Affle (India) Ltd
NSE:AFFLE
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 013.6
1 701.05
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Affle (India) Ltd
Earnings Call Analysis
Q1-2025 Analysis
Affle (India) Ltd
During the first quarter of FY 2025, Affle India Limited achieved remarkable financial metrics, achieving the highest revenue run rate to date. The company reported a revenue of INR 5,195 million, a significant growth of 27.8% year-on-year and 2.6% quarter-on-quarter. This growth reflects a strong consumer-centric focus and broad-based adoption of its products, suggesting a robust operational strategy that resonates with both existing and new clients.
Affle also reported an impressive quarterly EBITDA of INR 1,047 million, a rise of 24% year-on-year, translating to an EBITDA margin of 20.1%. The profit after tax (PAT) stood at INR 866 million, marking a 30.8% increase. This strong performance indicates not only a solid revenue base but also effective cost management and operational efficiencies contributing to margin enhancement.
Breaking down revenue sources, India and emerging markets contributed 73.2% to total revenue, with a year-on-year growth of approximately 24.8%. Developed markets experienced a remarkable growth rate of 36.9% year-on-year, contributing 26.8% to the total revenue. This blend of emerging and developed market performance illustrates Affle's successful navigation through diverse geographic segments.
The quarter also marked the completion of the strategic integration of all acquired businesses, resulting in a cohesive management structure and increased operational efficiencies. The management expresses confidence in this integration to enhance competitive advantages and positions Affle for sustained long-term growth, with a guiding projection of over 20% annual revenue growth in the upcoming years.
Affle is venturing into premium inventory investments targeting high-value users across various platforms, notably in Connected TV (CTV) and mobile channels. This strategy aims not only to broaden its customer base but also to elevate its CPCU rates. Current CPCU growth is around 3-4% annually, but there's an optimism for a lift in rates due to strategic premium offerings.
Affle reported an effective tax rate of 8.7%, representing a shift indicating normalization after previous fluctuations. Management anticipates this as a stabilized rate moving forward, fostering confidence in their financial health and providing a clearer outlook for profitability.
Ongoing efficiencies in operations have led to a relatively modest increase of only 4% in employee expenses. The operational strategy appears to prioritize high returns on existing human resources, indicating that the company does not foresee a significant increase in workforce size despite ambitious growth targets.
Looking ahead, the company maintains a focus on sustainable growth, with a clear strategy to continue expanding margins and enhancing shareholder value. While there are no imminent plans for acquisitions, management remains open to strategic opportunities that align with their growth trajectory.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Affle India Limited Q1 FY '25 Earnings Conference Call hosted by Anand Rathi. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Shobit Singhal from Anand Rathi. Thank you. And over to you, sir.
Thank you, Neha. Good morning, everyone. On behalf of Anand Rathi Institution Equities, we welcome you all to Q1 FY '25 Conference Call of Affle India Limited. I take this opportunity to welcome the management of FL India Limited represented by Mr. Anuj Khanna Sohum, who is Managing Director and CEO of the company; and Mr. Kapil Bhutani, who is the CFO 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 21 of the company's 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, Anuj.
Thank you. Good morning, everyone, and thank you for joining the call today. As just all of you are keep paying in good health. It is a matter of great plan that Affle has completed 5 years as a publicly listed company with remarkable service and wealth creation for all our stakeholders and consistent overachievement on the pre-IPO expectations. Over the last 5 years, we achieved [indiscernible] growth in revenues, [indiscernible] growth in profits and then [indiscernible] growth in our market cap. This performance was a result of our disciplined execution focus on long-term strategic initiatives to consistently enhance our consumer-centric platform offerings, verticalize our variability through its high-growth industries and leverage acquisitive synergies successfully.
In Q1 FY 2025, we completed the strategic integration of all our acquired businesses. We have achieved a pivotal moment in our integration efforts as 1 cash-generating unit and a professionally managed business with the top leadership team of 20 CXOs and VPs globally. We have successfully consolidated all our business and platform operations with our hands-on leadership providing direct oversight that's creating a cohesively managed global business. This has resulted in robust strategic synergies, cross-platform efficiencies that fortify our market position. and demonstrates the strength, control and commitment of Affle's leadership to drive continued long-term growth.
Turning our attention to industry trends. One of the notable development has been [indiscernible] recent decision that it will not deprecate third-party cookies. YouAppi was always immune to dedication of cookies as our business is focused on in-app and form device more experiences as opposed to browser-based X. However, Google has clearly indicated that even after 4-plus years since it first announced that it will deflate cookies, there are complexities and challenges associated with its own privacy initiatives. Consequently, Google's privacy and board project is also delayed.
In 2021, Apple transformed the iOS privacy changes to its competitive advantage in both developed and emerging miles. So we are well prepared to navigate any ecosystem level changes as our expanded IP portfolio of 36 patients includes futuristic gen AI use cases and the platform is previously compliant by design.
Speaking of Q1 FY 2025 numbers, we continue to exceed our performance targets. This quarter, we have achieved our highest quarterly revenue run rate, highest EBITDA and consumer conversion to date. We delivered revenue of INR 5,195 million, a growth of 27.8% year-on-year. We continue to enhance our consumer-centric platform offerings progressively delivering quarterly EBITDA of INR 1,047 million, and a PAT of INR 866 million. Our CPCU business delivered about 90.8 million conversions during the quarter at a CPCU rate of INR 57 that helped us achieve CPCU revenue of INR 5,177 million, an increase of 37% year-on-year. This growth is driven by the broad-based adoption of our CPCU model across our customer base and its application to premium use cases, further solidifying our overall value proposition.
