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 Q4 and 12 Months Financial Year 2023 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, sir.
Thank you, [ Viko ] Good morning, everyone. On behalf of Dolat Capital, we welcome you all to the Q4 and 12-month fiscal '23 conference call of Affle (India) Limited. I take this opportunity to welcome the management of Affle (India) Limited, represented by Mr. Anuj Khanna Sohum, who is Managing Director and Chief Executive Officer of the company; and Mr. Kapil Bhutani, who is Chief Financial and Operations Officer of the company. Before we begin 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 28 of the company's Q4 earnings presentation for a detailed disclaimer on that.
I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thanks, and over to you, Anuj.
Good morning, everyone, and thank you for joining the call today. I trust all of you are keeping in good health. Affle continuing its track record to conclude FY 2023 as a landmark year having delivered over 5x growth in top line and profitability over the last 5 financial years. It was an exciting year, marked with several important milestones and well supported by our focus on enhancing the quality of revenue, bottom line fundamentals by further scaling our tech platforms and ecosystem level partnerships. I'm pleased that despite the global headwinds that have impacted businesses globally, Affle delivered robust growth for the year, powered by our ROI linked CPCU business model. Our consumer platform delivered 256.8 million converted users crossing the 250 million mark for the first time. and our CPCU revenue increased by 35.3% year-on-year. Our cash from operations increased at a CAGR of 52.8% since FY 2019 June. We are stronger than ever before, and we are committed to deliver sustainable growth over this decade.
Speaking of Q4 performance. Affle delivered revenue growth of 12.9% year-on-year with meaningful margin expansion resulting in greater year-on-year growth in EBITDA of 22.1%. We achieved a revenue CAGR of 64.4% in Q4 over the last 3-year period, much ahead of the industry growth trends. Our CPCU business continued to be resilient, delivering 62.5 million conversions during the quarter at INR 51.2 CPCU rate. Our strong anchoring on India and other emerging markets enabled us to perform well with 20% year-on-year growth in Q4. Our differentiated market position as a consumer-centric and ROI-driven platform for advertisers has helped us further enhance our productivity and CPCU pricing. This resulted in a steady CPCU rate, leading to year-on-year margin expansion and a strong competitive market leadership position across emerging markets.
Our FY 2024 outlook for India and emerging markets remains optimistic and in line with our continued growth trend. However, macro headwinds continue to impact our business in developed markets in Q4 FY 2023 in a few verticals like fintech and entertainment. We mitigate this short-term impact and to accelerate success on the existing pipeline of opportunities in developed markets, we have actioned a multipronged 360-degree turnaround plan with decisive steps taken immediately in Q1 FY 2024 around people, partnerships, products and platforms, and that will give immediate measurable outcomes in FY 2024. First, we have reorganized our people team that we're focused on developed markets to ensure that these teams are aligned to upsell and cross-sell all our platform use cases on CPCU business model and largely limited by any one platform.
In line with our hands-on entrepreneurial culture, I will directly lead the developed market-focused business units in FY 2024. Accordingly, the reporting structure of teams and operating resources have been realigned with attractive incentives linked to attainment of aggressive turnaround growth plans across all key emerging verticals in all our developed markets. Second, we have realigned our strategic partnerships and execution strategies with deeper focus on product and platform lock-ins for multiyear growth focused on higher-value conversions with multimillion-dollar contracts with select supply-side partners, OEMs and operator partners across these markets.
Third, we have recently introduced all our CPCU use cases on our CTV, connected TV product with household sync capability. These integrations are now completed with a leading mobile measurement platforms to strengthen our competitive advantage as the only CPCU model-based CTV platform for advertising. This should result in greater growth of our higher-value CTV plus CPCU propositions from Q2 onwards. Fourth, our first-mover advantage on Apple iOS scan advertising product is further fortified as we have successfully rolled out Apple app store-related multiple touch points and thus providing our advertisers with the most differentiated and ROI-driven use cases on iOS scan and Apple app store.
We are also working on app store-related touch points with other OEMs and operators on Android as well. Now these initiatives are expected to drive greater growth for our CPCU business across all markets immediately from Q2 onwards in this financial year. Fifth, we have recalibrated our inorganic growth plan towards acquiring deeper access to customers' first-party data in high-growth verticals such as gaming, with key execution strategies to deepen all our use cases of CPCU business to unlock the highest lifetime value of consumer conversion for our advertisers. Our growth action plans for developed markets, as outlined above this now are already in execution under my direct leadership and by Q1 itself, the internal reorg would be completed. The new contracts and integrations with strategic partners will be completed. The key product initiatives across CPV and OEM app stores will be scaled up with deeper focus on emerging verticals and the turnaround impact of these initiatives will show in our operating results from Q2 onwards.
We will continue investing in our organic growth operations, augmenting our OEM and operator partnerships with some of the largest global brands as well as actively evaluating inorganic opportunities with greater emphasis on higher growth industry verticals like gaming. This will fortify our moat and ensure sustained meaningful growth with further uptick coming along the next few quarters this year as well as beyond.
To reiterate our strength of delivering unique consumer experiences, we had, in total, shared 21 case studies in our earnings presentations over the last 7 quarters. These were focused on some of our key industry verticals, including e-commerce, ad-tech and payment, finance and banking, FMCG, food tech, gaming, health tech and retail. Continuing to share our customer success story, this time, we have also included 3 case studies, which are focused on health tech, thereby we are looking at driving greater consumer adoption of online health, diagnostics and well-being services in India. We have also shared a gaming-related case study, which is a fast-growing vertical driving user growth across geographies. We've also shared the insurance Super app focused on growing the reach and adoption of essential financial services.
