Matrimony.Com Limited (MATRIMONY) Q2 FY23 Earnings Concall Transcript

Matrimony.Com Limited (NSE:MATRIMONY) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Murugavel Janakiraman — MANAGING DIRECTOR

SUSHANTH PAI — CHIEF FINANCIAL OFFICER

Analysts:

Vivekanand Subbaraman — Ambit Capital — Analyst

Prakash Kapadia — Anived Portfolio Manager — Analyst

Presentation:

Operator

Ladies and, gentlemen, good day and welcome to Matrimony.com Limited Q2 FY23 Earnings Conference Call hosted by YES Securities. We have with us senior management of Matrimony.com on the call. Mr. Murugavel Janakiraman, Chairman and Managing Director. Mr. Sushanth Pai, Chief Financial Officer. [Operator Instructions]

I now hand the conference over to Mr. Murugavel Janakiraman, Chairman and Managing Director Matrimony.com.

Thank you and over to you sir.

Murugavel Janakiraman — MANAGING DIRECTOR

Thank you so much. Good evening everyone. I hope all of you are continuing to stay safe and healthy. After many quarters of good growth we are seeing a subdued quarter due to intense [Indecipherable]. However, we are confident of overcoming the challenge and the move to better growth with our new launches and with our new focus on the customer side and we’re very confident of bouncing back on growth. Now, let me come to the results. In quarter two, on a comparative basis, we have accrued rupees INR109.1 crore in billing which is 2.2% year-on year growth. Revenues were INR114.9 crores which is a 4.5% year-on year growth.

[Indecipherable] and highlights for the Matrimony business includes as follows. Billing at INR106.6 crores which is a growth of 0.4% year-on year, revenue at INR102.5 crores, growth of 3 percentage beds — INR112.5 crores, a growth of 3% year-on year. The added 2.4 lakh sales subscription during the quarter is a growth of 8.3% year-on-year. [Indecipherable] declined 3.4% quarter-over quarter and 7.2% year on year.

We remain with our customer acquisition strategies. We continue to drive the impact that we pay for customers. But after the period that have greater about company goes and Ireland to prepare of in-quarter two. Now coming to the Marriage Services business anyone would be INR2.4 crore, a growth of 30.6, of late quarter-over quarter and 202.9% year-on year. Loss in the quarter was INR3.3 crores compared to rupees three both growth in the previous quarter. [Indecipherable] just hit some of the important milestones in the quarter.

We launched Rainbow Love an exclusive matchmaking app for LGBTQIA+ community to help them find a meaningful relationship and technology professional to on the from the same. But it’s, not all one. I think from where they are paid-off in the, best of both consequently to lot of Matrimony adult still wonder why subsidiary the building and outlook cost people. Not is building. grow but single-digit because of impact we have in-quarter two. That’s one more quarter, part of the bonds that we expecting won’t start to double-digit growth in-quarter four. Underwriting sir because the moment it’s put the continued.

Let me know pass onto Sushanth to comment on the key profitable areas.

SUSHANTH PAI — CHIEF FINANCIAL OFFICER

Yeah, thanks Muruga. Our EBITDA margin for the matchmaking business in Q2 is at 23.1% as compared to 23.5% in-quarter one and 29% a year-ago. Marketing expenses are at INR44.4 crores as compared to INR43.5 crores in Q1 and INR39.9 crores a year-ago. Excluding marketing expenses our margins in matchmaking are stable at 63%. On a consolidated basis our EBITDA margins in Q2 are at 16.3% as compared to 17.6% in-quarter one and 24% a year-ago. Tax-rate in the quarter is at 14.3% compared to 21% in-quarter one.

The tax rate reduced which is the ETR reduced to lower tax on realized gains on mutual funds which were redeemed to fund the buyback amounts. PAT is at INR11.7 crores, a decline of 2.2% quarter-on-quarter and 29.3% year-on year. Share of profit from Astro 12.5 lakhs. Net profit margin has been stable at 10% plus level for the last four quarters. Return on capital employed annualized for the quarter is at 19.5%. We completed the buyback of shares extinguishment by August 26 of 2022.

