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Just Dial Ltd
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Good evening, ladies and gentlemen. I'm Irshad, your moderator for this session. Thank you for standing by, and welcome to the Just Dial post results conference call. [Operator Instructions] I would like to now hand over the conference to Mr. Rishit Parikh. Thank you. And over to you, sir.
Thanks, Irshad. Good evening, everyone. On behalf of Nomura, I would like to welcome you all to the Fourth Quarter FY '18 Earnings Call for Just Dial. We have with us the Founder and CEO of Just Dial, Mr. VSS Mani; and also, we have CFO, Mr. Abhishek Bansal. So without further delay, let me hand it over to the management.
Hi, everyone. Abhishek here. Welcome to Just Dial's Earnings Call for Fourth Quarter of FY '18. I can quickly run you through financial and operational highlights for the quarter and full year fiscal '18.Firstly, on top line, we have been able to achieve INR 200.5 crores of revenue for fourth quarter, which witnessed growth of 10.3% year-on-year. Operating EBITDA stood at a healthy INR 45.8 crores, witnessing strong 42% year-on-year growth. Adjusted operating EBITDA margin, excluding ESOP expenses, stood at about 24.4%, which saw about 460 basis point year-on-year expansion. Net profit for the quarter stood at about INR 39 crores, which was up about 54% year-on-year.Importantly, unearned revenue stood at INR 333 crores as on 31st March, which witnessed about 21.4% year-on-year growth. For the full year, revenue at about INR 782 crores, witnessed 8.8% year-on-year growth. EBITDA saw a very strong 50% year-on-year growth in FY '18.Coming to operating cash flows. We generated about INR 226 crores of operating cash flow in FY '18, which was up 66% year-on-year. And considering CapEx of INR 21 crores that we did in FY '18, operating free cash flow stood at about INR 205 crores, which almost doubled year-on-year versus FY '17 free operating cash flow of INR 104 crores. And if you were to include the cash flow from treasury income as well, business generated a very strong INR 267 crore free cash flow during the year, out of which INR 84 crore went into buyback, the rest, obviously, has gone into increase in cash and investments.Overall, cash and investment stood at about INR 1,200 crores as on 31st March. Coming to operational highlights. Traffic continues to be robust at about 112 million unique users for the last quarter, growing 29% year-on-year. We continued healthy trend of addition in our listings, and we now have about 22 million active listings in our database, which was 22% year-on-year increase. 50% of the database is now geocoded, and we have about 45 million images in our listings, which was up about 40%, 41% year-on-year. Paid campaigns. Paid campaigns at the end of the quarter stood at approximately INR 445,000, compared to lowest levels of realization that we witnessed in fourth quarter of fiscal '17. Realizations are up about 7%, 8% year-on-year.Overall, I think, fourth quarter was a great quarter for us, and FY '18, overall, has been a great turnaround year for the company across-the-board, starting from traffic to data and content to turnaround in revenue growth, profitability. Cash flow generation, as I just mentioned, has been robust. We have been able to contain our costs pretty well without losing sight of growth and product improvement. On the product side, we have recently released a new version of our mobile site, which is built on latest mobile technology. It has reduced our page load time by approximately 40%. It's now blazing fast despite addition of several new features. So overall, FY '19, in fact, has started pretty well for us so far, and I think FY '18 has laid a very strong foundation for FY '19. On that note, we shall now open the floor for questions.
[Operator Instructions] We start with the first question taken from [ Akash ] who is from the [ ITI ] Equity Fund.
So congratulations on your really great cost control initiative this year. I had a question on the -- on your operating revenue number. So you're -- we're coming off a pretty soft rates of Q1 -- of Q4 last year. And -- so if you see the 2-year CAGR operating revenue, it is still around 8.1%, which is pretty much the lowest we've reported. So when [indiscernible] on revenue also, the incremental around revenue is, I think, around 7.5% to [indiscernible] operating revenue. So I just want to understand on the revenue side, do you -- I mean, the optimism that you're sharing is that [indiscernible] on the ground because of the advertising campaign that we've had? Or what specifically are you seeing for FY '19, which makes you so confident?