Now these case studies demonstrate our ability to provide innovative solutions and drive outstanding results for the advertisers globally. Affle continues to be recognized as an industry thought leader. And as a testament to that, we were awarded the best use of programmatic advertising at the Indian Digital Awards organized by the IAMAI. We were ranked amongst the top media sources globally to deliver ROI on Apple iOS scan campaigns in the Singular ROI Index 2023. We also won 5 awards at DGXX 2023 across various high-impact categories such as technology, programmatic and performance marketing and more as well as one award in geotargeting category at MMA Asia-Pac 2023.
With that, I now hand over the discussion to our CFO, Kapil Bhutani, to discuss the financials with you. Thank you, and over to you, Kapil.
Thank you, Anuj. Wishing everyone a good day and hope all of you are keeping safe and well. Continuing our growth momentum, we concluded FY '23 with a revenue of INR 14,340 million, a robust growth of 32.6% year-on-year and quarter 4 financial year '23, revenue stood at INR 3,558 million, grew of 12.9% year-on-year. We delivered a revenue growth of 20% year-on-year in India as well as emerging markets. Except for the developed markets, which anyway had a lower contribution for us on a consolidated basis, our business across global emerging markets remain resilient with an overall bottom line growth momentum and margin expansion year-on-year. During the quarter, India contributed 34.7% while international revenues contributed about 65.3% of our revenue.
We recorded an EBITDA of INR 2,930 million for the full year, an increase of 37.2% year-on-year. And for the quarter 4, we had INR 716 million as EBITDA for the -- with an increase of 22.1% year-on-year. As you are aware, our quarter 3 in any year is the highest quarter due to seasonality. However, the cost of operations in quarter 4 remained broadly at par with quarter 3. In terms of OpEx, our inventory and data costs stood at 60.8% of revenue from operations in this quarter. This is in line with Q3, while it witnessed a significant margin improvement from Q4 last year. Our employee cost during the quarter remained relatively stable sequentially, while our other operating expenses increased by about INR 18.3 million, largely on account of annual audit fees or other professional services. PAT on full year stood at INR 2,453 million, an increase of 33.8% year-on-year, while the Q4 PAT stood at INR 624 million, an increase of 18.4% Y-o-Y on a normalized basis.
Just to remind that last year in Q4, we recorded a gain on fair valuation on financial instruments of INR 162 million net of tax. Please refer to Slide 4 and 5 of our earnings presentation for detailed working on the same. Our effective tax rates were lower this quarter on account of recognition of deferred tax assets of a subsidiary. We remain focused on working capital management, continue to see a robust cash flow from operations. Our collections were robust and the ratio of our cash flow from operations and profit from tax stood at 106% for the financial year '23. We have been extremely prudent in our customer profile. And as such, there were no material changes in the collection risk. We remain confident for our long-term business prospects, invest further in our business and stand committed to deliver long-term sustainable growth.
With this, I end our presentation, let's open the floor for questions.
[Operator Instructions]
Ladies and gentlemen, the first question is from the line of Mr. Rahul Jain from Dolat Capital.
The commentary has been improving selectively for some of the global peers in this quarterly earnings. So I would appreciate if you could share a bit more on what you are witnessing across your key markets like India, Southeast Asia and our developed market? Secondly, if you could share that how the newer avenues such as connected TV that you talked about, that would have bearing on our key metrics such as CPCU costing or margin in general. And finally, last bit from my side would be that -- to your comment on this inorganic strategy, wherein you are looking towards strengthening first-party data. So any more color here would be helpful, is it like we're getting into the publishing side? Or any more input there would be helpful. That would be great.
All right. Thank you, Rahul, for your question. Well, definitely, I would say that the India market or emerging markets for us globally, we have no longer seen the kind of headwinds of the economic headwinds that are very strong in the last financial year even though we performed with quite a lot of resilience in the 20%, 25% growth range for India and emerging markets globally in FY 2023. In FY 2024, our outlook remains optimistic and positive with respect to India and emerging markets, which is already 81-plus percent of our business at the moment. So I think we are in a very strong footing there given I mean, our confidence and conviction is even more because in the last financial year, we were able to deal with those headwinds and still delivered an honorable level of growth. So I think going forward in FY '24, our confidence is higher that we can continue to maintain that level of growth in 20%, 25% organic growth range.
In terms of developed markets, I think I've already given a fairly detailed commentary about how we are looking at focusing and doubling down on certain differentiations that we have created in our product lines, like, for example, is CPV combining it with CPCU to go for even higher margin, higher value conversion as well as iOS, as most of us know is a higher margin play.
And within iOS, we already had a first view advantage on the scan changes that happened in 2021, but we have actually further enhanced our differentiation by adding into there, so in touch points on the Apple app store, where we are combining that for the advertisers and taking it again, the impact from a margin perspective or the CPCU rate perspective should be going to more of -- is a higher value and higher-margin segments, both CTV plus CPCU as well as Apple scan network and Apple app store plus CPCU, I think these are very positive initiatives that we have undertaken. This will help us not only in developed markets, but also the same initiatives would be actually create first mover advantage for us in emerging markets. So I see very positive trend lines there, and I'm very optimistic about it.
In terms of your question on the inorganic growth plans, so I did mention very clearly that we're looking at more first-party data of the advertisers coming. So no, we are not shifting to, let's say, becoming more on the publisher side. We are doubling down on our CPCU business, but we are saying we need to go deeper on certain verticals, and we believe that dealing with one such vertical where the advertisers who also gain publishers, they have deep first-party data and how we can work closely with them with deeper product introductions and so on and bringing all our use cases to those customers. So any inorganic growth acquisition that we're looking at right now is actually focused on these very specific capabilities that we are evaluating. And we have been evaluating this for the last 4 to 5 months, and we are continuing to be carefully calibrated, one thing we are absolutely sure. So yes, we are looking at more deeper verticalization focus and gaining first-party deeper integrations with these advertisers in verticals like the gaming vertical. So I hope I have covered all of your 4 aspects of your question.
Yes. Perfect. That's it from my side. Best of luck.
Our next question is from the line of Karan Taurani from Elara Capital.
