Affle (India) Ltd
NSE:AFFLE
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Affle (India) Ltd
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Good morning, ladies and gentlemen. Welcome to the Affle (India) Limited Q4 FY '24 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Karan Taurani from Elara Securities Private Limited. Thank you, and over to you, sir.
Thank you, Lisan. Hi, everyone, good morning. On behalf of Elara Capital, we welcome you all to Q4 and 12-month FY '24 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 the Managing Director and Chief Executive Officer of the company; and Mr. Kapil Bhutani, who is the Chief Finance 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 will be forward-looking in nature and may involve some risk and uncertainties. Kindly refer to Slide 24 of the company's Q4 earnings presentation for a detailed disclaimer.
I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thanks, and over to you, Anuj.
Very good morning, everyone, and thank you for joining the call today. I trust all of you are keeping in good health. Growth thrives in the face of challenges. Q4 FY 2024 marked a landmark period for Affle as we achieved record growth on both year-on-year and sequential basis to convincingly cross the INR 500 crore mark in quarterly revenue run rate. Defining the historical pattern, where Q3 is the highest quarter for us in any financial year, Q4 FY 2024 has surpassed the cyclical trend by inching above sequentially. This underscores the strength of our strategic initiatives, committed leadership and the strong business momentum. We have concluded FY 2024 on a strong note with our accomplishments demonstrating our resilience and a clear indicator of a long-term potential.
Let me highlight some of the key achievements of FY 2024. As confirmed in the previous call, we have delivered a decisive and timely turnaround in developed markets anchored on our determined execution with increased investments in sales and marketing and business promotion and our hands-on entrepreneurial leadership. We have fully integrated all our tech platforms, including that of YouAppi, the business integration of which was successfully achieved within the first year itself. Our strategic moat is stronger than ever before, with our unified Affle 2.0 consumer platform stack of all DSP platforms fully integrated and powered by Affle's ConvergeAI supply cloud to drive deeper consumer engagements and premium conversions at scale.
We have enhanced our product capabilities and invested in new product use cases as well as ecosystem level partnerships to unlock premium propositions and touch points for advertisers across connected devices, including CTV, Affle scans, iOS App Store and other OEM app stores. We have successfully implemented Gen AI-powered use cases on our consumer platform stack to strengthen our 2 Vs, vernacular, verticalization strategy to drive greater innovation as well as operating efficiency.
Our Gen AI-powered multilingual keyword recommendation engine has delivered success for our customers across all key industry verticals. We have further expanded our tech IP, harnessing next-gen technologies in a responsible manner, particularly in AI by filing 15 new Gen AI patent claims as well as received -- we have received 1 U.S. patent branch that was previously filed to unlock competitive advantage and to augment our market position.
Additionally, we have started FY 2025 with significant momentum, having recently secured 1 patent in the grant in the U.S. and 1 in India. And this brings our total IP portfolio to 36 patents with 9 patents now granted. With over 5x growth delivered in top line and profitability over the last 5 financial years powered by our unique ROI linked CPCU business model, we are poised to further accelerate our growth trajectory in FY 2025 with gradual increase in profitability margins.
Speaking of Q4 FY 2024 numbers, we delivered revenue of INR 5,062 million, a growth of 42.3% year-on-year. We continue to enhance our consumer-centric platform offerings, progressing -- progressively delivering stronger than ever quarterly EBITDA of INR 990 million and PAT of INR 875 million. Our CPCU business delivered about 88.4 million conversions during the quarter at a CPCU rate of INR 57, and that helped us achieve CPCU revenue of INR 5,038 million, an increase of 57.4% year-on-year and 5.5% quarter-on-quarter.
We are experiencing a strong market opportunity as advertisers are consistently increasing their digital spending. This trend is driven by widespread adoption of our CPCU model across our customer base and its application to premium use cases further solidifying overall value proposition and enhancing our market position.
In terms of the full year performance, we achieved revenue growth of 28.5% year-on-year and PAT growth of 21.2% year-on-year. Overall, for FY 2024, our CPCU revenue increased by 33.6% year-on-year and has grown at a CAGR of about 56% in the last 5-year period. Our strong anchoring across India, global emerging markets continues to be resilient and it contributed 72.9% to our quarterly revenues. In Q4, our growth in India and emerging markets combined was about 28% year-on-year.
Our broad-based growth across diversified vertical reinforces our confidence in the sustained market dynamics in India and global emerging markets.
Speaking of developed markets, we have significantly strengthened our foundation through our integrated consumer platform proposition, realigned strategies and confidence in our teams to continue to drive success moving forward. In Q4, our overall growth in developed markets was about 105% year-on-year, and it contributed 27.1% to our quarterly revenue.
Continue to share our customer success stories, this time we have included 3 case studies, which are focused on fintech in India, gaming as a global emerging vertical using CTV, and ride-hailing business in emerging markets. Our Affle 2.0 consumer platform stack continues to be recognized in the industry as the top performer, and we recently won top rankings in the singular ROI Index 2024 for our SKAN iOS performance. We also won 3 prestigious recognitions as the best ad tech company of the Year, best CTV ad tech platform and most outstanding programmatic platform of the year for mobile advertising at the Indian Digital Awards 2024.
With that, I'll now hand over the discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you, and over to you, Kapil.
Wishing everyone a good day and hope all of you are keeping safe and well. We concluded quarter 4 financial year '24 on a strong note and delivered a revenue from operations of INR 5,062 million, that is INR 506.2 crores on an overall consolidated basis. And INR 1,557 million that is INR 155.7 crores on a stand-alone basis. On a consolidated basis, our revenue growth stood at 42.3% year-on-year and 1.5% on quarter-on-quarter. This sequential growth is of present change to see quarter 4 inch above quarter 3 surpassing our cyclical trend as well as we crossed INR 5,000 million, that is INR 500 crores quarterly revenue run rate for the first time. It was a broad-based growth in the advertiser spend incurred on our CPCU model coming across various markets. During the quarter, India and emerging markets contributed to 72.9% of our revenues, while developed market contributed about 27.1% of our revenues.