[ Akash, ] on operating revenue, see, I agree, if you look at our CAGR basis, it will show whatever 7%, 8% annual CAGR. But better, I think, would be to look at it on a trajectory of growth. So we had gone down all the way down till about 6.5% year-on-year revenue growth. We then improved to about 7.5% [indiscernible] last quarter, we hit 10.3% [indiscernible] they have come from 2 or 3 key factors. One, since deferred revenue already has seen a healthy growth, so we already know that our particular past quarter had very healthy trend of collection. Secondly, the controls that we had put on productivity, those particular controls are paying off. Now we have also started adding to our manpower. So if you see this particular quarter sequentially, we have added people in feet-on-feet cold calling. That is the team that has been giving us very good growth in terms of revenue. So that particular team is being expanded. Our particular advertising campaign, for last 3 quarters, it has been giving us 30% year-on-year traffic growth. Even from our sales teams, the feedback is that our particular SME client base, they are also realizing on the ground that they are getting much better visibility this year for their investments with Just Dial versus the previous year. So overall, these are some of the metrics. And on the ground what we are seeing which gives us confidence that we should be able to build onto last quarter's growth rate and do much better in FY '19.
Sure. That's really helpful. I just have one additional question on -- could you -- would it be possible for you to share your uninstall rate? I know we have the app download rate, but then also give us a little more color if you have the uninstall rate along with the app download number?
See, uninstall rate, our particular apps' uninstall rate is, in fact, slightly better than whatever is the industry rate. As I last recall, as per the discussion with my team, overall, over a period of 1 year, about 30%, 32% of the apps remain. So that particular 1 year uninstall rate would be about 68%, 70%, which is better than the industry, as I believe.
Sure. Yes, actually so just on some other application, if possible, would you be able to share the time spent on the apps, daily, weekly, something which you can -- some trend that you can see there also?
See, one very important thing for everyone to realize is that at the end of the day, we are a search engine, right? For us, what is important is, the user comes to our platform, takes the information and goes away. Let me take a example of a particular metric, bounce rate. Bounce rate, for certain companies, a high bounce rate might mean that user is not getting the desired information or user is reluctant to spend more time on your website. But for a search engine, a high bounce rate might imply that the user is getting information so quickly, and on that for very first page on which the user is landing, bounce rate could be high. So the way we measure is in terms of what is the [traffic of] unique users that are coming to our platform to take that particular information.
Sure -- the reason I was asking is that -- I'm sorry to -- just sort of a small question follow-up. Because you already added a lot of features, you've added JD Social, you've added Live TV, even videos. So I mean, is there any present thing in metric that you would be revamping your app, people are spending more time on it?
Right. So due to these particular addition of features, definitely, the engagement with our particular platform is increasing. So people [indiscernible] sort of whatever exploration of various categories, companies, searches, the particular -- social-related activities, JD Social, that is gaining good traction. Recently, the mobile site and the iOS app, they have added chat features as well. As and when those particular features get explored, they will see good traction as well. News, Live TV, these are some of the key features that are bringing users on board and making users return to the platform for the subsequent times as well.
We have the next question from Mr. Nikunj from Edelweiss.
This is Pranav from Edelweiss. Can you just comment about relatively higher improvement in the realization versus paid campaign growth? What exactly has led to improvement in the realization? And how should we see this going forward?
Okay. See, this particular fiscal year, fiscal '18, saw benefit of realization aiding revenue growth. Campaign growth, obviously, was slightly on the lower side. Now there are 2 or 3 things that I think we should understand. Firstly, as a company, what is important for us is overall revenue growth. Why do I say so is because we try to maximize revenue per client, revenue per sales employee. When we rollout our particular revenue targets to our junior-most team, we don't [indiscernible] around whether a INR 10,000 revenue for a day is coming from 1 campaign or that particular revenue is coming from 2 or 3 campaigns. So that is first. Secondly, we had taken some price hikes at the start of the year because when we launched our mass media advertising campaign, we said that the price hikes that we had not taken for last couple of years, it is the best time to take because our visibility across the board would be high. So those particular price hikes have sort of delayed us. Third, earlier, there were certain particular products, which might be getting sold to a customer at various points of time. So if I approach a particular customer 2 times in a year, that would add 2 different campaigns. But now we are also encouraging our sales team to sell some of these products as bundled products. Why it helps us is that there is obviously a cost associated with approaching that particular client twice in a year. If that particular person is able to extract higher revenue for those particular bundle products, that might get counted as a single campaign and it would show up more into realization. For fiscal '19, in -- among the 2 levers, we believe that both the levers, that is the campaigns as well as realizations, both should aid us in achieving our particular revenue growth numbers.
