Zaggle Prepaid Ocean Services Ltd Q1 FY25 Earnings Conference Call Insights

Key highlights from Zaggle Prepaid Ocean Services Ltd (ZAGGLE) Q1 FY25 Earnings Concall

• Earnings Performance
  • Revenue grew by 113% YoY from INR118.4 crores to INR252.2 crores for Q1 FY25.
  • Program fees contributed 50% of total revenue, driven by growth in Zoyer business.
  • Gross profit margin expanded by 5 percentage points, resulting in 133.8% growth YoY.
  • Adjusted EBITDA grew by 85.3% YoY to INR25.5 crores.
  • Employee costs increased by 35.1% and opex grew by 13.4% year-over-year.
  • The company maintains its guidance of 45-55% revenue growth for the fiscal year.
• AI and Technology
  • Zaggle is developing AI-enabled solutions for enhanced visibility, automation, and compliance.
  • Company is augmenting optical character recognition modules with AI capabilities.
  • Developing computer vision algorithms to detect fraudulent invoices and bills.
  • Aims to achieve over 95% accuracy in OCR processing and reduce processing time to 3-5 seconds.
  • The company is implementing a human feedback loop to improve OCR and AI model accuracy.
• Future Plans
  • Exploring inorganic growth opportunities in spend management, payments, B2B SaaS, and NBFCs.
  • Actively working on US entry strategy, considering both organic and inorganic expansion routes.
• Strategic Partnerships
  • Entering cross-border payments space through a partnership with Skydo Technologies.
  • The company is working on partnerships and API integrations to offer forex payment solutions.
  • Tapping into the travel sector through partnerships with EaseMyTrip, Ria, and Yatra.
  • The company added about 100 new customers in the quarter, focusing on large enterprise accounts.
  • Developing a fleet management solution, with pilots underway for multiple customers.
• Growth Projections
  • Expects Zoyer to contribute 40-50% of overall revenue by FY26-27.
  • The company aims to increase adjusted EBITDA to 15-16% by FY27-28.
  • Zaggle aims to double its FY24 revenues of INR775 crores within the next two years.
  • Adjusted EBITDA margins are expected to hold steady at around 10%.
  • Any inorganic growth through acquisitions would be in addition to the stated projections.
• Acquisition strategy
  • Exploring both small tuck-in acquisitions and larger opportunities.
  • Aims to close an acquisition in the second half of the year, preferably Q3.
  • Company is seeking significant value at reasonable prices in its acquisition strategy.
• Market Landscape
  • The market for vendor payment solutions like Zoyer larger than for employee or channel partner solutions.
  • The company has chosen a conservative approach by directly integrating with banks and networks.
  • This approach, while longer, has positioned Zaggle’s solution as more compliant vs. competitors.
• Spend Growth
  • Existing card spend has grown dramatically, particularly with the introduction of corporate credit cards.
  • Corporate credit cards allow for much higher spending limits compared to prepaid cards.
• Revenue Diversification
  • Zaggle’s revenue streams are diversified to mitigate risks.
  • Program fees are largely based on interchange fees from card transactions.
  • Revenue split between prepaid and credit card components.
  • Zaggle aims to continuously increase revenue across all categories.
  • Diversification strategy helps reduce dependence on any single revenue source.
• International Expansion
  • Actively planning to enter the US market.
  • Exploring both organic and inorganic opportunities for entering the U.S. market.
  • Company is assessing product-market fit and developing a go-to-market strategy for the US.
  • Significant revenue from US operations not expected in the current fiscal year.
  • US expansion is viewed as a long-term growth opportunity.
• Competitive Advantage
  • Zaggle claims to have no direct like-for-like competition in India’s spend management space.
  • The company offers a horizontal solution covering employee, vendor, and channel partner spend categories.
  • Zaggle’s integrated platform reduces the need for multiple integrations with corporate systems.