The buyback cost taxes and are accounted as a reduction from the equity during the quarter ended September 30, 2022. The buyback program is successfully with 759% subscription and all the shareholders who tendered their shares well-accepted for the buyback depending upon the proportion of shareholding. Since the promoter group did not participate, it added further to that impact. On the outlook for Q3 margins we expect Q3 EBITDA and PAT be slightly lesser than the levels of Q2 due to the revenue impact of lower billings of occupancy. I would like to-end with the customary Safe-Harbor statement.

Certain statements during this call could be forward-looking statements on the business, these involve a number of risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. We do not undertake to update any such forward-looking statements that may be made from by or on behalf of the company unless is required by-law.

Over to you. We can open for the Q&A now.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We’ll take our first question from the line of Vivekanand Subbaraman Ambit Capital. Please go ahead sir.

Vivekanand Subbaraman — Ambit Capital — Analyst

Hi, thanks for the opportunity. I have two questions. So, one is on the billing trends it’s well below the guidance that or rather the Aspiration that you have of double-digit growth. Muruga, you said that seasonality was particularly bad. I’m just trying to understand this better because my sense was this segment — the online matchmaking segment was a fairly small part of the overall matchmaking activity that Indians do, so in that context provided seasonality hurt us so much so that is question one.

Secondly, as far as your strategy is concerned, couple of years ago you had chosen to follow a path where you would — you would segment your pricing based on the educational qualifications and also the place that the people are subscribing from and that was one of the factors that had led to transactions increasing to over 2 lakhs per quarter but now it’s stuck at that right compared to last quarter of level, this is small improvement year-on year but still you would argue that this improvement is definitely not something that would make you proud right? So could you, talk a little bit about the strategy that now you are following and it’s been two years since you followed that pricing led — the segmentation led model to increase more transactions but mixed success there. Thank you.

Murugavel Janakiraman — MANAGING DIRECTOR

Thank you Vivekanand, so let me talk about the seasonality first. The seasoanality definitely has an impact on the matchmaking business when people look at — they’re starting something — on the Matchmaking do people do look into their hospitals period and people well. I know some customers typically in the maximum on match between. The Q2. Particularly because it’s how we something called. Also I mean Andhra coming and also not in the other spot period so this is again it’s the across the regions during the period we definitely see that activity goes down, so again it doesn’t look last so many years of, there are some here we are able to overcome because of the different decent but our EBITDA on something I’m doing the period or some other part of the contributors historic trend the Q2 always definitely lower than quarter one but liquidity here onwards this for what are reason that the impact of severe. So so it was much more than what we had anticipated so this quarter definitely came this topic in terms of.

The customer digital in terms of the profile is and the Commerce and other impacts so definitely XSR device definitely it’s the low quarter absolutely business is consistent tend to go down because of which already explained. So but again as I said product follow. Our public we other. Severe impact on the quarter to our attractive certain is definitely bouncing back and while this quarter the crop. Now over to double-digit growth but the way things are. Between definitely quarter-four it the move to double-digit growth we are running.

And come the pricing strategies there the pricing strategy are based on various things. Two to be coterminous education Rod socioeconomic status, very attractive. If we look at our while that the building was sort of subdued but still dynamic that country personally the building growth so I’m going to talking about from last year from 2.2 last yea 2.4 lakhs it almost that it’s not going to go there now they function in the quarter so that’s a relatively good growth in all but we continue to comply with the operating category because it’s not all the customers seen that’s the right strategy to do our. Whilst we definitely that the big transaction moving up in terms of because compared to what it was in the past however we definitely can get better.