The reason why I actually asked this question was, over years, we have seen that because of higher increasing contribution from the Tier 2 and Tier 3 cities, the realization growth was not significant. So has the contribution of Tier 1 cities increased during this period or that is not the case?
Tier 2, Tier 3 cities, again, continue to gain share. Tier 2, Tier 3 cities now have about 21% share in revenue versus Tier 1 top 11 cities having 79%. In terms of campaign, Tier 2, Tier 3 cities have about 43% share and 57% comes from Tier 1, which obviously implies that the ticket size in Tier 2, Tier 3 cities is lower.
How has been the revenue growth in Tier 2 and Tier 3 cities versus Tier 1 cities?
See, Tier 2, Tier 3 cities, they have been growing at very healthy, say, even 30%-plus year-on-year. Tier 1 cities, obviously, the growth rates were lower, but recent particular quarter suggests a good turnaround in Tier 1 cities as well, which is, obviously, critical for our particular revenue growth in fiscal '19.
We take the next question from Mr. Gaurav from Morgan Stanley.
Firstly, just wanted to understand what are the various new services, which you would have launched in the last 12 months are doing well and you're getting traction? Are you seeing some transactions happening on your platform? Or is it still at an early level where the engagement levels are not moved to the transaction level?
We -- see, we want to stick to a strategy of -- I mean, we want to be the go-to place and people should come here and they should find whatever they want. We are not focusing a lot on transaction now. We are happy to you see if you search for restaurants and you click on home delivery, you might even see Swiggy fulfilling it, or maybe in some cases Zomato, in some cases, some other site. If you go and search for certain products, you might find online players like Amazon, Flipkart, and others as well as the local vendors. So goal is to make Just Dial a go-to place, to be a complete search engine where people can find products, compare prices, checkout reviews and ratings, and they take a decision whether to call or to drive down to the place or even messaging, which we have started with the new app, we can message the vendor, or you can transact online, which in some of these products and services, it's a third party fulfilling it. In certain categories like travel, we are no different from any travel aggregator. You would see that in hotels, apart from the list of hotels and the numbers to call, you also have an option to book online through third-party sites, which is more on the lines of coming to just Trivago, where they aggregate and they show you multiple websites' quote. So we are going to focus more on being the real finding place where you find things for the transaction. We don't want to get into that activity at all for at least times to come. There will be some exceptions like probably flights and stuff like that, which we don't have a choice. In fact, we're also looking whether we can do that also and aggregate a model where you can find out the cheapest flight in one of the multiple for travel portals. But the main revenue for the business comes from SME advertising and that would continue to dominate. And there we're trying to increase the contribution from these SMEs. In the months to come, you would see that this revenue per customer really growing in -- particularly, in Tier 1 cities and even in Tier 2 cities because we've got more things to offer now.
Fair enough. Mani, just to add on to this question, which I had asked. Couple of years back, we had seen a trend that the customers want to do all their activity in a platform and they don't want to go to different platform to -- first for searching and then for doing a transaction through a different platform. Do you think that there has been change in this trend from a customer behavior perspective? Or is there something more to your current strategy of being -- to be relevant as a search player and not necessarily care about transactions?
No. Actually, what customer prefers is actually go to one place and find -- discover a product, vendor, price, comparison and all that. They're agnostic of buying from A, B, C, if all 3 are of almost the same quality and grade. So we also always meant that like we have to be a Search Plus transaction engine. In the early days of Just Dial when we announced Search Plus in 2013, those were really early days when we thought like we would enable the small businesses to actually have their inventory up there and actually help the consumer transact there. We figured out that we required lot more effort, spending and different kind of -- it was absolutely different type of business where there was lot more burn. So we didn't like the burn story. So we decided, like, let's be the place where people can come and discover the price and let them go where they want. And I think that's going to be a very big play, being the go-to place for multiple things and which we are pretty confident. I think the step we have taken is also very light on us also trying to do all kinds of things, getting into businesses, which most verticals are specialized and so we don't want to get into that space at all.
