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 Second Quarter and Half Year Ended FY 2022 Earnings Conference Call hosted by Prabhudas Lilladher. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Aniket Pande from Prabhudas Lilladher. Thank you, and over to you, sir.
Thank you, Janice. Good morning, everyone. On behalf of Prabhudas Lilladher, we welcome you all to Q2 and H1 FY '22 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 Chairman, Managing Director and Chief Executive Officer of the company; and Mr. Kapil Bhutani, who is Chief Financial Officer 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 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. Over to you, Anuj.
Thank you. Good morning, everyone, and thank you for joining the call today. I trust all of you are keeping in good health. Affle delivered a landmark performance anchored on our entrepreneurial culture, tech innovation and continuous execution focus on sustainable value creation powered by our Affle 2.0 strategy. We concluded the quarter with highest revenue, highest conversion, highest CPCU rates and highest EBITDA and PAT year-to-date. We delivered revenue growth of approximately 104% year-on-year and 80% quarter-on-quarter this quarter and achieved Q2 revenue CAGR of 65.7% over the last 3-year period, much ahead of the industry growth trends. Our CPCU business noted a strong momentum, delivering 48.7 million conversions during the quarter, an increase of 73.3% year-on-year at an INR 51 CPCU rate. Our growth is broad-based across our top industry verticals and from both India and international markets. Powered by our ROI-ending CPCU business model and unique position in the industry, we continue to grow as a prepared mobile marketing company for global emerging markets and beyond. Our India and international contribution, historically balanced at about 50-50 each, has now shifted in favor of international on account of our successful integration of Jampp and our efforts to build local on-ground presence in newer international markets. The contribution stood at about 66% international and 34% India in this quarter. Our focused execution on Affle 2.0 strategy has enabled us to drive deeper verticalization for our advertisers across the EFG hedge industry verticals. This has strengthened our moat and our direct customer contribution has grown to 74% of our revenue in H1 FY 2022 versus 57% in FY 2020. Our consumer platform propositions, tech IP portfolio and all our organic and inorganic investments are performing well in terms of profitable growth momentum. And we continue to establish new thought leadership benchmarks in our industry globally. We won AT1 recognition across categories and geographies in the recent AppsFlyer Performance Index. Affle's Appnext platform was recognized as the #1 nonself-reporting network platform globally on retention index for Android in the non-gaming category and Affle's Jampp platform was rated among the top 10 platforms globally on the SKAN Index power ranking for iOS. Our consistent focus on R&D and tech IP creation has consistently delivered value to our customers and partners. We are thrilled to be granted 3 recent patent grants in the U.S., taking our total U.S. patents granted to 6 as on date, with 14 other patents filed and pending court jurisdictions having many applications and use cases for the future. I'm incredibly proud that Affle, for the third consecutive time, won the coveted Enabling Technology Company of the Year at the MMA Smarties India 2021, and this is organized by the Mobile Marketing Association. This is a significant win and this came together with several top campaign awards for Affle's innovative mobile marketing and advertising campaigns. To ensure deeper understanding and appreciation of Affle's consumer platform use cases, we have included 3 additional case studies in our earnings presentation showcasing the power of our platform to deliver consumer conversion and drive value for our customers. With the fundamental shift happening in consumers' lifetime towards mobile screens and connected devices, we remain optimistic of the global market opportunities and we continue our investments to enhance our market penetration. With that, I now hand over the call and discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you. Over to you, Kapil.
Thanks, Anuj. Thanks, everyone, for joining the call. Wishing everyone a good day and hope you are keeping safe. Continuing our year-on-year strong growth momentum in Q2 financial year '22, the company reported a revenue from operations of INR 2,747 million, a growth of 103.6% year on year; and sequentially on quarter 2, increased by 82 -- 80.2% quarter-on-quarter. We have seen growth in revenue coming across new verticals and platforms and all geographies. Our H1 revenue stood at INR 4,272 million, a growth of 91 -- 90.1% year-on-year. Our EBITDA for the quarter stood at 52 -- INR 521 million, an increase of 51.1% year-on-year and 48.6% growth quarter-on-quarter. The EBITDA margin stood at 19%. Our EBITDA margin is lower than the previous period on account of business combination of Jampp business. Going ahead, we are confident of further optimizing the business model and platform of Jampp to enable margin expansion over the time. We will continue to invest in our team to deepen our market penetration and then enhance our tech capabilities. We have recently quoted our employee stock option scheme and granted options to key members of the peer of the group. The response from the team members is encouraging on the options granted. Our profit after tax for the quarter stood at INR 476 million, a year-on-year increase of 77.1%. Normalized profit after tax after adjusting gain on fair valuation of financial instruments was at INR 420 million, an increase of 56.3% year-on-year and 47% quarter-on-quarter. We remain focused on working capital management and continue to see robust cash flow from revenue. In this quarter, we utilized our IPO proceeds raised in 2019 for the stated purpose of working capital completely, for which we had seek an extension from our shareholders. With this, I end my presentation. Let's please open up the floor for the questions.
[Operator Instructions] We will start with the question-and-answer session from Mr. Aniket Pande.
Thank you, Janice. Congrats Anuj and Affle team on great performance. I had a couple of questions actually. So what is revenue contribution and margin profile of Jampp acquisition in this quarter?
I'll take this question. So we have about -- a revenue contribution of about 30% on the consolidated basis coming from Jammp and a PAT contribution coming about 10% -- more than 10 -- a little more than 10% from Jampp.
