Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vaibhav Global Ltd (BOM:532156, Financial) reported a 15% year-over-year increase in revenue for Q1 FY25.
- Gross margins improved significantly to 66.1% from 61.2% in the same quarter last year.
- The company achieved a 20% year-over-year volume growth, with a 6% volume growth excluding acquisitions.
- Vaibhav Global Ltd (BOM:532156) has expanded its TV network reach to 130 million households and grown its unique customer base by 37% year-over-year.
- The company has made significant strides in sustainability, generating 1.1 million kilowatt hours of solar energy and achieving 100% renewable energy usage in its US, UK, and Germany premises.
Negative Points
- EBITDA margin decreased to 8.7% from 10% in the same period last year, primarily due to higher spending on digital marketing and airtime.
- Content and broadcasting expenses increased to 20% of revenue in Q1 FY25, up from 17% in FY24, indicating higher operational costs.
- Revenue growth in the UK, when adjusted for acquisitions, decreased by 6% year-over-year due to cautious consumer behavior amidst economic and political uncertainties.
- Profit after tax for the quarter was INR27 crores, down from INR30 crores in Q1 FY24.
- The company has discontinued its apparel manufacturing operations due to lower margins, impacting overall margins by negative 25 basis points on a trailing twelve-month basis.
Q & A Highlights
Q: My question is regarding the content and broadcasting costs. From FY20 to now, the CAGR growth in this line item is 23%, whereas our revenues have only grown by 12%. What is the reason for this divergence? Is customer acquisition getting really costly for us, and will this be a permanent drag on our margin?
A: (Sunil Agrawal, Managing Director) We have made investments where we see opportunities, including airtime and digital spend. Investments in Ideal World, Germany, and new airtime in the US have increased costs. However, we expect content and broadcasting expenses to be approximately 18% of revenue for the full financial year, and over time, this will moderate as businesses mature.
Q: Can you provide more insight into the performance and growth strategy for the German market? How do you plan to achieve profitability in the second half of FY25?
A: (Sunil Agrawal, Managing Director) We track unique customer trends and historical repeat purchases to project revenue. Based on these trends, we expect to achieve operating profitability in Germany by H2 FY25.
Q: What are the key drivers behind the increase in customer acquisitions and retention rates? Are these sustainable?
A: (Sunil Agrawal, Managing Director) Our 4R strategy—expanding reach, new customer registrations, customer retention, and repeat purchases—drives growth. Improved marketing efforts and product variety have positively impacted customer retention and repeat purchases.
Q: How do you plan to diversify your product portfolio, and what will be the impact on revenue and margins?
A: (Sunil Agrawal, Managing Director) We introduce about 100 new products daily, leveraging our extensive product development team. This constant innovation helps us maintain a diverse product portfolio, predominantly in jewelry, which supports revenue growth and margin expansion.
Q: How is digital and social integration impacting your business, and how significant is Mindful Souls in leveraging digital growth?
A: (Sunil Agrawal, Managing Director) Mindful Souls, a native digital company, has integrated well with our business, enhancing our digital capabilities. The supply chain and warehousing leverage from VGL Group are expected to improve profitability further.
Q: Regarding the new customer acquisitions, what initiatives are driving these, and can we expect this momentum to continue?
A: (Sunil Agrawal, Managing Director) We expect the current growth rate in new customer acquisitions to continue for our existing and new businesses. Ideal World may see a slight moderation, but overall, we anticipate sustained growth.
Q: How are you addressing macroeconomic challenges and competitive pressures in your markets? What trends do you see shaping the industry in the coming years?
A: (Sunil Agrawal, Managing Director) We expect the macroeconomic environment to stabilize, with positive GDP growth in the US and moderating interest rates in the UK and Germany. These factors should support our growth prospects.
Q: How do you see the demand environment shaping up in the US, your largest market? Are you seeing positive signs in terms of realizations and volume?
A: (Sunil Agrawal, Managing Director) The US economy is showing steady GDP growth. While the overall jewelry market is seeing negative growth, our business is experiencing positive momentum. We expect this to continue post-election cycle.
Q: For your digital versus TV channels, is there a difference in return on capital or unit economics?
A: (Sunil Agrawal, Managing Director) It's challenging to separate the two as we find migrating TV customers to digital highly accretive. The lifetime value of a customer who moves from TV to digital is significantly higher, enhancing overall business profitability.
Q: What are your plans for expanding into new regions or territories after Germany?
A: (Nitin Panwad, Group CFO) We plan to focus on Germany's growth before expanding to new regions. Japan might be a potential market, but this is at least three years away.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