Our strong anchoring across India and global emerging markets continues to be resilient, and it contributed 73.2% to our quarterly revenues. Our growth for India and emerging markets combined was about 24.8% year-on-year. The market tailwinds remain intact, affirming our positive outlook for continued growth across India and global emerging markets. Our growth in developed markets was about 36.9% year-on-year, and it contributed 26.8% to our quarterly revenues. We are strengthening our foundation through continuous enhancements to our consumer platform tech stack and are confident of sustaining the existing growth momentum, continuing to share our customer success stories. This time, they have included 3 test series, which are focused on digital best financial investment in India, direct-to-consumer fashion retail in international markets and BigCommerce as an emerging vertical in India, delivering our generative AI solutions.
As we look ahead to the rest of the financial year 2025, we are poised to further accelerate our growth trajectory with gradual increase in operating profit margins, and we'll continue to deliver greater value to all our shareholders.
With that, I now hand over the discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you, and over to you, Kapil.
Thank you, Anuj. Wishing everyone a good day, and all of you are keeping safe anyone. We have commenced financial year 2025 on a positive trajectory to continue quarter 1 revenue at INR 5,195 million, against INR 5,195 million on a consolidated basis. and delivered a growth of 27.8% year-on-year basis. Sequentially, our revenues have increased by 2.6% quarter-on-quarter basis. Further building Affle are exceptional growth on quarter 4 financial year for performance. On a stand-alone basis, India grew by 19% year-on-year, and on adjusted basis, India growth was about 5% year-on-year. And on a consolidated basis, our revenue grew by over 20% organically year-on-year. Overall, we had broad-based growth coming across industry verticals and across our markets.
During the quarter, India and emerging markets contributed 73.2%, while developed markets contributed 26.8% to our revenues. Our business continues to be improved momentum driven by our integrated platform and product strategies, leveraging upon dynamic digital ecosystem. Thus, we achieved the highest ever quarterly EBITDA of INR 1,047 million in this quarter, a growth of 24% year-on-year basis and 5.7% on a quarter-on-quarter basis. We achieved EBITDA margin of 20.1% delivering a strong operating margin expansion. In terms of OpEx, our data inventory costs stood at 6.6% of our revenues from operation in this quarter, while you continue -- while we continue our platform scalization onto [indiscernible] and touch points and deeper ecosystem partnerships. Our past investments in human resources, coupled with integrated team strategies have provided us efficiencies on employee costs for the last 2 quarters, thus normalizing [indiscernible]. Our other expenses stood at 7% of our revenues versus 7.8% in quarter 4 financial year '24. This, again, is on the back of past investment in sales and marketing costs. Over the last few quarters, that has yielded results without further increase in marketing costs in this quarter, thus growing our other expenses down by INR 32 million sequentially. We achieved profit before tax of INR 1,066 million in this quarter, an increase of 52.1% year-on-year basis and 6.4% on a quarter-on-quarter basis. Our profit after tax for the quarter was at INR 866 million, marking an increase of 30.8% year-on-year. Notably, our effective tax rate stood at 8.7% this quarter, a significant increase on both year-on-year and quarter-on-quarter basis as we had guided over the past 2 quarters. Normalizing our part for higher tax will demonstrate sustainable profitable growth, underscoring robust robustness of our financial help.
Moving forward, we see this effective tax rate to be a new standard for us. We continue to prioritize efficient working capital management. As such, there were no material changes in our collection risk. We remain confident of our forward growth trajectory and as we advance our strategic goals and invest to expand our market presence.
With this, I end our presentation, let's please open the floor for questions.
[Operator Instructions] The first question is from the line of Shobit Singhal from Anand Rathi.
Congrats on good set of numbers. I have 2 questions. first 1 is top verticals contribution has increased 95% from 90% earlier. So which metical vertical led this growth in current quarter?
Thank you for your question. Yes, we are seeing a very broad-based growth overall. But I would say that the growth in the gaming vertical, both in emerging markets and the better markets have been [indiscernible].
Okay. And sir, second 1 is how the growth in U.S. market and emerging market shifting up except India. And if you can just provide growth rate in those emerging markets and outlook that you can provide?
I think [indiscernible].
Sorry to interrupt, sir, your voice is breaking.
Okay. My connection -- can you hear me better now?
Yes, sir.
Okay. All right. Our overall growth across -- on a consolidated basis, organic growth this quarter has been over 20%, and that is really positive. And we're also seeing India is growing in a sensible way. We are growing well in India plus emerging markets overall in global markets. developed markets because of the pullbacks and the effects that we saw in the previous 1.5 years period, I think we are seeing now that we are moving in a much stronger way forward. So you're seeing perhaps higher growth at this moment. But if you are looking at modeling our company for you had, I would think that 20% both on top line is a sensible way to model a company at this moment, and we will continue to improve our margins, so hopefully deliver better growth on the bottom line.
Our next question is from the line of Raghav Behani from Citigroup.
Am I audible?
Yes, sir.
So I have 2 questions. One is employee expenses have grown just 4% Y-o-Y, somewhere in that range. What is your outlook on employee expenses going forward?