Vivekanand Subbaraman — Ambit Capital — Analyst

Okay. That was helpful, just one follow-up, so since seasonality had impacted our business very adversely in 2Q would it not be fair to say that 3Q would be a strong bounce-back at least in billing terms given that there would be some pent-up demand because going by your logic, people seem to have postponed

Their decision of, let’s say, signing on to match banking services because of auspicious days and across the country so, I’m just trying to understand if 3Q could be substantially better from a billing perspective? Revenue I understand revenue growth will be subdued. I understand because of weak bidding in 2Q.

Murugavel Janakiraman — MANAGING DIRECTOR

So comes of the building also because the goods but our revenue that from renewal, there will be a drop-in the revenue and building. It’s also from Canadian Tire some part the business quickly there in renewal part of the business we’ve got good partner revenue coming from our the people running the subscription so definitely has an impact on the renewal side so again the pent-up demand again that people. Just on-top of them there is a bond that happened it’s not that we are nice pent-up demand and always been I’ve been here and have the similar novel off the growth in terms of people coming up that will happen so we expect this quarter also the growth like we while we, don’t see a double-digit growth because of the reasons we thought it time but are. We expect the motor growth on the platform.

Vivekanand Subbaraman — Ambit Capital — Analyst

Right. I’ll ask one last question which is on the on the business model itself, so one of your competitors which is listed they have chosen to follow a model where now they are moving to more freemium then what you currently offer which is cat being free and they are trying to increase traffic for the category right for their site and, of course, be more relevant in the category separately we are also investing in a serious rating website. Indicating that they want to try multiple things here to get growth. In that on those lines, is there something that you are also trying to do region because this segment is clearly growing much slower than what one would expect of a deeply underpenetrated online classified segment.

Murugavel Janakiraman — MANAGING DIRECTOR

In terms of because models continue to remain what we way I believe we’ve seen the correct way to do kind and our product that the revenue drop — I’ve been the same across the market if, nobody has seen any significant drop-in the Canadian market, what is that please continue to look at the so we are not going up any impact so the because model in a debate because parties have been operating at the leader and we can go we continue to business model. In terms of overall the category growth it seems that yeah this category has been growing at certain second is not significant that’s the kind of growth again when you are taking to after the growth and we have some other initiatives I’ll come with our strategies yeah the company bonds back-in the last.

Wholesale quarter, Q2 was another quarters we look to bond PACCAR. In the Q4 and. The more on the double-digit growth. So, yes. I agree with you that right, there are some challenges because one of the reason that categories also other. The temporary intense competition but we feel that sort of. Things are.. Finally coming to that. We see that. Competitive impact continue but. I think probably with this what you’re taking we believe that it could able to better growth in the coming quarter.

Vivekanand Subbaraman — Ambit Capital — Analyst

Okay thank you and all the best.

Operator

Thank you, sir. We’ll take our next question from the line of Prakash Kapadia from Anived Portfolio Manager.

Prakash Kapadia — Anived Portfolio Manager — Analyst

Yeah. Thanks for the opportunity. We’ve seen second-quarter in a row EBITDA is actually declined for us and if I look at you know pre-COVID trends revenues are much higher than pre COVID but we are seeing advertisement expenses of almost INR45 crores which is much higher so what is leading to this increase despite we being industry leaders shouldn’t we you know drive growth and manage our profitability by pricing revenue potential and bit of cost management so now it looks slightly confusing to me so where are we heading because your ad expenses in a muted quarter are also high, so one would guess if sales or billings are weak we have or we should have ideally cut-down on, some of these expenditures so, what is driving this and what’s the outlook on ad spends in the coming quarters?

Murugavel Janakiraman — MANAGING DIRECTOR

See, the ad spend, we expect to continue similar level. While we understand that. Q2 was the one of the calendar quarter.. Our manage that my colleagues can do because. I didn’t know because news is kind of became in the middle of the quarter so. We thought that the right thing to do not only the marketing spend because sometimes prophylaxis which means also them the coming quarters also we don’t want to. Further impact that. This quarter it has already seasonally our quarter.