Sure. Last question from me. There was a period, which was a transition period for us, when we were moving and making customers aware about moving away from lead-based approach to more value-based approach, or what value you're getting out of advertising, not necessarily [indiscernible].
So that transition is pretty much achieved to a great extent. So you know some of the reasons that Abhishek said that we saw single-digit growth also was due to the transformation that was, rapid transformation, actually, from voice to Internet, and obviously, the customers were used to certain, noisy way of experiencing the service. And over a period of time, they've realized that there's no alternate medium for them to go to. This is the best and most value-for-money medium for them. And many of those customers have come back, and they're reinvesting and probably investing more money. And they understand the new analytics that we give them. In the Just Dial app, we give them analytics on how many visitors to their page, how many searches, how many calls made, how many messaging done to them and all this information. They're able to appreciate now, and they're able to act on this. So I think that change is taking place.
Has he disconnected? Hello.
Hello.
Gaurav is disconnected. Should we move to next question?
Yes, sure.
So we have Arya Sen from Jefferies.
Firstly, in an answer to the previous question, you talked about there being a difference between paid campaigns and unique customers. So what's the sort of -- what's the proportion of unique customers to your paid campaigns?
Unique customers would be broadly about 360,000.
360, is that correct?
360,000, yes.
Okay. And how has that grown over the last 1 year?
360,000, that would have grown broadly about 5%, 6% year-on-year.
Understood, understood. And secondly, on the deferred revenue number. So if I look, obviously, there's been a very healthy growth in deferred revenue this year compared to last year. But then if I look back last year versus FY '16, there was about 17% growth in deferred revenue in '17 as well, but then revenue growth was only 9%. Why is there such a large divergence between deferred revenue growth and revenue growth? Is there any change in -- are you collecting more upfront, is that the reason?
No. See, there is no significant change in terms of monthly payment plan versus annual payment plan. Deferred revenue, obviously -- what also matters is that post FY '17 March quarter, how had deferred revenue panned out in subsequent quarters. So one particular quarter's deferred revenue cannot really -- it can be a, obviously, indicator for how next quarters should look like, like the out of INR 333 crores, INR 320 crores, obviously, will get accrued in FY '19. But to have a direct one-on-one correlation, that obviously does not hold true.
Right, right. But I mean, the divergence seems to have been -- become higher than in the past. I mean, also related to that, I mean, with 24% growth in -- I mean, you should report at least this INR 330 crore of deferred revenue as revenue next year. So I mean, what's the guidance going forward? I mean, will that translate -- does that give you more confidence on, say, a 15% kind of revenue growth? Or that is not...
Yes, definitely. See, as I mentioned earlier, in last year FY '18, we are exiting at a run rate of about, say, whatever 10%, 10.3% year-on-year revenue growth. For fiscal '19, considering how recent trends have been, both for fourth quarter of last fiscal as well as, say, 40, 45 days of this particular fiscal, the growth rate that you mentioned definitely seems to be achievable.
Right, right. And what's the sense on margin? What's the margin we should expect?
See, on margins, there are 2 key, obviously, cost items that we have. First is the employee cost. Last year, I think, we did a great job in terms of controlling that INR 440 crores to exactly at about INR 441 crores -- INR 442 crores. That particular line item though should have grown 8%, 9% year-on-year, but we were able to automate several functions, plow back those particular savings into expanding more sales force. For fiscal '19, I think, while efforts on automation are again underway, there are still areas within support department where we can automate and reduce our dependency on manpower. So that should help. Overall, even if employee cost grows at about 8%, 9% year-on-year in line with whatever regular increment, et cetera, I think 23%, 24% margin that we are currently witnessing that should easily hold up, potentially, with the revenue growth that we've talked about, it should see some operating leverage expansion as well.
We have the next question from Shaleen Kumar from UBS.
So guys, the way I look at it, your investment in UI bundling of product should get you, I take it that's not great, and help you take price increase, improve the realization and investments towards your marketing campaign and all should help you get some -- increase your [indiscernible] but it's not directly comparable but that's the way I was thinking about. So we have done very well in terms of our realization. And in fact, in all the metrics, if I look at performance of the company for the quarter as well as for FY '18, it's pretty good. But this one bit where we try to understand that why the same list in growth, both absolute or year-on-year comparison is not coming through. So how should we look forward? How should we model going forward just little bit?