I think Kapil's commentary had mentioned that because of the integration and consolidation that we have done globally for our businesses in 1 single cash-generating unit. We have seen significant efficiencies coming in. So yes, I think it top-performing people have obviously got healthy appraisals and bonuses and so on, but we don't need to grow our employee base as much, and there has been some efficiency. And also, while it may not have come across as [indiscernible], we are adopting the new technologies as a scalable platform really well. Gen AI not only has been adopted in some of our product propositions to our customers, 1 which has been mentioned in the case study result in this earnings presentation. But also within internal operations, we are seeing significant efficiencies coming from that as well. So as business expands, I would expect to keep our employee expenses largely flattish, at least for the foreseeable future. And you would see much higher growth in revenues and a more flattish, let's say, growth in the employee expenses.
Now another question since other emerging markets and developed markets are growing faster than India. And Affle is also investing in premium inventory. Do you expect acceleration in the CPCU rates from the current 3% to 4% annual growth that we are seeing?
I think it is possible to see some lift of that. But given that you also pointed out in your question that we are also investing into premium inventories, I see that effect being utilized from a margin perspective, right? I mean so I think overall, the way Apple is strategizing itself, we are going more and more opinion in the way we are working with different strategic platforms, be it the app stores or the alternate app stores, the way we are working deeper with our partners with multiyear plans and product initial you will see a better PC premium pricing, and we would be able to work better in the market to attract the top dollars. Hopefully, helping us to achieve the higher margin that we intend to deliver because margin expansion is an important execution focus for us for the next few years.
Okay. Congratulations on the good quarter.
Our next question is from the line of Vijit Jain from Citi Group.
Sorry, just following up on my colleague's question a little bit. I was just wondering, there was this news around TCL partnership with BDSmart towards the end of the last quarter, right? And so I'm just wondering, is that what you are referring to when you talk about investing in premium inventory? And therefore, 1 should look at that as impacting your inventory costs and data et cetera, right now with the hope of higher CPCUs down the line?
This is just 1 example. So the TCL partnership like for the benefit of those who don't know, is 1 of the largest CTV Android makers in the world. globally. Maybe in India, they're still coming up, but in other markets, they are clearly a market leader in terms of the Android TV segment. And therefore, these kind of partnerships are important. I'm not suggesting that this is the only one. There are several parties that we are doing and investments that we are making. You would have seen that we mentioned in the previous earnings call that we're working with the app stores of OEMs, we are working very strongly inventories and pushing, let's say, Apple and iOS as a platform across all global emerging markets, including in India because the share of those devices going up and those are premium segments. Like what does premium mean? Premium hearings that we are going for the highest value and highest value wallet share of the consumers. And to go to those consumers, you need to go into high-end devices, you need to go into CTV, you need to go into iPhone and iOS ecosystem. Even on Android [indiscernible] need to find those premium tech points where we can get higher value conversion. Now you get higher value conversions, this is a core differentiation in the market because when the advertisers and the agencies have no choice, but to fully adopt our platform and to pay a premium CPCU rate, which is what we're talking earlier. And in the long term, we think this strategy is 1 that will provide defensible, sustainable margin expansion and better profitability and competitive moats versus any of our competitors. And I think most of the competitors in emerging markets at least are not very strong in the U.S. platforms. And given that we have a unique global presence, across developed markets and emerging markets, we are leveraging our strength in emerging markets and developed markets and our experience in developed markets on iOS platforms and premium inventories and bringing it to emerging markets. If net effect of it is higher CPC rates over the long term, higher margin extraction capability and very importantly, competitive moat, I mean, that's where it becomes defensible and sustainable. [indiscernible] end of in them.
Got it. And I have 1 last question. So you also highlight these -- your rankings, specifically with UP and Revex on these Apple performance index, right? And I'm just wondering 2 things. One, do these rankings on platform like this impact directly your ability to get more advertising dollars from agency specifically. And the related question to that is this quarter, the agent -- the non-direct business seems to have gone up in mix, right? So I'm just wondering if there's a correlation between these 2 things.
No, I would say that when you look at the slide where we talk about our awards or thought leader shape and so on, it is definitely an indicator that we are doing well versus competition. But it is still a lot more, let's say, profiling positioning of the company. The essence of winning business is about delivering performance and conversion. And the advertisers would rely that so when they run the campaigns with us and they see the results, more business would come. Now direct versus agency, it's within that range, 70% to 75% direct business. It is all in that range. So please don't read into 1 quarter or the other. It could very well be that 1 of the advertisers has gone from direct to work through an agency because of any corporate policy or otherwise. End of the day, we are serving the end advertiser. Even if you're going through an agency, the agency is just a [indiscernible].
Sorry, sir. Voice is breaking. I'll just reconnect your lines in a minute.
Okay.
Ladies and gentlemen, thank you for patiently holding. We have the management line back on call.
Apologies for this. I have been as well connected as ever. So I hope you all can hear me well. not sure what's the reason for the voice quality issue. Can you hear me?
Yes, sir.
All right. So as I was saying that the direct and indirect business is an indicator. But fundamentally, all our business is about serving the end advertisers ads and delivering performance back to them. And so please don't read too much into that or the PR of the rankings. I think what's important is that we are out there in the market and the advertisers and the agencies are coming to us for business as much as we are going to them. So I think it's about creating the pull factor. While we are selling to them, we're also creating enough marketing and pull that if anybody is doing mobile advertising, advertising, they should want our platform within their budget. So I think we're doing a good job there.
Our next question is from the line of Arun Prasath from Avendus Spark.