Our revenue for the financial year 2024 stood at INR 18,428 million that is INR 1,842.8 crores, a robust growth of 28. 5% on year-on-year basis. Our business continues to be in a high growth momentum with integrated platforms, while product proposition leveraging on evolving digital ecosystem. This helped us to achieve highest ever quarterly EBITDA of INR 990 million that is INR 99 crores in quarter 4, '24, a growth of 38.2% on a year-on-year basis, and 2.4% on quarter-on-quarter.
EBITDA margins stood at 19.5%. Our EBITDA for the financial year '24 stood at INR 3,611 million that is INR 361.1 crores, an increase of 23.2% Y-on-Y and EBITDA margin stood at 19.6%.
In terms of OpEx, our inventory and data cost stood at 61% of our revenue from operations in this quarter, which was almost in line with quarter 4 previous year, while witnessing a margin improvement sequentially despite our ongoing platform calibrations to various previous inventories and touch points and deeper ecosystem level partnerships.
Our other expenses stood at 7.8% of revenue and increased by INR 65 million, that is INR 6.5 crores on a quarter-on-quarter basis, mainly on account of continued investment in higher sales and marketing and trade event participations, which was also highlighted in the previous quarter. Our employee benefit expenses for the quarter largely remained flat on a sequential basis. We achieved a profit before tax of INR 1,002 million to INR 100.2 crores in this quarter. Our profit after tax for the quarter stood at INR 875 million that is INR 87.5 crores, an increase of 42.2% on a year-on-year basis and 13.9% on quarter-on-quarter basis. Despite an increase in effective tax rate this quarter, our tax rate is expected to gradually inch up.
We remain focused on our working capital management and has been extremely prudent in customer profile such as -- there are no material changes in our collection risk. Our operating cash flow to PAT ratio stood at 88%. Looking ahead, we remain confident of long-term business process to invest further in our business and stand committed to deliver long-term sustainable growth.
With this, I end my presentation. Let's open the floor for questions.
[Operator Instructions] The first question is from the line of Karan Taurani from Elara Securities.
Sir, congrats to you for a very good quarter as far as growth is concerned and also the profitability. The first question was on developed markets, right? So we have been indicating that the developed market is seeing strong traction. So if you can kind of break this up for us in terms of the organic revenue growth that we have seen from the developed markets. And going ahead, what is the kind of traction, what are the kind of growth rates we can expect? And what are the kind of verticals that are contributing for this kind of growth?
I think with respect to organic, inorganic, I know this is always the emphasis point. I think I just wanted to share that in the U.S. market, we have undertaken a very clear process of making sure that we are fully integrated as a premium platform. Focused on those verticals that we think we will find growth long-term, sustainable, profitable growth in the U.S. market. And we have already combined or we are already in the process of combining the -- even the entities of YouAppi and Jampp, the U.S. entities, which we had in the U.S. as well as the operations, the sales process and so on, I think that is taking effect fully at this moment.
Now when we look at organic growth of our company and we look at it in the context of the acquired companies and so on, in this particular sense in the quarter Q4 at an overall level, not just like developed markets, emerging like overall consolidated level I would say that the organic growth of our company has achieved year-on-year about 18.5% organic growth in this quarter, and that is after taking into account the global impact.
Now most of the impact of this was, I would say, in the international markets, developed as well as certain emerging markets context. The sequential basis of looking at the number is actually perhaps more important because in Q3, typically, October, November, December is our peak quarter, right? And Q3 to Q4 is comparable because there's no organic, inorganic adjustment. I mean, the entire business situation was the same. And typically, Q3 is the peak quarter and Q4 would be a slight dip. In Q3 to Q4, I think we have seen a sequential -- favorable impact overall. And I think we are seeing that the Q4 trend even across international markets was keeping in line with the Q3 trend. So the growth momentum is there for us.
And I would say -- safely say to all our investors, that we have fully recovered and bounced back from all the complications that we were feeling and spacing with respect to rebuilding Jampp, dealing with the complications of turning around Jampp. We have fully integrated all the acquired companies. We have also successfully fully integrated YouAppi, and the synergies of that are more or less already being seen in the Q4 results and would be even better realized as we go into FY 2025.
So within the next few quarters of FY 2025, you would find more and more synergies emerging from how all of these platforms are now completely integrated to the Affle ConvergeAI supply cloud. And that is having a very, very positive impact in the way we are able to expand, scale, drive premium conversions to our advertisers. So I'm very bullish about the way we have integrated and going forward, like April, May, June, this current quarter, 2 months have almost already passed, and we are already enjoying the benefits of this integrated approach of running our company.
Right. And any verticals you should point out maybe in emerging and developed markets which are doing strongly well because certain vertical which could be under pressure. So anything on the verticals point of view?
Thankfully, in Q4, I would say that all the pressure points have been neutralized and balanced out. We are seeing broad-based growth across verticals, across all markets. And we are calibrating carefully to ensure that we are not having any overdependence on any specific vertical. I think our goal is to keep it very, very broad-based as much as possible across geographies and verticals. So at the moment, I have no pressure point to report to you that we are feeling any stress or pressure in any particular vertical. In fact, we are seeing positive momentum everywhere at the moment.
We move on to the next question. That is from the line of Anmol Garg from DAM Capital.
Congratulations on strong sequential growth in our seasonally weak quarter. Just had a couple of questions. Firstly, going ahead in FY '25 now as you are indicating that most of the complications are over. Would it be right to assume that the company can grow 20% plus again for the foreseeable future?
Well, I have always said it very clearly that I measure our team internally as well as I measure my own performance internally at that kind of a benchmark where at least from a bottom line perspective, whether it is cash flow, whether it's profit after tax, I wouldn't settle for anything less than 20%. So in terms of revenue growth, I think it should also be in line with that. I would always be pushing for that.
