ROUTE MOBILE LIMITED has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
Ref No: RML/2022-23/313 Date: October 28, 2022
To, BSE Limited Scrip Code: 543228
Dear Sir/Madam,
National Stock Exchange of India Limited
NSE Symbol: ROUTE
Sub: Transcript of the earnings conference call for the quarter ended September 30,2022
We are enclosing herewith copy of the transcript of the Company's Q2 FY23 earnings conference call dated Friday, October 21, 2022.
transcript
The https://routemobile.com/wp-content/uploads/2022/10/Earning-Conference-Call-Transcript-Q2-FY23-october.pdf
the Company's website under
is also available on
Investors section
the
ie
Further, please note that no unpublished price sensitive information was shared/discussed by the Company during the said earnings call.
You are requested to take the above information on record.
Thanking You Yours faithfully, For Route Mobile Limited
_____________________________________________
Rathindra Das Group Head‐Legal, Company Secretary & Compliance Officer
Encl: as above
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“Route Mobile Limited
Q2 FY 23 Earnings Conference Call”
October 21, 2022
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ICICI Securities
C H O R
L
L '
MANAGEMENT: MR. RAJDIPKUMAR GUPTA – MANAGING DIRECTOR AND GROUP CEO – ROUTE MOBILE LIMITED
MR. GAUTAM BADALIA ‐ GROUP CHIEF STRATEGY OFFICER & CHIEF INVESTOR RELATIONS OFFICER – ROUTE MOBILE LIMITED MR. SURESH JANKAR – CHIEF FINANCIAL OFFICER – ROUTE MOBILE LIMITED
MODERATOR: MR. ANIKET PANDE – ICICI SECURITIES
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Route Mobile Limited October 21, 2022
Moderator:
Ladies and gentlemen, good day, and welcome to the conference call of Route
Mobile Limited arranged by ICICI Securities and Concept Investor Relations, to
discuss its Q2 FY '23 results. At this moment, all participants are in the listen only
mode. Later, we will conduct a question-and-answer session. At that time, if you
have a question please press star and one on your telephone keypad. Please note
that this conference is being recorded. Before we begin, I would like to remind
you that some of the statements made in today's earnings call may be forward-
looking in nature and may involve certain risks and uncertainties. Kindly refer to
Slide number 2 of the presentation for the disclaimer.
I now hand the conference over to Mr. Aniket Pande, Lead Technology Analyst at
ICICI Securities. Thank you and over to you, sir.
Aniket Pande:
Thank you. Hello, everyone. Wishing everyone Happy Diwali and a happy
weekend ahead. Thank you to the management of Route Mobile for giving us the
opportunity to host you for your Q2 FY '23 earnings call. We have with us today,
Mr. Rajdipkumar Gupta, Managing Director and Group CEO; Mr. Gautam Badalia
Chief Strategy Officer and Chief Investor Relations Officer; and Mr. Suresh Jankar
Chief Financial Officer. I now hand over the call to Mr. Rajdip Gupta. Thank you,
and over to you, sir.
Rajdipkumar Gupta:
Thanks, Aniket. Good evening, everyone. On behalf of entire RML team, I would
like to wish you all a very happy Diwali in advance. I'm happy to announce that
with another solid quarterly performance in Q2 FY '23, we marked six
consecutive quarters of sequential revenue and adjusted PAT growth. This is
despite the geopolitical tensions massive volatility across various currencies and
various other uncertainties that we all are grappling with. The underlying
strength in the business continues to be robust, and we are optimistic of inching
close to 60% Y-o-Y revenue growth in FY '23. Fueled by our resilient platform,
deep domain expertise and highly capable Route Mobile team spread across 20
global locations, we are winning quality deals worldwide.
The quarter gone by was in fact, our best quarterly revenue and operating profit
to date. Some of our key business highlights of Q2 FY '23 are as follows: RML
secured a preferential partnership deal with Telenor Group for five countries,
which is Finland, Malaysia, Thailand, Pakistan and Myanmar. We were again
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Route Mobile Limited October 21, 2022
recognized as a representative vendor in the latest Gartner report. As part of our
capital allocation strategy, we completed INR 120 crores buyback through the
open market route in Q2 FY '23.
Further based on our superlative performance in H1 FY '23. I'm pleased to inform
you that our Board of Directors has approved an interim dividend of 30%, that is
INR 3 per share. Regarding our organic strategy, we continue to focus on key
markets like India, GCC, LATAM and Africa. We have already started getting the
benefit of our investment in LATAM, and early trend looks very promising. In
terms of our inorganic strategy, -- the team is focused on integrating all the
acquisitions we have done and derived synergies. We may look at a few tuck-in
investments in coming days, and we'll try to complete all these acquisitions,
which we have done recently. With this, Gautam will walk you through our
financial highlights in detail. Over to you, Gautam.
Gautam Badalia:
Thank you, Rajdip. Good evening, everyone. Wishing all of you a very happy and
prosperous Dipawali. We have already uploaded our quarterly earnings
presentation on our website as well as at the Stock Exchange website. Hope you
had a chance to go through the presentation. I'll quickly summarize our financial
and operating performance during the Q2 FY '23 and H1 FY '23 before opening
the floor for Q&A. As Rajdip highlighted, the quarter gone by has been an
outstanding quarter, considering the seasonality of our business.