Okay. So sir, right now, is Jampp's tech platform fully integrated into Affle's platform? And once Jampp's tech platform is fully integrated into Affle's organic platform, okay, so will there be any redundancy between Jampp's and Affle employees who are completely engaged in R&D process? And do you expect to repurpose this talent and realize some cost in -- at this moment?
Hello. Sorry, I realized that my phone was muted. Anyway, I'll take that question. So the integration of Jampp has been successful in the first quarter and the last basically 4 months that -- post the acquisition was completed. And we're very confident that the integrations that we have done and the plans that we had prior to the acquisition are working well. Consequently, what you see now within the Q2 itself, that not only have we managed to grow Jampp through upselling and cross-selling efforts as well as we have managed to make it achieve a profitable contribution. So Jampp is still -- when we acquired them, they were breaking even at best. And now within the first quarter, we have achieved approximately 5% profitability on Jampp business. Now as Kapil mentioned that on revenue, the contribution is about 30%. And if that 30% of the revenue from Jampp is only achieving 5% profit and the rest of the business of Affle's on an organic basis has delivered robust overall continued momentum of growth, right? So just on an organic basis, we have seen very strong growth, almost 34% on revenues year-on-year, which is ahead of the industry growth trends. And then on normalized PAT basis, 37% year-on-year growth has been realized organically. So in terms of going forward, even on the Jampp's specific call that I had after the acquisition with the investors, I've mentioned that it will take us some time before we graduate Jampp's bottom line contribution to a higher to mid-teens to almost 20% flat in the next 1.5 to 2.5 years. So I'm pretty confident that what we have done in Q2 where Jampp is at 5% profit contribution for the revenue that [ followed through Jampp ]. We're already on a good track and trend to build on this momentum. And as we continue to do the further integration of certain technology components as well as the business model enhancement, the outcomes that we have as the playbook that worked out for Mediasmart and Appnext would also work well in the case of Jampp, and we are only getting better at it.
I had one last question, sir. So last quarter, you had guided that Jampp is expected to be converted to 100% CPCU pricing model, okay? So is this process complete? If not, then is there still further scope of improving pricing per [indiscernible] for Jampp?
Yes. I think in terms of upgrading the business model, I think it is fair to say that we have educated all the customers and also done the platform level and usual changes. But in terms of driving the efficiencies at which that model is done, whether in terms of CPCU rate pricing or with respect to the margin profile of the business, I think there is still a lot of progressive room for improvement. And the way to look at it is that Jampp is at 5% profit performance in terms of the EBITDA bottom line contribution for its revenue, then our goals are very clear that within this financial year with 2 more quarters to go, we hope to bring it up to high single-digit contribution. And then going forward into next year, bring it to mid-teens; and then the year after, bring it closer to 20% plus. And that is the playbook that Affle had when we did the earlier acquisitions as well and even for Jampp. So we will see further improvement, and that improvement will come with the further optimizations on the tech stack as well as on the business model. We think that the cultural integration, the business model integration and the initial tech integration has already worked well, and it is already showing in the results. So we're very encouraged by how we have done in Q2 with respect to Jampp acquisition.
Sir, does that answer your question? Mr. Pande?
Yes.
Thank you. We take the next question from the line of Manish Poddar from Nippon India.
Yes. Hi, Anuj. Congrats on a good set of numbers. So can we -- 2 questions. One is if you look at, let's say, the base business ex-Jampp, despite -- let's say, we were at roughly INR 135 crores last year and we are now at, let's say, INR 195 crores this quarter, so -- but despite that, the operating leverage in the business doesn't really kick in. So probably, could you help to understand, are we passing out the incremental pricing in terms -- to get more volumes, just to get the scale concept?
Yes. Okay. Go ahead, Kapil.
Yes. So the margins improvements, if you see our gross margins are quite stable despite -- the dip in the gross margin is reflective of the Jampp acquisition and consolidation. Otherwise, our gross margins are stable and the finance -- the leverage of the efficiency, which you are not seeing, is getting invested in our human resource to expand our markets to broaden our growth base. And we will continue to invest whatever leverages we are getting into expansion of the business. We have consistently maintained that Affle is a growth organization, and we'll continue to invest in our processes as well as manpower to continue [ to implement ].
And actually, even with that, I think the fact that the normalized PAT growth on a year-on-basis, 37% flat, with respect to how we are performing, there is -- even with the investments in growing our presence globally and handling for deeper verticalization execution across emerging markets as well as certain developed markets and certain verticals, this strategy is working really well. And we are seeing expansion in EBITDA and profit on the organic basis even at the back of very strong and consistent investment in our own organic growth and expansion. And we -- I think the focus of the company is really on the Affle 2.0 strategy, which is to grow the business consistently for the decade ahead. And I think the foundations in terms of the tech stack, the acquisitions, the IP portfolio, all of these investments are working really well. And now it is being backed up further with on-ground presence and growing our teams and capabilities in those markets so that we can establish increasing market leadership across key verticals where we are very strong. So it's a very consistent execution strategy, and I'm very happy with the way the team is responding and behaving. And with the recent stock option plan, I think there's a lot of passion and spirit inside with which the organization is executing. So I'm pretty happy with the way the execution on the ground is panning out across geographies.
Okay. That's helpful. And just one more thing. So the cash on books as on date, I think, is roughly about INR 550-odd crores. Can you probably help me understand, let's say, how this cash flow, let's say, would stand at the end of the year or, let's say, sometime next year?