My question is around 2 things. One is if you could give us some kind of indication around the growth rates in U.S., U.K. markets and the other emerging nations. Just to get a sense in terms of what is the quantum of decline that U.S., U.K. is facing right now? And how much time do you think this would take to come back on track?
I think in terms of growth rates for the overall industry trends, as in we are still very, very optimistic that the long-term tailwinds of digital continue to be very, very strong. In fact, in our earnings presentation, we've included some specific slides towards that. You see, if you look at some of the markets like developed markets, including like the markets like China and so on, you would find that the digital spends in these markets have already gone to much higher levels. Like in China, digital spend as a percentage of total advertising spend is around 80%. In U.S. and Europe, that number is somewhere between 65% to 75%. So overall, if you look at this digital spends have gone up substantially, whereas in India, Indonesia, Africa, LatAm, basically emerging markets, these numbers are still very under calibrated. So the long-term growth trends for at least our India and global emerging markets business continues to be very, very strong. And therefore, there is no reason for us as Affle to not be looking at, at least 20% to 25% organic growth from these markets over a period of this financial year.
Now with respect to developed markets, the addressable market is very large. And we have only a much smaller sort of footprint in the developed market. And so last year, what we saw was a scenario where our footprint was small and yet because of the macro factors, some of the customers in fintech and some of the customers in entertainment category were impacted. Now with the initiatives that I've outlined, I'm actually leading this directly hands on. I mean -- so therefore, I can give you even further clarity and conviction that Q2 onwards this year, we will see a turnaround situation because of the very clear and very concise action plans that have already been put in place, and most of them will come to a conclusion within this quarter as well. So the decisions have been made, the actions have been taken, and I'm directly leading this -- with the team reporting to me on a daily basis.
So making sure that we absolutely go for a winning turnaround position from Q2 onwards in developed market. And once we achieve that, you will absolutely see that this financial year, we will come back to the same kind of growth trends that we were always having guidances for, and we will continue to provide that kind of an outlook going forward as well because there is a huge addressable market in developed markets, and we're just scratching the surface but our products are differentiated, our platform proposition compelling and just making sure that we provide the right kind of entrepreneurial drive that is needed to enter these markets and create a meaningful impact. So I'm pretty confident that we will see a very strong turnaround for developed markets within this year itself, but Q2 and Q3 onwards, all the time it right for the October, November, December quarter. So all these initiatives are taking the conclusive footing now in this quarter, Q2, we would ramp up, Q3, we'd be ready to tap into the growth.
Got it. The second question would be around the developed markets. So obviously, the macro environment is while very big easing, but is this Affle privacy policy also kind of final impact because what we hear is that conversion rates are down the. Data costs are going up. So what is the kind of disruption that you're seeing in developed markets today? And is this also a very big reason for the growth being should have probably seen a decline?
See, the disruption related to iOS happened in 2021. We are in 2023 now, and we have already sailed through that. In fact, I gave my commentary earlier that on scan network, we are doubling down and fortifying our first-mover advantage of having increased the changes, right? So we have very little baggage. Our iOS exposure has been very low before. So I see iOS as a growth area for us because our product is complete. Our product is differentiated, and we're able to demonstrate CPCU-based business model on scan iOS solutions to the advertisers. We are able to bring a unique proposition with the Apple App Store related touch points and so on. So I think what we are offering is unique. What we're offering is competitive and compelling. And previously related issues, we have already navigated that to bring these solutions already to market. And so I don't think that, that is any further -- any kind of a concern.
On the contrary, because of these disposals, we have the ability to healthy advertisers that have been working on iOS, the consumers are more premium. The challenges are addressed by our products, and therefore, you've got to pay more. So I think the ability to charge a higher CPCU rate, the ability to extract better margin on this particular segment will actually work to our advantage versus to a disadvantage.
And I think we've already demonstrated that in the last few years, and we are now going to double down on that with respect to bringing iOS because in developed markets, iOS is 50% of the market share with respect to number of devices or the advertising spends going on iOS versus Android, whereas as you'd know in emerging markets, it is over 90% Android. So I think there is a very clear direction that we are taking that iOS is a growth proposition both in developed markets and a high-margin growth proposition even for emerging markets, and I think this will be a growth segment for us as we execute this year.
Right. And just one last one, if I may here. So I mean...
I'm sorry to interrupt Mr. Karan. May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Our next question is from the line of Mayank Babla from Enam AMC.
Sir, I have just one question around the changes in the -- or the new contracts that you are rolling out with clients that you announced in your speech. So could you give us a little more detail about what parameters or key deliverables that have been changed in the contracts with your clients that gives you so much confidence for a quick turnaround in the next 1 or 2 quarters itself?
Right. So this is still getting concluded as we thought, but I think the broad parameters are that working with these supply-side partners and OEMs and operators should lock in some of their touch points with the consumers pretty much exclusively with respect to how they work with Affle's platform and do a deeper integration together with them both on their first-party data, both on the touch points with those consumers, and ensuring that we have a longer-term lock-in and relationship with them for, let's say, 2 years, 3 years, in certain cases, longer. And I think that's the nature of the dynamics of these contracts, where we're trying to go to them is saying that we are the partner which has the end-to-end consumer platform propositions and initiatives.
And then they work with that, there could be at least some of the key strategic touch points on those devices, be it the app stores, be it certainly other, let's say, important touch points, and as we make any material, let's say, contract changes, we'll also be disclosing and announcing that, right? So some of those contractions are not getting material to go into any regulatory disclosures, but then some of them are. And once those contracts are signed, we will also proactively make sure that our investors and yourselves are informed about them so that you would know how to calibrate that forward, right?
We're already working with all of these partners for many years. Now what we are doing is just locking in deeper relationship at the highest levels in these companies and trying to do longer-term contracts, and it gives them a certain predictable part of revenue. But actually, for us, it becomes a much stronger competitive differentiation and a higher margin ability to go and deliver it into the market. So then it will also help us with getting longer-term contracts with the advertisers and the agencies once we have a very strong strategic partnership based anchoring. So that's the kind of direction that I'm taking and I'm already directly in touch with most of the leadership of our partners, and we are on high final stages of conclusion.