A couple. So my first question, again, continuing on this discussion on this cost management. On gross margin front, we have seen days of, say, where we had around 48%, 49%, 50% given gross margin. Even until recently before we came the acquisition we had around 41, 42. Is it in our plans any time in, say, in next couple of years, we will be seeing will be coming up to that kind of a margin level or this is the new normal, especially given that we are focusing on premium. So I assume the premium means eventually, you will have better margins as well. So is it something which is in your business plan, how much.
Thanks for that question. I think let's understand first, when we talk about the data and inventory costs, we are consistently not just utilizing that to earn our revenue but we are also investing into the future to make sure that we are listening deeply enough across different verticals and understanding and predictively understanding what is working and what is not working. So as we open new verticals, as we open new markets, as we go deeper, for example, within India, our goal would be to go deeper beyond Tier 2, Tier 3 cities to deeper within, let's say, rural regions as well and helping our advertisers to drive conversions. Now India has 650 million plus connected devices, not all of those users are necessarily out there shopping and converting, right? But we still make sure that we are creating that wider coverage so that we can keep understanding, investing into the future direction of our market. So what I'm trying to tell you is that when you look at financials and numbers, you see revenue. And you see that all the data inventory cost is going straight because it's creating that revenue. But there is an element of forward-looking investment in that. Similarly, when we are calibrating our business plan towards premium positioning in the market, we are investing into that aspect, so as to raise the profile of our company, deliver higher value to the advertisers, create that validation interdependent so that we have a competitive moat, and we can get higher wallet shares and slowly but surely get to higher CPCU levels and better pricing and better margin. So yes, all of that is going on. I wouldn't just cast it as the new normal, but I would say let the numbers do the talking, a step at a time. the margin profile, which is there right now, I would say it's sustainable. Can we improve it further? Let's see. But I think it has to be seen in the broader lens of what's happening. And we are disciplined and we fully expense out all the data and inventory costs in the reporting period, but there is an element of investment in that.
Anuj, you touched upon this investment part, but it's been always the case, right? I mean, it's not like something new to our business. So is this also possible because your competition is probably lowering the prices and hence, probably we will be -- we'll have to respond to that. Can we infer it as that as well?
I wouldn't say that because competition -- we are not fighting the competition on pricing. We are fighting the -- on value -- what do I mean by value? So when we work with the advertiser, let's say somebody delivers a conversion for the same advertiser of a user, a and another person delivers the conversion of user B. Now if user A has a higher lifetime value, the advertiser would be willing to pay premium, right? I mean, let's say, both the person sitting at the back of the car and the driver of the car, both are using some hard phones. Both might convert with the same app to order some food, but let's say, the person who is the boss and pays the driver salary, that person's conversion is more valuable to the advertiser than, let's say, the drivers, right? So I think what I'm trying to say to you is, we are a value ROI-based business model, not a cost plus business model, we're not necessarily fighting out on pricing. What we are fighting out on is how do we deliver highest lifetime value to an advertiser deliver premium conversions. So it is -- the pricing is not as impacted. Maybe in some advertisers are not thinking strategically or fully through the funnel, they're saying, hey, somebody is offering this price go for that. But once they start working with us, we graduate them to see it as a value-based pricing versus a cost plus, right? So I don't think that competitive forces are pulling us down. But it is an ecosystem level play and even for us to look at how can we sustain in the long term. We don't want fluctuation where, okay, in 1 quarter, we are at certain level of margin or the other. So I think what you see right now is a sustainable pattern, and we will consistently endeavor to do what is right for our business for the long term. I'm not promising you straightaway going 40% less, but I'm comfortable with where we are at the moment.
Understood. Understood. My second question Anuj is on -- you spoke about Google's policy in changing the third-party cookies. Do you see the similar action panning out in the GID depreciation as well?
Okay. So when I mentioned that they have delayed the privacy sandbox project that was precisely what I was talking about. So previously sandbox is the name of the project that is related to GID and so on. And it is the holistic thing, everything is play deferred or not build on. And I think it's a complex environment from Google's perspective, 1 at an ecosystem level second, from a regulatory point of view, I think there are many considerations to take care of it before they take any action. So at the moment, it seems that cookies, which I thought was a very simple thing for them to do, technically at least. And for 4.5 years, they have essentially said that is not going to happen for now. And so this delay is essentially telling -- I mean, first of all, we were not too worried about the cookies at all. And we are fully preparing and ready for [indiscernible] sandbox. So there was no nervousness as such about it. But the fact that all of this is delayed or deferred from an investor's perspective or the analyst perspective, no, okay. I mean, right now, it's status go for at least several years forward, and that's good news, right? So this question can be parked aside. But I also want to give confidence that we really -- please remember, in 2021, what Apple did was way more intense, way more holistic with the privacy initiatives in 2021 on iOS. And what happened to Apple with that. I mean we turned it into a competitive advantage in developed market space and then bringing it to emerging markets as well. So we aren't particularly worried about it.
Right, right. Anuj, but on this [indiscernible], I just want to understand fundamentally how important is in today's environment, is very important for you to deliver a campaign, say as compared to, say, what was 3 years ago, is still relevant for you? It's -- or you have technology or have algorithms which can work beyond GLD as well?