So we would organically increasing our cash flows from operations. In this, if we -- and when -- if we may decide to move into further investments in expanding the business, that will be a cash out, but that would -- that cannot be -- there cannot be a future guidance on that. But positively, there will be an increment in cash definitely into the balance sheet from the operations.
So when is the outflow for Jampp expected?
So the outflow for Jampp, the initial comment has been done in the month of June and some in July. So the next branch in -- is in June '22.
June '22?
Yes.
And so post that, just to understand whether post that the cash on books would be somewhere in that INR 300 crores to INR 350 crores bracket?
So the next part is not heavy [indiscernible]. Next part is only close to about 8 to 10 -- in the range of INR 8 million.
So if I may just add, I think fundamentally, the way I want you look at Affle is that we have historically always funded our acquisitions to internally accrued cash flows. And as we continue to grow our profitability and converting that into cash flow from operations, we will see that a lot of these payments will actually get funded through the operating cash flows on an ongoing basis. So we should have a continuously good cash position and a strong balance sheet. And when the right opportunity comes, we will do further investments, inorganic as well as organic, to deliver growth. So that's how you should look at us.
The next question is from the line of Divyesh Mehta from Dolat Capital.
So my question was in terms of margins of the previously acquired businesses, right, starting from Mediasmart, can you just give us -- can you just give a rough idea of how and where they are in terms of their progress of margin improvement? And also with respect to Jampp, if our current profitability usage is around 5%, that is on EBIT level, right?
Yes. So the -- like I mentioned earlier in my discourse, that every acquisition that we have done, if you look at the pattern of the acquisitions that Affle has done, we have acquired companies when they were at a breakeven level or just at the cusp of turning towards profitability. And then we have a clear path that within year 1, bringing them to a high single-digit level of profitability. Within year 2 of the acquisition, go to mid-teens and as high as possible. And by the time of year 3, we want them to be at the same quality of unit economics that we enjoy in our organic business as well. So with respect to Mediasmart as well as Appnext or any prior acquisitions, whatever this phased plan is to improve the bottom line contribution of this business has worked really well for us. That gives us the confidence to then continue and do a bigger transaction with Jampp and a further transaction, the company that builds in North America, South America and much further. And then the larger transaction size was backed by the fact that our execution on inorganic and the track record is solid, and it's inspired our confidence. Same thing we are seeing in Jampp now. And your question whether Jampp's 5% of EBIT or PAT, I would say we are looking at it on both lenses. We're very granularly tracking that. And it's about 5% on EBITDA and PAT is not very dramatically different, but it's about 5%. We can take it at 5% EBITDA at this moment.
Okay. So in terms of recent acquisitions, you have highlighted that they are well going on track, just to quantify it in some ways. Again, you cannot share exact numbers, but you are looking at that Mediasmart and Appnext are already about like 10% to 15% on an EBITDA level or -- like, I don't want an exact number, but direction side.
That is correct, so that is correct. So both these acquisitions are now in year 2, and we are aiming for mid to high teens in terms of contribution at the bottom line level. And it's going as per plan. And that's what I mentioned in our commentary that all our organic as well as inorganic investments are performing well in terms of profitable growth momentum. So the momentum, the trend lines, all of this is doing well on every granular aspect that I look at for our investments that we have done. And I'm really confident that it's a broad-based growth happening across markets, across customer verticals. And our teams are well aligned to achieve those goals. And these KPIs, our incentives now added with the stock options are keeping the entire organization execution completely aligned with these goals.
Okay. So just to confirm what you're highlighting is that on a margin level, they are somewhere between 10% to 15%. That is right. And one last question. In terms of your expansion in other geographies, how are we doing there, have there been any inroads and any qualitative word on any big client entry or anything where we can see that, okay, that you have -- any qualitative commentary in terms of us getting into some brief lines or something which we can see on AppsFlyer to get an area how we are progressing on that front?
Sure. So I think the qualitative aspect can be seen with the fact that we are having our key platforms in tracking and consolidated, achieving very strong recognition, whether it's the industry indexes or whether it is the industry awards, the kind of campaigns, customers, the wins and estimates consistently as well as indicated qualitatively in the case studies that we have shared. So the last earnings presentation we had 2 case studies this kind of added 3 additional case studies to give you a much clearer qualitative sense of what's happening on the platform? What are the capabilities that Affle has? How are the customers benefiting. And we are trying to ensure that you build a deeper appreciation of what is fundamentally happening at Affle beyond just financial numbers and so on. So I think there is a consistent effort from our side to ensure that our investors deeply appreciate and understand the power of our platform and how we are doing across emerging markets in not just India, Indonesia case study was shared, Malaysia case study was shared. And I think progressively, we're also looking at the planning of the Annual Day, which will come soon and we will share more insight into more markets. But very broad-based growth, the verticalization strategy is working and really strengthening our moat and building our confidence to go ahead and invest into people, on-ground presence in those markets. We will only do that when we are absolutely sure. So all our investments are done very prudently, whether they are organic or inorganic. So the fact that we are investing in global expansion to those markets is a very strong indicator that things are working well. Our platform is delivering. Our strategies are working. And therefore, we are investing to grow and scale deeper in multiple geographies.
The next question is from the line of Arun Prasath from Spark Capital.
