Affle (India) Ltd
NSE:AFFLE
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Affle (India) Ltd
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Ladies and gentlemen, good day and welcome to the Affle India Limited First Quarter FY 2023 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions].
On behalf of ICICI securities, lead technology analyst, Mr. Aniket Pande, we welcome you all to the Q1 FY 2023 conference Call of Affle India Limited. I take this opportunity to welcome the management of Affle India Limited, represented by Mr. Anuj Khanna Sohum who is Managing Director and Chief Executive Officer of the Company; and Mr. Kapil Bhutani who is Chief Financial and Operations Officer of the company.
Before we begin with the discussion, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve some risks and uncertainties. Kindly refer to Slide 23 of the company's Q1 earnings presentation for a detailed disclaimer.
I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thank you and over to you sir.
Good morning everyone. Thank you for joining the call today. I trust all of you are keeping in good health. Today, we celebrate Affle's third IPO anniversary, together with our over 385,000 shareholders. This inspires us and instills in us greater responsibility and accountability to deliver cash flow positive long term growth for Affle. We are related to close yet another quarter of momentous growth. In Q1 FY 2023, we achieved our highest quarterly revenue and EBITDA run rate ever. Our highest conversions and our highest CPCU rate ever.
We delivered revenue growth of approximately 128% year-on-year this quarter, comprehensively beating our Q1 CAGR growth strength of 67% over the last 3-year period. Our CPCU business noted a strong momentum, delivering 61.9 million conversions during the quarter, an increase of 96.7% year-on-year, at a CPCU rate of INR 52.1. We witnessed accelerated broad based growth in ad spends driven by our unique ROI linked CPCU business model, having achieved 45% organic growth, which was well above the industry average growth trend, and coming across our top industry verticals in India and international markets.
In the near term, while we are closely monitoring the geoeconomic situation in developed markets, we remain confident of the long Term ad tech industry trends, driven by the fast evolving consumer behavior acceleration towards adoption of connected devices. Our focused execution, powered by Affle 2.0 strategy anchored on our 2 Vs, vernacular and verticalization, and 2 Os, OEMs and operator level partnerships, has enabled us to drive deeper verticalization for our advertisers across the E, F, G and H industry verticals. This has strengthened our moat and our direct customers contribution has grown to 75.1% of our revenue in Q1 FY '23.
We continue to unlock innovative consumer experiences for the advertisers and to reflect upon our strengths. We have also included 3 case studies in our earnings presentation focused upon OTT, FMCG and Fintech solutions. We also appointed 4 additional directors to our board in this quarter, further strengthening the board structure. These additions are designed to support Affle's accelerated global growth momentum, provide greater accountability to the senior leadership, and to reflect upon the company's commitment to maintain highest standards of corporate governance, with enhanced depth of expertise. With this, Affle's Board will now comprise of 10 directors led by our independent, Non-Executive Chairman, and will include 4 women directors, that is 40% of our board.
During the quarter, Affle was also awarded Data Protection Trustmark DPTM certification, for a period of 3 years by IMDA Singapore, making us part of a selective group of companies that made it to the DPTM certification, and that this is a significant validation of our Affle 2.0 strategy. We keep the consumers interest and privacy concerns as central to our innovation, and we continue to focus on our endeavors to deliver consumer centric technologies, following the highest levels of data security and privacy standards. We further enhance our platforms while penetrating deeper across both new and existing markets, as well as further verticalizing our capabilities towards high growth emerging industry verticals.
We are a differentiated business, fundamentally inspired to deliver deep tech powered futuristic use cases, and innovation LED profitable growth globally. Our investments across the products and platforms are performing well, contributing meaningfully to our overall growth, healthy margins and resulting in positive cash flow from operations. We continue to leverage upon the market opportunities, drawing significant moat from our entrepreneurial culture, tech innovations and sustainable value creation powered by Affle 2.0 consumer platform stack. We look forward to further leveraging our scientific and strategic expertise, while keenly promoting Affle 2.0 culture of diversity, equity and inclusion across the organization, enabling a sustainable ecosystem towards holistic stakeholders value creation.
With that I now hand over our discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you and over to you Kapil.
Thank you so much. Wishing everyone a good day and hope all of you are keeping safe and well. Containing our growth momentum of clocking over 120% year-on-year growth in the last 3 quarters, our FY '23 revenue stood at INR 3,475 million, a robust growth of 127.9% year-on-year and 10.3% quarter-on-quarter, contributed by both organic growth and Jampp. Our EBITDA for the quarter stood at INR 687 million, an increase of 95.9% year-on-year, a strong growth of 17.1% quarter-on-quarter. In this quarter, our data inventory was sequentially stable at about 63.3% of the revenue, our employed costs increased by 1.6% quarter-on-quarter. We remain bullish on the business and continue to expand their teams for growth across platforms, markets and verticals.
However this quarter, our employee expenses were down by 106 basis points as a percentage of their revenue. Our reported profit after tax for quarter was INR 545 million, an increase of 52.6% Y-on-Y. Half quarter 1 last year and the previous quarter 4 of FY '22 included higher other income than recent quarter, primarily on account of minimum fair valuation of financial instruments and investments. Our effective tax rate is higher than last year and is inching towards long-term tax rates primarily on account of deferred tax assets of our acquired businesses getting adjusted.