See, what is important is some kind of an identifier, okay? Whether it is our own internal identifier or we're working with the triangulation of several data points to do a predictive identifier or we are working with the OEMs to get an identified at the moment on Android, GID is the way it works. And for next many years, it will continue to work like that. But if, let's say, even if Google go to use privacy sandbox and say, GAD is done, there would be -- there still has to be a way to deliver an ad to user and to see which device was it delivered to which user was it delivered to what happened on it? There has to be an ability to track it. The only thing that is being done right now by all such changes or platforms, the attempt is to protect the consumers' privacy. Let's not have any scenario where the users privacy is getting compromised. And we are a big supporter of that since inception as a company, right? So I'm not worried about data previously a big supporter of data privacy and whatever needs to be done, should be done because once the consumer privacy is intact, there will be more confidence in the ecosystem. I assume it's not that the advertising will suddenly stop. What you need is some kind of an identified to track that, okay, we have shown the ad and what happened to it, right? And I think that's what the purpose is of an ID or a GI in this case.
The next question is from the line of Swapnil from JM Financial.
I had a couple of questions. First 1 is on your use case split. So I would like to understand what percentage of your total revenue comes from new downloads or transactions and 2 use cases. If you can just help us understand that because what I see your use cases are more focused towards new downloads, which is basically a new customer acquisition. So I just wanted to understand from that [indiscernible].
Swapnil, this is data point that you're requesting that is typically for us when we go to an advertiser, what we want is a big part of their budget. And each advertiser based on where they are in the stage of their own journey will have different levels of split. So for example, let's say, if it is an advertiser in an emerging vertical, and it is a new entrant in India. They will be putting a huge amount of money to get new users so that we can drive new conversions versus an advertiser, which has already got, let's say, I don't know, 20 million, 30 million or even 100 million users, they will be spending in a balance and saying, okay, I want new users, but also want to drive incremental conversions on my existing base of users, which is what they already have. But they don't want to lose that base for conversion from their existing consumers to a competitor, right? Because each of these industry verticals where we are playing, there are new entrants in those verticals. There are incumbents in those verticals. The existing user, like for us let's say, we already cover over these years, if you do a tabulation, we have delivered hundreds of millions of conversions and converted users already. So for our database, that user is not new anymore, right? I mean, chances are that 90% plus of Indian converting users have already delivered at least some level of conversion, some volume of conversion through the Apple platform to the advertisers. So to an advertiser, which is a new -- for them, it is a new budget but for Affle as a platform, we think that we are having almost 100% penetration on the conversion base of the users, and for us, it is not so much as new or existing. We are looking at, how can we maximize the conversions from the user, whether it is from a new advertiser or an existing bank. So therefore, the slicing and dicing that you're expecting is from our platform vantage point is not that important. However, let me give you an industry insight. A new advertiser an advertiser, which is needing to conquer a lot more of the territory would typically put 80% of the budget on new user acquisition and only 20% on repeat business from existing users. Whereas an advertiser, which has gone to a certain scale and is a, let's say, seen as an incumbent or a market leader could even put 60%, 70% new acquisition in emerging markets and 30% to 40% on repeat conversions. And then in developed markets, the balance is more sort of balanced in developed markets, you'll see more even spends across these initiatives. Yes. So I wish I could give you the numbers that you were seeking for, but I hope I've given you a better understanding.
That's very useful, Anuj. So just on that point, you mentioned that it may happen that you might have a decent data base of the users and not necessarily because adverse there is new that would be adding to some incremental things. So. would it be fair to say that since you have such a big data base your gross margins should ideally keep on coming down the same use case is getting repeated more often?
This is not a fair understanding because each time you want to drive a conversion, whether it is from a new user or a new advertiser or an existing user for a new advertiser and existing user for repeat conversion from an existing advertiser, you still have to work hard in ensuring that you reach the user at the right place at the right time. So unless you can show the ad at a point appropriate context. So the context of the user is very important. I mean, if you're busy in your office doing your work, you're not going to suddenly start registering for some entertainment side or some game. But if you have done with -- but maybe during lunch break, you'll order food. So I mean, so it depends on what time in what context do you show an ad. So there's a lot of effort and still showing ads and creating engagements. But yes, what it does is it places competitive moat because our advertisers have worked with us for years and they have seen that a lot of their converted user base has come from us. There is a lot of confidence. They also know that we have intel first-party data that the advertisers have about their own users and conversions. All of that is a relationship of long-term trust. And therefore, when they trust such data and insights with our platform, they will continue to work with us longer. And as that happens, if you can convince them to pay a premium, be higher for the conversion because we can show them a higher lifetime value of those users, or more premium conversions, then we have a way to increase our CPCU price and therefore, the margin. So it is a much more involved thing versus saying 1 segment is more profitable than the other.
Got it. And just 1 more thing on your India revenue trends. So we have been hearing about R&D gaming impact in the previous quarters. So is it fair to say that the RNG impact is now gone for good? And that -- so that basically has helped you deliver a decent recovery on the growth part, which earlier we was doing?
So I think we are definitely going more broad-based. And even in India, even gaming -- definition of gaming, right? I mean, looking at it in a much more broader way than just, let's say, RNG and so on. So I think we are neutralizing that impact. And yes, I would say for now that impact is over, and we are -- this is our new normal, and we will continue to grow sensibly from here.
Okay. And just 1 data point with respect to your revenue split on developed markets and India and emerging, you have given it for the current quarter, if you can help us with the previous year 2Q -- sorry, 1Q FY '24 number, that will be helpful.