Further, our business has yet again demonstrated strong resilience despite global
headwinds, inflationary pressure, geopolitical turmoil, energy crises and rising
interest rates. The strong foundation, coupled with multiple engines of growth
has been our secret sauce for demonstrating six consecutive quarters of
sequential revenue and adjusted profit growth, as highlighted in Slide 19 of the
presentation.
In volume terms, we have processed around 27 billion transactions in Q2 FY '23,
which is again the highest quarterly billable volumes processed by year till date.
In terms of geography, India continues to be one of our largest markets by
termination, accounting for 47% of our revenue by termination. You may refer to
Slide 6 for the same. We continue to increase our market share in India and are
on track to surpass our guidance of $ 175 million revenue coming from India in
FY '23.
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Route Mobile Limited October 21, 2022
In terms of our investments in Masivian over the last few quarters. the early
trends as Rajdip highlighted, looks very promising. Masivian clocked 21%
sequential revenue growth in Q2 FY '23, coupled with margin expansion. We
continue to witness very strong momentum on the next-generation products, Y-
o-Y growth of 116%, One may refer to Slide 21 of the presentation. In terms of
cash conversion, the cash conversion for this period was slightly muted, largely
because of three factors:
A large PSU bank mandated the collection of our overdue receivables through the
Government e-Marketplace portal, which is called the GeM portal. The integration
process with GeM portal led to overdues receivable remaining outstanding as on
September 30, 2022. Further, some of our large global CPaaS customers have
been taking slightly longer than this stipulated payment cycle, owing to the
headwinds mentioned above. In terms of payables, there was a slight reduction
in terms of the days payables because we settled an outstanding invoice with a
large MNO in view of some additional discount.
With this backdrop, let me walk you through our financial performance. In terms
of Q2 FY '23 performance, revenue from operations grew by 94% from INR 4,357
million in Q2 FY '22 to INR 8,458 million in Q2 FY '23. There was a sequential
growth of 16%, billable transactions increased from the 10.8 billion in Q2 FY '22
to around 24.8 billion in Q1 FY '23 to 26.9 billion in Q2 FY '23. Average realization
per billable transaction increased from 0.294 paisa in Q1 FY '23 to 0.314 in Q2 FY
'23. Gross profit margin expanded from 21.2% in Q2 FY '22 to 22.3% in Q2 FY '23.
EBITDA grew by 77% from INR 617 million in Q2 FY '22 to INR 1,094 million in
Q2 FY '23. There was a sequential growth of 27% in EBITDA as well.
Effective tax rate for the quarter was 11.7% going to some deferred tax credit that
we had. EBITDA margin expanded from 11.8% in Q1 FY '23 to 12.9% in Q2 FY '23.
Adjusted profit for tax grew by 103% from INR 454 million in Q2 FY '22 to INR
921 million in Q2 FY '23. as compared to INR 872 million in Q1 FY '23. Adjusted
PAT margin was 10.9% in Q2 FY '23.
For H1 FY '23, revenue from operations grew by 94% from INR 8,132 million in
H1 FY '22 to INR 15,749 million in H1 FY '23. In terms of certain KPI, billable
transactions increased from 18 billion in H1 FY '22 to 52 billion in H1 FY '23. We
had staggering net revenue retention of 128%. You may refer to Slide 17 of the
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earnings presentation. We added over 350 new customers in the six months
across all products.
Gross profit margin expanded from 20.8% in H1 FY '22 to 22.4% in H1 FY '23.
EBITDA grew by 76% from INR 1,108 million in H1 FY '22 to INR 1,954 million in
H1 FY '23. In terms of operating leverage, EBITDA as a percentage of gross profit
stood at 56% for the 6-month period. EBITDA margin contracted from 13.6% in
H1 FY '22 to 12.4% in H1 FY '23.
Adjusted profit for tax grew by 116% from INR 831 million in H1 FY’22 to INR
1,793 million in H1 FY '23. Adjusted PAT margin improved from 10.2% to 11.4%
for the same period. Net cash as on September 30, 2022, was INR 8,062 million.
Average receivable days increased from 57 days in FY '22 to 65 days in H1 FY '23,
and average payable days decreased from 86 days in FY '22 to 68 days in H1 FY
'23, going to reasons mentioned or highlighted above.
Cash flow from operations was INR 240 million in H1 FY '22. Cash outflow relating
to investing activities was INR 410 million towards the payment of purchase
consideration of INR 118 million. And the split of that amount was especially
deferred payout for the email platform and advance to Teledger, and there was a
CapEx of INR 333 million.
Cash outflow from financing activities was INR 1,604 million, primarily due to
buyback of INR 1,492 million, which includes tax. We on boarded 142 new
employees during the six months period and 146 employees resigned during the
same period. With this, we open the floor for Q&A.