Having said that, given the backdrop of how things have been last year, I think it should be easier to do this year than last year. So if you just look at the run rate that we have in Q4, which is typically our weak quarter, right? So I think that's important to take note of that. So there is no one-off event, which has helped us to look better in this Q4. What we have delivered is a broad-based all-round, sensibly calibrated growth, which we will definitely be able to defend and improve upon as we execute into FY 2025. So it's a simple math. You look at INR 506 crores, give it some sequential uptrend and compare it to H1, you would naturally see that the math will add up that FY '25, if we defend our Q4 run rate and do a little bit better, you would see that the math would land up in that zone of numbers that you're seeking for me to confirm.
But I mean, I leave that to you in terms of modeling. Long term, as long as I think the consumers are still using smartphone devices and connected TV, as long as that consumer trend is intact, I would expect nothing less than a 20-odd percent growth from our company.
Sure. Secondly, I wanted to understand for the non-CPCU business part. So in 4Q, it's almost nonexistent now. So just wanted to understand if we have deliberately reduced the work over here in the business and what's the outlook over there?
See, our focus has always been -- I've been pushing my entire organization and team and in fact, incentivizing the team members who say every order that comes, let's make sure every product, every use case in every vertical push for CPCU business models. That is our differentiation. That is how we stand. If you noticed a few quarters earlier in the earnings call, I mentioned that even our CTV product is now being blended with the CPCU business model pushed into the market. So I think we have found that to be our anchoring transition. And I've given a deadline to our team that starting calendar year 2024 January, we have to push really hard in that direction. And we have been successful in doing it. I'm very happy with that outcome. In fact, you have to see it as the CPCU business is like the single cash-generating unit as a company.
Sure. And last question from my side. So as we are seeing more synergies coming in YouAppi and Jampp business, particularly in developed markets. So can we expect that going ahead as more synergies play out, we can see some margin increase going ahead?
Absolutely. See, when we acquired Jampp, one of our thesis was to enter into Latin America markets, North America markets, go into gaming. And Jampp was struggling to kind of achieve those goals. In order to augment that and to solve it, we had to take some decisive steps last year. And one of the steps was absolutely to acquire YouAppi and see how we can create those objectives and get to those growth targets that we have as an organization at the consol level. And Affle has done fantastically well in that execution.
I think this year, I'm super proud of how we have integrated this whole go-to-market approach. At the same time, I think rebuilding Jampp. Now synergies-wise, there are 2 areas of operating synergies that we will be working towards. And I have commented in my script earlier. One, the ConvergeAI supply cloud, which is like the Affle's let's say, core engines and platforms, which are essentially making sure that all our DSPs have clean supply, clean meaning, there should be no bot traffic and all these a lot of patents that we have got. How do we filter out the not so good traffic and really have clean access to the consumers and target premium consumers, on-premium inventory. So this efficiency we are bringing to our -- all our integrated platforms.
The second area is compliance, making sure that we are dealing with data privacy, we are dealing with all of those aspects and providing that baseline level of compliance as well as clean premium scale up in terms of the traffic. So this is leading to great outcomes because all the platforms are leveraging the same sort of central platform capabilities. And that is helping us in dropping certain areas of cost and optimizing the margins or even growing more premium, maybe the cost is the same, but we can charge more to the advertisers. We can go and inch up our pricing. So I think those synergies are now starting to show in our numbers.
And I am feeling the power of it in the execution. And I think that's why we have also said that progressively we will see some incremental improvement in profitability as we execute and scale from here onwards.
The next question is from the line of Rahul from Dolat Capital.
First question for Anuj. I know you said growth is really broad-based. But is it possible to attribute it in some manner such as, let's say, is it more client logo win, is it revival in spend from some of the troubled clients such as the fintech in U.S. or RMG in India? Any flavor for this quarter? And in generally, demand environment across key markets would be of great health.
Thanks for that question. I'll give this answer in 3 dimensions to you. Let's look at India. In India, we are seeing more broad-based bounce back across verticals. We are no longer feeling overdependence on a gaming or real money gaming. We broadened our approach towards that. So I think that, that effect is weaning off. In terms of emerging markets, global emerging markets beyond India, I think we are -- we never had any issues.
So we are doing fine there. But what we are benefiting from is that we are selling more integrated product propositions, right? So we are going and winning new logos and customers, but we are winning it in a competitive advantage of that we are bringing an integrated suite of capabilities of our products. So a lot more upselling and cross-selling is happening with the way we are approaching the market. So I think that's really working well for us in markets like Brazil, Southeast Asia, Middle East Africa and so on.
We are also -- in terms of the developed markets, I think there, I've already commented earlier that we are going out there, again, with an integrated approach and finding positive outcomes. But there is less pressure now on the fintech, because fintech and vertical was under pressure for most part of last year. But I think in this last quarter, we have seen budgets coming back from those customers who had tailed back before. So there is a all-around favorable impact. So the pressure points have been released. The strategic integrations of our products and platforms coming together are being realized across markets.
So when you see existing customers, you see there's a lot more upselling and cross-selling happening. When you look at new customers, we are winning better in the verticals that were under pressure, as well as the integrated proposition is a competitive moat versus our competitors don't have all these integrated platforms in their capabilities. So I think it is definitely helping us get budgets on these basis.
And just 1 question for Kapil. Given the fact that our organic growth is back to 20% plus, is it safer to assume you may get operating leverage of nearly 70 to 100 bps hereon? And any specific reason for the jump in the unbilled revenues, if you could highlight?
So I'll answer your second question first. There is no specific reason for the contract assets or the unbilled to grow up, a, if you compare it from the last year, the turnover of the revenues from YouAppi have added in. So that is 1 reason. Second reason is the developed market billing either for Jampp and YouAppi were being done on the 31st of the last month, which has gotten changed into the 1st or the 2nd of the next month. So the dating of the invoice has changed, and that is in line with our SOPs and RCMs. So that has brought in on the cutoff date, a higher unbilled versus the previous year opening, right?