So the first question is on the recent case filed against Google by a group of interested parties in Texas, where it is alleged that the Google's demand-side platform has unfair advantage and engage in anticompetitive practices. So in the context of India, what is your current opinion on this issue, if you could elaborate a little bit on this? And then as a follow-up to that question, assuming that the level playing field is created as a result of this litigation. Can you explain this scenario by taking us through, say, a hypothetical campaign where some -- there's someone like Affle, how it can benefit from this favorable outcome?
Sure. I think I will give the opportunity to share with all the members on the call that Affle has 16 years of history in this ecosystem, focused exclusively on mobile marketing. Unlike other companies, I could say that we haven't really pivoted or neither been pivot. The mobile marketing has been anchoring focus and have consistent vision of the company til now. And the ecosystem has gone through tremendous changes in adaptations over these 16 years, right from when we started, it was before Google had acquired Android before Apple had launched anything on the iPhone. And Nokia was king and Blackberry were still doing mobile marketing. We saw a massive change with the touch screen form factor of devices, and we all know that a lot of changes have happened in the ecosystem but Affle has maintained a very, very strong execution track record to maneuver through various changes and the uncirculated culture that we have, keeping ahead with that innovation consistently has really helped us to maneuver through any kind of changes. In the last 5 to 6 years, we have seen data privacy coming in Europe and GDPR in Singapore, Personal Data Protection Act in the next few years, we'll see that as well. And most recently, there was nervousness around iOS 14 and related policies. And we have shown that we were -- we had the foresight to do the Jampp acquisition. We knew that there were some of the things that they and we were working on that can be leveraged in order to make a head start into the new sort of IOS 14, and still our Jampp platform has consequently seen that edition is a top trend where we platform on scan network. What I'm trying to establish is that based on Affle's historical credentials, you can see that we have a very strong track record of maneuvering through any changes that are happening at the ecosystem level. Now with respect to Google and Facebook, Affle's view is that we operate in an ecosystem where we are still [ biotic ]. We are not head-on competing or staying against Google or Facebook. On the contrary, we in fact, integrate our tech stack on Google, Facebook so that we see it as a platform where we can find consumer audiences and drive conversion for our customers from their touch points as well. So I am very neutral to what happens exactly whether Google and Facebook or platforms like that, we'll see any further flipping of wings by regulation or these checks and balances, how much they have or they don't have. My long-term view is that the non-Google, Facebook part of the ecosystem will continue to grow at least at par with the total digital advertising growth, if not much better over time. And that's to do with the fact that I think the advertisers have over allocated their budgets on Google and Facebook so far. And there is a lot more competent platforms with complementing capabilities that can drive higher ROI and value for the advertisers over time. So we will see that all of these platforms will continue to grow, but the non-Google, Facebook part, in my opinion, should grow faster for multiple, multiple factors. And specific to what's happening in India, let's wait for the outcomes of these cases and so on, and we are equally watching it with interest and preparing ourselves for all opportunities and possibilities.
That is very helpful, Anuj. But I just wanted to specifically understand how much of our currently, say, our performance or growth rates would be different if this level playing field is already there, if you can take a wild guess?
See, the way I look at it is that the average industry growth rate in India for digital should be in the range of 25% to 30% CAGR for next several years to come that is all in -- like Facebook, Google everything is in that. And I believe that Affle will continue to grow better, hopefully, than the average industry growth plan. The last several years already showed that the CAGR growth of our Q2 revenue, 65.7% over the last 3 years. And even if you slice and dice into Jampp business and non-Jampp business, you will find it as a very fantastic growth trend. So I think we're already doing very well. Can we continue to do as well and very confident bullish about it. Can we up it further and improve it further, let's wait and see, let's not simulate the scenarios that have not happened in time. But I think even if the [Indiscernible] I think we will continue to do better than the average industry growth rate, definitely. And if the [Indiscernible] push in through favor of non-Google and Facebook, of course, we will take advantage of that.
The next question is from the line of [ Rishit ] from Nippon India. As there's no response from the current participant. We take the next question from the line of Sanjay Ladha from MJ Investment.
Hello.
Sir, please go ahead with your question.
Yes. So a very good set of numbers, sir. Just wanted to ask, which was like -- In the previous interaction, you have mentioned that inventory and data cost will be in the range of 55% to 58% of the sales while in this quarter and half year, this ratio has increased. Can you throw some light on how should we look at this ratio going forward? And why there is so increase in inventory and data costs. And what is our strategy for the same going ahead?
Could I take this Anuj?
Please go ahead Kapil.
As you would have seen in our earning presentation, we have consolidated Jampp's business [Indiscernible]. And with that acquisition commentary which was [Indiscernible] June -- on July. The margins on the Jampp business are significantly lower on the gross margins. And then what happens on there is an impact of 4 to 5 basis points coming in overall impact is coming on only from Jampp. If I say, excluding Jampp, I made this point in my earlier answer also, there is no impact on the gross margins on the non-Jampp business of the company. So we had, in fact, increased 1 basis point -- sorry, 100 basis points over the last year performance in the organic business.
So sir, how should we look going forward, this ratio so in like suppose in coming 2 to 3 quarters, this issue can be come down to 58% or this will be elevated?
It will not improve in the next 2 to 3 quarters as we -- as Anuj mentioned previously also, it will take -- it will improve from here. But to say that it will come down to what Affle -- I think Jampp acquisition in the next 2, 3 quarters it will not be. Yes, we will try to improve the business model to an extent that we, say, 4 to 5 quarters of -- or maybe 6 quarters down the line, we may come down close to what we do overall business, including the Jampp business.
