad networks by multiple properties, multiple large data sets which are out there in the world.
— Mukul Garg
Even in the developed markets, there is almost negligible impact of Europe.
— Anuj Khanna Sohum
That level of maturity and bringing that authenticity to plan for 10 years is never easy, even in a organic situation, in your own management team, to get people to think that far and deep sometimes is a challenge.
— Anuj Khanna Sohum
I know I will get through it, but that is the challenge that I want to talk about and I would spend more time on it prior to the acquisition going forward, than post.
— Anuj Khanna Sohum
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Q&A — 8 exchanges
Q
If I look at the top down macro-level approach, it looks a bit bleak. The ad outlook has increasingly dimmed over last few weeks in the midst of signs that rising inflation is beginning to affect consumer spending. We have seen that in US television networks and news, so I believe publishers also will be feeling the impact of slowdown in the advertising market. Recently, the indication by a giant technology company related to the ad spending retrenchment has also spread aggressively. Secondly, in India also, we have seen the recently listed tech companies commenting on their concalls about red
Anuj Khanna Sohum
Firstly, in regard to the recent commentary from companies in US and Europe over last few weeks, it's important to note that Affle's exposure to Europe is negligible and our exposure to US or broadly developed markets is not as significant, because we are deeply anchored on the global emerging markets. In the emerging markets, especially markets like India, Indonesia, Africa, LATAM, the penetration of advertising into digital is still under calibrated. The trend we see in these markets is, let's say, if the total ad spend is 100, only 25 out of that 100 is going to digital for now and that nee
Q
My first question is regarding Jampp. For more clarity on y-o-y comparison, could you give us the contribution from Jampp as far as user conversions and the average CPCU rate is concerned?
Anuj Khanna Sohum
Jampp on a y-o-y basis saw a significant integration benefit together with Affle. We are now seeing Jampp operating close to 10% of profitability margin from its business, at the end of completion of one year together with us in June 2022. We are seeing a meaningful level of momentum towards scaled growth with the differentiated propositions, with the ability for them to pitch conversion links, CPCU based business model. We are seeing a positive qualitative as well as quantitative impact that we have had in the last one year. If you're comparing it specifically from Affle's organic growth pers
Q
Anuj, my question is on the overall advertising market, especially in the emerging markets. Earlier, you spoke about how emerging markets ad spending is strong, but again if you split this ad spend in the emerging markets into multiple categories. One category, which is seeing a lot more growth is the short video platforms. How Affle is placed in this value chain? Are we able to participate in it or be part of this spending or are we yet to develop any capability to deliver ads within the short video platforms?
Anuj Khanna Sohum
See, for us video as well as the theme that we have around video on connected devices, connected TV and connected households is a strong theme. Now, where are these short videos being consumed? These short videos are, if I'm not wrong, over 90% being consumed either on mobile devices or on the connected TV experiences that people are having. Affle is having a strong play in this area. The overall growth that we are seeing in terms of advertisers shifting their spends towards mobile and digital in emerging markets is basically in emerging markets. What was lagging behind is catching up to what
Q
My question was on the same Google privacy norms. If I read the blog correctly, the official blog by Google, it's not that they have abolished the plan completely of phasing out third-party cookies, the decision has just got postponed to 2024. So, what I wanted to understand is if you could specify what impact can this have, assuming this goes ahead in 2024 or in 2025, for example, somewhere it's tough to believe that this can't impact the company. We have seen the kind of havoc what created on Meta because of the Apple IDFA changes. So, it's tough to believe that if Google does actually go ah
Anuj Khanna Sohum
First of all, the cookies are only applicable and relevant in a browser scenario, meaning that somebody is going to a website from a mobile browser or a PC browser and only then a cookie comes into play. Affle's business has almost, not even like 1% to 2% impact of anything to do with the browser. Our business is almost distinctly of on-device partnerships with OEMs, operators, in-app, like on apps, which are downloaded on the mobile devices or even on connected TV and working with those apps either directly by integrating with SDK API or through programmatic means. So, today, or in fact, for
Q
Hi, Anuj and Kapil. Firstly, wanted to understand that from the last three- quarters, we have not seen any improvement in our gross margin, per se, when I am talking about gross margin, I mean, the inventory & data costs as a percentage of revenue. We have not seen much improvement over there. Why is the improvement in Jampp’s margin not visible in the inventory cost at consolidated level? Is it because of a decline in the margins of India business? What can be the reason for the same?