Moderator:
Thank you very much. Ladies and gentlemen, we will now begin the question-
and-answer session. Anyone who wishes to ask may ask a question may enter star
and one on the touchtone telephone. If you wish to remove yourself from the
question queue you may press star and two. Participants are requested to use
handset while asking a question. Anyone who has a question may enter star and
one. Ladies and gentlemen, we will wait for a moment while the question queue
assembles. Our first question is from the line of Aniket Pande from ICICI
Securities.
Aniket Pande:
Thank you. Congrats to the Route management team on a great performance on
all metrics. I just had a couple of questions. First, I wanted to understand what led
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to such a strong revenue growth in this quarter? And how your guidance of 60%
looks quite modest? Any specific macro reason for that?
Route Mobile Limited October 21, 2022
Rajdipkumar Gupta:
Aniket hi Rajdip here. I think I've already mentioned in the past also, Route Mobile
is a global company operating from 20 different global destination, and we have
termination all across the globe. We have signed a few large OTT players in last
few quarters. In fact, we are working very closely with them to increase their
termination in various other countries.
Initially, when we on boarded those customers, they were using one or two
countries now these customers are using more than 13 to 14 countries. And that
is the kind of potential we carry with every single customer, which we onboard
on our portfolio that we can at least offer them more than 200 countries if they
want to terminate messages through us.
And I think one of the reasons our revenue and I think volume is increasing
because based on our close working with the OTT players as well as some of the
large banking customers started sending traffic with us in last quarter. And the
same trend is going to continue for the coming quarters as well.
Aniket Pande:
And my second question on your EBITDA margin has expanded quite massively
in this quarter. If you could walk us through the headwinds and tailwinds on the
margins and also your margin aspiration in coming years?
Rajdipkumar Gupta:
Aniket, we have always talked about our aspiration to increase our margin in
coming quarters because we believe that the omni channel adoption is going to
increase in more and more in coming quarters or years to come. We are at very
early stage of adoption all across the globe, not only in India.
As we speak, if you see our new revenue coming from new technologies is
increasing per quarter around 15% to 16% and we, at the current run rate, almost
about INR 36 crores. If we just do on an annual basis, we are already there with
INR 150 crores run rate. So I think as and when this new line of communication,
the new channels will get adopted more by our customers, our revenue sorry, the
margin guidance will definitely increase more and more and we believe that I
think all this channel of communication has a much higher gross margin as
compared to messaging, and that is exactly where we as a company focus and,
there is one slide we have also presented in our presentation. I think the kind of
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customers we are onboarding not just from India various part of the work on our
new channel of communication. Gautam, if you just want to add anything to this?
Route Mobile Limited October 21, 2022
Gautam Badalia:
Yes. So Aniket, I mean just to address, both the points, right? So I think besides
what Rajdip just highlighted, there was an ILD price increase that has happened,
which was always, I mean, that is very positive. I mean, whenever there is a price
increase by Telco because ours is pass through. The other thing is, besides the
new product contribution, that's definitely continuing to show good momentum.
I think some of our acquired entities like Masivian, they have started to now do
really well. I mean we had invested over the last few quarters to expand their
teams. And they have some seasonality aspects. And now know, I think they are
getting into the phase of the year, which are the best for them, and we have seen
tremendous improvement in their margins as well. So going forward, I think we
have already called out, we are talking about 100 to 150 basis points
improvement in our EBITDA margin for the year.
Moderator:
Our next question is from the line of Pranav Kshatriya from Nuvama. Please go
ahead.
Pranav Kshatriya:
Thanks for the opportunity and congratulations on a good set of numbers. My first
question is, again, a bit on the margin. You talked about around 11.5% EBITDA
margin, which is 150 basis points higher than what was the Q4 margin. But if I
look at your H1 performance, it is closer to 12%. So what is making you
conservative in terms of the margin guidance? Or you're just keeping it
conservative, and if there is a possibility that you might overachieve|?
Rajdipkumar Gupta:
Pranav It’s better to be conservative and overachieve. That's what I believe.
Pranav Kshatriya:
Got you. But I mean, technically, we should not be seeing any headwinds on the
cost side for the next? I mean, are there anything which you want to call out that
in the next quarters, maybe because what I was expecting is -- it's not that the
gross margin led expansion is there. This margin expansion is because of the
operating leverage coming through? And in the coming quarters, because those
are H2 seasonally stronger, we should see even more operating at or are you to
expect some more investment?
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Rajdipkumar Gupta:
Pranav, I think, I as a CEO of a company would love to have more visibility of
company in various global market where we are operating now. And I think if you
see from last one or two quarters, we have been very aggressive on attending a
lot of conferences. I think that we need to spend some kind of marketing stuff as
well because I think marketing is also one area for spend, where we have capped
our marketing budget, but definitely, there will be a cost in the coming quarters,
especially on marketing side.
Pranav Kshatriya:
Sure, and in terms of the revenue, you talked about scaling up of the certain OTT.
But can you give a little more granular color? If I look at the spurt in the revenue
compared to Q1, what is contributing? Is the stand-alone Route mobile growth is
what is contributing. Bulk of Mr. Messaging is contributing, Masivian is
contributing? What exactly is driving growth?