Okay. Shaleen, let me give you a sense of how on-the-ground we operationalize this. Fiscal '18 was the year where we said that, okay, let us bring back efficiencies in place. Bringing back efficiencies in place meant that within all departments, including sales, we had to be ruthless about ensuring that we don't have any mediocre performer. At the same time, we ensure that our product development, revenue growth should not be hampered. When we started fiscal '18, we took certain price hikes, those particular price hikes -- see, market will not be fully inelastic that any particular price hike will not have any impact on campaigns, and it will directly slow down to realization. So last particular year's first 3 quarters, we did not ramp up our particular sales force. We tried to ensure that our particular sales force is able to receive -- achieve the desired productivity level. Fourth quarter, we added to our particular sales force. So this particular process resulted in FY '18 seeing more benefit of realizations versus campaign. At the end of the day, what matters is that, yes, realizations can have only a limited room for growth, unless we offer better offering to our customers, which in any case we are doing. Fiscal '19, ideally both particular levers should, actually, aid in revenue growth. And we were absolutely clear from day 1, we don't want a scenario that we have 15% growth in paid campaigns, realizations go down 10% year-on-year with the reason that Tier 2, Tier 3 mix is growing and net-net company grows only 5%. 6 quarters, 8 quarters back, paid campaigns were growing 18%, 20%, 25% year-on-year, but that did not result in the overall revenue growing at about 15% year-on-year. In fact, we slid down to 6%. So efficiencies are very important. That is the reason we last year focused on ensuring that with whatever the resources we have, we optimize on those resources, which resulted in paid campaigns or the paid listings being lower and benefit coming towards realization. Fourth quarter, as we have already seen in terms of the advances that we received from customers, which are sitting in deferred revenue, that is showing a very healthy sign. So fiscal '19, I think, overall revenue growth, we should be able to achieve desired numbers with a good optimal mix of realization growth and campaign growth.
So Abhishek, are we broadly guiding any kind of revenue growth and mix in terms of paid campaign, absolute or growth and realizations for FY '19?
See, for me or for everyone in this particular company, what matters is the overall revenue growth, which should be sustainable for quarters as well as years, right? When -- as I mentioned earlier in my call as well, when I give target to my specific branches or people in the sales team who are frontline executives who actually go out and get us revenue, we don't give them targets specifically on campaigns, and this is the reason to do that. If we give them target specifically on campaigns, it is possible that they will get us a lot of campaigns, which are low-value campaigns. So that is not optimal for the company. Overall, as I mentioned that mid-teens growth is definitely revenue growth is what we are targeting. How that comes, it has obviously 2 ways to look at it: revenue per customer, revenue per employee, number of employees and number of customers. Those particular mix can, obviously, 1 particular lever can overweigh the other. But as a company, we are fine till the time we have clear visibility that overall revenue growth can sustain for coming quarters and years.
Got you. And Abhishek, how should we look at the bundle products like what percentage of your paid listers are using your bundle products? I mean, what kind of headroom is there, any colors on that?
See, bundle products, the way it is now done is that whatever products that a particular sales person sells, they have a bouquet of products that they see in their pocket to sell, which would have a nonpremium listing, a premium listing, within nonpremium and nonpremium listings also they would have some variance. Then they would have add-on product, such as a banner, ratings and revenue certificate, online website, customized mobile app, et cetera. So -- and they have the ability to pick and choose those particular products as per the desired -- whatever the customer desires. More number of products that he choose, the -- obviously, value of the contract increases and customer gets a higher benefit in terms of getting some percentage discount on the overall value. So those particular bundle products are, like, you can pick and choose from various stand-alone products that we have.
So you don't basically, like, market like percentage of consumer -- what percentage of paid lister is using this premium product or something like that?
Right. So I have put a bouquet of products saying that, okay, guys, I sell these particular 10 products, you want to buy them and you usually do so. You want to choose these particular 3 products, you can do so. If you were to buy individually, it costs 100. If you were to choose all 3 at one go, it costs you 90. So that is the sort of -- add to cost sort of feature that we have enabled for our sales employees.
Got you, got you. And what about churn rate? How has been the churn rate for the quarter and for the full year?