Some of the contracts have already been concluded, but they are not -- they are more like proof of concepts, and they're not material for us to go and make any specific disclosures, but there are some material ones, which we're also working on, which are on final stages, and we will announce them as they conclude.
And my last question was around the international revenue. And beginning the Y-o-Y growth was only around 9%. So could you highlight which geographies specifically was there headwind?
Sure. I think I did already mention in my commentary that India as well as global emerging markets, we -- within this quarter, Q4 also saw over 20% year-on-year growth. And therefore, consequently, if the overall growth is lesser, it implies that the developed markets continue to see the headwind, and I mentioned 2 verticals, fintech and entertainment. These 2 verticals shrunk for us in developed markets in this quarter, even in the previous quarter, and this is where the headwind impacts have been.
So if we take it on a consolidated basis, India and emerging markets clearly is showing great resilience. Even with all the kinds of headwinds that were there, we are still in that range of 20%, 25% organic growth.
Whereas in developed markets where we were under calibrated, we have not been as strong to respond to the headwinds, and we have seen the impact and shrinking in the developed markets in some of the verticals. To solve for it, I have given clarity that what are the turnaround action plans that have already been put in place. And I have a lot of conviction and clarity of what needs to be done. I'm hands-on involved in leading this and turning it around. And I'm confident, therefore, that we will see clear measurable outcomes on this from Q2 onwards, be ready for the festive quarter, October, November, December, Q3, which is typically our highest quarter. I want to make sure that we are all guns blazing on all of these initiatives, maximizing the advertiser budget in our favor in developed markets. So that's the color I can give to you, so which markets are included in those developed markets, it's primarily U.S. and Europe. These are the 2 sort of bigger contributors within our developed markets. And yes, this is where we are making sure that we put in the focus and turn this around.
We have a right to play. Our products are strong and differentiated. We just need to make sure that we do smart execution on the ground. And for that, the appropriate teams are already wired with the right incentive structures. And when they report to me, there is a lot more let's say hustle in the process, right? So we are definitely bringing it a lot of action on the ground. And I'm pretty confident that the pipeline is already there, and we will be seeing conversion starting from Q2 onwards.
Our next question is from the line of Vikrant Gupta from ICICI Pru Life.
I had mainly a question on the inorganic growth plans that you outlined. Could you talk a little bit more in detail about what sort of geographical exposure we're looking for? Or would this largely be on the emerging markets again, the gaming acquisition you're talking about?
And second, are we largely looking at acquiring some sort of a demand side platform here?
Thank you for that question. The fact that we haven't announced any transaction yet, there will be a limit to what level of clarity I can go into, and I also don't want to give any negotiating levers to those targets that we are negotiating with or evaluating for the last 6 months. So I think I just wanted to be a bit conscious of that, and I hope you'd appreciate it. But yes, broadly, what we're looking at is our core strategy has been verticalization. And in that verticalization strategy, we have already enumerated what are those verticals that we're focused on. Gaming as a vertical for us as a whole group across the developed markets, emerging markets is under calibration.
Now in emerging markets, gaming is still an upcoming vertical. It's not that advertisers are spending huge amounts of money in gaming, at the moment, in the emerging markets, but we expect them in the next 3 to 5 years gaming will also be a very, very strong vertical in emerging markets.
In the developed markets, in advertising and digital advertising, gaming is actually one of the largest verticals for most of our peers with the listed companies. And most of them, gaming would be like north of 50% or in some cases, even 80% of the revenue. Therefore, Affle as a group, gaming is less than 10% of our revenue. So therefore, we think that doubling down and verticalizing on gaming would be strategic for us.
And what are we looking for when we look at these target companies? Do they have the right quality of customer integrations? Do they have deep data integrations with those customers? And if the answer is yes, when we see a great opportunity for Affle, the rest of our core platforms and propositions to be upsold and integrated with those existing customers of the target company. And so the strategy is much more how do we rule in with razor focus in a particular vertical, growing to those customer accounts by upselling all of Affle's propositions on CPCU business model basis. And therefore, expand the lifetime value of those consumers for those customers, right? So really looking at new user conversion, repeat user conversions, using Connected TVs cross-device conversions and so on and so forth.
And these kind of capabilities that Affle's platforms have inherently, we just want to shorten the time to market. If we do this organically, it may take us 3 years because the gaming customers do deep integrations with these platforms and the switching cost is higher. So for us to gain a stronger footing straight off the bat of a meaningful size into these verticals, inorganic is a very sensible way to do it. And currently, the valuation of most companies in this space because of the headwinds of macroeconomic factors are actually quite sensitively priced. So we are evaluating a few targets. We have been actually evaluating for the last 6 months, and we have a very long courtship period in deciding whether to proceed or not.
And yes, I think within this year, we should have at least one such transaction. So yes, it will since the CPCU business-led, it will be verticalized into high-growth verticals where we are bullish. both globally. Gaming is one of them. And it will still be on the demand side because we are basically doubling down and having the same core CPCU segment as the main segment of the company. We are not, let's say, diversifying yet because I think we are still small, and we need to get much more market share globally before we look at, let's say, maybe diversifying to other possibilities. So at the moment, same CPCU vertical, verticalization as a strategy, gain access to customers that we can upsell and cross-sell our other propositions, and that's really the thesis.
Understood. So, so clearly, your customers are looking to spend -- or looking to advertise more on the gaming side, and that part of the spend is something that you are looking at?
It is not about, our customers are looking to spend on the gaming side. It is the gaming customers, we are looking to expand our portfolio with.