The next question is from the line of Mayank Babla from Dalal & Broacha. Sir you may please go ahead with your question. As there is no response from the current participant, we take the next question from the line of Alisha Mahawla from Envision Capital.
I'd just like to understand that our average CPCU has been in the range of INR 40 to INR 41. And this quarter, it has spiked to INR 50 plus. Just wanted to understand the reason behind the scene?
Sure. Typically, the CPCU is balanced based on the function of business contributions in India and international markets. International markets typically have a slightly higher CPCU rate compared to what we have seen in India. And this quarter, because our contribution for international business is higher. Consequently, the CPCU rate average has gone up to deleverage that we're seeing now. And we believe that we can sustain this level of contribution. And as the Indian international mix stabilizes, we will see the CPCU stabilizing. As we improve the verticalization strategy across the newer markets where we are executing, we will have capability to also improve the CPCU rates further. And we will provide progressive explanations on that, as any shift happens. So -- but for now, the reason that you see this, that until now it was hovering at around INR 40 to INR 42. Now it's down about INR 50. The function contributing to that is that there is a higher contribution of international business, and therefore, the average is moving up at this moment. And I expect it to hover around this and then improve it further progressively with our verticalization strategy and as we get in deeper within the international geographies.
Understood. That was well explained. Sir, just wanted to clarify that while you had mentioned earlier in the call that contribution from India and international used to be 50-50 and now is tilting in favor of international, where do we expect this mix to sort of stabilize, like you said, once verticalization and full integration of Jampp, et cetera, takes place? Are we saying it will be this 63-33 or are we saying it will be 70-30 or any other number?
It's hard to give that specifically, but I will certainly say that India is our home ground, it's is our home market. And I would expect it to continue to contribute around 30% plus to our business as we are a single largest contributing market. And then the international business, as you already know, it's about 66% now. But because the number of markets and geographies that we will continue to invest further into and grow, we will see a higher addressable market size in the international business, while India will continue to be anchoring the market for us. And a lot of our innovations and strategies are almost always first rolled out in India, whether it's the Connected TV product, whether it is the Connected household, [ Vizury ] or whether it is the Omnichannel platforms. You can see our emphasis on executing deeply in India, be it the vernacular strategy or verticalization. Our focus on India execution is disproportionately high. And teams on the ground, which are looking at India, they're 100% focused only on India. And the teams that are looking at other international policies, we're also building market-specific execution focus on those geographies so that we can -- there's no dilution of focus happening in terms of depth of execution. Be it on India or Southeast Asia or Middle East, Africa or Japan or the verticalized focus in developed markets as well. So we are very clear about our execution strategy, and this contribution will be a function of how business expansion continues to happen. But for now, I think you can say that it should hover in the range of 30 plus percent for the year.
Understood. Understood. Sure. Sir, my next question is with respect to converted users. We see very strong Q-on-Q and Y-o-Y growth if you look at full year basis or even if you look at -- track it on a quarterly basis. Just wanted to understand where is this growth coming from? Is this simply expanding into newer geographies? Or now that we have some proof of concept and foot in the door, we're getting more business from the same client? Any color you can share on the same?
Sure. See, the first and foremost, the macro factors in the industry will continue to be very favorable with active sales for growth of this business model of converted users because more and more users increase in emerging markets are going on to becoming online shoppers for all kinds of life science products and services across industry verticals. So the consumer trend is very, very strong. And I think it's a multiyear trend. COVID has accelerated it, and we expect that to continue because once people are hooked on to digital, I think it's a trend that stay and it continues to accelerate. So that's one. Then in terms of the advertisers, the industry verticals that we are working on and the clear strategy and verticalization that we're seeing increasingly, direct advertisers working with us for almost 74% of our revenues this strategy is working very well on a broad basis across the top verticals contributing over 90% of the revenues. And then within those verticals, we see existing customers, new customers and our sales teams, and we are consistently pushing for growth on those parameters. And this is happening across geos. It's happening for us in India. It's happening for us across international markets. So what gives me great confidence is that the growth is very broad-based. It is not that suddenly 1 customer has become [ vague ] or 1 particular contract has become [ diligent ]. Very broad-based growth coming across verticals, across geographies, on existing and new customers, and that is really sustainable in my opinion. I think the engine of growth is working and the momentum is strong.
The next question is from the line of Mayank Babla from Dalal & Broacha.
Sorry, I was on mute earlier. Congratulations on a great set of numbers. Anuj and Kapil sir, very good execution. I had 3 questions primarily. One was, if you could give the -- categorically give the converted users in the organic business and what was the contribution from Jampp in the converted users this time? That was one.
Okay. All right. So I think the contribution for the Jampp on converted user this is not something that we have published in our earnings report. But it would suffice to say that international markets, the CPCU rates are higher and the number of conversions is not so high, right? So I mean in terms of the math of it, and in terms of the contribution from organic business is more than 80%, actually close to -- hovering close to 90% is coming from organic business conversions and 10% and less than 20% coming from inorganic. The focus of the company as we go forward will continue to be on the converted and conversion-based ROI-focused business model as we need, and expand our business across the board. And we are seeing a very strong uptick of this business model. And what is really encouraged us is that we are able to execute on this business model even on certain verticals in developed markets on iOS as well. And I think that is extremely encouraging and something to be looking forward to as we continue to scale and expand.
