Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CarTrade Tech Ltd (BOM:543333, Financial) reported a 64% growth in operating revenue and a 46% growth in overall revenue for Q1 FY '25.
- The company achieved its highest-ever Q1 revenue at INR 156.4 crores and an adjusted EBITDA of INR 43 crores.
- Profit after tax (PAT) grew by 69% to INR 22.9 crores for the quarter.
- CarTrade Tech Ltd (BOM:543333) remains the number one automotive platform in India, with over 70 million unique visitors monthly.
- The company is debt-free and holds a cash balance equivalent to INR 782 crores.
Negative Points
- The remarketing business faced challenges with repossession supply, impacting revenue growth.
- Standalone accounts showed a reduction in other income due to the OLX acquisition, affecting treasury income.
- Marketing expenses as a percentage of revenue have been decreasing, raising questions about potential growth limitations.
- Employee expenses in the remarketing business have decreased, indicating possible cost-cutting or reallocation of resources.
- The OLX business, despite showing growth, still requires significant focus on increasing paid listings and dealer subscriptions.
Q & A Highlights
Q: Congrats on a good set of numbers. Can you give more color on the growth in the consumer business, particularly in the used car and new car segments? What are the future growth drivers?
A: The consumer group has grown by 18% in operating revenue. The mix remains consistent, with 85% of the business in new cars and new 2-wheelers. We are optimistic about the business, driven by dealer and manufacturer listings and advertising. The leverage in the business is evident, with significant profit growth accompanying revenue growth.
Q: Marketing expenses have been coming down as a percentage of revenue. Is there potential for stronger growth if marketing spend increases?
A: The marketing expense as a percentage of revenue is decreasing due to revenue growth. Traffic on our platforms is also growing, so we don't see a need to increase marketing expenditure at this stage. We believe the current level of marketing expense is sufficient.
Q: On the OLX side, what are the monetization areas you have capitalized on, and what are the future plans?
A: The first few months post-acquisition were focused on technology transition and team stability. Since December-January, we've focused on growing the business, resulting in consistent revenue and margin growth. Costs are fully baked in, and we expect revenue growth to drive further margin expansion.
Q: How does the OLX business compare to Facebook Marketplace, and what areas can be improved?
A: OLX is very strong in terms of user response and product listings. We continuously benchmark against competitors like Facebook Marketplace. Improvements could include better targeting capabilities for sellers, but OLX already offers best-in-class response rates for listings.
Q: Can you provide more details on the remarketing business and its challenges?
A: The remarketing business has faced challenges due to lower repossession rates, which is a positive indicator of the Indian economy. However, we've focused on building an alternative supply segment through retail, which now accounts for almost 42% of our business. This shift has helped maintain revenue and profit growth.
Q: What is the strategy for growing the non-auto business within OLX?
A: We've appointed a head for the non-auto business, focusing on categories like homes, electronics, and jobs. The business is already profitable, so the investment will be more in terms of resources and bandwidth rather than financial. We aim to grow this segment significantly in the coming months.
Q: How do you see the future growth of the new auto business?
A: It's hard to give exact guidance, but we expect to outpace the market growth significantly. The new car market grew by 3-4%, and we aim to achieve higher growth rates. The consumer group has consistently delivered its highest-ever quarterly performance, and we expect this trend to continue.
Q: Can you provide more details on the OLX franchise stores and their contribution to the business?
A: We have over 250 stores between OLX and CarWale abSure plus signature stores. These stores are part of our classified B2C platform, operated by dealers under our brand. The margins from franchise stores are higher due to the value-added services we provide.
Q: What is the revenue mix between paid listings and ad revenue from networks like Google?
A: About 10% of our revenue comes from ad networks like Google. The majority of our revenue comes from paid listings by dealers and consumers. We see potential for growth in both areas, driven by increased traffic and more advertisers on the platform.
Q: Are there any plans for a buyback given the strong cash balance?
A: Currently, we are not able to do a buyback due to compliance issues. However, we will consider it once the company meets all regulatory requirements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