Our normalized profit after tax was INR 552 million, an increase of 93.5% year-on-year after adjusting fair valuation gains and share of our associates. Please refer to Slide #4 and 5 of our earnings presentation. We remain focused on working capital management and continue to see robust cash flow from operations. Our collections were robust and the ratio of our cash flow from operations to profit after tax, stood at 99.9%. This shows quality of our customers, robustness of our operations. Further, Affle is well diversified in the [ vast markets served ] tech use cases, platforms, customers, publishers and with reasonable cash in hand to invest further in our organic businesses, we stand confident to deliver long-term sustainable growth.
With this, I end my presentation. Let's open the floor for questions.
[Operator Instructions] We have a first question from the line of Aniket Pande from ICICI Securities.
I just have one broader question, Anuj, then I will get back in queue. If I look at the top-down approach for Affle actually, okay, it continues to remain a bit bleak actually. The ad outlook has been increasingly dim in recent weeks, in the midst of signs that rising inflation is beginning to affect consumer spending, okay? We have seen that in U.S. in U.S. television networks and news publisher also are feeling the effects of slowdown in advertising market, okay? And recently, the latest indication that an ad spending refreshments, previously flagged by giant technology companies, are also [ spreading ] quite aggressively.
Secondly, in India also, Anuj, we have seen that the recently listed startup companies on their con calls, have commented about reducing ad spending. I do understand that ad spends are equally important for organization to increase their reach, okay? But like start-ups have entered into a bit of economic downturn right now. So will it have a broader impact on digital advertising business? And in all this scenario, actually, where does Affle stand? Are we taking any headwinds? And the last thing would be, our pipeline continues to remain strong as we are more focused towards mobile ads rather than display ads.
I think the first thing about recent weeks and commentary, largely talking about developed markets, U.S., Europe-based commentaries that are coming out, it's important to note that Affle's exposure to Europe is negligible in U.S. or developed markets, and all is not ad significant, because we are deeply anchored on global emerging markets. And in the emerging markets, especially in markets like India, Indonesia, Africa, LatAm, there is -- the penetration of advertising into digital is still undercalibrated. So we are seeing that in these markets, the average -- let's say, the total ad spend is 100, only 25 out of the 100 is going to digital. And that needs to grow to 50% over time, to be even sensible. So digital is still catching up in emerging markets, even if the budgets are being reduced, even if that were to be true in emerging markets, we think that the digital advertising will still continue to see significant growth.
So if the average growth of the industry was expected to be in the 30%, 35% range, let's say, it will still be in the 25% to 30% average industry, it will continue to be a strong growth momentum for digital in emerging markets. So don't compare that with the commentary of Europe and U.S., or companies which are talking about traditional media advertising, as well as digital in one breath. So make that distinction. Developed markets and developing emerging markets will have a clear difference in the way they respond to what's happening in the world today on the macro factors. Within that, digital spend will be way more protected than the traditional spend, either the traditional will get reduced or it will move to digital as the case might be, between developed and emerging markets. So there, we are in a pretty strong footing.
As far as tech startups and tech startups linked pieces is going, anybody running a sensible long-term business should balance what they're spending on advertising versus what their revenues and profitability is. So I think it's a good sign, that a lot of these startups are looking at being way more sustainable on financial fundamentals. And that is a very welcome thing by Affle all along. Even when we work with startups, we always look for those startups which are more sensibly minded in what they are spending.
Now as far as Affle is concerned, we have a large part of our business anchored on -- enterprise customers are not going anywhere anytime soon. For next -- typically, we look at -- when we look at our customer mix, we see at least 80%, 90% of customers should be there for next 3 to 5 years. So we are also selective on who we are scaling up on our platform, that's one.
Secondly, in terms of the conversion focus of our business model, the ROI linked conversion focus, it is deeply in line with what the advertisers are doing, whether traditional advertisers or even the startups, who are becoming more ROI-centric. They are not -- they're never going to say that they're going to reduce their sales. And therefore, if Affle is delivering them ROI linked conversion, it will be almost like wrong for them to say, okay, I'm going to reduce the number of conversions that I am getting from consumers. That's not what anybody is saying they will reduce. What they're saying is, I want to get as many conversions as possible with consumers, with a more effective advertising spend. And therefore, Affle's propositions and business models are becoming more compelling to customers who are tightening their control, right?
They are saying, I want a bigger bang for my buck. I want to get the same kind of revenue with less advertising, right? And therefore, what this means is, is that they must embrace a conversion, like the ROI-linked business model, and therefore, I tell my sales teams very clearly, that in these times, this is where our business model, our business proposition becomes way more compelling than ever before. And so let's go out there and win. And so I remain bullish about our growth.
Now of course, had the macro factors not been what they are, maybe they could have been even more broad. So are we completely insulated? No. But will we still continue to deliver superior than industry average growth. That's what our pipeline says. That's what our strategy says, and that's what we are going to execute on.
We have a next question from the line of Mayank Babla from Dalal & Broacha.
Sir, my first question is regarding Jampp. So just for a little more clarity for the year-on-year comparison. Could you give us the contribution from Jampp, as far as the user conversions and the average CPCU rate is concerned?