See, churn rate by and large has been similar, 1 or 2 percentage points lower. So this particular, like, about 40%, 45% is the overall churn rate. There hasn't been material change there. But recent signs or recent feedback that we have from our sales force, a lot of particular customers who had probably exited 2 years back, they are now amenable to coming back into the paid ecosystem because they realize that among the digital properties, this is the [indiscernible] can give them value for money, advertising opportunity. So over time, ideally that particular churn rate should come down, which means that we would be retaining more customers and focus strategy on adding new customers.
Right. Great. And this is last bit, if I can squeeze in. What about the cash, which we have on balance sheet? Any plans for that for FY '19?
See, last particular year, as we said INR 267 crores got generated, approximate INR 84 crores went towards buyback. Our focus for this particular cash is that, we obviously are on lookout for any opportunities inorganically, but we are very clear that those particular opportunities have to make strategic sense for us. Whatever the incremental cash flow that is being generated, part of it could be returned to shareholders through buyback. The next buyback earliest can be done post September because there needs to be a 1-year cooling period between 2 buybacks. And apart from that, we would spend on advertising as well as growing our product. So improvement of products, promoting our products, those are the 2 key areas that we would focus on.
We have the next question from Mr. [ Prasoon Agarwal ] From Indus Capital.
Mani, this question is for you and it sort of continues from the previous question, which was asked. So we have around INR 1,200 crores of cash on balance sheet and we're generating around INR 265-odd crores this year. So it seems sort of unfair for the shareholders that this business is generating good ROE, but we are using this cash and investing in long-term bond products. So there has to be a better use of this cash, right? And it's like a war chest that we have. And maybe in an environment where we see activities not that high for other apps, do you think it's a good time to go out and get some growth and better utilize this cash?
No, we always meet so many new companies, almost one a week. It's just that the models are so -- it's not like the type that we would really want it to be, and so it's high risk. And so we don't want to get into such space that -- where we have less chance of making it successful. And we are lookout -- we like more of technology, something that will take us a long time to build if we can buy such technology companies. Those, we are talking to couple of them. But it's very hard to get good companies, honestly speaking. So we are -- I mean, this forum if anybody has something to suggest to us or Abhishek, please do forward it to us. But it's tough to get something, which is really high quality.
Okay. So that's on the inorganic part. But on the core business itself, is there a way we can think about the ad spend, which was -- I mean, it was great that it got increased last year. I believe, it was INR 60 crores, INR 65-odd crores. And this year, hopefully, it's higher. But that ad spend, does that add to the growth numbers. And I think one of the common theme in the questions, if I may say, is about the sort of lack of growth, everything -- every other metric looks really good, but the growth is, someway, not coming. So do you think if we increase this number to, let's say, INR 100 crores or INR 150 crores and the growth that we get, is that a sustainable growth? And if for 1 year, if we sacrifice a little bit on our OCF generation, I mean, how do you think about that?
See, I wish advertising easily translates to revenue growth. It doesn't that way. But then we are definitely spending much more than last year. This year, you would see somewhere close to INR 100 crores being spent on advertising. And we are also quite comfortable in doing a mid-teens growth also. So -- and as we do get better growth out of this spend, then obviously, we can step up more on advertising. See, it's not as simple as you splurge more and then you just get the growth. And you know a lot of these companies that have been shut down have spent hundreds and hundreds and millions of dollars, but they are nowhere there in the scene right now. So everything has to be calibrated, thought through and you have to measure it and do it that way. I think what the market is listing is, okay, we have turned around, like Abhishek said, that we've got back to a double-digit growth after stagnating for almost like 7 weeks, Abhishek?
7 quarters.
7 quarters we've stagnated and we've turnaround. And we have first time ever in a earnings call we are saying that we are comfortable doing a particular number for the year, that speaks volumes for what's happening on the growth front. But the most -- I'm thrilled more by the fact that the company is far more efficient than what it was in the last 8 to 10 weeks -- 10 quarters and that really makes me feel very happy. So that, that whatever growth comes, if you notice one thing, this year's performance is despite what 100% increase in advertising spend?
200%.
200% increase in advertising spend. Despite that, we have given a decent growth in EBITDA.
50%.
