Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Route Mobile Ltd (BOM:543228, Financial) posted its highest quarterly revenue in Q2 and Q3 of FY '24.
- The company secured strategic deals, including a direct contract with a leading e-commerce cloud computing company across 10 countries.
- Route Mobile Ltd was ranked as a Tier 1 vendor in the A2P messaging market impact report by Rocco and received Juniper's best mobile authentication solution Platinum Partner award.
- The imminent closure of the Proximus deal is expected to bolster the company's portfolio and extend its global footprint.
- The Board of Directors proposed a final dividend of INR 2 per share following an interim payout of INR 9 per share.
Negative Points
- The CPaaS industry is facing headwinds, including enterprise cost optimization initiatives and shifts in communication channels.
- Route Mobile Ltd fell short of its revised guidance for FY '24.
- Mr Messaging's financial performance was adversely impacted due to geopolitical issues in Europe and industry consolidation.
- There was a soft devaluation of Naira, impacting revenue in the Nigerian market.
- EBITDA margin contracted from 13.2% in Q4 FY '23 to 11.8% in Q4 FY '24.
Q & A Highlights
Q: My first question is on revenue growth expectations. Rajdip, Gautam, we have been guiding our revenue growth each year. What top us from not giving numerical guidance this year? Or any range band you can highlight for growth expectation in FY '25?
A: So let me just answer this, maybe Gautam can add. So Nikhil, I think there is lots of synergies post deal with the Proximus, which needs to be planned. And I think that is 1 reason we are not able to give any guidance at this point of time. Gautam, if you want to add, please? Yes. No, no, sir. Absolutely. So I think we are, I think, expecting the closure to happen anytime now. And once the closure is done, I think a lot of these synergies will be quantified and some of these are material and will warrant shareholders' approval. So once some of these things are kind of approved by the shareholders, I think it will be worthwhile to then give the guidance for FY '25 and beyond.
Q: Sure. Can you at least quantify what kind of benefit you are seeing now as matter is almost complete, while you might not want to classify it between FY '25, '26. But after the merger, now you have more clarity, more integrated. Can you please quantify how much could be a potential benefit or the value synergy?
A: So I think it will be worthwhile for us to kind of validate or give any of those guidance once the transaction is closed. So please bear with us for a few days, I think, for the transaction closure and then I think we can publicly talk about a lot of these numbers.
Q: Sure, Gautam. Also, our -- clearly, we are seeing challenges in the ILD revenue side and ILD revenue continued to decline even in this quarter, right? Any color -- and what kind of visibility you have going forward, especially on growth perspective?
A: Nikhil I think we went live with Vodafone Idea firewall on 1st of April, and we see -- do see a growth in traffic at our end. And I think our firewall is doing fantastic job. There were some leakages, which we have identified. I think the Vodafone team is already taking action on it. So I think as of now, we are just 1 month like in terms of our exclusive deal with Vodafone Idea, and we have seen a growth on ILD volume. But I'm sure that volume will grow in coming quarters as well.
Q: Got it, Gautam. My last one is on the INR 100 crores of line credit facility we have issued for Route U.K. Any color on what it is for?
A: Yes. So this is essentially for a bank guarantee that we have to give it as part of a contractual arrangement. So it is essentially backed by fixed deposits. And since Route Mobile U.K. is kind of doing it and the fixed deposits are being held in India, so this was -- this approval was warranted.
Q: So what we have mentioned, improvement in cash flow is including the assumption of INR 100 crores going perfectly for that, right?
A: No, this INR 100 crores doesn't go out of the balance sheet. So essentially, this is cash sitting on the balance sheet. So this is only a guarantee, which is a noncash, I mean, outside balance sheet.
Q: A couple of questions. First about the onerous contract. If you can provide some detail about the onerous contract where we made some provision?
A: The onerous contract, I mean, because of confidentiality and because of the competition sensitivities around it, we would not want to kind of call it out, but we can kind of give you a perspective that this is being negotiated. And once the negotiations are through, we'll be able to kind of get some benefits back to the -- as a write-back and into the books. So at this point in time, we'll want to reserve our comments on this onerous contract, but I mean, there are active negotiations already happening, I mean, on this count.
Q: Second question is about the EBITDA margin. I think you indicated 60 bps one-off into '24. Should we want to assume that 60 bps will not recur and your margin would be 60 bps higher in next fiscal?
A: Yes, so I think Q4, typically, we have a little bit of one-off, I mean, in terms of some of the events that we attend in terms of our EOP planning that happens. And plus, I mean, the drag because of... Plus the variable payout as well, I think in (inaudible). Yes. So some of these things, I think, there's a bit of a [drag]. But yes, some of these things should normalize. We are hopeful, I think MRM, I think, should bounce back strongly. So they are kind of working very closely now, I think, across the teams to see whatever synergies they could bring from the group. So yes, so I think that's where we are.
Q: Just to get further detail about the EBITDA margin, when I refer, I was not retiring for quarter 4. I am referring from '25 because in your presentation, you mentioned 60 bps impact in FY '24 because of various factors you highlighted. So my question is more about next year. When you look from a margin perspective, do you think that is likely to be fully recovered?
A: So Dipesh here in -- again, I mean, so as I said, I think there will be a lot of material related party transactions. So I'll request that we discuss this once some of these approvals from minority shareholders are narrated by the...
Q: And just on the onerous contract, whether it is -- because it pertains to domestic market-related business or it is outside of India business?
A: No, it is outside of India.
Q: So first question is, sir, you mentioned about the changing landscape in which enterprises were looking for cost optimization and also in terms of alternative channels for communications. So if you can please elaborate and started from November onwards. So how do you see the situation there, has it stabilized and how we see that shaping maybe in the next year?
A: So Amit, let me just start this. I think if you talk about the large OTT players, they have actually cut down their costs and they have not moved their channel to another channel. Like they're sending OTP from SMS, they have not moved that to WhatsApp or other channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