Well, I would give you a financial overview that Kapil will provide shortly. But on a qualitative basis, I can tell you that the acquisition of Jampp on a year-on-year basis has seen a significant integration benefit together with Affle, where now we are seeing Jampp almost operating close to 10% of profit on bottom line contribution from its business, at the end of completing 1 year together with us. And also, we are seeing a meaningful level of momentum towards scale growth with the differentiated propositions, with the ability for them to pitch conversion linked CPCU-based business model.
So we are seeing a positive, qualitative, as well as quantitative impact that we have had in the last 1 year. If you're comparing it specifically from Affle's organic growth perspective, I think in my commentary, I specifically mentioned, that we have seen a 45% plus growth in our revenue on an organic basis year-on-year for this quarter, that is excluding Jampp, which is consistent with what we saw even in the -- some of the previous quarters. So there is robust organic growth in our business. And 90% plus is anchored on the convergence linked business model.
If you see the math of our business, revenue grew this quarter 127%. Now if you look at the further breakdown of the math, the conversions grew about 90%-plus, right, 95%. And the CPCU rate grew around 25%, used to be INR 40-odd, it went up to INR 50 plus. So the growth in revenue is powered by 2 drivers: number of conversions, as well as the CPCU rate. Now the conversions are growing well. The CPCU rate is growing well, therefore, revenue is growing 127%. In terms of organic growth, we have seen 45%. We're mapping it year-on-year. You take last year's data and you map it up. The number of conversions growth in non-Jampp would be higher, because the CPCU rate is increasing more because of Jampp. The conversions is increasing more because of the organic business. I hope that answers your question. Kapil, if you want to add anything to it, please go ahead?
Yes. You added Anuj the contribution on the bottom line, approximately 10% from Jampp, both in terms of EBITDA and PAT margins is inching up slowly, as desired, from the 0% EBITDA when we acquired Jampp. So we are on track on long-term sustainable EBITDA trendlines on Jampp also.
Got it. And sir, my second question is related to Google and Android. So recently, I was just reading that Google has stopped the unexpected pop-up ads inside the apps from next month onwards. So a user will only be seen as if he chooses to -- he or she chooses to get some rewards in games or in any other app. So I just wanted to understand from you, what sort of impact this might have, whether it be on a revenue or inventory or data costs, and your view on that?
I think in Kapil's commentary, he mentioned rather explicitly, we are a very diversified and balanced business, whether in terms of geographies, verticals, use cases of how the consumer engagement is happening on device, in app and programmatic, and all the entirety of the consumer journey that Affle captures, it's -- what Google is talking about, is going to impact some percentage of the consumers' engagement on gaming only, all right? And gaming is one of our top 10 verticals, and in those top 10 verticals, this mathematically is well below 10% overall as our contribution. And within that, one of the use cases of gaming is being tweaked by Google, this cannot be done and that can be done.
Now I believe the impact of that would be that, we will see much greater conversions and engagements with the users in any case on the more meaningful rewards-linked conversions, versus the inclusive kind of ads that come, that actually irritate the consumer. So what Google is trying to do is, improve the experience of the consumer on the device and reduce the irritation factor, right? When the ad comes right in the middle of your game, a big screen ad comes and you want to close it, you can't close it. I mean that kind of advertising is, I mean, bordering on spam-ish advertising. So what they're trying to do is, reduce the spam, and I don't think it has any material impact to us, because the impact would anyways be to those who were focused disproportionately on gaming. And Affle is not focused disproportionately on any one particular vertical. So there's nominal, if not, no impact at all.
I have a couple of more questions, I will get back in the queue.
Just one second. I'll take the opportunity, by the way, for those of you who have read, Google has also announced that they are no longer deprecating the cookie on their browser in the time to come. This was a talk for years, Google was saying, I will do it in 3 and 4 years. Apple did it on the Safari, I don't know, maybe 4 years ago or 3 years ago. And everybody is waiting Google will do it, will do it. Well they said it will do it, but they will do it eventually, and I'm not adding any more color to it than what the facts are. And I think that the point is that, Google is going to fundamentally do everything that supports the advertising revenues. I think all of us understand that.
So just one very small question I'll squeeze in...
I request you to come back in the queue, sir. We have a next question from the line of Arun Prasath from Spark Capital.
Anuj, you gave a broad color on the advertising market -- so Anuj, my question is on the overall market -- advertising market, especially in the emerging markets. You spoke about how the emerging markets ad spending is strong. But if you -- again, if you split this ad spend in the emerging markets into multiple categories, one category which is seeing a lot more growth, is the short video platforms. How Affle is placed in this value chain? Are we able to participate in or be part of this spending? Or are we yet to develop any capability to deliver ads within the short-video platforms?
See, for us, video as well as the theme that we have around video on connected devices and connected TV and connected households, is a very, very strong theme. Now where are these short videos being consumed? The short videos are -- if I'm not wrong, over 90% being consumed either on mobile devices or on the connected TV experience that people are having. And Affle is having a strong play in this area. The overall growth that we are seeing in terms of advertisers shifting their spend towards mobile and digital in emerging markets is -- basically in emerging markets, what was lagging behind is catching up to what the consumers have already caught on to, right? The consumers in emerging markets are deeply connected on the mobile device, and going forward on other connected devices as well, that trend is very, very clear and COVID times have actually accelerated that adoption curve and trend.