With regards to the efficiencies on the organic growth, as we have mentioned that we are working for the premium inventories, so we are striving there also. So it cannot be assumed that it will be 100 bps. Yes, there will be some efforts to notch it up. But yes, we are spending a lot of efforts to prove our inventory base on the premium inventories also?
Sorry to interrupt you there, but the Gen AI-related efficiencies that we are also seeing. So Gen AI is helping in 2 dimensions. One is innovation, okay? Clearly, bringing new use cases and power of Gen AI to make our advertisers get better ROI. The second area is that is improving efficiencies. Efficiencies means we can do the same things faster, better and with less manpower involvement and so on and so forth. So whether it is coding, whether it is testing, whether it's creating creatives, whether it is creating data science decision-making or reports, many things are getting automated inside the office.
So we are embracing Gen AI like a full embrace on the innovation, on the product side as well as on operating efficiency. So there will be definite positive impact on the margin. Let's not quantify it and take a forward forecast or basis points, but let us execute and deliver the numbers and you will see the trend as it emerges, but let's not nail it down into some specific number forecast. But I'm pretty optimistic that we are seeing efficiencies for sure.
Yes. That's helpful. And congratulations on achieving the milestone.
The next question is from the line of Swapnil from JM Financial.
Congratulations on a good set of numbers. So the first question is on the breakup of your revenue growth across India and other emerging markets. I know you have given the combined number, but it will be helpful if we can break it down and help us understand separately. And any particular reason why you have changed the reporting structure with respect to growth in these markets? That would be my first question.
Okay. In terms of year-on-year growth in India, we have seen over 15% year-on-year growth. And in the rest of the markets, we have already provided that. If you see India and emerging markets on a combined basis, that's over 28% and in developed markets over 100%, I think the emphasis now is that the India's core business is actually not just applicable -- I mean, just from an India lens, but what is happening is that the advantages that we have of our business in India, in terms of data, in terms of data science, capabilities, product, processes, efficiencies, dealing with the mass sort of volumes that we are dealing with in terms of the Indian consumer and how tens and thousands of servers are running to process that efficiency, the same efficiencies are absolutely replicable across all other global emerging markets that we are running into, where the pricing is always under pressure.
The number of users is very high. The data science algorithms are also finding that what we do in India is actually finding great success in terms of how we apply it directly into the other emerging markets. So we see that as an important sort of segment that emerging markets globally are behaving in a certain pattern.
And what we are doing, of course, is anchored on to India. And India's anchoring and how we report India is super important. It is anyways as a listed company, India stand-alone is being reported and consol is being reported. But from a growth perspective, we are seeing that India and emerging markets is one segment, and let's take out the developed markets and see how we're going to ramp up there, bringing it back into the focus versus blending it as one, I think it was important to see it in that lens. So I hope I've answered your question.
And yes, it is all around growth, and I'm very happy with what we are achieving. It's super important to exit FY 2024 with this kind of a growth momentum where organically overall consol basis, we are seeing 18.5% growth year-on-year. This is very positive. And I hope to improve it in further as we execute into the rest of this financial year.
Got it, Anuj. The second question is with respect to -- I mean, the continuation of that a bit. The other emerging markets growth seems to be significantly higher over the last 2, 3 quarters. In fact, if I'm right, it would be more than 30%, 35% kind of a number. Now what kind of confidence we have that this growth will continue in FY '25 as well given that the base itself would have changed? And any particular verticals within these other emerging markets that are doing significantly better than others?
And other question is with respect to developed markets as well, wherein there has been tremendous growth in those markets as well. Any particular things that you're doing differently this time around, which is helping you penetrate the customers in those markets. Because there is a significant competition in those markets already. So what is helping us penetrate the customers. Some examples could be helpful.
Okay. I understand that. So in terms of other emerging markets, I would say that we have seen a consistent pattern of growth all along. And what has helped -- and there was no particular pressure point that, oh, there is a problem in this vertical or that vertical. Unlike in India, there was either an ad tech had an issue, then there was challenges in gaming verticals and so on and so forth. There were different moments of challenges coming in different verticals in India. Then there was -- in developed markets, there were similar challenges coming across certain verticals and issues.
But I think in other emerging markets, we were fortunate that there was no such stress point at any moment. And now it is, of course, benefiting overall from the fact that we are doing all the integrated propositions, we are able to do upstanding and cross-selling of those propositions. So therefore, there's a broad-based growth both on existing customers and new customers. And regarding developed markets, I already answered that question earlier. So if you have any specific clarification on that, I'm happy to clarify.
No, what I meant in the developed markets, like what exactly is helping you win more revenues from those customers which otherwise would have been working with some of our competition earlier.
So what's helping us there is in, let's say, one, that the customers we already had in fintech before who had pulled back quite a bit because of their own industry dynamics, those are coming back. Those budgets are coming back. So that is 1 factor, right? The stress point has been released.
Second is, we are also pushing our gaming as well as non-gaming products in an integrated fashion, like I mentioned that we are creating synergies across how we can push certain use cases in an integrated way in the North America market that is helping.
And third is execution. Our base is so small. Our base in developed markets is -- actually, our base is overall quite small, even if I see other emerging markets. So it's not a scenario where one has to think that, okay, we execute well on the ground, sharply on the ground with the right kind of sales and marketing positioning our product, definitely has the capability to deliver and be competitive versus those competitors out there.
So how to win business out of them is just about sales execution. That's why you would see that last 3 -- last whole financial year, we have invested disproportionately more money in sales and marketing efforts. And I think that has yielded results. I mean first, you start investing, then you build a pipeline. And if your product and merits are good, you will convert those pipelines. So that's what is happening. Just sensible execution on the ground.
We move on to the next question that is from the line of Mayank Babla from Enam AMC.