I realize it’s a big within that sort of impact on quarter to quarter-four lots that impact was much more than what we are down, assuming the past so however you know the market is 10 products in the countries remain at that level because obviously that kind of one thing that we have multiple brands to manage also the marketing been the company will continue to win and I important that we believe that continued to operate at similar level so while we are 100 we’re working on our strategies and to our carry the growth again we believe currently we looked like the market is probably in the middle of the product in the novel and we are now all from.

Now onto the global to drive the growth and now I feel positive the increase in the wind that to the revenue. Would they also that, a better margin on yeah we definitely look this quarter was at 100 upon the quarter got route we are confident wants to back on a growth mode but however the marketing spend now on one. And in terms of other calls. I think as a company operating at, they’re very efficient this not. So we’ll continue to look at the ways to optimize the cost. So that’s always been the case [Technical Issues]

Prakash Kapadia — Anived Portfolio Manager — Analyst

So, the only way to offset some of these higher ad expenses is to get higher revenue growth which at least you alluded, next quarter could be slightly challenging but Q4 onwards that double-digit revenue growth has to come in to offset, some of these expenses otherwise, profitability improvement could become a challenge in H2?

Murugavel Janakiraman — MANAGING DIRECTOR

Yes, the billing growth.

Prakash Kapadia — Anived Portfolio Manager — Analyst

And from the revenue side you did mention some the factors in terms of seasonality or some of the loss which is so was it in South of India only or this was witnessed in some of the other markets and also you could give us some sense of what is happening, say, nor the West you know non-South markets so what is competition doing or what are we sensing in some of the other markets, except South?

Murugavel Janakiraman — MANAGING DIRECTOR

No problem [Indecipherable] I think only they there are different not that. I know you one-off. The breadth and dollar that would be in the period of you see that profiles are goes down because there are people revenue in the period of sentiment about these things. That’s up 1% of people so it’s not that the entire India all the all the India it’s only certain percentage of people that the reason why the drop is only up few possibly so and again it’s only up entire 3rd-quarter you can come in for a month, Andhra is paramount market pocket in this I it’s academies in Mexico some India it’s very limited calendar not to our is about.

On sentiment than about these things so dividend from market-to-market but some of the market is simple part definitely very so quarters the drop is not limited to, any particular across India, we’ve seen the so that it’s a broad-based and so it’s not one governance feel I think that they’ve. So that they. Going back to cost cuts,.

Prakash Kapadia — Anived Portfolio Manager — Analyst

Understood, understood. Thanks all the best.

Operator

[Technical Issues]

Murugavel Janakiraman — MANAGING DIRECTOR

Has ruled against Google do you foresee any benefit for your business and the industry and further being a seasoned veteran in the tech space would you be able to comment on the larger implications on the. Domestic tech space. That’s one and I have one on our business also which, I’ll ask after this answer. Thanks Amanda got a good verdict by our CCI. So this new work, Google. Wanted to mandate was that the companies who are operating the digital business in India digital savvy forward as that, they are being used what is an improvement in our billing system that.

So you have to pay second of transaction money they did do I didn’t varies from a cabinet categories and the Google petition or what is it there has been for commodity, tariff has no category because it’s important because 80%. We’ll give you this. Even otherwise that you know initially was the Google demand it, rather one of the revenue that in that building payment. And, they will come out, include other cutting covered our reduced other current provider we have to pay Johan Persson commission what do you mean we got about the payment this is like the recipe of you. Other CCAvenue nuanced but it did repayment.

But the around to two percentage. But then Google. Google not building out around 15,. So this is probably obviously Google and this the dominant in that no the place electricity. Almost 90% of the download through Google not. And at this stage. So is it because the PCIe, because. Google what sitting that the company’s operating, because.. The new is when they good in that building or even the new cargo terminal with regard to the. So more like a Google that you know you have seen that we did a big countries it’s come out them one-off probably under a final Google and the Google deposits so we obviously whether one Google. So it would be very unfair to be able to go to improve either are top of players.