In developed markets, the consumer has already moved on and the advertisers have also moved on. In emerging markets, the consumers have moved to digital much more deeply. However, the advertisers are still catching up. So the shift that I'm talking about from traditional spends to much more digital spend in emerging markets, is the megatrend, which will not get slowed down because of macro factors. In fact, when the macro factors become tighter and all of these companies marketing and advertising spends come under a stronger sort of review that, hey, where is the ROI coming? You will see a faster adoption towards digital, and a faster trimming down from traditional to digital. And that if you segmented yes, digital has many formats and Affle is diversified across all those formats, video, short-video inclusive of it. In fact, one of our case studies that we have shown, is talking about video and connected TV and connected households in this earnings presentation itself.
Anuj, just to add to -- we work with short video formats, both on the sites -- the client also, and the customer also and on the publishing side also. Affle has capabilities to place ads in short video formats.
Okay. That's helpful. My second question is more from the Bobble divestment that you have said that in your notes, your accounts, that you are considering the sale of Bobble investment. Our understanding is that Bobble was supposed to help you through getting lot of first-party data. So what has happened in this front?
So let me give -- let me take that question. So our strategic intent and relationship with Bobble is a 5-year long partnership, where we are the exclusive partner with our SDK integrated within the Bobble Keyboard, to leverage the monetization capability. So we can bring the consumer experiences, the consumer recommendations and to enhance the consumer experience, while delivering conversions for the advertisers. Now that is a 5-year partnership. That is -- I mean, that is obviously more anchored, together with the fact that we also are a significant investor. In the last 3 years, we have been the only investor who's invested in Bobble, whether it's year 2020 or 2021 or 2022. Now in 2022, we are looking at maybe more investors coming into Bobble, and therefore, there could be an opportunity for us to sell some part of our equity and take a great sort of ROI return on investment on it, while still holding one of the highest investor positions in the company, on their cap table, and continue to be a long-term strategic partner.
What we are also doing -- so the equity ownership position and the commercial strategic relationship are 2 independent [indiscernible] transactions. What we are looking at is also to strengthen our own cash position in the company, by saying, okay, can we -- because Bobble is today an associate company of ours, the 25% ownership that we have earned in Bobble over the period of time, and they're looking at -- the optimal position for us would be to take a minority, but a significant major investor position within Bobble, but not necessarily to bring it -- to become an associate of our company, which as a public listed company, has several other implications on Bobble.
So I think we are very bullish about what we can do on a strategic basis together with Bobble, and that includes leveraging consumer insights powered by data, leveraging the ability to have that touch point 100 times a day to connect with them. But Bobble is not necessarily a company that Affle would want to own, more than a 20% or 51% at this point in time. I'm not closing those possibilities, but at this point in time, our strategic intent is to be more broad-based with multiple keyboard partners, multiple publishers, and there are other keyboards that already work with us. So we don't want to show that we are so deeply involved, that others start feeling threatened. So we want to be deep with Bobble yes, but at the same time, we want to work with other keyboard companies as well around the world. And as part of the plan, it makes sense to keep our ownership at a certain level, and not beyond that.
Just to add to what Anuj said...
Sir, I request you to come back in the queue, please. We have our next question from the line of Nikhil Chandak from JM Family Office.
Anuj, my question was on the same Google privacy norms, et cetera. So if I [ read ] the block correctly, the official block by Google, it's not that they have abolished the plan completely or they kind of plan completely, third-party cookies, disabling third-party increase. The decision has just got postponed to 2024. What I wanted to understand is, if you could specify what impact can this have -- assuming this goes ahead in 2024 or in 2025, for example, sometimes it's very tough to believe that this can't impact the company. We've seen the kind of havoc that got created on meta, because of the Apple -- changes. So it's very tough to believe that, if Google does actually go ahead, maybe with a delay, that this can't have an impact on Affle. So if you could explain how -- what will be the exact impact? Assuming this change happens in '24, '25, whenever?
So first of all, the cookies are only applicable and relevant in a browser scenario, meaning that somebody is going to a website, from a mobile browser or a PC browser and only then a cookie comes into play. Affle's business has almost like -- I don't know, not even like 1% to 2% impact of anything to do with the browser. Our business is almost distinctly on-device partnerships with OEMs, operators in app -- like on apps, which are downloaded on the mobile devices or even on connected TV and working with those apps, either directly by integrating with SDK-API or through programmatic means.
So Affle's business today -- or in fact, for the last 17 years, ever since I started Affle, our business was always on device, in-app, mobile embedded experiences for consumers. It was never about the browser on mobile, because I always felt since inception, that the browser was maybe a little bit too slow. Having said that, the -- even those whose business is on the browser, I believe that by the time, Google is going to implement cookies -- as in replace cookies, it will implement something that will be even more effective and efficient for advertisers and advertising than the cookie. Because Google wants to enable advertising to continue, while addressing the obsolete technology of cookies, if I may call it that. Cookies have been around ever since Internet has been around, and there has been no evolution in that for almost 25, 30 years. This needs to...
So to be sure, none of the changes proposed by Google would have an impact on Affle -- what you're saying?
So the 2 changes that were today talked about on the call, one was on -- within gaming apps, Google is saying that certain types of ads which are intrusive and potentially spam-ish should not be allowed. That has nominal or no impact. Second topic of Google that we talked about today was about cookies, because that's largely limited to websites and browser. I can tell you whether today or in '23, '24, as of today, there is very little exposure that Affle has to anything to do with the browser or websites and cookies. So again, no impact on that.