Okay. Understood. And just a final one, sorry. So what sort of margin expansion are we looking for going into fiscal '24 because we had guided for getting our required entity maybe mid-teens sort of margin. I think the FY '22 numbers were closer to 7% to 8%. So where are we in FY '23? And where do we think we will be in FY '24?
Okay. So almost all the acquired entities over the last 3 years, in this financial year, we will actually complete 3 years with us with respect to, let's say, Appnext and Mediasmart, and I think we've already brought them to the mid-teens kind of margin level performance, bottom line performance.
Jampp is still completely -- the next month is going to complete second year with that. And Jampp is way more focused on developed markets. And therefore, we're going in leading the developed markets directly and making sure that we're integrating all our use cases and propositions across our platforms and pushing that to developed market's customers, the differentiation and aggression is something that is happening now, which is by the time we complete this financial year, we would have almost reached the end of the third year for Jampp as well.
And I think this is really the case of lifting the margin profile of the company, at least basically north of 20% EBITDA in this financial year across all the quarters. And since it's up -- like even if you look at last year's numbers for us, we have seen a margin expansion on EBITDA by about a percentage point. And I think going forward as well, our goal would be to see how we can improve it meaningfully one step at a time.
And even though, I want to give you some comfort around any inorganic transaction that we do, I'm no longer playing the playbook of 3 years for that. We have learned, we have understood how to do these acquisitions, and we have learned over 3 years of integration, and we have now levered to understand. In case we do another inorganic transaction this year, we will ensure that in FY 2024, it's already within year 1 contributing mix stream in terms of desired performance. So I would not see any significant, let's say, averaging down.
Also from an organic perspective, on a stand-alone perspective for a lot of our businesses, our margin profile would be close to 25% EBITDA, but then factoring in the Jampp is still to complete 3 years and we do a new acquisition but still in the mid-teens. The average would still come down to, let's say, north of 20% EBITDA but still margin expansion on a year-on-year basis. So we're very carefully calibrating this and making sure that not only our margin profile is showing a clear trend towards margin expansion. But also, as you know, we are very careful with respect to how we are doing on our cash flow because that is the only way to fund some of these acquisitions and what we're doing.
So I think you will find the discipline of bottom line performance, margin expansion to be sensibly filled. And we're not going to do something with daily averages, averages our margin performance down. That's not going to happen. Yes.
Our next question is from the line of Arun Prasath from Avendus Spark.
Anuj, just you spoke about the categories which let you down in this year, namely fintech and entertainment. Can I request you to also talk about the categories which helped you to sustain the momentum to, top 3, top 4 categories which we need to sustain the momentum during this year? And what do you think, the [ risk ] in these categories falling off the radar? And if it happens, which other category do you think this can come back and replace this so that our momentum has discontinued there in the emerging markets. That's my first question.
Well, interestingly, the fintech and entertainment impact was in developed markets, a negative impact which as in emerging markets, actually fintech did quite well, entertainment did quite well. So when I look at it on a sort of overall basis, there was some balancing happening there but that was more emerging markets led.
I think in developed markets, fintech and entertainment was impacted. We were still resilient in gaming. We were still resilient in food tech. We were still resilient in e-commerce. So e-commerce, food tech, gaming and even ad-tech, I think these 4 verticals were so resilient for us in developed markets. Whereas in emerging markets, we saw overall across the board growth across all our verticals, and that was quite heartening because there were times where fintech was a bit in trouble in some of the quarters. Ad-tech was a little bit in trouble at the beginning of the financial year FY 2023. But over the course of the year, we have seen broad based growth across all verticals in emerging markets.
In developed markets, like I said, fintech and entertainment, we saw some of the customers shrink or suddenly have knee-jerk sops in budget. I think we could have done better in terms of execution by upselling, cross-selling our other production services, but because our presence in those markets was still under calibrated and the leadership was not as confident of doing the rest of Affle business in those markets.
So I think, therefore, making those changes bringing in the conviction and pushing all our products as integrated proposition in developed market, we will, I think, bounce back quite strongly even in fintech and entertainment because these are very large verticals, and large addressable markets in developed markets. And our numbers are so small in developed markets as we cannot be on the back foot. So I'm pretty confident that this financial year, we will see a bounce back across verticals in developed markets. And in emerging markets, like I said, we already ended the year with a good kind of growth run rate in emerging markets that we should be fine there.
Yes, the focus is very clear. I think keep it verticalized, keep our product proposition differentiated, keep our business model compelling. And the execution then becomes simple because we were selling something that's compelling, and we are selling it in such a verticalized way that those advertising in those verticals will find it a compelling proposition to find Affle. And the rest of it is platform-based scalable execution. So I'm really leading the sales teams with a very strong hustle to make sure that we maximize or make good for any gaps or headwinds that we saw in FY '23, so make it good in FY '24.
Yes. Understood. Next -- and my second question is on the gaming. You gave quite a bit of color on the gaming. And you also spoke about how you develop business players that have much higher revenue coming from that meeting but those are the players who also help big gaming developers to develop the game from the scratch. Are we looking to add this kind of capability through our initiated -- strategic initiations? Because that is quite a very, very elaborate set of skill additions to the [indiscernible].
No, no, no. What I was talking about was not gaining publishers. I was talking about people who are running mobile marketing and ad-tech with the demand side platform company. And they're very comparable to what Affle platforms are capable of doing, except for that they are so deeply focused on gaming, whether it's relationships with the CXO for the product integration that what we've already done with these gaming customers for this that the stickiness. So if we go to, let's say, win a gaming customer by default, they would say they have too much anchoring on the existing partners to be switching.
What we are looking for within organic in Q4 in the gaming is to gain access to the gaming customers and integrations of a meaningful size and scale and added to our portfolio by default so that we have a high way on which the rest of our platforms can drive in and upsell and cross-sell and therefore, create achieve organic growth on top of the inorganic acquisition of these customer portfolios, right? So we are looking at these kind of ways to accelerate our market share into gaming by our way into it as a good starting point on which we can then expand on to by upselling our own platforms and capabilities there. So that's what we're looking for.