Sure. Okay. My second question is regarding Jampp itself. So sir, we've seen a strong growth in this quarterly run rate while CY '20, the annual run rate of Jampp was around $29.5 million, which roughly converts into INR 545 million. This time, the contribution, as you said, was 30% of revenue, which is around 800 million -- roughly INR 800 million. So my question to you was what -- is this a normalized growth rate? Or what is the normalized run rate that we can or assume so that we can get a sense on the future earnings?
Sure. Let me answer that qualitatively for you first, so that we can understand what is happening much better from a ground execution perspective. Prior to the acquisition, Jampp was in a tough spot. They were not profitable, certainly not cash flow positive and they were, therefore, playing on the back foot. There was COVID impact across a lot of their markets and key customers of theirs were down because of COVID, there's a lot of their sort of customers who are on-demand services, food delivery, taxi. When things were really shut down in some of the markets, some of the courses we had a bad time. And therefore, from a management execution mindset, it was a survival mode. Or a final call, from a cricket analogy playing on the back foot just to keep wickets in hand and not really score a lot of runs. So I think this -- we were just on the back foot. With the acquisition, I think we have been able to bring the entrepreneurial culture on the forefront, the growth mindset, with the go ahead and get the business and the fact that they are back in the limelight there's cash in the bank account of the company, that the baggage of dealing with conflicted interests of all kinds of investors they have in the cash, all that is gone. Now it's just Affle, there is money in the bank and there is clarity of direction. And so think of it from a very defensive play to keep the wickets than actually let's go and score. And that is what has changed. And I think the -- that's when I say the cultural integration has worked well. The financial integration has worked well. I mean, we've got the audits and compliance is achieved within a very short span, within the first quarter across geographies and so on. And the -- this integration has also worked well, which is leading to better sell-through rate, better extraction of budgets from the customers because now you're going in proposing a broader set of capabilities and so on. And then we are consequently seeing the impact on profitability as well. So I think there is growth on all fronts, including growth on team costs, so we're investing. I mean, in the case of Jampp, the team has grown and we have really shown them the growth path and profitable growth momentum is the key word. And -- so continuing to grow is important. So what we are seeing now is the, let's say, the correct definition of where the business should have been. And if you look at calendar year '20, had they had better funding, more clear strategy than they would have probably done better in that year. So we had analyzed all of that. And when we acquired the business, the thesis was clear that how we will turn it around by bringing additional scale, growth, better business model, better pricing efficiency, and then one step at a time, improve its profitability. Now where it is now, I would want to focus on enhancing its profitability metrics versus just scaling with the 5% contribution on EBITDA and PAT. This is something the priorities are clear, get the unit economics to a better place and, of course, continue to scale, but the priority #1 is get the unit economics right. So I'm not giving you any guidance of continuous growth momentum and if we over deliver on that, that's something to celebrate, I think the focus and priority on execution is clear, improve the unit economics and scale sensibly through internally accrued positive cash flows that are generated in the business. And I think that's the best way to answer it at the moment.
[Operator Instructions] The next question is from the line of Ruchi Burde from BOB Capital.
Congratulations to the team for the excellent set of numbers. I have questions, starting with the iOS policy changes. I know this forum has discussed it a lot, but trust me, we get a lot of questions on this. So Anuj in U.S. with the iOS policy changes, we saw a very diverse impact on the businesses of digital advertisers there, where in the Android ecosystem benefited a lot now with -- in terms of rate increases. Did you also experience same? Any comments on that.
I'll make 2 comments on this. One, that Affle is really strongly and emerging markets, which consequently makes us very strong in Android. And secondly, the plans that we had done the acquisition of Jampp, and the timing of the acquisition, if you look back at around the time an iOS 14 has been rolled out, and we said we want to take the opportunity head on and grow in that segment at the back of our credentials that as Affle Group, we are very strong in Android. Now when the advertisers became shaky on, okay, what's going to happen on iOS and so on. They're looking for partners who are very strong in Android. And we came out, hey, we are the strong players on emerging markets and Android choose us and that's a plus we have. Now on down presence in North America, that iOS 14 is clearly the strongest. And we had differentiated capabilities that we rolled out for the advertisers to give them confidence on both fronts, as an advertiser we want to reach out to consumers broadly and drive ROI. They were shaping an iOS where we came with some innovation and he said, "hey, we have something for you here." And which they were thinking that they will shape you on iOS and they were shifting any budgets to Android, then again, [ this was called as a yes ], Android, this is our home ground, from emerging markets. I think it's really worked to our advantage. And this is what I was saying earlier, whenever a change happens, which is an ecosystem level change, the organizations that have entrepreneurial agility and culture, the organization who have set innovation backed capabilities, which are preemptive in nature, we're always investing ahead. We're not reacting that something has happened and we quickly scrambled to come up with something. We're always investing ahead -- and both those combinations with clear execution focus is the way that Affle has maneuvered and made the most of this opportunity, we have benefited on Android, we have also benefited on iOS. And that is shown in the results. And that's where some of the people who were underscoring and under calibrating theirselves that, hey, this is overperformance. I think this is the right level of performance based on the execution strategies we put in place.
That's really great to hear. Anuj, I know, I mean, we are predominantly Android -- we operate in Android dominated market. But even if you look at, I mean, subset in India also, the iOS would make up, if not more, at least a low double-digit number of mix. So if you look in your device is that how was your experience for the iOS devices in the last quarter? Was -- did you see any drop in the efficacy of your platform, especially for the iOS devices? Or it wasn't material?