Rajdipkumar Gupta:
So I think we have the numbers. I request Gautam to just share the number if you
can, if you have the numbers.
Gautam Badalia:
Sure. Hi Pranav, actually the growth has been there across all the entities. In terms
of organic growth, I think we have demonstrated over 20% growth on a
sequential basis and as I said, Masivian also had to get demonstrated that kind of
growth. So we've seen it across the board. And I think we are now entering into
supposedly one of our best quarters at historically Q3.
So hopefully, I think that operating leverage will definitely play out. Plus, there is
some degree of optionality. I'm just trying to call that out as well, which may kind
of lead to further surprises in terms of margin expansion. Essentially, a lot of the
cost, we've been very conservative in terms of front loading it.
So some of that, I think, in due course, worked out favorably for us. So we will just
wait and watch some of those aspects, but there is some degree of optionality also
there into the margin expansion.
Pranav Kshatriya:
Sure. Sir, just one last question from my side. There seems to be a fair bit of
investment on the working capital side. Should we expect this to reverse? Or how
should we see this or this investment will continue since you're going so fast in
the second half of the year?
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Gautam Badalia:
Yes. So I think we're growing at breakneck speed. So it will definitely warrant
some amount of working capital. But having said that, there were a few cases. So
I just had called it out that I think this GeM portal thing it was something which
caught us on the wrong foot and hence, some amount of working capital got
blocked there. Now those things are all streamlined. So hopefully, going forward
will not have issues with any working capital issues with respect to the GeM
portal staff. And for some additional price discount, we also settled one of the
large M&O outstanding. So some of these things, are more tactical, more statistical
moves that we've taken. And that will ogle well for us, in terms of the overall
margin expansion.
Pranav Kshatriya:
Sure. Thank you, Gautam, Rajdip and the entire Route Mobile team. Wish you very,
very happy Dipawali.
Moderator:
Before I take the next question, we'd like to request participants to please limit
the questions to two per participant. Time permitting; you may come back in the
queue for a follow-up question. Our next question is from the line of Pritesh
Chedda from Lucky Investment Managers. Please go ahead.
Pritesh Chedda:
Sir, I have one question. In your cash flow, there is INR 83 crores being deployed
in other financial assets and other assets, that's before operating cash flow. So
what is this INR 83 crores?
Gautam Badalia:
No. So a large part of that, so about INR 64 crores out of that is the unbilled
revenue. Essentially, the service is being rendered but we were not able to invoice
it. So that is a part of the receivables. So that should be construed as part of the
accounts receivables.
Pritesh Chedda:
And in your balance sheet, so there are two areas, right? So there is an area which
is more longer-term financial assets, other financial assets where there is an
increase and there is a part in the current asset. So I can understand the unbillable
part in in the current asset? Or is there a unbelievable part even in the longer-
term financial assets?
Gautam Badalia:
No, unbilled revenue.
Pritesh Chedda:
Will be a part of your current assets. Unbilled revenue is part of the financial
assets.
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Gautam Badalia:
Yes. There are two financial items. Okay. There are two financials. One is long
term in nature. One is short-term in nature in your balance sheet? One is a part of
your current asset. Within current assets, we have other financial assets. And then
there are longer assets were also you have a financial asset. Do you have your
balance sheet infront of you?
Gautam Badalia:
So the other non-current financial assets, last part of that essentially is the fixed
deposits having a maturity of more than 12 months.
Pritesh Chedda:
That is the other financial assets.
Gautam Badalia:
Other non current financial assets.
Pritesh Chedda:
Other noncurrent financial assets. Perfect. So which means that this INR 50 crores
is cash generation in case whereas around INR 40 crores have gone because of
unbilled revenue
Gautam Badalia:
That's right.
Moderator:
Thank you. Next question is from the line of Abhishek Bhandari from Nomura.
Please go ahead.
Abhishek Bhandari:
Rajdip and Gautam, I just have one simple question. Longer term in a business
like yours, what should be the CFO to EBITDA ratio. I was under the impression
that the kind of business what we have, typically a working capital cycle should
be very small. So is the business. -- is the industry undergoing through a change?
And what is the sustainable number here from a medium-term perspective?
Gautam Badalia:
So I think on a sustainable basis, I think we should be able to achieve a 50% to
75% conversion. And as part of our guidance, we have called that out as well.
There were certain certain one-offs in this, hopefully, I think that should get
course corrected once you report the full year number.
Abhishek Bhandari:
So you mean to say there's no change in the billing record or the payment terms
from the clients?
Gautam Badalia:
No, change in the billing record, per se.
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Moderator:
Thank you. Our next question is from the line of Manik Taneja from JM Financial.
Please go ahead.
Manik Taneja:
I just wanted to understand, given the increasing share of our global business and
some of these acquired businesses are have higher margin profile, why are we not
seeing an impact in in terms of gross margin expansion? And secondly, just to
crawl you a little bit further on the cash generation. If you could help us
understand as to government movement and yes.
