Zaggle Prepaid Ocean Services Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Zaggle Prepaid Ocean Services Ltd (ZAGGLE) Q4 FY24 Earnings Concall

• Financial Performance
  • Zaggle doubled its revenue over the past three years.
  • Strong revenue growth of 37% QoQ and 46% YoY in Q4 FY24.
  • Total revenue of INR273 crores in Q4 FY24 vs INR187 crores in Q4 FY23.
  • FY24 revenue of INR775.6 crores, up 40% from INR553.46 crores in FY23.
  • Gross profit up 78.5% YoY and 57.7% QoQ, gross margin at 59.1%.
  • Gross debt reduced to INR736 million from INR1,210 million in FY23.
• Market Opportunities
  • Sees massive traction in B2B SaaS industry.
  • Increased adoption by corporates and government’s digitization push.
  • Higher propensity for companies to pay higher SaaS fees.
  • Plans to capitalize on opportunities and gain significant market share.
• Strategic Initiatives
  • Invested in Span Across IT Solutions for tax filing and financial wellness products.
  • Onboarded new marquee customers like Wipro, Westcorp, MQ Pharma.
  • Emphasis on cross-selling products and partner offerings.
  • Exploring inorganic expansion through acquisitions and international expansion in US/North America.
• Customer Growth and Product Offerings
  • Added 179 new clients in Q4 FY24, taking total customer count to 3,016 as of March 31, 2024.
  • Active users on platform grew 20.3% YoY to 2.73 million as of March 31, 2024.
  • Zoyer accounts payable platform bundled with business credit cards drove growth.
  • Multiple solutions reduce hassle of working with multiple vendors for clients.
  • Monetization through platform fees, program fees, and Propel Points rewards program.
• Strategic Partnerships
  • Partnerships with public sector banks (Indian Bank, Canara Bank, Punjab National Bank) allow reach to corporate/consumer base across geographies.
  • Tie-ups with travel firms (EaseMyTrip, Yatra) enable self-booking on platform, earning commissions on bookings.
  • Partnership with Axis Bank and Nishi Forex to offer forex cards bundled with expense management platform.
• Revenue Opportunities
  • Forex card programs expected to go live in FY25 and start contributing revenues after integration period.
  • Increased spend flowing through platform via travel bookings to boost revenues.
  • Propel Points (gift card) revenues expected to maintain 7-10% margins going forward.
• Guidance
  • Aims to double revenue again in the next two years (FY25, FY26).
  • Expects 45-55% revenue growth in FY25.
  • EBITDA margins expected to remain at current levels in near-term.
  • Focus on capturing maximum market share, operating leverage benefits may kick in later.
  • Highest growth expected from program fees (interchange earnings) in FY25.
  • SaaS revenues also expected to grow healthily backed by investments.
  • Maintained guidance of similar margins around current 11% level for next couple of years.
  • Prioritizing capturing market share in hypergrowth phase over margin expansion.
• Cash Flow Management
  • Increase in other receivables over last 3 years impacted cash flows due to prepaid card loadings.
  • Working diligently to improve cash flow position going forward.
  • Deploying cash to invest in growth and expanding business reach.
• ESOP & Pricing
  • ESOP cost guidance for FY25 is around INR8 crores without any new issuances.
  • Rack rates have increased significantly over last 2-2.5 years.
  • Current rack rate is INR249 per user per month, up from INR99 earlier.
  • Ability to command premium pricing aided by marquee customer/bank partner names.
• Revenue Streams
  • Three main revenue streams: SaaS fees, program fees (transactions), and Propel Points.
  • Program fees up 90%, Propel up 60%, SaaS up 30% in FY24.
  • Plan to drive 45%+ growth in FY25 from these existing revenue lines through cross/up-sell.
• Zoyer Performance
  • Accounts payable platform contributing around 30% of program fee revenues.
  • Program fees from Zoyer were around INR40-42 crores in Q4 FY24.
  • Take rates broadly stable but may see some compression as usage expands across categories.
• Zatix Analytics Platform
  • New product Zatix being developed for data analytics on spend management.
  • Monetized via recurring SaaS-like fees from bank partners for transaction analytics.
• Costs and Margins
  • 25-30% of cash back/incentives line item is cost of funds for credit period.
  • Cost of funds expected to reduce over time with more bank partnerships.
  • Propel Points (gift cards) business has gross margins of 7-10%.
• Incentive Costs
  • Incentive costs increased by around INR50 crores in Q4, offsetting INR50 crore increase in program fees.
  • Initial higher spend on incentives to drive adoption amid market opportunity from regulatory actions.
  • Cost of funds component for credit cards also contributing to higher incentive costs initially.
  • Expect incentive costs to stabilize over time as usage becomes more ubiquitous.
• US Market Entry
  • Plan to enter US market, seen as big opportunity.
  • Investment expected to be nominal initially for marketing existing products.
  • Adopting calculated, methodical approach to assess product-market fit and go-to-market strategy.
  • Specific investment guidance not provided as market entry plans still being evaluated.