So I wouldn't say that the change was immaterial. I think the industry has seen that the change is material. But what is -- with that material change, there are some fundamentals of our industry that won't change, right? I mean the advertisers' budget did not shrink, the advertisers' budget going to digital is only increasing. Now whether it's going to Android or iOS or it's going to Google, Facebook or non, I mean it's all around growth, right? In terms of advertisers wanting to spend on digital to connect with -- that macro trend is a pillar of strength because the demand for digital advertising from the business small and across verticals and markets is very, very strong. Next is the consumer trends the consumer who are still using the iOS device is still a valuable consumer for -- and the consumer is going to do conversions from the mobile phone, whether this way or that, and the consumers are also deeply married to their devices. And so these 2 sides of the ecosystem, on one side, the advertiser's budgets are their, on other side, consumers are not leaving the screen, then the rest of this is technical execution that all this has changed, it's will adapt and make it happen. And I think what we have seen is that those were able to adapt are rising faster, those who are not able to adapt will scramble through and just hopefully in time. And I think for us, like I mentioned, we have benefited on both sides on iOS as well as Android, and I'm pretty confident that we'll continue to improve and execute better going forward. So the nervousness or risk around the change is behind us because we have cross [Indiscernible] with strong outcomes. And I think that builds confidence because we're seeing customers across verticals, it's a huge booster in our own conviction of where we are headed.
The next question is from the line of Rahul Jain from Dolat Capital.
Congratulation on the set of numbers. Most of my question has been answered, just 1 or 2 things I would like to clarify. First of all, you explained well on the Jampp, on what kind of outlook and thinking we should have. But from a more sustainable point of view, given the kind of market it is playing and with the cultural shift that we spoke about. What are the ideal range of growth rate it should aspire for because the market opportunity could be a little different compared to what we have that 25%, 30% kind of a mindset at the corporate level? So any input on that would be of help.
Sure. See, the underlying assessment for any acquisition that Affle has, and this is our internal sort of assessment, and I'm sharing that with you so that not only does it applied to Jampp or our earlier acquisitions, but also in future, if you do any acquisitions, the playbook is very clear. One, we will only acquire those businesses that we believe we can continue to build and grow with the kind of growth momentum that we expect from Affle overall, which is to beat the industry growth trends. And the 25% to 30% CAGR growth that we have seen on a broad basis for digital advertising, we expect every part of our business to grow that way. That's one. Secondly, we expect to turn around the acquired businesses where they are breaking even or struggling to make them profitable over this period of time. And for that, we give ourselves about 2 to 3 years to bring them to a high teens or 20% plus EBITDA kind of a margin performance over that period of time. Now so earlier we were talking about Jampp on bottom line business and now you're asking about Jampp from a top line growth perspective. And there, let's say, 1 year -- give us 1 year plus to make sure the unit economic leads to a level where the growth is organically funded through profitable cash flow, and we need to solve the unit economics on priority #1. And then the next priority comes where we get to the same level of CAGR growth rate for the future, which should be hopefully at least 20%, if not higher, and then go into 25%, 30% CAGR for the longer term.
And just last one question. One, from your capital that you have available a significant part of it. So are we at a point, given the stability of -- in the Jampp integration process? That we are ready for a big acquisition if it comes our way, that this point one. Second, in the stand-alone operations in this quarter, we have seen significant jump in the inventory data cost, 25%. So is it because we might have some optimization in terms of booking base cost at a [Indiscernible] level in the stand-alone operation? Or is it only relevant for the stand-alone revenues?
Okay. I think for your first question with respect to bandwidth, whether it is financial bandwidth to post you another acquisition or management bandwidth to version of the acquisitions. Let me assure you that the acquisition of Jampp has only increased our management bandwidth and capability, not consume the intent. The quality of the management of Jampp is strong. They're properly [Indiscernible] and the debt footnote is strong. And the fact that we now have a very strong management team that's aligned with us for the long term in those, obviously, is actually a big advantage of the acquisition. And therefore, the ability for us to do any acquisition, whether in terms of financially bandwidth or in terms of management bandwidth, that is strong. Having said that, we are very, very prudent with respect to the acquisitions that we do, the investments that we do, and we have learned over time that there is -- doing a wise and carefully calibrated acquisition is more important than just doing [ wise ]. So there is no undue pressure or stress that, hey, there's cash, we think, better do something or you have bandwidth. So why don't you do something? If we find the right target, I assure you we will do -- And finding the right target has many, many factors that one has to see, and we will carefully calibrate it. So there's no short-term or medium-term guidance to this. But the readiness is there and the capabilities, then the options are there, and we will choose the right time to do it. So that's one. The second part of your question, quite frankly, stand-alone and call, I didn't quite understand. Kapil, if you have understood, can you answer that?
So I will take this question. You were comparing the data inventory cost on a sequential basis in standalone. I would request you if you compare it on Y-o-Y basis because every quarter has its own demands and availability of the inventory and the cost associated with it. So your comparison with sequential, I would request if you can compare it with the Y-o-Y September standalone, you will find [ what the message is in that ]. Does that answer your question?
[Operator Instructions] The next question is from the line of [ Samir Choksey from Indus Equity ].