We are not looking to create a new diversification or going into publication or some other thing. We are staying true to our course. This is what we do well. We are a consumer platform. We are a CPCU business model based consumer platform that is doing new user acquisition, repeat conversions, CTV-based conversions, online-to-offline conversions and connected devices overall. And this is where the use cases still the same. We just want access to those gaming customers that have already done some integrations at data and platform level with the target companies that we are looking at right now. And once we do such a transaction, our goal is to upselling, cross-selling, our core platform into that, right? So giving a stronger footing in market share into the gaming vertical. And I'm not just waiting for the long sales cycle that is involved in the gaming onboarding of customers.
And will this result in some savings in the...
Mr. Arun, maybe request that you return to the question queue for follow-up questions as we have other participants. Our next question is from the line of Anmol Garg from DAM Capital.
I had a couple of questions. Firstly, Anuj, you were talking about the margin expansion going ahead in next year. So can we expect the margin expansion to come from operating usage? Or do you also think that we can structurally bring down the data and inventory costs further because it has come down from 50% to 60% now? Can we bring it down further? Or will it be to employee expense and other expenses based on the operating research?
See, I'm looking at more scaling our business and growing our business with a growth mindset. So we will continue to invest in data and inventory costs. We will continue to invest in our operating expenses as well to ensure that we are supporting this growth part because we are not just looking at 1 quarter, next quarter, this financial year, we're looking at the better [indiscernible]. We have still 7 more years to go, till 2030 and I have a lot to deliver there based on what we are looking to achieve for our company in long term. So therefore, we continue to do the right areas of investment.
Having said that, believe the margin expansion is calibrated today that some of our organic businesses are already at the 25% EBITDA level. Some of the acquired companies have already reached close to 18% to 20% EBITDA level. So they are still looking at teen growth margin contribution. So when we look at the blended sort of result on EBITDA, you think about 20% EBITDA, right? So when we plan our business for, let's say, FY 2024, are we looking at -- because we were thinking scaling up revenue, scaling up our margin by going into higher value segments. So how do I improve the CPCU pricing? How do I make sure that we're selling highly differentiated product proposition with our business model, which is already very unique?
And with that gaining deeper access into the market as it differentiated more towards the competitors. So we are not -- we don't higher up in the value chain versus being commoditized. So I think depending pricing and so on is important.
Then the operating decision in terms of how much to invest in gaining deeper quality access to data and inventory and so on and so forth. There are some levers there for us to optimize. But I would say that we're looking at the natural progression, where one step at a time, the acquired businesses should move closer to the 20% EBITDA level. If we acquire newer business within 1 year, making sure it is in the 15% to 20% EBITDA range and so on and so forth. And therefore, also given your predictable path there okay, we were 20% EBITDA in FY '23, can wee aim for 20%, 22% in FY 2024. Those are the kind of, let's say, one step at a time scenario. But are we looking at dramatically shifting straight away 25%? The answer is no. But there's a clear path to doing that once at a time in the next few years.
That's sort of detailed answer. Just last one from my side. Is that -- if you can highlight what percentage of our revenue comes from U.S. and Europe? And within that, are we dealing with a few large clients or there are a number of couple of smaller clients over there, where we hope to scale up.
That's a great question. So in terms of our overall business, India and global emerging markets is already at 81% of our country revenues. So the developed markets contribution is about 19% today. And it's a small base because the developed markets, the total industry market is very large. Now on that small base, we have existing customers and partners already where we can go and upsell and cross-sell better, so we can give you more budgets from there, and that is an area of growth for us. And we do have a meaningful number of customers. We are well known in these markets, right? I mean, it's not that we had a new player in that sense.
I mean, yes, we are perhaps a lot more known in India and emerging markets globally because we are clearly anchored as an emerging market-focused player on Android. But let's say, after the 2021 change in iOS, which actually leverage the playing field for the incumbent player, it gave us a good sort of entry point. to get into developed markets and talk about our proposition in a differentiated way both for iOS as well as for Android. So I'm seeing a very, very good sort of opportunity for us to scale up in developed markets, and we have a meaningful number of customers in developed markets. I would say, at this moment, maybe around 30 to 40 customers contributing meaningfully through across verticals. And we are looking at growing that number substantially if you would double, triple from here in terms of where we are going.
So yes, I think there is a healthy base to start from, and it's a good market position for us to start from with the differentiated product propositions, good case studies across these developed markets and then calibrate it up and make sure that it is coming back to the kind of growth trends that we're looking at so that we can deliver 20% to 25% growth in FY 2024 on organic basis.
The next question is from the line of Swapnil Potdukhe from JMFL.
So my first question is on emerging markets. Since we have heard a lot about on this developed market growth rates, I just wanted to understand, like, the growth rates in these emerging markets, we -- earlier we used to say the industry is growing at around 25% to 30%. Now for the last 2 quarters, if I were to look at it, you have grown 23%, now 20%. Why are we underperforming the industry growth rate? That is the first question I would like to understand.
I think the answer to that is that the last couple of quarters are a unique situation, where the market is behaving to all kinds of macroeconomic headwinds and sometimes the customers are conservative, sometimes they're talking budgets of the festive season into the next quarter, the next financial year and so on and so forth. And I think that could be perhaps an explanation. And the explanation is not that Affle is underperforming. I'm pretty confident that what we are delivering is still at par at least, if not ahead, of what the industry is seeing. And at least most of our competitors, they are either firing people or they are cutting down on costs as they're not performing particularly that could leverage. We are doing all our appraisals. We have 50 positions open for hiring at this moment, and the company is absolutely growing.