Congratulations on a great set of numbers and a great exit to FY '24 despite the seasonal weakness. Anuj, my question is to you that you mentioned earlier in the call that there were no one-off events in this quarter and also the integrations are coming through nicely for you. So in the future, can we see the seasonality in Q4 disappearing in the foreseeable future?
No, I wouldn't say that. I would say that this Q4 is a better outcome because of several unresolved things getting fully resolved as of -- I mean, I think I made that statement last time also that like by the end of Q3, I think a lot of the challenges were already overcome. And I was keeping fingers crossed that my assessment be right and then we'll show it in Q4, and we have shown it in Q4. And I think that's how you should look at it.
I think the fact that Q3, October, November, December has always been higher than Q4, it's more of a function of advertising industry and budgets. The consumers are in a happier state, it's festive moment. So the advertisers are also spending and the consumer is also spending more, right? So there is a clear correlation there. So I would expect that trend to continue. And -- but at the same time, this Q4 is not a one-off in the sense that this is the new base. This is the new base where we are at. And on this base, we will be able to continue to build up from, right? So what you're seeing here is that, oh, this is about an exceptional Q4. It is a normalized 3 months result that we are seeing. And this is the base on which the business will continue to build forward, right?
But as you go and model FY 2025, you would say, okay, Q1 should have some sequential growth. Q2 should have some sequential growth. Q3 should have that better spike that used to happen each year. And then Q4 of FY 2025, I would still model it slightly lower than Q3 FY 2025. Does that make sense?
Sure. Got it. Got it. And my second question to you is I wanted to understand from you what is your vision or strategy with all the patents that Affle has one. I mean how do you plan to monetize them? Or is there any aspiration there?
The patents are monetizable in many ways. The constructive way of monetizing is to be innovative, put it into your products, those patent concepts and go and make money by selling to the advertisers and telling your advertisers that we are the inventors of this and therefore, we deserve it and the others are copycats or also me and that they can't actually provide you that. So a lot of big companies respect that, okay? A lot of big companies would respect that and say that you are the inventor. So we will work with you because using another company's product, which may have patent infringement issues later on who wants to get into those mess.
So I think the -- so the best way to monetize is by taking that first mover advantage back into your products and taking it to market and winning. The other way of monetizing is to go and become go and issue notices to all your competitors and say, start paying me royalty because you're trying to use this particular invention that is assigned to us in this patient, right? So I think those, I think, are also approaches which so far, Affle has not undertaken. We are winning business on the merits of our products versus trying to go after the industry and say, "Hey, this is our patent. Start paying as royalty." So we haven't exercised that option yet. Someday maybe we'll look into that. And I think it is much more prevalent in U.S. these kind of things. So I will look into it maybe in FY 2026.
But for now, the patent is an indicator of the future readiness of our company, of our products, our mindsets, and it is also a great opportunity for us to refence areas of future invention. So in Gen AI, when there will be more companies and products doing many things, and we'll have the patents in those areas, I think we will have some clear advantages whether in terms of acquiring those companies or investing in those companies, so we will use it to our advantage at the appropriate time. But I think it's been core to our philosophy. Whenever we work in a certain direction, we would think sensate with innovation.
The next question is from the line of Arun Prasath from Avandis Park.
Anuj, I think the YouAppi performance, I think it looks very good. I think when we entered -- when we had it last year and compared to that, it kind of has doubled, it looks like. If that is the case, I know our gaming -- exposure to our gaming is very small. It's a very big market. But is it something that is how we are -- can we double this? Can we grow in this space in this vertical? And what is our right to win? Now you have seen YouAppi closely for the last 12 months. And why we should -- why we can sustain this growth? If you can add some color to this.
Yes. A few things I want to share there. One, YouAppi has achieved for us what we once thought Jampp would achieve for us. And I think we have achieved the right level of integration points. One of the things that we have also seen with YouAppi is that we have been able to enhance the upsell opportunity where the CTV initiatives of our company that were built organically by our company over time have now been fully integrated with YouAppi as well as Jampp, and we are able to integrate these platforms and use cases in a way where considering that with the CPCU business model, we are creating a right to win, a greater right to win. So the differentiation is on the product. The differentiation is on the business model. And of course, you have to still execute well on the ground, right?
So I think all of these things combined, plus the Gen AI innovations that we are doing, we are really lifting up the differentiation and the moat of all of our companies by combining the power of the use cases across our platforms. And we have already seen success stories on that. So if you see the case study that we have shared this time, it's a gaming case study, gaming customer, but on CTV. And CTV was not something that Jampp and YouAppi or any of these platforms were doing before.
So when we have built it over time internally, right, across these platforms. And then we are able to augment these use cases to create success. So upselling to existing customers of YouAppi, Affle's products and propositions as well as bringing new differentiations to these platforms so they can compete better in the market, that's something we have done exceptionally well, and we feel like that we really know how to play this game, right?
I mean, earlier during COVID times when we were doing acquisitions, we were already conservatively guiding 3 years to integrate, right? And actually, we took that time as well because we were figuring things out. But I think now our confidence is so high. We have seen the good cases. We have seen the not so good cases. We know how to manage it and fix it and deal with it and while communicating transparently with all stakeholders like yourselves, we just want to make sure that in YouAppi, we have again demonstrated. See, we have learnt it, we have done it well, and it's making an impact. So I'm very positive about how our company is shaping up to take on FY 2025 convincingly.
So Anuj, is it fair to say that -- given where CTV is, how growing it is and how big an opportunity you have in gaming, is it fair to assume that you yourself will be disappointed if you don't sustain this kind of a space in YouAppi?