Anuj Khanna Sohum
No, the way you have to see the ability for improving the margins in Jampp business is to create much more operational efficiency in terms of how the technology cost is working as a function of the overall cost and how we are enabling incremental scale up without incremental increase in the OPEX of Jampp. So, our tech stack is actually leapfrogging Jampp and the acquired business, why only Jampp, I mean, Mediasmart and Appnext and so on, the same playbook has workedfor all. You acquire a company that is breaking even, you help that company to leapfrog ahead without investing further in cost, b
Q
Thanks for the opportunity and congratulations on strong performance. One structural question, which is that on this Apple privacy policy impact, what we're hearing from several publishers that the monetization on the store has been impacted. I understand that you have been growing on this, because of your size and positioning, but more on an overall industry sense, who in your view would take the hit eventually? Is it the publisher side or is it higher customer acquisition cost for the advertiser or at the growth margin would be the bigger hit? Second thing, on the Jampp side, we have been gr
Anuj Khanna Sohum
So that's three questions. I will try to answer all in one breath. The changes that you are seeing on the iOS platform, while it may happen at an ecosystem level. I strongly believe that they were sharply pointed at the big technology companies or the big advertising tech companies like Google, Facebook and the likes. I believe that Apple has been kind in the way they have opened up their backend platforms, capabilities, and the kind of APIs and ability for platforms like us to integrate with them. I think we have seen a fairly good, transparent and sensible approach there. We believe that the
Q
Hi, Anuj. If we see the impact of Apple's IDFA and the recent macro environment, one thing which is picking up quite smartly is this plan of putting out first party ad networks by multiple properties, multiple large data sets which are out there in the world. Can you just share some thoughts on how you see this impacting the market as a whole because this obviously puts out a lot more credible and highly correlated data out in public domain, which can improve the efficiency of the ad networks? Also, whether this will enable relatively newer startups in the space to catch up to the large data s
Anuj Khanna Sohum
Firstly, if you look at the emerging markets, exposure to Apple devices in emerging markets will be low and ad spends on iOS will be insignificant. As I see, well over 90% of mobile in emerging markets is Android. So, when we talk about Apple IDFA or even the macroeconomic factors, we must straight away take the context to developed markets. Europe has negligible contribution to Affle, US market is a large market and Affle is a very small there as a percentage, even within our scheme of things. And The numbers are small that suddenly the macro factor is not impacting what Affle is making in th
Q
Congratulations on your third IPO anniversary milestone and my commendations to Mr. Khanna Sohum and the rest of the management on another steady set of numbers. I had a few questions, but I'll just ask two of them together. So at Affle, we have pursued a fairly robust M&A strategy, we have got many new acquisitions into the fold over the last few years and we are likely to do so in the future. Now, in this regard, what sets Affle apart from its peers in terms of being able to successfully integrate these acquired enterprises, both into your ecosystem and culture so well? Has there been any pr
Anuj Khanna Sohum
I will take your first question on the M&A strategy and then Kapil will answer the second one. Now, why our M&A strategy has worked out so well, especially with respect to Mediasmart, Appnext, Jampp, which were acquired outside India and culturally different from us. Mediasmart is in Spain, the Appnext founders from Israel, Jampp has Latin American founders. So the first reason for it to be strong is that we have a clear Affle 2.0 consumer platform stack, which we had then presented together with Jampp, Appnext, Mediasmart in December, 2021 to all our investors and analysts. This is a clear st
Speaking time
Anuj Khanna Sohum
16
Moderator
11
Kapil Bhutani
6
Mayank Babla
3
Sumail Choksey
3
Arun Prasath
2
Nikhil Chandak
2
Mukul Garg
2
Aniket Pande
1
Nikhil Chandan
1
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Opening remarks
Anuj Khanna Sohum
Good morning everyone and thank you for joining the call today. I trust all of you are keeping in good health. Today, we celebrate Affle’s 3rd IPO anniversary together with our 385,000+ shareholders. This inspires us and instills in us greater responsibility and accountability to deliver cash flow positive long-term growth for Affle. We are elated to close yet another quarter of momentous growth. In Q1 FY2023,we achieved our highest quarterly revenue and EBITDA run-rate ever, highest conversions and highest CPCU rate ever. We delivered revenue growth of approximately 128% y-o-y this quarter, comprehensively beating our Q1 CAGR growth trend of 67% over the last 3-year period. Our CPCU business noted a strong momentum delivering 61.9 million conversions during the quarter, an increase of 96.7% y-o-y at a CPCU rate of Rs. 52.1. We witnessed accelerated broad-based growth in ad spends driven by our unique ROI-linked CPCU business model, having achieved about 45% organic growth (which was w
Kapil Bhutani
Thank you Anuj. Wishing everyone a good day and hope all of you are keeping safe and well. Continuing our growth momentum of clocking over 120% y-o-y growth in the last three quarters, Our Q1 FY2023 revenue stood at Rs. 3,475 million, a robust growth of 127.9% y-o-y and 10.3% q-o-q, contributed by both organic growth and Jampp. Our EBITDA for the quarter stood at Rs. 687 million, an increase of 95.9% y-o-y and a strong growth of 17.1% q-o-q. In this quarter, our Inventory & Data cost sequentially was stable at about 63.3% of revenue. Our Employee cost increased by 1.6% q-o-q. We remain bullish on the business and continue to expand the teams for growth across platforms, markets and verticals. However, this quarter our employees expenses were down by 106 basis points as a % of revenue. Our reported Profit After Tax (PAT) for the quarter was at Rs. 545 million, an increase of 52.6% y-o-y. Our Q1 last year and the previous quarter Q4 FY2022 included higher Other Income than the recent qua
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