Yes, sure. So my commendations to you, Mr. Khanna Sohum and the rest of the team on an excellent set of numbers. So I'll just limit my question to one and it's slightly elaborate. So do bear with me. Now this pertains to Affle's future growth narrative. So far, the company has been largely focused on visual advertising as a medium. But today, what we're seeing is advertising purely through voice-based mediums is growing as well. And we see, for example, Spotify provides voice-based ads in its free version priority song streaming. And you're also seeing conversational e-commerce purchasing it at is growing extremely rapidly. So bearing this in mind, do you foresee this is a business opportunity for Affle? Is this something you all believe, you all can address your R&D capabilities. And would it be fair to say that the Affle 2.0 strategy could accommodate a third V, besides verticalization and vernacular in the form of voice. This unused largely also on the banks of your podcast-based IP. So if you could just shed some flavor on that, that would be great.
That's a great question, and thanks for your references to our 2V strategy Affle 2.0 as well as our voice-based site that we've got in the U.S. market, it's absolutely right that this is a growth opportunity for us. Where we look at connected households and connected devices. So here I'm just elaborating to give you a vision and a -- or a very human sense of how consumers and all of us will behave going forward. Our households will have voice-based devices, our variable devices would also have voice commands, will be changing the lights and the fan speed and the [ air control ] and all that, home automation is going to happen over the next several years. Our cars will have these feasibilities and so on and so forth. So while the mobile device and the Connected TV device will continue to be strong visually-led devices and will form a big part of the consumer experience for next 3 to 5 years. There will be increasing number of wearable devices, home automation connected devices that will come, where the interactions would be different, where we would be listening to it or we will be giving visual commands to it or when we are listening to something, for example, if you're listening to music. I mean, none of us would necessarily want to interrupt that experience by having an ad playing between the song, they will listen to a bhajan or Bollywood or a Hollywood or whatever kind of music that you can love or like, we don't want a sudden out of context audio ad playing in between, right? There will be components of visual advertising together with the voice-based experiences and integrated experience will come. And we -- And one of the ways to deal with it, for example, you're driving a car and you see something on the screen, you listen to something with your ears, neither can you catch it nor do you want to interrupt that because there's another audio playing. So using gestures to then do a command if I'm interested in something, yes, I like this. Let's keep this for later, I will look into it, or using some smart gestures. And I think those are the kind of use cases and some human behavior use cases that Affle has already done research on, has statement on the patient that's already granted, which I think is a clear indicator that not only are we giving good service to future trends, we are investing into them, and we are building competitive moat on that and believe before these become big market opportunity, the fact that we already launched our Connected TV, connected household initiative last year in India is indicative of that because the market is clearly very, very nascent, but we have already launched products, invested in that. So we are ahead of the curve, and we're excited about this possibility. The next 3 to 5 years, I can assure you visual ad is not going anywhere. It's only going to continue to grow, and voice will be nascent, small, but an exciting space. And then we love to build exciting spaces that what we like about our industry. And we will definitely continue to see that as an opportunity and build IP in that area. So yes, the third, you could say, voice or vernacular, verticalization, voice and the -- of course, already we have a case for video ads and so on. We are holistic in our thinking and our strategy.
I'll just quickly ask one follow-up. I'm cognizant that we should be asking only one, but just regards -- with regards to your new patents, which you all did file in the U.S.A. regarding the blockchain IP for fraud detection and the podcast-based IP, do you see this bringing in revenue anytime soon? Or could you give some sense on that?
See, I want you to -- and all investors to know that IP and patents, these are foundational blocks of any tech innovative company. And these are strong indicators about the future of the company. What is it that we have IP for? What are we building? What does happen investing in? What are the directional things that are happening and you see that? I mean why do we go and apply it in U.S.? I mean because U.S. is one market where these IPs are most valuable. I mean one of the largest markets too. So even though we are not necessarily on the ground executing on to make sure our IP innovations are recognized, registered over there because that's where it is most valuable. And of course, we can then command revenue possibilities over time over there. So it's lesser about immediate revenue and financial, it's more about strategic long-term sustainable growth direction of the company. And reflecting the culture of the organization, that we are creating. We are Inventors first, then we are entrepreneurs. So we invent new things, then we go and execute and commercialize it as entrepreneurs, and then we execute for scale and growth and market leadership and path leadership. So those are the steps. And the features that we have filed, whether granted or not, are indicative of that. It is also defensive strategy where some of the larger companies who have taken, they sometimes try to muscle out or throw patent wall at companies to keep them out. And we want to make sure that we can neutralize that by having our own set of patent portfolios to counter that when that happens. It also works as a deterrent in case somebody goes [ anti ], we think, we can counter that [ barrier]. On your home ground, we have all these patents so better watch, don't -- so there is the forward-looking foundational strategy in the IP portfolio. And there's also defensive our strategy in the IP portfolio and we cover both grounds with what we have done. It's not just about short term, what's happened to revenue and profit of that. I think it's a decade long view for us for any point in our strategy, and this is how you should see IP and patent-related updates from us.
Thank you. Ladies and gentlemen, due to paucity of time. We take that as a last question for today. I would now like to hand the conference back to the management for their closing comments.
Well, thank you so much for joining the call today. I would like to congratulate all our shareholders. And also for those who are interested in evaluating the Affle as an investment that this Q2 result is a landmark performance and it's deeply anchored and a validation of our entrepreneurial culture at innovation and continuous execution focus on the Affle 2.0 strategy. So looking forward to updating you more as we progress in the next 2 quarters of this financial year. All the best and take care.
Thank you. On behalf of Prabhudas Lilladher, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.