I think you have to go beyond this. I've been saying it very clearly that it is 1 integrated cash generating unit, 1 integrated platform, you can have different -- I mean, I'm seeing it as 1 integrated body with many limbs, and those limbs are all being integrated to the one common central ConvergeAI supply cloud of Affle. And now that is how you're going to see it. So you say that, okay, there is 1 DSP that's focused on gaming. There's another DSP that's focused on CTV. But this is all working in an integrated fashion across one sort of central system. And I think that's super important to see. And it is not going to be a one-trick pony that okay, is this one doing well or that. There's no such cross-platform hedging that is necessary. It's really an overall market.
So an overall market, we have a right to -- and by the way, if I break it up like that, I think we will not have the competitive mode that we enjoy today. When we integrated, the way we have integrated it, that was always the plan, that is how it was supposed to be done, and I am glad to report that we have achieved it. Okay? Today, every single acquired platform is fully integrated as one cash-generating unit within the Affle Group, powered by our Affle ConvergeAI supply cloud, and we are doing well.
And these platforms, I dare say, wouldn't have done as well, if not for these integrations. Had we not put in the CTV, had we not put in our supply efficiencies to deal with it or introduce certain mechanisms, I don't think we'd be doing that well. So now is the time to say, is the market, is the overall advertising budget of the advertiser is going to support our growth plans and the answer is yes. We are seeing growth in advertising budgets in some of these emerging areas. Our advertisers coming to us and saying, "Hey, show us what we can do in CTV." And it is not about just TV. It is integrated right, saying what can we do in the consumer journey? How can we leverage some of these innovations and drive better consumer conversions. End of the day, what an advertiser wants is to engage with their right quality of consumers and to convert with them.
Now whether you touch them on a mobile or a CTV or other variable computing or you use Gen AI, whether you deal with them on a vernacular context of trying to convert, are you using video, or are you using banner, those kind of things are what we need to absolutely integrate and all our platforms are able to do those integrations to bring conversions to the advertisers. We are seeing budgets across verticals, across our markets. And I think it's also a blessing our base is still small. I think Affle has a long, long runway of growth ahead. Our base is still small, whether in developed markets, other emerging markets or even in India. There is room for a lot of growth.
Okay. Right. Very interesting. Anuj, you are saying you have integrated very well. You have greater resources and bigger team, more proficient team as compared to, say, what -- what was that in 5 years. So you have all the levers to grow and then you have a bigger market, your FL is too small at this point of time in overall scheme of things. So given all this is growing at the industry level slightly higher, it is given. So -- but what will -- what are the specific challenges that you are seeing so that you can grow at much bigger than the industry because you have all components in place with you right now. So what is the specific challenges that you are facing today in trading -- doing a growth -- profitable growth?
When you say industry growth, you have to see that not all ad revenue in the industry is worth 20% EBITDA, not all revenue is equal. So when the industry growth metrics is reported, it's only reported on revenue, correct? That how much ad spend increased. But some of that ad spend, I would reject that budget completely and say about the pricing, the way those guys are asking for it and whoever is chasing for it, that business, I don't want to do because that business will give us nothing. There's no -- you can't -- there's no margin. There's no profitability. So there is -- you have to choose the battles that you will fight. If you look at our commentary, what are we saying to you? We are saying that Affle is not just going for growth, it is going for cash flow positive, bottom line sensible, high-margin premium profitable growth.
Now when you add all of that together, then you'd say that, okay, which segment should we be playing in? Which vertical should we be playing in? Should I be going for more iOS? Should I be going for more SKAN and iOS, should we be going for OEM app stores, premium, Kapil also said premium inventories that we are forming. What is the meaning of premium? Are we going after the -- I mean I just want to explain to you that we are going for the highest profit pool segments in our business. And then going for those with great efficiency, and therefore, delivering superior financial results on top line growth and bottom line sensible outcomes, that's how you have to look at it versus saying, industry average growth industry average profitability is also not that strong. So we want to be that and therefore, going premium selective, I will choose my rate of growth and the profitability and build for sustainable, sensible growth.
So therefore, I think as long as we are operating in that sensible range of about 20% plus growth, I think that is a good, healthy place to be in, in our industry.
The next question is from the line of Moez from Ambit Capital.
My first question was that in previous quarters, you had called out some slowdown in real money gaming in India. So what has changed incrementally which is in this quarter? And what's your outlook on this sector moving forward.
Thanks for that question. I think in terms of any -- whenever there is any major change, where suddenly an unexpected change comes and then everybody has a major reaction, there will be a period of time within which that reaction will get digested, normalized, and things will get a little bit better. I wouldn't say real money gaming has bounced back fully, and that it's back to its past glory, there is still some impact. But I have gone and Affle has gone beyond that. We are not interested in just talking real money gaming because Affle is way more than that. Is this 1 vertical in 1 market. And yes, it was a big exposure point, but I think we have gone beyond that. I am no longer going back to that discourse anymore. And saying that we will grow in India on a broad basis. Real money contributes more, great, but I'm not channelizing or keeping a baggage of that in our minds and our execution going forward, nor in my discourse.
So yes, real money gaming, there's still some room for it to bounce back become better, but our solution to that is the same. What is the issue with real money gaming? The cost of doing that business has gone up. The incentive for the consumers to maybe necessarily play those games has gone down because they can't make enough, there is taxes. So the only way to do is go to more premium base of users.
Now if you go to more premium base of users, those have bigger lifetime value, contributions to the advertisers then they can afford to spend, right? So I think the solution to most of what we are talking about from a strategic point of view is, play in the premium segment, go higher up in the value chain, go on CPCU business model, price higher, get higher ROI to the advertisers, that's the name of the game, and that's exactly what we're doing.
We are going on iOS platform in a big way. We are, of course, programmatic CTV. We are going for innovations and Gen AI. We are going for CPCU business model. All of these are indicators of going more premium for higher ROI customers. And then similarly, on the supply side, we are saying we're going to target more. So I think just see the trend line that we're talking about, it solves not only for real money gaming, but most of the challenges in the industry.
All right. My next question was on your average CPCU rate. So now with your focus on targeting more premium customers, is it fair to say that your average CPCU rates would go up in the future? Or -- and how would that split be between, say, the developed and emerging markets?