1Q, 4Q. Look, I think what we are very clear is that India and emerging markets behave in a very similar manner and the demographic profile of users, the penetration of connectivity, the adoption of CTV, iPhone and I mean all of those elements across emerging markets is extremely similar. So India and emerging markets need to be seen and therefore, 1 block. And developed markets was also where some of our performance issues were in the past, which we're very transparent about. So we thought let's bring it out and let's club it in the logical sense. So I think we did that in the last quarter as well. We're doing it this quarter and onwards as well. but you can connect with our Investor Relations team, and I think they should be able to provide you what you're seeking.
[Operator Instructions] The next question is from the line of Anmol Garg from DAM Capital.
Anuj, if you can indicate how do you see growth in emerging and developed market in coming years, which is the market where you are more bullish on? And secondly, if you can also indicate what are the margins in both of these markets. And in case, the developed market is growing faster, do you see a margin impact for a longer term?
Thanks for that question. I think at the moment, we are seeing a very good momentum across emerging markets and developed markets overall. The kind of verticals and the kind of effort that goes in and winning in these markets is slightly different. And I mean, clearly, North America, Europe, these are the 2 main regions in our developed markets. And we think that in these markets, the addressable market is very, very large, even though it's the overall pie is not growing as fast, but the size of the pie is so large, and we are still so small there that there is a massive runway for long-term growth to be extracted in these markets for us. Now the way we address these markets operationally is super efficient. We don't go and say there is hire hundreds of people to go and dominate in this market. We go incrementally. We focus on some key verticals in those markets, get into the ground position and when. Whereas in emerging markets, I think the battlefield is very different, the kind of competition, the competitive forces we deal with is different. So in developed markets, the pricing is high, competition is high and therefore, margin is balanced. In emerging markets, the competition is low, the pricing is low. And so you see a very different math. But overall, from a margin and bottom line perspective, I would say both of these segments are providing us the ability to deliver a similar kind of margin profile in terms of bottom line efficiencies. So from an EBITDA perspective, right? So if we're looking at 20% plus EBITDA in these markets, in emerging markets, the pricing is low, the cost is low, competition is low. And all of that, we can still extract 20% plus EBITDA. In developed markets, pricing is high margin due to competitive forces can get balanced out a bit, but then you still see OpEx, which is also relatively high. So we can -- what we are building our business for is to build a consistent expansion on the EBITDA margin overall on a consol basis as well as in each of the segment basis. So I wouldn't take 1 favor or the other. At the moment, developed markets because of a smaller base, is growing faster. But I would think that modeling our company long term for the next several years, at about 20% growth in revenue is a fair way to do it.
Sure, Anuj. And just on a continuation of that, we have a decent cash on our balance sheet. So are we looking at any M&A? And if you can indicate would it be developed or emerging market?
So first of all, I think we have been extremely successful in our track record of M&As over the last 5 years since you went public. And barring the challenges that you faced in [indiscernible], which we also negotiated and sold transparently and gracefully. I think we have shown that we are good at this. We know what we're doing and we are conservative in our approach of doing it. So the cash on the balance sheet is 1 aspect, but we're also consistently generating more cash every day. Our business is a cash flow positive operations. And so we will keep adding to the cash pile. So the question is a valid question. How will we invest that cash to unlock more shareholder value, and M&A is 1 of the ways of doing it. But I think we are not in a rush. We have just completed. [indiscernible] is 1 year and full integration done in less than a year. So I think we're not in a rush, but let us wait and see. If we find the right acquisition target, we certainly would. But we must also keep ourselves ready to see how the ecosystem evolves around new innovations, which we are already building in house as well, but we also keep an eye out for what's happening in the market, if we see something interesting, that would add value disproportionately and put a booster shot into our growth, I think we will certainly take that step for the acquisition. I wouldn't give you any clear indicator yet whether there's a preference of doing it in India or emerging markets or developed markets. I think let's keep an open mind. And when we find the right target, we will provide the right scores.
And just a last 1 from my end.
Sorry, excuse, sir. I request you to come back for a follow-up question.
Sure. I'll come back.
The next question is from the line of Deepak from Sundaram Mutual Fund.
So sir, this quarter, we have shown a good growth of 28%. And partly, it is because of a favorable base in last Q1, where our YouAppi revenue was around INR 35 crores. Now on the quarterly run rate, it is around INR 89 crores. So that's why we're able to show that 28% growth rate. going forward, like 9 months into FY '25 or H2 and FY '25, do we expect that to maintain 20-plus percent growth on Y-o-Y basis? Because last quarter, you had mentioned that we have recovered some lost ground in Q4 FY '24 and the cyclicality of revenue from Q3 to Q4 and FY '25 could be expected.
See, I don't give short-term guidance. And I think the numbers speak for themselves. If you look at the numbers of this quarter, year-on-year growth, we've already provided that it's over 20% organically. So even if you remove the effect of YouAppi is 1 month, you still see organic [indiscernible]. And if you look at last year's Q2 numbers and you applied our current Q1 numbers, assuming this coming quarter, July, August, September, I mean I'm not giving you any guidance, but let's say, we do exactly the same numbers, and there's no sequential sort of uptick, which is not how we are. I mean we typically see Q1 to Q2, there is some sequential uptick. But let's say there isn't any. And we keep it flattish even then compared to last year's Q2, we're already more than 20% growth, and that's fully organic because it's like-to-like comparison because -- so you can already see the 20% revenue growth is the numbers already telling that. And I'm also telling that not on a short-term basis, but a long-term growth outlook basis, it is a sustainable, defensible growth position to have. So if we do any other organic transaction in any M&A, then the number would hopefully be even more, but 20% is defensible. And even if you take last 5 years growth trend, I mean, I started my commentary by saying in the 5 years roughly, over or almost 6x growth in revenue has happened. And if you map it up and you'll find that, that's almost 50% CAGR growth, but that's organic plus inorganic. But if you just want to model it on, let's say, no acquisitions, nothing else, 20% is a defensible long-term position for modeling our growth.