50% growth in EBITDA. I mean, that's like lot of things to take note of, which means the company is on the right track. If it gets the 50% growth, then obviously, a lot of that would also translate to growth in profit, but at the same time, obviously, advertising is a must for us. And we would be continuing to spend more and more money. You would see more ads of Just Dial this year than ever before.
Definitely. That's very encouraging to hear. The other question I had was on the -- this INR 18,000 average that SMEs are spending. My understanding is that if somebody has to go to, let's say, Google, they have to spend at least INR 2 lakh to INR 3 lakh to have some sort of -- to get some sort of traction on the ad spend. So what is this? I mean, the gap between this INR 18,000 to INR 2 lakh, first of all, is that INR 2 lakh number ballpark right in your view? And where is this gap between INR 18,000 to INR 2 lakh? And what are the other alternatives that SMEs have if not Just Dial?
See, last when we did a study of our advertisers and if you see they are advertising on Google, almost close to 90% of them don't do it. So which means that we are in a far better position. We have a different market we are addressing. And so there is no such threat from Google or anybody. Secondly, see, JD is far more simpler, easier to advertise. We still have people facilitating for you. Perhaps, Google is slightly difficult for people to comprehend. It's a click-through model, and those are issues. But I think that there are merits in both the models. Each one caters to a different market. Our -- we are -- we can see clearly that in the coming years, the average spend per customers will slowly inch northwards and it will be much[Audio Gap]much, better really, perhaps double the amount in 5 years from now. So businesses have understood the importance of Internet now. Actually, Internet has become top most for them priority than other mediums. And just that the spending when it starts, it will be really multiplying. So SMEs usually take a much longer period to change as compared to medium and large sales -- actually large corporates. So -- but that's debt, so we also have many customers paying us INR 2 lakhs, INR 3 lakhs, INR 4 lakhs, INR 5 lakhs, also.
We have the next question from Mr. [ Prajwal ] from B&K Securities.
Just wanted to understand your views on dividend, sir. As we can see that you're generating good cash flows and your company doesn't need any heavy CapEx to move on. So just wanted to understand your views on dividend policy, sir, if you have one or have you thought of it?
This year, we'll definitely give some money back to the investors, whether it could be dividend or buybacks we'll have to decide.
[Operator Instructions] We have the next question from Mr. [ Saksham ] from Fidelity.
This is [indiscernible] from Fidelity. Just one question to your confidence on mid-teen kind of growth next year. Now if I just look at exit revenue per campaign, which we can calculate in Q4, that's about INR 18,100, to full year number that gives you a rough realization growth of 2% for next year, even if realization per campaign doesn't move up, right? So if you -- in that scenario if you get to 15-odd percent growth, we're talking about 13% growth in campaigns, which is a significant increase in the incremental campaigns required on a quarterly run rate basis versus what we have seen in the last 4 to 8 quarters. So the question really is that will realization move up, and hence the number of campaigns that we require to grow would be lower? Or you think next year, it'll be more about campaigns growing at 12%, 13% and realizations just being more gradual?
See, [indiscernible] on the realization average, realization per campaign that you see for fourth quarter, fourth quarter accrued revenue is coming from what we sold in last 4 quarters, right? Whereas, the money that I collected from my customers in fourth quarter, which will get accrued in -- bulk of it will get accrued in fiscal 19, that would have a higher realization. Or the other way to put it, my embedded realization in my deferred revenue is higher than the realization that you are actually seeing in quarter 4, which implies that, ideally, realization should have an increase versus what we saw in fourth quarter. However, considering the mix is tilting towards Tier 2, Tier 3 cities, that actually tends to pull down realizations a bit. So difficult to exactly say that 2% will come from realization, rest 13% has to come from campaigns. It will be a sort of mix of both.
Okay. So realization for campaigns can go up more from these levels. This was, I guess, the question so...
Yes, definitely. Realization for campaigns are already higher as per the last quarter. For the deferred revenues, embedded realizations will surely be higher.
Okay, fair enough. The second question is that if we look at collections, and they've gone fairly strongly for you sequentially Y-o-Y. Would it be fair to say that the lot of growth that you are expecting now could be upfronted in the sense that 15% can be 10% in first half and 20% in the second half. But since that you've got collections now and you're seeing collections improve, and you're exiting at 10%, so to fix that double digit, low-teen, mid-teen sort of a growth could very well be the first half phenomena for you?
