Release Date: July 19, 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) demonstrated an industry-leading revenue growth of 14% year-on-year and 8.5% sequentially.
- The acquisition by Proximus Opal of an 83.1% stake in Route Mobile is expected to help the company enter mature markets like the USA and Europe, expand its product portfolio, and unlock synergies with TeleSign.
- Route Mobile's largest firewall deal with Vodafone Idea went live in April 2024, resolving initial issues and contributing to revenue.
- New product revenue showed strong momentum, registering 94% year-on-year growth and 16% sequential growth.
- The company expects revenue growth in the 18% to 22% range for FY25, with an EBITDA margin of approximately 13%.
Negative Points
- Employee benefit expenses increased by around 27% sequentially due to annual increments and one-off incentives, impacting operating overheads.
- There was a non-operating non-cash ForEx translation loss of INR119 million and a one-time cost of INR8.6 million for expert opinions on transfer pricing and mandatory tender offer.
- Average realization per billable transaction declined to INR0.30 from INR0.33 in Q1 FY24 due to increased domestic volumes in India.
- Profit after tax improved by only 1.5% year-on-year, with PAT margin declining from 9.5% in Q1 FY24 to 8.4% in Q1 FY25 due to an increased effective tax rate.
- The company faces challenges in ramping up related-party transactions and synergies, which may take time to materialize fully.
Q & A Highlights
Q: Sir, my question is on the promoter holding side, like a post-acquisition, it is showing 83%. So how we have done that and what's our planning to reduce it? Because as per norm, this is not.
A: So pursuant to the open offer, the promoter shareholding actually increased to 83% plus. And we have a stipulated time frame of one year to bring it back to the minimum public shareholding of 75%. (Gautam Badalia, Group Chief Strategy Officer, Chief Investor Relations Officer)
Q: My first question is regarding any color management can provide on revenue synergy?
A: There's a large deal win by Proximus Group. It's a five-year deal we signed with Microsoft, and CPaaS is definitely one of the key areas for growth. We are working on multiple deals with Proximus and TeleSign, which will show impact in coming quarters. (Rajdipkumar Gupta, Group CEO, Founder, Managing Director, Executive Director)
Q: In terms of new product revenue ramp-up we have seen. That's about INR100 million on a quarterly basis, right? But the revenue we have guided for Vodafone Idea is much higher, right?
A: The firewall revenue will be reported separately. The INR500 crores of incremental revenue for Vodafone includes some amount of revenues that would come from TeleSign onto the Vodafone network. (Gautam Badalia, Group Chief Strategy Officer, Chief Investor Relations Officer)
Q: So if you can tell us what was the incremental or the contribution of the VI deal? Or we should consider whatever incremental is there in this quarter is from VI?
A: We have definitely seen growth in certain traffic coming from ILD site and a huge growth on the domestic volume in India. The new product growth has seen a 94% increase. (Rajdipkumar Gupta, Group CEO, Founder, Managing Director, Executive Director)
Q: So just to continuation on the last question in terms of guidance. So if you can tell us what was the incremental or the contribution of the VI deal?
A: This is not a seasonally best quarter for us. So I think gradually, the traffic will ramp up further. (Gautam Badalia, Group Chief Strategy Officer, Chief Investor Relations Officer)
Q: So any quantification you can give there?
A: We have seen growth already because there were some large campaigns this month. We believe in this quarter because of certain more such events, we will see growth. (Rajdipkumar Gupta, Group CEO, Founder, Managing Director, Executive Director)
Q: Now with the new management fully coming in and being the first quarter, any changes we used to work or any changes in terms of the sales approach or in terms of how we are seeing the market?
A: There are a lot of positive things to highlight because of Proximus as a group. We've got direct access to large enterprises like Microsoft. We are working on certain large contracts because of them. (Rajdipkumar Gupta, Group CEO, Founder, Managing Director, Executive Director)
Q: What changes, let's say, we made in sales process compared to when Route used to be a stand-alone entity?
A: We are working on multiple lever points. The combined team of TeleSign and Route Mobile is working together to gain more access to enterprises domestically and internationally. (Rajdipkumar Gupta, Group CEO, Founder, Managing Director, Executive Director)
Q: Can you help us understand the nature of the INR38.8 million refundable security deposit related accounting amortization?
A: This is for the security deposit given for a firewall deal, treated under IND AS 109 accounting standard. The interest earned on that security deposit is carried to the other income. (Gautam Badalia, Group Chief Strategy Officer, Chief Investor Relations Officer)
Q: My question is regarding the gross profit margin, EBITDA margin, and PAT margin. Why is there such a gap between the two companies' profit margins?
A: We have consistently been trending around these margins. There is definitely room for these margins to improve, and we are working towards it. (Gautam Badalia, Group Chief Strategy Officer, Chief Investor Relations Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