I think the conduct of our company is a sensible conduct where we are not only defending our pricing in tough macroeconomic headwind situations. We are not commoditizing our position in the market, and we are not succumbing to these diverse budgets even if the pricing and marginal is lower. No, we're not doing that. We are choosing who we work with, and we are doubling down on our investments in organic growth areas. So I don't see any sign of, let's say, weakness in the performance that we have delivered at least in our mind set in terms of our confidence as an organization is, like I said in my commentary, we're at the strongest position than ever before in terms of how we are performing, whether it's the margin profile, whether it's our cash flow and growth positions, the products, the team, I think we are in a very strong mindset going into FY 2024.
So I wouldn't see a defensive or we grew only 20% or 23%. You got to see it, I think overall year's performance versus just seeing it as a 1 quarter here or there. And overall, year-wise, 35% growth in the financial year year-on-year on CPCU business is by any stretch of imagination a very strong growth performance. 37% year-on-year growth in EBITDA, that is a very strong performance. Of course, 1 or 2 quarters, we also demonstrated EBITDA, 20% growth in Indian emerging markets, given how the macro factors were and how the clients are shifting budgets from 1 quarter to the next quarter. It's not with the budget are difficult, whether people are sometimes being more careful.
I think you've got to respect that. That hasn't changed the long-term trends or what is the calibration of digital advertising growth or has Affle's products become less competitive? The answer is no. I think we have a very strong position in India and other emerging markets. And as I go ahead and maybe hopefully talk about some of the contracts that we are trying to strategically close and align for the long term, you would know that hey, we are still the partner of choice, not only for the advertisers but for the entire ecosystem.
So just to extend slightly -- extend that point, how do you see growth panning out in FY '24 for this market, specifically? Would we -- would the 20% growth trajectory continue? Or should we look at a slightly higher number?
Yes ,I think we -- whenever we have a backdrop of a year like FY 2023 and the starting point that we have, the -- it is sensible to be conservative. And therefore, on that basis, I'd say the 20% to 25% overall growth for Affle across all our business in FY 2024 organically is a sensible plan that we have already made and we are executing towards. Can we do more than that? Possibly.
With inorganic, if we do and complete any transaction this year, obviously, the growth would be higher. And our goal would be to sensibly calibrate overall organic -- less inorganic north of 35%. Now how much of that will come from because of organic did better or inorganic put it out better? Let's see. I think let's take a step at a time. But in terms of organic growth, we should definitely calibrate 20% to 25%, given the backdrop of FY 2023. And then I hope to change the discourse on that for FY '25 by actually creating a different backdrop in FY 2024. But I think it has to be seen in the context of where we're coming from and where we are headed. And we're respecting that and giving you an industry can as well as what we expect to happen in this year.
Mr. Swapnil may we request you to return to the question queue for follow-up questions. Our next question is from the line of Mr. Roshan Chutkey from ICICI Prudential Mutual Funds.
Yes. Just a basic question, sir. If ad budgets get cut, say, in a particular vertical like entertainment, then CPCU budget should go down, whereas CPCU should actually improve because you're getting, you're paying only unconverted user in times like this? Is it because -- I mean is it -- is that right? And if not, are you a marginal player in the developed markets and therefore, you are losing out to other ad-tech platforms? How should one think about it?
I think in developed markets, we were under calibrated. And I wouldn't call it a marginal player, but I would say under calibrated where one of our platforms was sort of doing more in developed markets and we are therefore very busy growing in emerging markets, and we have not let it put as much emphasis of direct leadership involvement for developed markets because we are clearly an emerging market-focused company, and we'll continue to remain that way right? given that 80% plus of the revenue is in emerging markets.
Having said that, in developed markets, when each particular customer reduces budgets or say that they're going to stop marketing for 1 quarter and then recalibrate what happens in the next quarter, then some of them might be immediately essence of everything. This is not a case of rational decision making. They are probably going to firing people. The whole marketing department is changing. And when they recalibrate, they might hold that for a short-term period. That's why we always qualified, and we say that these have short-term impact, which happened in the last few quarters in some of the verticals in developed markets for some of the customers.
Now because our base was small in those markets, when -- let's say, a few of the customers hold back budget for a few quarters, you don't have sufficient feet on the ground, or sufficient pipeline to make that good from others because the base was small. So therefore, we saw an impact.
We are absolutely and aggressively solving for it by broadening our addressable market by coming up with strategies of how to win bigger, better customers fast and broadening the base across certain key emerging verticals in developed markets. So I did outline the 5 action points that are getting action as we talk this quarter. And then I'm directly leading that effort. I hope to see Q2 to start showing some trends, which may then we maximize fully in the most important quarter which is Q3 and of course, in Q4. Does that answer your question?
Yes.
Our next question is from the line of Ashwin Mehta from Ambit Capital Private Limited.
So Anuj, in terms of our CTV offering, which we are putting more emphasis on, which are the countries that we initially focus on? Any indications that we can give in terms of initial traction there? And secondly, how does the CPCU rates compare there like-to-like versus our consumer platform?
Ashwin, could you clarify which products are you talking about the CTV products? Or you are talking about the iOS?
CTV product. The CTV product. Connected TV product.
Yes, yes, okay. So, see on connected TV, most of what is happening is that the linear TV budgets are shifting to connected TV, right? I mean, more and more so -- and this is, of course, a much bigger addressable market in U.S. and Europe that it is also a very strong theme in emerging markets, including in India as well as other emerging markets around the world for that. So when we talk about the CTV proposition, most of the times, the advertising are still used to paying for it and pay for impressions or pay for the activity or viewership kind of models right? What we are bringing is a differentiation where we are saying hey, we will charge on the CPCU business model, and we have done that for our own CTV products and roll that out starting from this quarter. So we are going to the advertisers and to the agencies, bringing them a differentiated CTV proposition together with the combination of CPCU business model and being the only differentiated platform that's doing well. So I think that gives us the room to play, a room to enter into winning budgets for new customers with a differentiated proposition.
Now CTV on CPCU business model basis would -- our calibration, the higher value, higher value business, I will want to wait for the results to come so that we can give you more detailed commentary on that. But I would expect that our CPCU rate because of not only the CTV plus CPCU business but also the iOS scan as well as the Apple App store-related propositions that we are rolling out, these are all higher value propositions.
