Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- One97 Communications Ltd (BOM:543396, Financial) achieved its first full year of EBITDA profitability since IPO, with INR559 crores.
- Revenue for the full year was close to INR10,000 crores, showing growth across all three business segments.
- The company reported a contribution profit of INR5,500 crores, representing a 56% margin.
- Merchant business has started to grow again in April and May, with MTUs stabilizing in May.
- The company is expanding its focus into insurance broking and equity broking, aiming to enhance financial inclusion and wealth management products.
Negative Points
- Revenue for the quarter dropped to INR2,267 crores, a decline on a quarter-on-quarter basis.
- The active merchant base declined by 10 lakhs, roughly 10% of the overall merchants, due to higher attrition and paused new merchant additions.
- The company expects an incremental EBITDA impact of INR100 crores to INR150 crores in Q1 due to lower MTUs and active merchants.
- There is a projected annualized people cost savings of INR400 crores to INR500 crores, indicating potential layoffs or cost-cutting measures.
- The company faces regulatory challenges, including pending approval for the payment aggregator license and ongoing compliance issues.
Q & A Highlights
Q: What is the view on the marketing services business, and what does pruning of non-core businesses entail?
A: The marketing services business saw lesser consumer base, leading to flattish growth. It remains a support to the payment business. Non-core businesses include projects like cross-borders and software services to banks, which are being evaluated for their necessity.
Q: Do you have any update on the payment aggregator license, and is there a risk of losing existing customers?
A: The RBI is awaiting feedback from the government, and there is no immediate risk. No significant online merchants have been lost; revenues from online merchants have grown on a product-to-product basis.
Q: How will the distribution-only loans model impact your business, and what is the outlook for merchant loans?
A: The distribution-only model is temporary until the market stabilizes. Merchant loans continue to be collection-centric and are recovering well. New credit lines like micro LAP are being explored.
Q: What is the plan for the excess cash on the balance sheet?
A: The company will invest in customer acquisition and is discussing with the Board the best use of excess cash, including potential returns to shareholders.
Q: Can you discuss the recovery trajectory across merchant categories and GMV terms?
A: Organized offline merchants recovered first, followed by semi-organized and online merchants. The overall GMV is down 6-7% from January but is showing signs of recovery.
Q: How do you plan to achieve the 50% contribution margin target?
A: The focus is on recovering inactive merchants, scaling up high-margin businesses, and maintaining cost discipline. The company expects to see meaningful recovery in Q2 and onwards.
Q: What is the outlook for breakeven, given the current financial challenges?
A: The company is focused on stabilizing the payment business and having productive conversations with lending partners. While specific guidance beyond Q1 is not provided, the company aims to return to profitability soon.
Q: How many lending partners are currently active, and is there any FLDG agreement?
A: Not all partners are active, but there is ample supply of capital. There are no FLDG agreements, and the focus is on distribution-only models.
Q: Can you explain the impact of inactive merchants on subscription revenue?
A: Inactive merchants do not pay rent, impacting subscription revenue. The company is focused on reactivating these merchants to improve revenue.
Q: What are the plans for people cost savings, and how will this impact the workforce?
A: The company aims to save INR400-500 crores annually by optimizing operations and technology. The number of sales executives will increase to grow the merchant ecosystem.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