And. I think I doing what kind of cannot Indian ecosystem one to in the company set-out the, Goldman Sachs. Importantly one between customer. I mean we got limited because wonderful company offering a good, obviously they economic charge our original target that news on the companies are offering, they become a product our Gimoti so it’s kind of community. So this is when we set the company up bidding, Mr correlated with the company because so we said company mandatory the company as have been doing and in the US and the Google tried to follow the significant and globally there are so many. Cases are going against the companies in, South Korea, again. Total Google that did not do that secondly is the good opportunity department, they are both the both Google and Apple come to dominance to pay cards 52 CAD because the company in Italy transform into a tax.

Okay determined 76 and I don’t individual retail companies because the bar chart there similar trend of revenue for other companies so that candidly the announced and Delphi going to maybe talk about in fact for Indian companies come back almost our EBIT at 15% capacity because to Google that doesn’t increase the cost of running the business. So I didn’t. I don’t think that. It. Because I see room for Google to do that no trading up 15% EBITA five building that’s for quoting up people used to the Google mobility and others the commission on using other even universities other tenants company so it’s the impact on the Indian sort of ecosystem so part of countries are definitely been and, they will buy the product and up thankfully now conduct the exclusivity with also. Indicated our guidance on this one.

Prakash Kapadia — Anived Portfolio Manager — Analyst

So. Muruga thank you so much for the elaborate explanation does this have any bearing on your realization and if you can talk to us about the proportion of transactions that happen directly through the Google Cvent system or through the other billing that you could have used and is this going to have any financial bearing on our business.

Murugavel Janakiraman — MANAGING DIRECTOR

No because we don’t need Google then impairment system individual came in with this so that the commission for the Metro one contract but we have to pass so. So they’re not seeing products no benefit on AuthentiGuard if been have been operating the even an intercompany out in these various payment basis. To conclude the transaction where the EPA bit more depth contracts we met with a dividend because the competencies take mode but again is around ARPU passengers.

Prakash Kapadia — Anived Portfolio Manager — Analyst

Okay, my second and last question is the you are running your matchmaking business profitably despite hyper competition resulting in ATV and very-high ad spends so why not deploy more money in wedding services to chase growth I mean that business you seem to be targeting a category which is very-very under-penetrated even more than your matchmaking business and you could you, give us an update on the business model any metrics that you’re tracking in terms of traffic or monthly active vendors or let’s say the monetization there?

Murugavel Janakiraman — MANAGING DIRECTOR

No, we are upgrading, India’s largest wins have become our company we are one point highlights that is quoted on within the group. So again it’s integration up and cut-off. I know quarters. It’s not two quarters earlier so we are. I think the benefits of integration Gamba working on it lifting increasing in the I mean want to different patent or showed off 10 milestones.

Then we decide what we want to how do you want to take this different Call-IT because we believe that whatever we have done and want to really that our the benefits of the integration we believe that. Now we could able to go there any for that the industry you’re operating, get closer to the profitability and then if you go to what is the next course of demands of pattern. I think the plan is to where the growth to the cross the bridge when.

And then figure out then work on not the growth didn’t work on the mix with growth in so rather than now we are seeing of much more on this category because one of the investments we have been all been good enough for the kind of growth what you are seeing now that the problem with a probably maybe couple of more quarters down the line.

Prakash Kapadia — Anived Portfolio Manager — Analyst

Great. Thank you and all the best.

Murugavel Janakiraman — MANAGING DIRECTOR

Thank you Prakash.

Operator

Thank you very much. [Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Murugavel Janakiraman for closing comments.

Murugavel Janakiraman — MANAGING DIRECTOR

Thank you all for joining this call and look-forward to speaking with you during the quarter, if you have any questions, you can write to us. Thank you once again.

SUSHANTH PAI — CHIEF FINANCIAL OFFICER

Thank you so much. Thanks.

Operator

[Operator Closing Remarks]