So my second question is with respect to your inventory cost. So now all the platforms have been integrated, right? So now we can use each platform's ability to target our existing clients or newer channels. For example, YouAppi and Jampp is to target an in-app mobile. Now because of this integration, maybe we want to target those on CTV and new channels. Okay. And those will be kind of relatively newer venture for us for those clients and those sectors? So right now, our inventory costs as a percentage of sales is around 6.6%. So because we are venturing into this premium inventory and newer channel, do we expect this cost to go up or to be maintained at the current level.
See, first of all, that's a very good insight that you gave and you connected it to CTV that if you see our reports or news we are talking about Jampp, CTV, YouAppi, CTV. We're talking about different dimensions of expanding the reach of our integrated propositions across connected devices to the consumer. The end of the day, the consumer is the same. So if you, as an individual, go and transact with an advertiser do you think it makes a difference to the advertiser, whether you came from in-app mobile, on device, mobile or from CTV, you as a consumer are of the same value to that advertiser, correct? And if you see how Apple has consistently define its business, we call ourselves as a consumer platform business. Why? We -- I've never said we are an ad tech company or an ad tech platform. I've always made the distinction to say Affle is a consumer platform business. We are focused on consumer-centric innovations and when we focus on the consumer centricity, it means that we will go to all connected devices that the consumer is going to connect with. So since mobile is the center forward device at the moment for the consumer, CTV is another device. As we go forward, there will be variables. There will be new form factors, as long as Affle innovation focuses on the consumer, we cannot go wrong. Similarly for the advertiser, we are saying, look at the consumer, it's the same consumer on mobile and the same consumer on CTV. As long as we focus on the consumer, we will find the right conversion and it doesn't matter whether the conversion comes from CTV connect or it comes from a mobile connect and so on, right? So I think our focus is on the consumer. And as long as we do that, we will need to be on all connected devices. As far as the data and inventory cost is concerned, I think I've already answered in the previous question, and we are where we are. And we are comfortable to defend that range and position at the moment.
Okay. So then our monetization factor won't be affected because of these different channels.
I think the monetization factor should become more favorable as long as with the right choice of channels if we can go more premium and command better pricing. So when we say premium channels, that means we're going after premium users. We're going after those users in each country who are actually going to transact a lot more than the other users. So in India, let's say, the 150 million transacting users who are actually ready to pay or engage with an advertiser. Not all of the 150 million are the same, right? The ones who are on iOS devices or the more premium Android devices, the onces who have CTVs at home, wouldn't you agree that those are the users who are perhaps more premium. And if they are, then we should be able to charge a better pricing, hopefully, get better margins as we go on. So I think our focus is to make sure that we are covering the whole spectrum of the user base and bringing our advertisers' objectives to the forefront. But we are covering the whole base. On 1 side, we're going more premium. On the other hand, we're also making sure we are deepening our reach even into rural India and so on because the advertisers' objectives might be different. On 1 side, it could give us higher premium users, give us higher ROI. On the other hand, could be give us deeper reach because we want to cover more ground. So I think we are balancing that out in a sensible way.
The next question is from Rahul Jain from Dolat Capital.
Yes. Am I mean audible now?
Yes, sir.
I mean I know this is been asked in a different [indiscernible]. So either if you could share a talk or market for us at this point and what are in respect to rates? Or if you could share what is the industry growth rate for us on a weighted basis. based upon the markets that we are working at this point.
Well, I would say in terms of markets, the broad regions that we are focused on include Asia Pacific or Asia as a region, we are -- Latin America, Africa, I mean, these are the emerging market regions. And from a developed market perspective, it's clearly in North America and Europe as we developed markets. And I think the growth rates across these regions is different. So for the emerging markets, 1 could say that the growth rate is higher than the developed markets, but then the addressable market in developed markets is bigger and we are smaller. So I think the theory around growth rates of an industry applicable once you reach a certain size and scale. So for -- in emerging markets, I would say the industry growth rate becomes important to us because we are a meaningfully sized player in emerging markets. But in developed markets, we are so small that the industry growth metric should not be a dampener for us because the addressable market is so big. I wouldn't want to give you any specific numbers. If you look at industry growth across markets, you will be able to pick it up from some market research reports that you prefer or want to rely upon or you can connect to the IR team and see what they want to share, but I would rather put it from a source and just throw some numbers on the call.
Sure. Maybe another thing that will help us was since you said that in emerging markets, we are related with the pace in terms of our price -- so India, I can understand if you could sense that what will be our kind of in market share or positioning in some of the bigger markets within the emerging bucket? And also what are the typical time between performance and end you could any color in that way.