Pricing is always a sensitive topic and to command a higher price, you have to first demonstrate higher value, right? So the way it works is that as you go more premium, we'll be able to show to the advertisers that when they're working with us, they're getting higher value. And consequently, we should command better pricing. So I think -- and how to command better pricing, we have to deliver that higher value and create competition for that amongst many advertisers.
All of them coming to our platform and bidding and saying, you want more volume on our platform, you got to bid higher price. So there is a gestation period. So first, you invest in the innovations to go premium, deliver that value proof of the pudding, get enough competition in the market then influence the pricing. So I think there is -- that whole process is underway, and you will see that inching up as we go along.
I think there is room for revenue growth, there is room for pricing improvement, there's room for margin improvement and efficiencies. I am optimistic.
We'll move to the next question that is from the line of Rishit Parikh from Nippon India Mutual Fund.
Anuj, congratulations on a decent quarter. Just a couple of questions, right? One, how are we splitting responsibilities given that we've got -- we've had some changes in the U.S. market, right, [indiscernible] market especially. So where you've taken up responsibilities, but now obviously, you've got India and emerging market, which is also growing fairly well, right? So just sort of help me understand on how are the management responsibilities played out by? Sort of you relocated -- or I mean, how are you looking at that business?
See today, in my opinion, and I've said it many times, I think, and perhaps an interactions even with you that Affle is still a very -- in my opinion, still a small company. I mean 600 people is not a very large company. And in my view, it's a 19-year-old company, where in the last 12 months, I think I would have been to every single office of Affle, right, from Argentina to U.S. to Japan to Korea to Southeast Asian offices, of course, India, every other time, Israel, including pre as well as during and post war and so on to Spain. I mean, yes, it may seem like we are all over the place, but we are still a small company.
All of the 600 people in the company, I would have either already met or known with great proximity. But this is not only about me. What I'm saying is that we have a very big management team for the 600 people. So if you go to our website, you look at the management team profile of our company, right, the Chief Revenue Officer, the Chief Operating Platform Officer, the Chief of Architect of the Platform, the Chief Strategy Officer, all of these people, a lot of them have been with the company for 17 to 18 years. Many of them have been with the company for 10-plus years.
Seasoned players who know what we're doing inside how we are -- I mean they can come on this call and pretty much do the earnings call as if Anuj is doing that. So there is -- this level of [indiscernible] match that has happened over so many years, right? And then you have the next line of leaders who are already strong professionals, which we have acquired. So YouAppi, which we acquired within Mediasmart, which we acquired within Appnext. And that bunch of people are the non-entrepreneurs, the professionals who are CXO level people in those companies, haven't made much money from the exits, they are in it for the stock options that Affle ( India ) has given to them.
They believe that, hey, we're going to grow 5x in the next 4 years of their vesting schedule because we have seen in the last 5 years, we've already grown 5x in terms of at least our revenues and profitability. So they are seeing that, okay, hey, this is a team that knows how to execute.
Next 5 years, if they stay together with us, they'll -- so there is a lot of incentive alignment. And I would say there's at least a good 20 to 25 people who are CXO VP level people in this company of only 600 people. So each of those -- and I think like I said, it's -- we don't have a management bandwidth issue at the moment. I'm still picking up my children from school and helping them to bed in the night. And there is a balance of life while I have to admit. I mean I love doing what we do at Affle. And there's a common joke in the family that I love Affle more than the family.
But other than that, I think we are a young team. We are ready to work hard and fight it out, and we have a strong team, a big enough team, and we feel that our potential within management team to lead this to 3x to 4x growth from here and still be the leadership team without making any dramatic leadership changes or upgrades is possible. And I don't see us growing too much in the employee base. So if we have 600-odd people strong, to grow 3x, 4x from here, I mean, I don't think I'm needing that many more employees. It's going to be a test. In fact, with Gen AI capabilities the way we're implementing it I don't think we have to grow the employee base too much.
No, that makes sense. The second question is on DM right? That's interesting. Now look, it's 27% of our revenue base, right? But on an absolute number, it's still much smaller considering the size of the market that we are operating in, right? So just sort of help me understand that, look, from the capabilities, what is the strategy, let's say, from a 3- to 5-year perspective in this business? Are we sort of targeting niches? What is the kind of competition that we typically run into? And then are you sort of -- from a growth perspective, outlook perspective, are you sort of being a little more conservative because that business, in my mind, can grow multifold, right? And it -- your India AUM is already growing 20% on an aggregate basis, right? So I mean just sort of help me sort of put that puzzle in the DM, even a little more perspective around 3- to 5-year strategy.
I have been advised by all our top institutional investors, Anuj, you are too aggressive and bullish all the time. I say but that's who I am. I mean that's how I lead my role as a CEO, as an entrepreneur. The advice is under promise and over deliver. And by no stretch of imagination, am I saying that 20% plus growth is under calibration. All I'm saying is that when we are looking for growth, we are looking for sensibly calibrated growth, which I think there is a lot of revenue in this market. I mean, if you tell me just grow the top line without worrying about the bottom line too much, yes, I mean that game, I could have played even 10 years ago.
We have built this company on the DNA of profitability, cash flow, positive, sensible execution, let's make sure -- and also only when those customers are going to be around for the next 3 to 4 years and where we can inch upwards, right, and deliver better outcomes. So I think the philosophy of running the business that way is actually something I would never tradeoff for anything else. And I think that has been a huge advantage for our company, especially in the context of being a public listed company because we were always building Affle the same way. So I wouldn't change that for anything.
Can we get a lot more growth? The answer is yes. Can we get it now this year, this is, sure, we can. But I don't want to grow in a way that is not sensible. So we will pick our battles. We'll pick and focus and grow sensibly. If we over deliver on that, that would be cause to celebrate. But I would take advice of the institutional investors who said, under promise, over deliver.