Now within developed markets, as we recalibrate and go for these propositions anyways, the CPCU rate is higher in developed markets, within developed markets, these are the most premium segments. So in terms of understanding Affle's strategy for developed markets, we are not going there and saying, "Hey, we are coming from India, from emerging markets. And you know what, we have a cheaper proposition." We're actually going there and say we have a more premium position, which is more compelling and ROI linked. So our goal is to go to the highest segment because we are small, right?
So if we have only 10 people on the ground, do I want to go and play at the lower end of the segment or the highest end of the segment? And because I am leading it directly, I think we have a right to go and convince our advertisers to treat us as a premium, most premium proposition and therefore, going at CTV, CPCU, iOS and Apple App store CPCU, these are the propositions we're pushing in the market. So I expect a positive impact on our CPCU rates and our margin profile from these contributions as well.
And also, what this also means is when you're going for the premium, we don't need an army of people. I don't need 100 people to solve it. I just need 10 smart people who can work with me, and I will create examples of how to turn this around by focusing on the premium segment in certain verticals.
Fair. And just one follow-up. So we had pretty stable CPCU rates despite the fact that our DM portfolio has seen declines. So would it be fair to assume there've been increases in CPCU rates in the emerging markets and ideally with better growth in DMs as you get into the next year, plus some of these propositions the CPCU rate should be higher as you go along?
Yes, I think the CPCU rates we are -- like I said that when the times get tough, there are 2 ways that companies would respond. One way is that is we're only getting let's say like one of the investors ask, you're only getting 20% to 25% growth. So some people would take the pressure and say, "No, no, no. I need to show 25% to 30% revenue growth, let's reduce pricing."
Affle and [indiscernible] is very, very clear. We want to be seen as a differentiated platform, a premium platform and playing in premium segments, so no dropping of pricing. If you want to play hard, it's okay if it is 20% to 25% revenue growth, but let's make sure that the CPCU and margin expansion is happening, and our market position continues to be differentiated. We don't become commoditized. And I think that's what you're seeing here as well.
So yes, when the headwinds came in, he said, don't worry about revenue growth. Make sure margin is expanding, make sure pricing is intact, go position yourself as a differentiated player, whereas our competitors are firing people, are dropping the prices. So I think there is a very different strategy at play here. And I'm able to, therefore, build pride, organizational pride and confidence within our company that we are here for the long term, for sustainable growth, and we're not trying to make any short-term shortcuts to impress anyone in 1 quarter or the other. And I think that builds confidence in the team that, yes, we are a public listed company and -- but we are still making long-term sustainable growth grades and we are not getting nervous about any short-term headwinds because we think we are here for the long term, building the company for this decade and well beyond. So there is no reason to short-change our pricing or to take pressure on that.
Yes, we are improving our CPCU pricing, we're improving our margins. And most importantly, we're improving our conviction and confidence in our organization that our products are superior and our market position is strong.
Due to time constraint, we are limiting to one question only. Our next question is from the line of [ Omkar Golgatre ] from Shree Investments.
Yes, the initiatives which you have taken for the higher growth in the developed markets and margin expansion. Just wanted to know that the benefits of that would be coming from you said from Q2 onwards. So the benefits of that would be short lived for quarters or like they are -- therefore, the structural, they will be there for the next couple of years?
It will be structural. It will be starting to show because I'm taking charge of the team. I'm taking directly reporting of a lot of the management there on a regular basis and pushing in and going into customer meetings and so on and so forth, pushing our team to get the right events. And all of that is happening right now within this quarter.
So with any situation, let's say, one statement to make is have we bottomed out in any inverse trends that were there in developed markets, the answer is yes. Why have we bottomed out? Because the CEO himself is putting a hand and saying this is it. From here, we turn around. And how do we turn around or what do we see? We start seeing the trends in Q2. And now we'll report to you with the Q2 results as and when that comes. Of course, we still have the Q1 results in between.
And Q1 FY 2023, the developed market was at its peak. And then from Q2, Q3, Q4, starting to slide down because of the headwinds that were there. And now we have stopped that trend, inverting that trend in Q1 with certain structural changes that we have already outlined for you.
In Q2, you have seen measurable outcomes of that so that we can maximize the biggest quarter of our financial year because of seasonality, October, November, December is what we will be gunning for to be back in the driver seat of taking it to the upswing that one deserves.
And I think that's how I would address it. But these are not for 1 or 2 quarters. We are not doing any short-term mandate fixes. We are working on our product strategy, our partnership strategy, our people organization and lifting it up the way one should in these times. So I'm excited about it, and I'm very convinced with what we're doing. And it is structured. It should be there for multi -- it should help us for many years to come.
Just a small question. I just wanted to know what would be the CPCU rate or like the structurally for the acquisition you would be doing? It would be less accretive or like...
Positive. I mean, like I said, any actions that we are taking today, whether organic or inorganic, is to go more premium, to go more higher in the value chain and therefore -- and with bottom line sensibility. So whether it's organic or inorganic, I'm very clear about the direction and the promise to the investors that over the next several years, you will see higher quality revenue, higher quality margin, and you would see a stronger market position for Affle in terms of its product positioning, both in iOS and Android.
Due to time constraints, that was the last question of the question-and-answer session. I would now like to hand over the conference to the management of Affle India Limited for closing comments.
All right. Well, thank you. Well, I want to say that your company is now 18 years old. I started Affle in April 2005 in Singapore. It's been 18 years since I've been at the helm, and I see it as a young adult, which has a long way to grow into a great corporate citizen. And I hope that not only do we deliver great value creation for our shareholders but rank very highly on good governance standards for the company. So I think with that, please stay tuned, please keep believing. And one step at a time, we would see much greater outcomes as we execute this year and beyond. Thank you.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.