Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 12% from INR297 crores to INR332 crores, in line with expectations.
- EBITDA increased by 18%, outpacing revenue growth, indicating margin expansion.
- Significant investments in hiring and expanding business leadership in EdTech and MarTech.
- International expansion in Indonesia and the US, contributing to accelerated revenue growth and margin expansion.
- Healthy cash position with gross cash increasing by INR6 crores despite a INR10 crore buyback.
Negative Points
- Borrowings increased due to large projects and consolidation of 361Degree Minds Consulting Pvt. Ltd.
- Law segment saw a decline in test-takers by 30% due to changes in the testing calendar.
- Some product segments experienced price rationalizations, leading to a flat average realization per student.
- MarTech business faced muted marketing spends from key sectors like IT and FMCG.
- Q4 profitability in MarTech was slightly muted due to regional factors like Chinese New Year and elections in Indonesia.
Q & A Highlights
Q: What are the potential revenues that we lost due to the change in the law examination and can we regain them in FY25?
A: Due to the change in the academic calendar of the test, the number of test takers has declined by about 30%. We have increased our focus on outreach and are running campaigns to request the consortium to move the exam back to the April-May season. We expect the number of test takers to return to original numbers in a couple of years, and our enhanced marketing efforts will help us regain market share and increase law volumes.
Q: What is the student growth in CUET and how does it impact revenues?
A: We have increased our student numbers by close to 50% in CUET. Our focus was on growing market share rather than revenues, given the nascent stage of the exam. We have seen significant growth in enrollments, particularly in English preparation and general aptitude test segments. Our CUET student growth was in the range of about 50%.
Q: Have you closed any centers this year?
A: Yes, we have. Typically, our centers are on a 3-year contract and go through a renewal process. We had about 25 new additions and some exits. The total number of renewals and additions was in the 40 to 50 range, with about 10-15 centers shutting down over the course of the year.
Q: As the buyback could not be completed, is the company looking for any other avenues to reward shareholders?
A: We are always looking for ways to maximize shareholder wealth. Any corporate action deemed appropriate will be discussed during our Board Meetings. As of now, no specific action has been decided, but we will keep shareholders posted on any final decisions.
Q: What is the revenue breakup in the MarTech segment between physical and virtual for FY24?
A: The total virtual revenue, including virtual events and meta commerce, is currently in the range of 6% to 7% of total revenue. We expect this percentage to increase marginally each year by 1%-2% points. The remaining 80% of revenue comes from physical events and other services.
Q: What are the plans for using the INR100 crores cash and are there any M&A opportunities?
A: We are evaluating inorganic opportunities in both EdTech and MarTech spaces. Initial discussions and evaluations are ongoing. We are hopeful that something will materialize in the next 2 to 4 quarters. Meanwhile, the cash is securely kept in fixed deposits.
Q: How does the CapEx work for your business?
A: We operate on a negative CapEx model for our core test prep business, focusing on adding more franchisee locations. Investments are made in product, people, and technology, classified under intangibles on our balance sheet. These investments are typically amortized over 5 to 10 years.
Q: Do you have any plans to enter the NEET or JEE examination space?
A: Currently, we do not have plans to enter the NEET or JEE space on a pan-India level. We will continue to focus on our core products where we are market leaders, such as MBA, Law, IPM, BBA, and CUET. We may consider inorganic opportunities in the future if they are appropriately valued.
Q: What are the expected revenue growth and margins for FY25?
A: While we do not give specific revenue and margin guidance, we expect to grow at a level slightly better than this year. We aim for an EBITDA margin increase of 100 basis points each year. Operational leverage should begin to kick in FY25, with significant reflection in FY26.
Q: When will EBITDA start getting the benefit of operating leverage?
A: Operational leverage should begin to kick in FY25, with significant reflection in FY26. Most of the new centers signed up in the last 12 to 18 months will start contributing to revenue growth and profitability, reaching a certain threshold.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