Any other changes you think -- I'm sorry, I am harping on this, but any other changes, for example, to the Android platform or anything which potentially can have an impact 2, 3 years down the line?
So Google has talked about doing something, which is a diluted or a much more acceptable version of what Apple did last year in 2021, with respect to IDFC and certain changes. And Google has started to talk about doing similar changes many years later than what Apple did. Now that has some implications. However, that implication is at least a few years out, what one can see, if on cookies, Affle has -- I mean, Google has reacted 4, 5 years later or even much more later than what Apple did. Then even on the in-app ecosystem, Google is not necessarily going to accelerate its path, as is evidenced from the track record.
And most importantly, when Affle made these changes in 2021, what did Affle do? Affle went and acquired Jampp, and together with Jampp, we went into the U.S. market with our revised sort of proposition for iOS, and went and did really well in that segment, which means that even after Google -- I mean, Affle did the changes that it did, Affle, together with its newly acquired subsidiary, went into the U.S. market, which is not Affle's home ground, and became one of the top 10 successful platforms in the U.S. market on Affle's revised policy.
So having negotiated Affle changes in 2021 and making it into a business opportunity for us versus competitors, because the fundamental is clear. The consumer is not going away from mobile devices. The advertisers' budget is not going away from digital and mobile. These 2 things are the anchor pillars of our business thesis. Within these 2 things, whether it is privacy laws or whether it is Apple changing something or Google changing something, one thing that they cannot change as the consumer is not moving away from these devices and the advertisers consequently are not shifting the budgets away from these devices.
And therefore, as long as we find the technology solution to implement and create the right ROI metrics, we will continue to thrive versus competition in this business, like we did in 2021 and continue to do in 2022 on Affle's platform in U.S. market, together with Jampp. So we are not nervous about it. And are we immune to it? No. I mean, of course, changes happen. I read every single bit of this progress with deep interest, and we build strategies to combat that and diversify our business to combat that, and we are very comfortably placed, where we are today.
We have our next question from the line of Anmol Garg from DAM Capital.
So just had 1 or 2 questions. Firstly, wanted to understand that in terms from the last 3 quarters, we have not seen any improvement in our gross margin per se. When I'm talking about gross margin, I mean, that data and inventory cost as a percentage of revenue, we have not seen much improvement over there. So do you think that the improvement in Jampp's margin is -- why is it not visible in the inventory cost? And is it because of a decline in the margins of India business? What can be the reason for the same?
No, I think the way you see the ability for improving the margins in Jampp business, is to create much more operational efficiency, in terms of how the technology cost is working as a function of the overall cost and how we are enabling incremental scale up without incremental increase in the OpEx of Jampp, right? So our tech stack is actually leapfrogging Jampp and the acquired business, why only Jampp, I mean, Mediasmart, Appnext and so on, the same playbook as well. You acquire a company that is breaking even. You help that company to leapfrog much further without investing further in cost, because they're leveraging Affle's backbone. Once that happens, the first -- that is the first year because in Jampp, only 1 year has happened, and we still have 2 more years to go before we bring them to the level of profitability that we enjoy in Affle's business organically.
So if you look at -- Affle's business organically is around 25% EBITDA. The acquired business of Jampp was 0% when we acquired them, and now it has come to about 10% on the bottom line contribution and still work in progress. So in -- and how will this work in progress happen in the next year and the next 2 years, there will be a lot of areas of improvements, how to scale up more, how to bring more efficiencies, how to charge the advertiser a bit more, while the data and inventory cost stays the same as a percentage of revenue, it changes because you are now able to charge more, because you're delivering more value to the advertiser for conversion. So how can we increase our price without increasing data. So there are multiple optimizations that have not yet happened with respect to Jampp.
Now to attribute and say that India margin has gone [indiscernible] that is not true. I mean, if you look at on a standalone basis, transfer pricing adjustments across our countries and entities will continue to happen as per the policy, as the audit is approved. But fundamentally, what we are seeing is, the drivers of our growth are more conversions, more consumer conversions, defensible pricing of CPCU rates organically over INR 40, organic plus inorganic over INR 50, the defensibility of our pricing, the ability to scale up on consumer conversions and to attract a diverse range of verticals with a diverse set of advertisers who continue to want to spend on this business model. That is what is driving our revenue growth. And our margins -- I mean, last several quarters, when you look at it, the efficiencies are absolutely there. Even between Q4 and Q1, we have seen 17% growth in EBITDA on a 10% growth in revenue. So even if you take the immediate sequential quarter, you see that there are margin efficiencies that are coming on the bottom line.
The other aspect that I want to touch upon and take the opportunity is that, what is exactly data and inventory costs. While it is a line item on the P&L, is fully expensed out in each reporting period. Data and inventory is also an investment, that Affle is making in our 2 Vs vernacular verticalization strategy. I mean when we say vernacular, verticalization, what does it mean? At just words that sound good. The [Technical difficulty] how we are investing in the deeper data and inventory costs. Our data systems, our DMP platform is verticalizing the knowledge and intel. It is building the intent of the consumer on the vernacular stack as well, to see how we can go deeper with consumer recommendations and engagements on that basis. To do these 2 things, we've got to invest in data and inventory costs. We cannot just say these strategies and then not follow it up. So we are actually following it up.
