Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gaming revenues increased by 22.9%, showing strong growth in this segment.
- Active gaming subscriber base grew by 13.6%, reaching 7.6 million.
- Cost optimization efforts led to a 15.9% reduction in OpEx and a 9.5% reduction in manpower costs.
- The company added 10 new deployments this quarter, bringing the total to 111 live deployments.
- Cash balance increased to INR68.8 crores from INR63.7 crores in the previous quarter.
Negative Points
- Overall revenue remained flat at INR126 crores compared to the last quarter.
- Gross profit margin decreased marginally by 1.9%, standing at 51.1%.
- EBITDA for the quarter was down sequentially, impacted by a charge-off amounting to INR5.6 crores.
- The company reported a net loss of INR15.3 crores for the quarter.
- Loss of a key customer (Vodafone) impacted revenue and growth metrics.
Q & A Highlights
Q: Can you provide the next year guidance in terms of revenue growth and the next two-year guidance on EBITDA growth in terms of percentage growth?
A: Francois-Charles Sirois (Executive Chairman and CEO): We see the trend of gaming growth continuing for the rest of the year. Once gaming becomes profitable and the mobile entertainment business grows, profitability will improve significantly. Radhika Venugopal (Global CFO): Gaming is set to turn profitable by the end of this quarter. We are optimizing costs while signing up for large deals, and we expect overall company profitability to improve with renegotiations in Tones and adding more customers.
Q: By the end of FY25, can we expect at least 10% to 12% EBITDA margin mainly on the gaming platform business?
A: Radhika Venugopal (Global CFO): The steady state contribution margin for gaming would be around 25% plus. We expect gaming to turn positive by the end of this quarter, but we cannot provide an exact margin percentage or EBITDA percentage now.
Q: Do we see a steady state EBITDA of 25% to 30% in FY25-26 with about 100 optimized accounts?
A: Francois-Charles Sirois (Executive Chairman and CEO): Yes, that's the plan. By 2026, we aim for a 25% EBITDA margin on gaming and 14% to 18% on mobile entertainment, with at least 100 optimized accounts. This should bring significant profitability.
Q: Is the revenue impact flat because of losing the Vodafone account last year?
A: Francois-Charles Sirois (Executive Chairman and CEO): Yes, losing Vodafone impacted our numbers. However, we are working on optimizing other accounts to compensate for this loss. The growth in gaming is being absorbed by small hiccups in Tones and Videos, but we expect improvements.
Q: How much revenue do we generate per subscription in the gaming and video segments, and what is the number of paying users?
A: Radhika Venugopal (Global CFO): Mobile gaming revenue this quarter is around INR25 crores with approximately 42,000 paying users. The ARPU for gaming is around INR27 to INR28, and for mobile entertainment, it is INR15 to INR21.
Q: Are we looking to divest the Chingari investment?
A: Francois-Charles Sirois (Executive Chairman and CEO): Chingari has switched to the App Store and is planning to raise money in the next six months. We did not get the expected synergies with ONMO, but we are secure on the investment. We aim to do a secondary and exit our position by the end of the year.
Q: What is the difference between the gross margin and EBITDA margin in the gaming segment?
A: Radhika Venugopal (Global CFO): Gross margin includes content and hosting costs. To arrive at the contribution margin and EBITDA, we reduce marketing costs and direct manpower costs. The goal is to maintain a gross margin of 90% and a marketing cost ratio of 40% to 50%, aiming for a 25% EBITDA margin.
Q: What was the reason for the fall in gaming revenue share from 18% in Q1 FY24 to 16% in Q4 FY24?
A: Francois-Charles Sirois (Executive Chairman and CEO): The decline was due to losing a key customer in India, which impacted our gaming revenue share.
Q: Are you guiding for an EBITDA margin of 25% or a contribution margin of 25%?
A: Radhika Venugopal (Global CFO): The 25% upwards is for the contribution margin, which includes all direct costs. The EBITDA margin will be slightly lower, but we do not have an exact number at this time.
Q: What is the daily and monthly active user count for the gaming segment?
A: Francois-Charles Sirois (Executive Chairman and CEO): We do not disclose the actual active users currently, but we plan to include this data in future investor decks. The engagement level varies significantly between Tones, gaming, and video services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
