Route Mobile Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Route Mobile Ltd (ROUTE) Q4 FY24 Earnings Concall

• Revenue Growth and Industry Challenges
  • Highest quarterly revenue in Q2 and Q3 FY24.
  • Good growth in H1 FY24.
  • Headwinds in CPaaS industry since November 2023.
  • Enterprise cost optimization initiatives.
  • Shift in communication channels from global OTT players.
• Acquisition Impact
  • Imminent Proximus deal closure.
  • Bolsters product portfolio.
  • Extends global footprint.
  • Ignites innovation pipeline.
  • Synergies to complement product, geographic, and customer base.
  • Benefits from certain deals already visible like Vodafone deal.
• Financial Performance
  • Fell short of revised guidance.
  • Q4 FY24 revenue grew 0.8% YoY, declined 0.7% QoQ.
  • FY24 revenue grew 12.7% YoY.
  • Gross profit margin contracted in FY24.
  • EBITDA grew 8.4% YoY in FY24, margin at 12.3%.
  • PAT grew 11.7% YoY in FY24.
• Outlook
  • Expecting significant growth in revenue and profitability in FY25, driven by synergies from Proximus acquisition.
  • Working towards successful FY25.
• ILD Revenue Challenges
  • ILD revenue continues to decline.
  • Growth witnessed in Indian ILD segment.
  • Decline largely from rest of the world and Masivian.
  • Vodafone Idea deal went live on April 1^st.
  • Growth in traffic observed.
  • Expects further growth from larger players as leakages are blocked.
  • Litigations identified, Vodafone team taking action.
• Credit Facility Purpose
  • GBP10 million credit facility for Route UK.
  • To provide bank guarantee as part of contractual arrangement, backed by fixed deposits in India.
  • Approval required as deposits held in India.
  • Not impacting cash flow improvement assumption.
• Communication Channel Shift
  • Route Mobile in talks with OTT players to facilitate channel shift if needed.
  • Offering APIs for multiple channels, including WhatsApp.
  • WhatsApp price hike makes SMS more cost-effective for OTP authentication.
• EBITDA Margin Outlook
  • 60 bps one-off impact on EBITDA margin in FY24.
  • Impact unlikely to recur in FY25.
  • Margin expected to improve by 60 bps in FY25.
  • Dependent on related party transactions and approvals.
• New Product Performance
  • New product revenue down quarter-on-quarter, attributed to seasonality impact on Masivian.
  • Overall, strong pipeline and growth potential for new products.
  • Bullish on scaling new product business in coming months.
• Messaging Business Challenges
  • Messaging impacted due to geopolitical issues in Russia and Ukraine.
  • Lost customers in those regions.
  • Working closely with Mr. Messaging to support new contract wins.
  • Masivian performed well, only faced seasonality impact in Q4.
  • Masivian revenue ₹514 million in Q4 FY24, down 17% QoQ.
  • Messaging revenue ₹1,795 million in Q4 FY24, down 7% QoQ.
• US and Europe Revenues
  • Major OTT clients in US and Europe were cautious on spending.
  • Impacted overall ILD traffic growth.
  • Expects recovery with WhatsApp pricing nearing ILD pricing parity.
• Domestic Volumes Growth
  • Domestic volumes in India grew in double digits, despite 20% hike in NLD pricing.
  • Able to close some large accounts last quarter.
  • Have a strong pipeline for the current quarter as well.
• Receivables Jump
  • Receivables increased by around ₹390 crores.
  • Impacted cash flow conversion.
  • Large payments received from OTT clients in first week of April 2024.
  • Caused a temporary spike in receivables.
• Volume vs. Revenue Growth
  • Transactions volume grew 17.5% in FY24 vs 12.7% revenue growth, attributed to significant increase in lower-realizing domestic volumes.
  • ILD volumes degrew due to price increase.
  • Overall transaction growth expected across channels.