The correct way to account for data and inventory, which I believe in strongly, but I don't think the auditing and the accounting standards are up to the mark to do that, and complicate life too much for everyone to understand, that some percentage of the data and inventory cost is actually an investment, is actually a balance sheet event, it's not a P&L event. And that investment that we are making into our strategy, shows that we are bullish about how the future growth would come. Otherwise, one would not invest. I will report a higher profit in the short term and not invest into our strategy, by having lesser data and inventory costs. So please do take this in context, that we are fully expensing it out, but it has an element of investment in it.
Anuj, this is Kapil this side, just adding to it. A, you have to see the 3 quarters together. India percent did not go down in quarter 4, equal to what international markets went in, because Q3 is the highest quarter. So largely, it is a balancing act between the movement of Q3 to Q4 to Q1, where the budgets move, and this will be in the first quarter. Secondly, we don't see this as a decline. It's because we had a nice quarter 4 as compared to international, India did not show any dip in quarter 4 compared to quarter 3. So it is in line with overall numbers.
Second, is the margin volume, gross margin [ is staying ], it has 2 implications to it. One is the cross pricing, which is getting affected because a few operators have stopped billing from India entities right, and they are now billing for international entities. So they get billed to our international subsidiaries and then there is a cross charge to it. So there is a chance of rising cost, which is also going on. It's not just the factor of the margin on the standalone. However, because of the geopolitical reasons, few of these OEMs have stopped billing from India entities. They say that we don't want to operate our India entities, and that is why we are getting incorrect inventories, who are subsidiaries based out of India.
We have our next question from the line of Rahul Jain from Dolat Capital.
Congratulations on a very strong performance. One structural question, which is on this Apple privacy impact, that we are hearing from several publishers, that the monetization on the store has been impacted. So I understand that you've been growing on this because of your size and positioning. But more on an overall industry sense, who in your view would take the hit eventually? Is it the publisher side or is it higher customer acquisition cost with the advertisers, or the ad growth margin would be the biggest hit? Second thing, on the Jampp side, we've been growing very well, so if you could help what is driving our momentum here? Is it more about attractive pricing or better conversion efficacy? And the clarification on Jampp margin, is it 10% margin or 10% contribution?
Okay. We have 3 questions. I'll try to answer all of them. On iOS, I think the changes that you are seeing on the iOS platform, while it may happen at an ecosystem level. I strongly believe that they were very sharply pointed at the big technology companies or the big advertising tech companies like Google, Facebook and the likes. I believe that Apple has been kind, in the way they have opened up their back-end platform capabilities and the kind of APIs and ability for platforms like us to integrate with them, I think we have seen a fairly good and transparent and sensible approach there. So we believe that the changes that are happening in iOS, the biggest people to take the hit would be the Googles and the Facebooks and the likes potentially, and not be relatively, let's say, smaller or upcoming stronger sales like us.
And with respect to overall growth that we are seeing in digital advertising from brands who are working with us over industry verticals and so on, I believe that the fundamentals of a unique differentiated business model, which is giving ROI linked conversions to the advertisers, is a key factor in terms of how we are achieving outcomes.
The second is that, we focus on emerging markets disproportionately, and the competitors are -- all the competitors that I can see as credible technology platform players, who have invested meaningfully or have been around long enough to compete with us meaningfully, are all focused on developed markets disproportionately, and they have a relatively weaker focus or emphasis on emerging markets, whether it is in their R&D plans, whether it is in their teams that they are signed, or the strength of the offices that they open in the emerging markets.
So it is interesting for us to go and compete with all the top global names in the ecosystem in emerging markets, where we are the strongest player, and then we have all these strong looking names, but they are weaker in their presence, and therefore, we are able to beat. So unique business model and clear competitive advantages in emerging markets, make us a strong player to continue to win greater market share versus industry average growth rates in emerging markets.
And I believe you had a third question, but sorry, my memory has got...
And that is -- Rahul, that is 10% of the margin on Jampp business.
So that is called EBITDA margin or contribution to EBITDA? So that is contribution to EBITDA?
[Technical difficulty]
Okay. So if we have INR 100 EBITDA, INR 10 came from Jampp?
No, no, no. INR 10 of revenue [Technical difficulty].
Okay. Jampp EBITDA margin at 10%.
We have our next question from the line of Mukul Garg from Motilal Oswal Financial Services.
Anuj, just if we see the impact of Apple's IDFA and the recent macro environment, one thing which is picking up quite smartly is this plan of putting out first-party ad networks by multiple properties, multiple large datasets, which are out there in the world. Can you just share some thoughts on how you see this impacting the market as a whole, because this obviously puts out a lot more credible and highly correlated data out in public domain, which can improve the efficiency of the ad networks? And also whether this will enable relatively newer startups in the space to catch up to the large data sets, which we have collated over the last many, many years?
First of all, -- if you look at emerging markets as the focus, Apple devices or total ad spend on Apple would be negligible, well over 90% of what is mobile in the emerging markets is Android. So what we're talking about, when we talk about Apple IDFA or even the macroeconomic factors, we must straightaway take the context to developed markets, Europe, negligible contribution to Apple, not worried at all. U.S. market is a very large market and Apple, it is very small as a percentage, even within Apple scheme of things. And the numbers are so tiny, that suddenly the macro factor is not impacting what Apple is making in that market today.