Rajdipkumar Gupta:
So Manik, let me get in and then the Gautam you can add. So Manik, can you also
understand the various geographic presence we have, like if you go to Africa,
there would be a very different gross margin game. And then if you go to Asia, or
will go to Latin America, is truly different market. So I think the overall, when we
console our balance sheet, I think what -- that's exactly what we're presenting.
Gautam, you can just answer this
Gautam Badalia:
So Manik, honestly, I think there was some issue with the voice quality. If you can
just repeat your queries, I just missed some leg part.
Manik Taneja:
So the first question was with regards to the gross margin performance. While we
are continuing to derive a higher share of revenues from international and from
acquired business and some of the acquired businesses have higher gross margin
profile as for the difference we have provided?
Gautam Badalia:
So yes, so I'll address this first. I think Rajdip highlighted the key aspect. I'll just
add to what he said. So some of the large OTT players, right? Because of the size
and scale and the rate at which they grow, there are some volume based
discounts, which essentially leads to a drag on the overall portfolio gross margin,
but that is then adequately compensated by the new products and some of the
acquisitions that we have done, which are at higher gross margins. So that's the
way to look at it.
And from our perspective, if you were to look at it, some of these large OTT, if you
are able to service them in multiple geographies. The serviceability of some of
these accounts doesn't warrant significant operating cost. So there is tremendous
operating leverage that kicks in, and hence, it leads to higher ROCE
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Manik Taneja:
Sure. And the second question was with regards to the cash generation. If you
could help us understand what's changed with regards to the government
procurement?
Gautam Badalia:
Yes. So I think for this one of these large PSU bank that we were providing the
services. at the very last moment, I mean, we were told that the entire billing has
to be routed through the Government e-Marketplace portal, which is the GeM
portal. So we had to get ourself integrated. That process is again a process which
warrants a little bit of time because we were doing it for the first time. So some
part of that bank's quarterly revenue, a large part of that was stuck as it had to be
settled through the GeM portal. But now those things have been streamlined. We
are already integrated. We have already received the payments for this particular
bank in the subsequently.
Manik Taneja:
So should we expect an improvement in cash flow in 3Q itself?
Gautam Badalia:
Yes.
Manik Taneja:
And one last one from my end. Basically, the industry as a whole has seen
significant increase in ILD pricing over the course of last 24 months, how are we
seeing both the pricing, both on NLD and ILD volumes, if I have to think about the
next 12 months?
Rajdipkumar Gupta: Manik hi, Rajidip here. So for us, it is pass-through prices, right? So definitely, we
did see some kind of a volume dip. But based on the price increase, I think it is
just a pass-through for us. And I don't see there is any impact going to -- in fact,
we're going to gain more out of that rather than any impact.
Manik Taneja:
Sure, but, do you think we could probably see that situation where ILD price will
increases?
Rajdipkumar Gupta:
It all depends on operator Manik because I deal with some thousands of operators
and there are different operators have different aspiration, like and they I think
definitely, most of the operators believe that SMS one of the like big thing for
them. And I think most of them are trying to increase prices all across the globe.
You never know, but I can't comment on there. We have what probably they may
be.
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Moderator:
Thank you. Our next question is from the line of Dipesh from Emkay Global. Please
go ahead.
Dipesh:
A couple of questions on. First about the data-related questions, Yes, can you help
me with the acquired entity performance this quarter, if you can give revenue run
rate of Masivian, MRM. Second question is about EBITDA margin expansion
optionality.
I think Gautam earlier alluded to I was a bit not sure what he is referring to. If you
can provide some more detail what he tried to convey. And last question is about
ILD price hike and rupee depreciation. Both of these sectors are positive for our
revenue growth this quarter. So can you provide some quantification of those
benefit versus normal business growth?
Gautam Badalia:
Sure. So Dipesh, Masivian revenue for Q2 FY '23 is about INR 562 million.
Dipesh:
Sorry, I missed the number, Gautam.
Gautam Badalia:
562 million in INR terms. For Mr. Messaging, it's INR 1,720 million. Is that
sufficient or you want further entities
Dipesh:
No, that’s fine
Gautam Badalia:
Okay. Fair enough. So yes, so your second query was on the optionality that we
were talking about, right? So what is happening is, I think in terms of the ESOP
cost, right, the first year, the impact of the ESOP cost is the maximum. I think we
are now past the 12 months. So going forward, from the next quarter onwards,
there would be a drastic reduction in the ESOP cost because it will reduce 48% to
almost 28% for the full year. So that is the extent of the reduction that we'll kind
of pay out. Sorry, what was the third query? I hope that addresses your query
Dipesh, what was the third point?
Dipesh:
Third question was about ILD tariff and rupee depreciation some benefit, if you
can quantify those benefit versus usual business growth?
Gautam Badalia:
No. So ILD because of the price increase, definitely, there was benefit in terms of
realization.
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Rajdipkumar Gupta:
I think, Dipesh we also buy in dollars and my customer also pays in dollar. So I
hope you're aware of this for ILD.
Dipesh:
That’s fine. But when you
Gautam Badalia:
Sorry to intervene. So Dipesh, so about 35% of our revenue is in dollars, 35% of
the revenue is in euro. So in a way, those things have settled off -- in terms of the
capital commitment that we have in terms of euros for Mr. Messaging will tend to
benefit because of further depreciation of euro, but some amount of it will be
offset by what we have to pay to Masivian in dollars.
