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.