So I think when you take the question in the context of Affle, it becomes a question that is more intellectual for us, to look at what's happening in the market. Not how is that impacting Apple so deeply, yes? Because Apple as a percentage of the U.S. market, which is a small percentage of Apple's business. And as a percentage of total U.S. market is even more negligible. There is enough Android business in the U.S. market for Apple to go and win that, and still continue to grow disproportionately in the U.S. market. So I think all of these factors have to be taken into account.
Now is Apple IDFA change introducing new set of quality data into the hands of the market, the answer is no. In fact, it is clipping the wings of accessibility of data through consent of the consumer for, and therefore, only a few select players would have that. Having said that, what they have crippled is Facebook and Google's ability to go beyond their own first party, on their third-party networks that they were doing, right, with other publishers and so on and so forth. That's the part that has impacted these guys quite a bit, right? So I think there is a lot of assumption there in saying, that what Apple IDFA is doing is to bring out quality data sets into the market, that's not true. These quality data sets, which are first-party data sets, already existed in the market with each of those publishers.
Now only those publishers who have consent, will have those data sets. So data is becoming more premium versus commoditized. Data is becoming harder to gain, than to -- say that it has become easily accessible to everyone. At least that's as per my understanding. But having said that, for any investor who is not keeping pace with this conversation or the depth of this conversation, must know one thing, Affle is disproportionately anchored on emerging markets, over 80% of our business is emerging markets. Even in the developed markets, there's almost zero impact of Europe.
So any worry about recession or deeper impact in Europe, please keep that out of Affle's sort of forecast and plans. Any impact on the U.S. market, please know that or -- in combination with IDFA, Affle is very tiny with respect to how big the U.S. market is. And we are still aggressive out there. Because when the base is small, I think all of us agree it's easier to grow. And our base in the U.S. market is nothing almost.
And so even if we are in the U.S. market in a very small way for us to grow in the Android side of the ecosystem itself where, we come across as the strong contenders in the emerging market leaders, there in the U.S., we are still able to win business on Android. And on iOS, we have been in the top 10 in the first year after the iOS changes. So we are quite bullish and confident. We are not completely in [Technical difficulty] changes, but we are in a very, very privileged position versus most competitive in the market.
Anuj, as a follow-up, you said that the first-party data is becoming more constrained or like people need to pay for -- to access those data sets. Is that something which impacts us as a business? Although we have collated a lot of data also. And also, someone is willing to invest -- spend for those data sets, and I'm -- again, like I'm focusing on emerging markets because those data sets will emerge here also in due course. Is that something which worries us?
Not really because the islands of datasets never lead to the kinds of insights that we are talking about. In emerging -- first of all, the data sets that you're talking about are largely focused on iOS, consent based, IDFA based first-party data set, okay? They existed even before. Earlier, the consent wasn't really as clinically required. This time, the consent is clinically required. So they are becoming a little bit harder to get.
Now coming to emerging markets, there is no such scenario, because 95% of the market is Android. iOS contribution on devices is like 5% or lesser. So anywhere in emerging markets in the world, we find that 95% of the data set is -- no change is happening right now, at least for the next several years. Now where Affle is unique, is the fact that we have data across, let's say, we talk about India, we have data over 600 million connected devices. And this data is deeply verticalized across the top 10 verticals and vernacularized over 30 different languages. When we talk about this depth of data across industry verticals, across this kind of wide consumer demographic segment, it is really hard to get. You can't just go and say, okay, you go to one publisher or one particular party and buy that data. Even trading in that data, the consumer privacy laws are -- I mean, they're not allowing some free trade that anybody can go and buy and sell data, right?
So the access to that depth of data and information, and the depth and breadth of data that we have over all these years of serving hundreds and hundreds of advertisers across these industry verticals, and therefore, learning which consumer cohort is likely to convert for which particular vertical and what is the correlation between them, there is no [ short circuited ] way of doing it. Even if I were to tomorrow start another startup all over again with all my experience in Affle, I'll take at least 3 years to get to reach any position to give a fighting chance, to have some budgets run out of Apple. So not eliminating the possibility. I'm just saying it is hard for somebody even like me -- for somebody to step out and do. IT takes time. There's no shortcut to it. It's not like suddenly, it will happen.
This is Kapil from Affle. Just to clarify, because the question was not fully understood, by Rahul. Just to clarify that the EBITDA margin from Jampp business is about 10% and contribution is less than 20%. So I hope it is very clear, because the question was getting confused between the contribution and the margin. So the margin is less than -- margin is around 10%, and the contribution is less than 20% on the EBITDA.
We'll take our last question from Mr. Sumail Choksey (sic) [ Sushil Choksey ] from Indus Equity Advisors.
So my congratulations on your third anniversary milestone and my commendations to Mr. Khanna Sohum and the rest of the management on another steady set of numbers. So I had a few questions, but I'll just ask 2 of them together. So you know at Affle, we've pursued a fairly robust M&A strategy. We've got many new acquisitions into the fold over the last few years, and we're likely to do so in the future. Now in this regard, what sets Affle apart from its peers in terms of being able to successfully integrate these acquired enterprises, both into your ecosystem and culture so well? Has there been any prime catalyst for this. And I'm sure there have been some challenges faced in the integrations as well. So what has been the chief learnings from these, and how have they prepared you all for the future? And on a quarter-on-quarter basis, there has been a slight dip in revenues from India, has this been due to a lack of demand or seasonality? I'm guessing, if it's seasonal then it's likely to reverse in the coming quarters.