So net-net, if you look in terms of the capital commitment between Mr Messaging
and Masivian. we have a net euro exposure. So in a way, we'll benefit in terms of
the capital commitment.
Moderator:
Thank you. Our next question is from the line of Moez Chandani from Centrum
Broking. Please go ahead.
Moez Chandani:
My first question is on your revenue guidance of 60% revenue growth year-on-
year we're looking at H1, we've already grown at 94%. So in that sense, are we
being a little conservative with our revenue guidance of 60%? Or are you
expecting to see some slowdown over the next couple of quarters? Because even
if our Q-o-Q growth is flat, we should be able to comfortably exceed that guidance.
So I just want to
Gautam Badalia:
60% is definitely a very good guidance, like so I think we want to stick with 60%,
and we are definitely have that -- like we as a team are looking forward to achieve
over 60% also. But as far as the guidance is concerned, I think we want to stick
with 60%.
Moez Chandani:
Okay. Understood. My second question was on the two acquisitions, the two small
tuck-in acquisitions that we are being planned. So could you give us a time line on
when we expect those acquisitions to be completed?
Rajdipkumar Gupta:
I think both the acquisition, we're still going through the due diligence process.
And right now, it's under the process only. So as soon as we have the outcome of
the diligence, I think then we can definitely share some data. But as of now, it may
take some time. That's what we can tell you.
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Moderator:
Thank you. Our next question is from the line of Vivek Sethia from HDFC
Securities. Please go ahead. Mr. Vivek Sethia, please unmute the line and go ahead
with the question.
Vivek Sethia:
Sure. So my question -- and I had a question I just wanted to understand the
breakup of the acquisition Masivian Intertelco and MRM. And just a follow-up on
that, since your target is to achieve that 50% revenue growth. So could you break
that up in terms of how much would be organic and how much would be from the
acquisitions
Rajdipkumar Gupta:
Yes, so I think from an organic growth standpoint, I think we should be able to
achieve a 25% to 30% growth rate and balance, we're looking at contribution
from the acquired entities.
Moderator:
Our next question is from the line of Ajaypal Singh from Asian Paints Limited.
Please go ahead.
Ajaypal Singh:
Congratulations for the good set of numbers. My question is with respect to the
revenue growth. We have been achieved 94% of the revenue for the Y-o-Y quarter
Q2 growth. As I have seen, there's a number of MRM Masiv have been added,
which is of INR 236 crores. What is the other aspect which has led to the increase
in revenue? And any major customer which we have added in the quarter and
generated the revenue will it be one-off or it will be continuous continuation?
Rajdipkumar Gupta:
It will be continuous. We have added a few banks. We on boarded a few banks and
those traffic started coming from last quarter. As I said earlier also, there's a large
OTT player we have signed, and we have now started servicing these customers
for 13 countries. We are also very working very closely with some of the large
CPaaS players that volume is also increasing.
So there are multiple reasons like where because of which our volumes are
increasing. And it's a properly strategy, we defined that we want to work with
everyone, especially with the CPaaS players also and we want to support them
than competing with them in various markets. So apart from that, I think, banking
customer and OTT player has contributed a lot, along with our Masivian and Mr.
Messaging. For the incoming quarters as well.
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Ajaypal Singh:
I'm hoping with the best results. One more thing, if I explain the 94% of the
growth rate, how much has been coming from the acquired entities growth rate
and how much is the normal business growth rate?
Gautam Badalia:
Yes. So organic growth rate on a sequential basis was 20.6%. Balance is
attributable to some of the acquisitions that we've done.
Ajaypal Singh:
Okay. So 95% has been to pass 20.6% is our organic and the remaining 70%,
which is on Y-o-Y, which are not in by
Gautam Badalia:
We are talking about quarter-on-quarter sequential growth.
Ajaypal Singh:
No, Y-o-Y I'm talking about.
Gautam Badalia:
Y-o-Y, just give me a second. Yes, 40% is the Y-o-Y organic growth rate.
Moderator:
Thank you. Our next question is from the line of Saurav Kataruka. Please go ahead.
Saurav Kataruka:
Yes right. First of all, very happy Diwali to the entire Route Mobile team. Sir, I have
two main questions. You talked about increase margin improvement, in future
new age technologies whatapp, Viber, RCS gets more adoption, and that is
something which we have been hearing for many quarters now. Based on your
client interactions, what do you think is the reason for the slow adoption in these?
And then second is, this is a request rather, can you present this breakup of new
edge technologies versus SMS growth or revenue split in the investor
presentation from next time maybe just like some of the software services firms
report that digital growth.
Rajdipkumar Gupta:
Sorry, we, already have the one in the presentation.
Gautam Badalia:
Yes, it's on Slide 21, if you may refer to it.
