Route Mobile Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Route Mobile Ltd (ROUTE) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:13:37] Anil Nahata asked about the projected market size for AI filtering and security-related platforms in India and globally over the next 1-2 years. Rajdip Gupta CEO said the market for AI filtering and security related platforms are still in its early stages, and ROUTE cannot provide a market size estimate at this time. However, ROUTE expects to have a better understanding of the market by the next quarter.

• [00:16:30] Nikhil Choudhary from Nuvama asked about the triggers behind the strong revenue growth in 4Q23 despite seasonality, and the expected revenue growth for FY24. Rajdip Gupta CEO said ROUTE expects 20% growth next year. Last quarter’s strong revenue growth was due to onboarding large banks in India, Ghana, and Nigeria and traction in the Middle East and LatAm markets.

• [00:17:57] Nikhil Choudhary from Nuvama asked about the impact of geopolitical impact on Mr Messaging and when it will be resolved. Gautam Badalia CSO said Mr Messaging was impacted last quarter due to a decline in terminating communication messages in Russia. However, there are signs of normalization in April with growth from other markets while Russia is still affected.

• [00:18:50] Dipesh Mehta from Emkay Global enquired about the organic revenue growth for the year in new products, and how is this likely to play out in the future. Rajdip Gupta CEO said that with increasing digital adoption, new product deployment takes 2-4 months. There’s strong volume growth in WhatsApp, e-mail, and SMS.

• [00:19:51] Dipesh Mehta from Emkay Global asked about the current state of pricing in the NLD, ILD, and international markets, and how is this likely to change in the future. Gautam Badalia CSO replied that there was an ILD price increase in India on April 22nd. The company has not lost any customers due to the price hike, but it is too early to tell how much the price increase will impact revenue in the coming quarters.

• [00:19:59] Dipesh Mehta from Emkay Global queried about the level of gross margin expected once the revenue reaches the target of $1 billion? Rajdip Gupta CEO replied that ROUTE aims for a 25% plus gross margin at $1 billion revenue and potentially 30% plus over 3 years depending on the product mix.

• [00:25:14] Moez Chandani at Centrum Broking asked about the reason for borrowing of about INR100 crores in FY23. Rajdip Gupta CEO replied that the borrowings are primarily for treasury management purposes and are backed by cash collateral in the U.K. entity, resulting in positive carry transactions for ROUTE.

• [00:31:09] Vivek queried about the comparable companies in the Indian and international landscape against which ROUTE competes. Rajdip Gupta CEO clarified the company does not want to be compared to its competitors, as it is focused on its own roadmap and growth. ROUTE is a global company with a strong presence in over 22 countries. It has a unique connectivity platform that connects with over 1,000 operators, which gives it a competitive advantage.

• [00:32:33] Abhishek Sharda of Hem Securities asked if the 20% growth guidance for FY24 organic or a mix of organic and inorganic growth. Rajdip Gupta CEO answered that it’s completely organic growth.

• [00:34:26] Abhishek Sharda of Hem Securities enquired about ROUTE’s hiring plans and the current attrition rate. Rajdip Gupta CEO replied that the company is hiring to build new products and to replace employees who have left the company. The company does not have a specific number of hires in mind, but it is actively hiring.

• [00:36:37] Vivek Setia from HDFC Securities asked about the reasons for the decline in new product sales and how does ROUTE plan to address it. Gautam Badalia CSO replied that the decline was more related to seasonality. On a YoY basis, there was a 24% growth in new products. And 135 new customers were onboarded in 4Q23.

• [00:42:34] Dipesh Mehta enquired that being a product company in the IT industry, why cash flow is 70% odd. Rajdip Gupta CEO replied that the company is focused on improving its operating cash flow. It has made strategic investments and is working to meet its working capital requirements. The company is different from other IT companies and that a significant part of its cost of goods sold is paid to operators.

• [00:47:07] Dipesh Mehta asked what percentage of the company’s 20% growth guidance for FY24 is expected to come from organic growth. Rajdip Gupta CEO said the company is providing a conservative growth guidance of 25-20% for FY24. However, the company has a history of overachieving its guidance, and it expects to do the same in the coming year.

• [00:48:28] Mohit Motwani from Nuvama asked about the nature of the acquisitions that will be evaluated, whether they will be buyout transactions. Rajdip Gupta CEO said ROUTE is focusing on organic opportunities in the virtual contact center space with a strong voice stack and exploring potential acquisitions. ROUTE is bullish on its product-specific approach, particularly TrueSense, and conducting proof-of-concepts with enterprises in markets like India and neighboring countries.