No, so look, that's understood. What I'm trying to understand is, look, you've got gaming, you've got couple verticals today, right? So that 3- to 5-year strategy is what I was looking for. How do you sort of penetrate into customers. What is the strategy of expanding slow deals strategically across some of these customers. I get the profitable part, which is something that you highlighted earlier in the call as well, so.
That's right. So I think I was just commenting on your last comment that are we under calibrating at 20% growth? And I'm saying no. I'm just being, let's say, balanced about it. Having said that, let me also put it this way that our strategy is already very crystallized, vernacular, verticalization, adopting Gen AI capabilities for greater innovation and efficiency, integrating all of these platforms and use cases, offering a full suite of services to the advertisers, right from mobile to CTV to wearables, give them something that they cannot refuse in a business model with CPCU pricing. And they say, then you are successful, when you get ROI, pay us, you're not successful, don't pay us. But give us your budgets for across-the-board budgets. TV budgets are going to CTV, let's fight for that. Mobile is already continuing to grow, let's get greater ROI and make the consumer-centric CPCU business model.
So you know our business model. You know our vernacular verticalization strategy, how we are putting the Gen AI together. You know how we're executing deeply with the committed team in India, not letting that be focus for anything under the sun. Yet having local teams in Southeast Asia, Middle East Africa, Latin American markets, also looking at CIS markets going forward, looking at North America, all of these places need to have -- Europe or even in Japan, our team is doing so well in Japan. So I think the focus is local execution. And for those local teams, let's power them with the resources for the highest level of market share win in those markets, right?
So verticalization is an important execution strategy because we can start small. We don't have to go and say, let's attack all 10 verticals in every market that we are in. So when we open North America or Japan market or when we go into Spain or U.K., you're looking at it, which are the verticals that we can go in and shoot for like a snapper. Have a small team, have a small sales team there, 5, 10 people, and then let's go and win against competition on the merits of our products and integrated proposition.
So that's a very simple strategy. I'm not sure how else to paint it, but we are not going with some massive attack on let's go North America and hire 100 people, that's not how I have ever executed. So we would always do incremental movements but very strong incremental movement backed with great team members and winning at the back of product and giving the heat to the competition one step at a time. That's how we'll execute. So nothing dramatically different from what you have already seen.
The next question is from the line of Arushi Shah from Sushil Finance Services.
I wanted to know, we have been growing through multiple acquisitions that we do. So I mean, any such acquisitions which we have in pipeline for, say, next foreseeable future FY '25 and '26. And if you could shed some light on that? And also about typical ticket size for acquisition? And what...
I think I've got your question. If you don't mind, I'll answer it now. Regarding acquisitions, you would notice that Affle's acquisition approach has been very systematic, very consistent and very conservative. One, every acquisition we have done is in the consumer platform business. We are not acquiring to diversify. We are acquiring to integrate, consume and making into 1 integrated cash-generating unit.
So the consumer platform business as one single cash-generating unit is growing organically on CPCU business model. As it generates cash, we are also conservatively saying how much cash have we generated in the last few years. We are using that as a basis to define how much of a budget or hand do we have for acquisitions. So if you look at all our past acquisitions largely funded from cash generated from operating cash flows of the company. And so that discipline is there that, hey, we're not going to go around borrowing or dramatically borrowing or going outside our means in order to do any acquisitions. So that discipline is there in terms of your question of size.
In terms of your opening remarks that you said that it's more multiple acquisitions. I would say that we are consuming and growing, let's say, we wanted to enter into LatAm. Let's get a team there rather than hiring one by one, let's go do an acquisition also in North America. You can do it. You can achieve faster movement through acquisitions. You can think of it as actively hiring. Acquiring customers, acquiring teams of people that are functional and then doing it conservatively, winning sensible valuations, sensible size of the deals.
And realistic expectations to integrate it together so that we can expand the margins using the power of our integrated ConvergeAI supply cloud capabilities. And I think these are the methods that are already proven, tested and we are confident of. Going forward, will we do any acquisitions? I think time will tell. We are keeping ourselves resource ready and capable in order to do it, but we are very selective.
So if something fits into -- and we are also very experienced now within all dimensions of it, whether it is an acquisition in Israel or Spain or Latin America, U.S., I think we have covered significant ground and experience to understand the various challenges and dynamics. So we will be very carefully calibrating. If the right opportunity emerges, we'll guide you towards that. At the moment, can I tell you that, yes, we're going to do 1 this year, in 1 next year, there is no such prediction or clarity that I can give to you.
So what would be the approximate investment amount for the acquisitions which you're doing, say, this year and next year and are you looking at a typical rate of return to integrate with your growth rate?
First of all, that question has an assumption that we are doing an acquisition and therefore, it assumes that I will give a budget, I will give neither. So one that we are not forecasting that we will do any. If we do, there's no budget rate that I can give you, but let me give you some clarification. Historically, our largest transaction was around USD 40 million to USD 45 million, right? And if you calibrate that on, is that equal to the kind of EBITDA levels that we are doing in those periods of time, in the trailing 12 months of run rate, I think we typically see that can we pay it off from 1 year of EBITDA worth? And I think that's how we typically calibrate.
We're not going to outsize our deal transaction. It's not like you're going to buy a $1 billion company and say, let's create some complicated merger structure. That's not my mindset. And I don't see that happening. So it will be more bite-sized. And if it adds incremental value great, if it doesn't, we should be able to either digest it and integrate it or reject it, but it should not impact our ability to -- I mean it should not fundamentally change us in any way.
Ladies and gentlemen, that's the last question. I now hand the conference over to the management for the closing remarks.
Thank you very much, everyone, for taking time on a Saturday. I know we typically do our earnings call on Monday. But this time, I appreciate you all taking the time out on the weekend. I wish you and your families a happy weekend and healthy rest of the financial year ahead. And I hope to see you soon. Thank you.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.