Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dreamfolks Services Ltd (BOM:543591, Financial) achieved a strong revenue growth of 20.5% during Q1 FY25.
- Gross margin improved to 11.7% in Q1 FY25 from 10.7% in Q1 FY24.
- Adjusted EBITDA grew by 30.3% year-on-year, reaching 8% in Q1 FY25.
- The company expanded its team by recruiting talent from leading business schools, anticipating substantial returns over the next two years.
- Dreamfolks Services Ltd (BOM:543591) added six new airport lounges domestically and 41 new lounges globally, enhancing its network.
Negative Points
- The adjusted EBITDA margin of 8% in Q1 FY25 is lower than the yearly guidance of 11% to 13%.
- The seasonal nature of the industry means the first half of the fiscal year typically underperforms compared to the second half.
- Contract renewals with vendors in the first half of the year result in lower margins.
- The company faces challenges in marketing its services directly to consumers due to regulatory constraints.
- Employee costs have increased due to annual increments and investment in new workforce, impacting overall expenses.
Q & A Highlights
Q: Have you taken any price hikes during the quarter?
A: Yes, some of the revenue growth is driven by price hikes, which occur at different times throughout the year due to contract renewals. (Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: Can we expect the same margin improvement this year as last year?
A: Historically, the first half of the year is lower due to seasonality and contract renewals. We expect better performance in the second half of the year. (Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: How are the volumes moving in the Malaysian operations?
A: The volumes are still low, but we have clients in the pipeline. The model in Malaysia is different, focusing more on technology, and we are in the process of onboarding networks and issuers. (Sandeep Sonawane, Chief Business Operator; Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: Are the new offerings based on the same model of benefits offered by banks on their credit cards?
A: Partially. We are not restricting ourselves to banks and are targeting enterprises with contemporary services. The model will include a membership package with complementary and discounted benefits. (Sandeep Sonawane, Chief Business Operator; Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: What is the impact of the shift to spend-based programs on your growth aspirations?
A: The shift is still in process, and we expect to see the impact in Q2. We maintain our 20% growth aspiration. (Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: How are the margins for enterprise clients compared to banks?
A: Margins are generally better for enterprise clients due to lower volumes. We expect the enterprise segment to contribute 15% to 20% to our top line in the next three to four years. (Liberatha Kallat, Executive Chairman of the Board, Managing Director)
Q: What is the expected contribution of new services like doctor on call and medication services?
A: We expect these services to contribute close to 20% of our revenue in the next three to four years. (Sandeep Sonawane, Chief Business Operator)
Q: How are the volumes and margins playing out with the shift to spend-based programs?
A: We are still in the middle of the transition. The guidance numbers for EBITDA and gross margins are what we aspire to achieve. (Balaji Srinivasan, Chief Technology Officer, Executive Director)
Q: How are you addressing the issue of long queues at airport lounges?
A: We have introduced a web access solution where customers can check their benefits and generate a QR code to bypass queues. We are also offering services beyond the lounge, like F&B at the airport and in-flight meals. (Balaji Srinivasan, Chief Technology Officer, Executive Director)
Q: What are your revenue and margin targets for the next three to four years?
A: We are targeting a 20% to 25% growth rate in revenue and expect gross margins to improve as the mix of services changes. (Giya Diwaan, Chief Financial Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