I'll take your first question on the M&A strategy, and then I'll let Kapil answer on the second one. Now the reason why our M&A strategy has worked out so well, especially with respect to Mediasmart, Appnext, Jampp, which were acquired outside India, culturally different from us. One is in Spain, one, the founders Israeli, the other one is Latin American founders and entrepreneurs. What has led to success across such a diverse sort of -- set of dynamics and during COVID times.
So the first one is -- the first reason for it to be strong is that, we have a very clear Affle 2.0 consumer platform stack, which we had then presented together with Jampp, Appnext, Mediasmart in December 2021 to all our investors and analysts. And this very clear strategy on our platform stack, enabled the playbook to be very seamless to bring an acquired a set on board, integration steps are clear. The acquired set sees an immediate benefit and the value system starts to unroll, without becoming too intrusive or in the face of anyone. That's step number one.
So if any other company that tries to do an M&A strategy and doesn't back it up with a clear technology stack and a non-intrusive way of bringing value by bringing things together, they will have a tough time to do it. So this is the one reason that makes it very simple. And that is more about technology and process, less about people and culture.
Second, in terms of people and culture, we have been extremely conservative and very, very careful. So if you look at the -- and the point that I'm making, there is, exceptionally long courtship period to iron-out everything that could go wrong in terms of people and culture, prior to getting married, okay? So think of it in -- I don't know, with the analogy of marriage, is that you date someone, you live in together, you make sure everything is clear, fully compatible, then let's get engaged, then let's get married.
So deep and long courtship periods. In the case of Jampp, 8 years. In the case of Mediasmart and Appnext about 5 years to 4 years, each deeply connecting with them. And therefore, even during COVID times, we had the confidence to cross the line and to sign on the dotted line. So that's second reason.
And of course, the third reason is that Affle's culture and Affle's own success, creates a desirability and a pull factor, where all of these companies are happy and holding pride in its association with Affle, right? So I think the way we conduct -- the way they perceived this prior to signing the deal and how the employees perceive us after 1 year or 2 years or 3 years of the deal, I think the -- we have risen in the internal credibility perception and build pride for the Affle brand. And that full factor keeps people together. So I think these are the 3 factors that have led to a robust M&A success. And we've been -- it may seem like we've been aggressive, but I feel we have been conservative and very careful and therefore, successful. That's on question number one.
On question number 2, Kapil over to you to give a...
Sorry, I don't mean to interrupt -- just the last part of that question, I wanted to ask about again. I'm sure there must have been challenges, what are your chief learnings then from those? I mean, have they prepared you better for the future? In terms of the integration, I mean, the challenges?
So I have to admit that the expectation of challenges was always high, when we were nervous, even after doing these long courtship periods, having the confidence to do the deal is one thing, but I cannot eliminate the deep nervousness that I was also feeling entering into these transactions. And I have to admit to that. And in context to those nervousnesses around the challenges that will come about, or may come about, the eventual challenges that did come about, were actually almost insignificant, almost insignificant.
So what kind of challenges come up? Well, sometimes there is an expectation of what kind of long-term value creation that we can align as a path? Like we may want a 10 years togetherness plan. Well, most people don't think 10 years in our industry. I mean, most of the start-ups or entrepreneurs are thinking maybe 1 year, 2 years, 3 years, they don't even know how to forecast beyond that. Affle thinks 10 years, right? When we started this year 2020, Affle 2.0 was our strategy from 2020 to 2030. So graduating people to think that and to think it authentically, not just oh, we had to give something because Anuj is saying, no. To actually believe guys, we are going to be around together for that long, and 10 year's path is really fast.
That level of maturity and bringing that authenticity to plan for 10 years, it is never easy even in an organic situation, like in your own management team, to get people to think that far and deep sometimes is a challenge. And dealing with the CEOs and entrepreneurs who have already got fixed in their base over the years, to expand that sustainable long-term thinking, that is still work in progress. But I am at it, and I'm good at it, so I know I will get through it. But that is the challenge that I want to talk about, and I'll spend more time on it prior to the acquisition going forward than post.
Sure. I think the second question was on a quarter-on-quarter basis, India has seen a slight dip in revenues. I mean, has it this been due to a lack of demand, or is it seasonal in nature? I would guess if it's seasonal, it's likely to reverse in the coming quarters?
So I answered this question previously also. It is to be seen in the light of Q3 to Q4, there was hardly any movement from Q3 to Q4. And generally, the Q4 is lower than the Q3. And that is where you have to see that it is in line with that. The Q3 to Q4 momentum was lower for the international market and India was resilient in Q4, and it is in line with that only. There is no other way to read it.
I now hand over the call to the management team for closing comments. Over to you, sir.
Well, thank you so much, everyone, for joining us today on our third IPO anniversary. I did mention earlier that we celebrate today with 385,000-plus shareholders, and it is deeply humbling, very inspiring, and it instills clearly greater responsibility, accountability on our shoulders to deliver the sustainable cash flow positive long-term growth for Affle. So I'm looking forward to the journey ahead. And like I mentioned, we think long term, we are making all our teams think long term as well, and we look forward to meeting you as the journey unfolds. So thank you for believing in us and for supporting us.
Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.