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 1st.
- 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.