Saurav Kataruka:
Okay. I might have missed it. And just another one. The second question is about
Call 2 Connect. in Q2 FY '22, you had told about 1,000 seater facility addition. And
I see the employee count in your investor presentation is 724. Does that include
the Call 2 Connect employee count? And even statistics, what is the current
utilization of the 1,000 seat capacity -- and the last small one, it is about the
Click2Pay service, which you had launched sometime around Q3 last year. Any
traction in that?
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Rajdipkumar Gupta:
Yes.
Saurav Kataruka:
Thanks, those are the ones
Rajdipkumar Gupta:
700-plus employees completely for Route Mobile and I think on Call 2 Connect,
we have a separate set of employees. -- that number is Gautam has, you can share
Gautam Badalia:
Yes, around 200, 200 orders
Rajdipkumar Gupta: No, no, Call 2 Connect.
Gautam Badalia:
Rest around contracts. On payroll, it's about 200-odd employees for Call to
Connect.
Rajdipkumar Gupta:
And overall, it would be more than INR 1,500 if I'm not wrong.
Gautam Badalia:
That's right. And in terms of the utilization at this point in time, it's running at
50% utilization. So, we were running at 300 seats, and we've just got additional
order of 200 seats right now. And there are some active pipelines that we have.
Some of this, I think, should fructify in this quarter.
Saurav Kataruka:
And on Click2Pay there any traction in anything you would like to add?
Gautam Badalia:
Yes. So Click2Pay, I think definitely, there is some amount of traction. In fact, I
think we've just deployed a conversational commerce platform with Coca-Cola in
UAE where they tried, tested our Click2Pay, but they had their own propriety
payment solution, which they integrated it. So we are taking it to clients at this
point in time, nothing which warrants highlighting it at this point in time. But
we're seeing good traction on that as well, from a 360-degree conversational
commerce experience.
Moderator:
Our next question is from the line of Rohan Bopani Retail Investor.
Rohan Bopani:
First of all, thank you for the opportunity and congratulations for the great set of
number. I have a couple of questions. First is, has seen lately that people are using
Google Authenticator and other apps to basically authenticate the program. And
compared to the traditional SMS-based authentication, so what's your view on the
impact of this on our business?
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Rajdipkumar Gupta:
So not at all, Rohan. It is all about different use cases are arising based on the
current requirement, okay? SMS is still there, WhatsApp is still there -- most of
the WhatsApp used cases are customer support as of now, it cannot be taken over
by SMS. So I think because of the digital adoption ratio increasing day by day, the
various number of use cases are also rising. So Click2Pay or Google thing is it all
new channel of communication, which has a different use cases. And we don't see
that as a competition to message, SMS, but that will have a different use case and
different customer set for that.
Rohan Bopani:
So will we adapt to that style of authentication?
Rajdipkumar Gupta:
It's a customer choice, based on their customers, use case and choice, right? Same
customer is using for channel of communication, including voice, SMS, e-mail and
they may use Google Authenticator also, that is available since very long time.
Rohan Bopani:
Okay. Second question is regarding the buyback. Sorry if I'm wrong, I'm seeing
that in the investor presentation, it has been clear that promoters have not
participated in the buyback, right? But on the screener, I have seen that your stake
has been increased a bit. So can you just clarify on this?
Gautam Badalia:
Can you please repeat your query?
Rohan Bopani:
I'm saying that in the buybacks, promoters have not participated right?
Gautam Badalia:
Yes, they are into the open market. That’s right.
Rohan Bopani:
Yes. But and I see the, shareholding pattern I can see that promoters have
increased their shareholding in this quarter. So that's what I wanted to
understand.
Gautam Badalia:
No, pursuant to the buyback, the shareholding of the promoters had increased.
But thereafter, there was a small block that was offered to a marquee investor. So
that resulted in the resultant shareholding of the promoters marginally falling
below their March shareholding.
Rohan Bopani:
Okay. And I just have a last question on what's your view on macro environment?
And how do you see that the recession and other issues will impact our business
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Gautam Badalia:
Sure. So I think till now, I think we are largely present in emerging markets. We
haven't seen too much of headwinds in terms of what is today happening in the
developed markets, plus what is happening, especially in markets like India
because of digitization, because of the initiatives by the government to digitize
the economy.
We've seen the micro transactions increase multifold times. And as CPaaS
partners to enterprises, we tend to benefit out of the increased number of
transactions. So per se, we haven't faced the hit that the developed markets are
facing at this point in time. And yes, so I think that is where we are right now. and
for a lot of large OTT players from the US and even companies like Alibaba,
TikTok, you name it, most of these companies so largely from the US OTT players,
they are looking at their growth coming from emerging markets, and hence, we
tend to be a big beneficiary.
Moderator:
Thank you. Our next question is from the line of Mohan Kumar , an individual
investor. Please go ahead.
Mohan Kumar:
That’s another great set of numbers. Just a quick question regarding the cost of
message I see that message cost was [up by around 20% this quarter, which is
much higher than the rest of the expenses that you guys are seeing. So any
particular reason why that number is a little higher?
Gautam Badalia:
Sorry, which number, can you just repeat?
Mohan Kumar:
Purchase of messaging services, it's up to about 657 versus 565 last quarters. So
that’s grown littler higher.