Sure. And I'll provide just some color. So typically, when we look at advertising, you slice the pie. So what is the total advertising spend in the market when you look at what is the digital spend within that digital spend, how much is going to the walled gardens like the Googles, Facebooks and so on. And then from there, you will say, okay, in the non-Google, Facebook part of the side, who are the market leaders. And you would find that within that space, Apple is clearly positioned as 1 of the key market leaders or the company that should be in the consideration set. So our goal from a market positioning perspective is that all advertisers are necessarily spending on digital and they are increasing their spend on digital. And within digital, they are also increasing their spend on non-valuating non-Facebook, Google Digital. Within that space, if anybody is spending money, they should definitely look for Apple or our sales team should have already knocked on their door or they should already be our existing customer, right? So this is the way we map the landscape and we go into these markets. And I would say that we have a very good position and market position, tabulating market shares specifically is challenging. But I would say that in terms of perception, our competitors, their employees, our employees, our customers, their employees, our agencies, ecosystem partners, OEM operators. All of them see Apple as a market leader in the non-Google, Facebook space for digital advertising. And also, see us as a market leader who they can trust and they can share their first-party data with and do long-term 4 years, 5 years kind of integrated projects or initiatives with -- so we are seen as a very, very important stakeholder in our ecosystem across emerging markets, certainly. And in developed markets also, I think we are creating a name and space for ourselves very well.
The next question is from the line of Lokesh Manik from Vallum Capital.
I just have 2 questions. One is, Anuj, just to get some insight from your understanding of the global industry. The advertising budget of an advertiser is divided between brand awareness and performance marketing. So what would be this ratio globally if we would have some idea on that? And the follow-up on that is how do you see CPCU as a proposition, what is the market share versus CDM, let's say, 5 years back and how it has improve? How are you seeing it improve in the global markets. That was the first question.
[indiscernible] feed back. Okay, it's better now. So in terms of the lines between brand and performance in digital, are actually getting more and more blurred. And I mean, the way we see it is that even though we go to agencies and we go to the brands and we work with them, our pitch to them is still that it's not that you've just done the advertising just to show or to create an impression or an impact on the minds of the consumers. But you can actually drive conversion because in digital is very -- it's not a passive just see it and done, right? I mean, in digital, most of us want to engage with something that we have built general interest in. And whether it's a click or whether you go beyond or you save it for later or you want to share it with some friends or make it more wide. There has to be some actionability associated with digital, and that's why digital is such a personal and interactive medium. And therefore, the advertising spends I mean traditional media is very easy to see what is brand and performance. If you're asking me from an overall ad spend, how much is going to traditional media brand and how much is on digital. I think those are several reports in the market. But within digital, is there really such a big line between brand and performance, not to us. So when we work with brands, we convince them that you should still do branding on a conversion measurable basis, whether it is the conversion or engagement that happens online, or whether it's a conversion, which leads to a footfall where somebody walks into your retail store or engages with your brand offline. I mean they should -- because they still carry the mobile phone with them. And if you could create that level of conversion metrics for, let's say, budget that was marked for branding. This is what Affle's endeavor is, and that's a very good space to be in because brands like to see accountability as well. Nobody is saying, okay, no, no, I'm putting branding money so take it chill no problem, get show us how many we pay it. Everybody wants to know truly what was the impact? And what kind of conversion ROI impact it would have. So it is possible to measure it on a CPCU basis, and that's what we are educating the market for. And so far, we're seeing pretty positive response even from agencies, traditional agencies, brand advertisers, and we are finding good audience with them and converting them slowly but surely.
Great. Anuj, my second question was on, if we have to gauge the intelligence software tech stack and how it is improving year-on-year. apart from conversions and the connected devices that we're adding, any other variable you would like to call out that we can track and gain more insight and confidence into how fixed that is getting more intent.
See, I think the intelligence of the tech stack is something that we are constantly calibrating multiple times in a day, right? Then when we -- any campaign that is continuing, we is trying to see how we can make it more efficient. And if we can make it more efficient, then we allow ourselves room for doing more strategic investments, either trying to experiment more, let's take it more premium, let's take it further? Or so there are 2 options, right? I mean, let's say, if we if our campaign intelligence become better, that means we should be able to drive conversions at a lesser cost. Now we can, therefore, pass that benefit back to the advertisers, so they see higher ROI, right? Or what we can do is we can cast the net wider and look for invest into the future to find new pockets of high-value users or deeper strategic reach in those markets. So I think the measurability of our intelligence is seen in many, many ways. For example, 1 could slice and dice the intelligence of our platform to say, how are video ads doing on our platform. are we becoming more intelligence in the combination? How are we doing on CTV? Are we driving more conversions there? What kind of a combination of connected devices within households are we doing? So if we show an ad on a mobile and then another 1 on CTV. So we are doing so many slice is combinations, and that's what our data science teams and when we talk about AI, that is what we're doing. And interestingly, even to assess our own performance. We're using Gen AI to assess the performance of AI on a real-time basis to see which atoms in which context is doing better and the slicing and dicing has become very, very efficient. Per campaign, per market, per inventory type, the granularity of our intellectual platforms in connect and performance is very, very high. And I mean, of course, we don't want to open all of this to our competitive advantage. So I'll leave it at that for now.
Ladies and gentlemen, due to [indiscernible] of time, this was the last question. I now hand the conference over to the management for closing comments.
Well, thank you so much for the support to Apple. Like I mentioned at the beginning of my commentary, we take immense pride as an organization that we have been able to deliver value over the last 5 years as a public company and with over 3 lakh shareholders in India, some really strong institutional investors, including the recent addition of the Singapore government investing in our company. It is a matter of great pride to us that Affle has had a great 5 years G&A as a public company. And we hope to provide consistent performance over the next decade and beyond. So we're looking forward to more opportunities and we stay tuned and please stay interested and we will provide you clarity as we get more opportunities on the next earning calls and beyond. Thanks.
On behalf of Anand Rathi Share and Stock Brokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.