Gautam Badalia:
It’s function of the increase in revenue as well, right? Revenue increased from INR
730 odd crores to INR 850 crores.
Mohan Kumar:
A little more than the revenues. So I just want to know
Gautam Badalia:
No, so, gross profit margin, if you were to plot it for both the quarters, it's around
22.4 and 22.3 -- so pretty much, I mean, it has been at same levels.
Mohan Kumar:
Got it. And just a second question regarding the -- and I know that you've
mentioned that you're probably conservative, but if you just look at the basic run
rate from current levels, you're looking at like second half a much stronger for
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you guys than it just looking at the current run rate, keeping this here, we are
looking at around 70% growth. So would I be wrong if I'm morphing in close to
75% or 80% Y-o-Y growth?
Gautam Badalia:
So a small kind of a caveat there. I think definitely, Diwali also actually has
happened and there are some obvious festivities have actually happened in Q2
this time. So there is some amount of that has already played out in Q2.
Notwithstanding that, we definitely believe Q3 and Q4 will be good. But I think
we have already given a guidance of 60%. We would want to stick to it and ensure
that we kind of outperformed that number.
Mohan Kumar:
Just a follow-up on that, you mentioned the Diwali aspect has already kicked in.
So what do you mean by that since there's still like almost a couple of weeks away
like Diwali is next week just trying to understand how has that laid out in the last
quarter?
Rajdipkumar Gupta:
There are lots of sale has been already, I think it was there in last month, if you
see, like whether it's Amazon or sale for Flipkart and other like so that's what
Gautam was trying to mention.
Mohan Kumar:
Got it. Sounds good. Thank you very much. I hope you guys have even more
successful next couple of quarters. Happy Diwali and all the best
Moderator:
Thank you. Our next question is from the line of Aditya Yadav from Transient
Capital. Please go ahead.
Aditya Yadav:
Apologies if the question is a bit repetitive because I joined the call a bit late. Sir,
as you've been guiding previously that we are trying for like 100, 200 basis point
margin expansion every year, and that is the vision for the company. And although
the revenue growth has been super and blockbuster to say, but on the margin
front, even if you look at year-on-year, the margins have been flat to a bit negative
at the operating level?
Gautam Badalia:
Yes. I think we discussed this point earlier. So essentially, what is happening is
there are some large clients, right, where the revenues grow in multiples, and we
service them across multiple geographies. And they happen to be million-dollar
clients.
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So over a period of time, as we deepen our relationship with them, there are
volume-based discounts, which essentially tends to have a drag on the overall
portfolio margin. But the newer products, some of the acquisitions that we have
done, which are doing tremendously higher gross margin, they tend to offset it.
And hence, while the gross profit margin has remained at 21%, 22%. But in terms
of the operating leverage that flows in, in terms of the EBITDA margin expansion
that actually should -- and from our perspective, we look at it from a return on
capital employed perspective.
So for servicing some of these large multimillion dollar clients we don't tend to
incur too much of operating overheads. So whatever we are able to generate in
terms of gross profit flows directly to the EBITDA and hence leads to higher
ROCE.
Aditya Yadav:
No, if it closed down to the EBITDA, then obviously, the margin should expand
now? And as you are saying, okay, sometimes you have with certain clients with
larger clients, there's a bit of..
Gautam Badalia:
So some amount of cost impact on the EBITDA margin has been because of the
front loading of the ESOP cost
Aditya Yadav:
What I'm saying over a year on year, these things would normalize a bit and you
should see some kind of expansion in the margin
Rajdipkumar Gupta:
So Aditya, exactly what we are trying to say from last one hour that new product
is something what we all are focusing right now. As on when the adoption of new
channel will happen and more customers will be on boarded for the new channel,
our margin will expand for sure. And the kind of guidance we have given in the
market that we have the aspiration to grow our GP in the range of 25%, 30%, and
we are working towards that
Aditya Yadav:
And the short-term goals also which you discussed the 120 basis point expansion
every year.
Gautam Badalia:
Yes, we've already called out, I think, as part of our guidance, 100 to 150 basis
points improvement in our EBITDA margin.
Gautam Badalia:
Yes, that should play out.
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Moderator:
Thank you. Our next question is from the line of Anil Nahata, an individual
investor. Please go ahead.
Anil Nahata:
My question is that these lead channels like WhatsApp and all, have they been
able to make significant volumes to reach a couple of percentage of the overall
revenue so far?
Rajdipkumar Gupta:
Yes, indeed, I agree, because we are already onboarding lots of customer on
WhatsApp as we speak, not only on WhatsApp, but on Viber as well as on other
channels.
Anil Nahata:
Hello, I lost you
Rajdipkumar Gupta:
I think I answered you, but if you..
Anil Nahata:
I'm sorry, maybe I'm having an issue at my end. I will go through the transcript.
Moderator:
Thank you. Ladies and gentlemen, that was the last question. I now hand the
conference back to the management for closing comments.
Rajdipkumar Gupta:
Thank you, everyone, and wish you all a very happy Diwali and prospers New
year as well. Thank you once again.
Moderator:
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this
conference. Thank you for joining us. And you may now disconnect your lines
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