See, whatever collections that happened in fourth quarter, obviously, they would be spread out over next 4 quarters. For the second half of fiscal '19, bulk of the work is yet to be done. So you are right that how first 2 quarters pan out in terms of collections will determine how second half pans out. So overall, the way we are internally working on numbers, full year is what we are looking at. First half, obviously, we'll have to see what run rate we achieve. We would definitely ensure that -- or we would want to ensure that those particular run rates are much better compared to the exit rate of FY '18. But for me to say that split of that particular mid-teens would be first half would be higher, second half would be lower, that obviously is a bit difficult.
But you should have fair visibility for first half numbers anyways now, right?
See, first half numbers, obviously, this particular INR 330 crores that is for INR 320 crores has a current deferred revenue that is there for -- that will get accrued over next 12 months. First 6 months revenue, if we just annualize the INR 200 crores, that would be INR 400 crores. Out of INR 400 crores, obviously, around, say, INR 200 crores ballpark, INR 180 crores could come from the deferred revenue. But we still need to get that particular remaining balance INR 200 crores, INR 220 crores.
Okay, okay, fair enough. And just the, employee cost this quarter was slightly high. I don't know if you already covered this. How are we thinking about employee cost this quarter, were there any one-offs here? And then if you're looking at the whole year next year, you've done, obviously, tremendous cost control this year. But how should we think about that next year?
See, employee cost last quarter is optically looking on the higher side, couple of reasons. One, since we had good collections in fourth quarter, the incentives, which are around 9% to 10% of the collected revenue goes as incentive in the entire sales team, that particular 10% incentive got booked upfront because we pay upfront to the sales employees. So in a way, it's good that those particular costs have already being expensed, whereas the revenue for the same collections would be accrued over the next 12 months. There were 1 or 2 increased incentives or bonuses that we gave out to our sales employees. So I would look at it more as INR 441 crores annualized basis, INR 111 crores, INR 112 crores should ideally be assumed as the occurring run rate for fourth quarter. In case employee cost turns out to be higher, I would possibly be happier because the only key reason for higher employee cost would be due to incentives, which are paid on the revenue that comes. For full fiscal '19, this INR 441 crores we are trying to ensure that will stay within our 9%, 10% range. But if this particular number goes up, that would, obviously, imply that it is more due to addition of sales employees, which would further imply that there is even better visibility on revenue growth.
We take the next question from Mr. [indiscernible] from HDFC Mutual Fund.
Already a few questions have come on the use of cash. I just wanted to check if you had either minimum or a maximum level of cash in mind that you would want to keep?
See, there is no specific levels of cash we are targeting. However, internally, we are contemplating that whatever incremental cash that the business generates in a particular year, part of it should, obviously, if there are no inorganic opportunities, should get returned to shareholders through dividends or buybacks.
So if you only return back a part of it, then you'll keep accumulating cash on the balance sheet, right?
Yes. The -- that way since the business is generating good operating free cash flows, it would continue to result in cash accretion. So as we mentioned earlier, in case there are any good inorganic opportunities that come along the way, or organically, we have any opportunities to invest, we will do so pertaining to product development, product promotion, but at this point of time, as I mentioned that whatever incremental cash flows that business will generate, we think part of it will go back to shareholders and part of it will get accrued to the company.
[Operator Instructions] We take the next question from [ Akash ] from [ ITI ] Equity Fund. Mr.] [ Akash ] your line has been unmuted. Please go ahead with the question. [Operator Instructions] And we take the next question from Mr. [ Umang ].
Abhishek, I had a small question. So most of my questions have actually been answered earlier. But if you could give out the absolute advertisement cost that we have incurred for the full year?
It was around INR 65 crores.
Around INR 65 crores. And we -- actually we were guiding for a higher advertisement cost this year, but we have refrained from spending that. Any particular reason for that? Or...
See, as we mentioned earlier, first of all, it's not that we decide a particular number and then we target to achieve that particular advertising spend number. It's more of a monthly, quarterly evaluation that we do that whatever are the ad spends that we're doing, how is it turning out in terms of our user growth as well as revenue growth. Last particular year, if you see, lower advertising spend was mainly in the fourth quarter. Fourth quarter, we were awaiting launch of our new mobile site and new app, which got launched in the month of April end. These particular new mobile site and app have new features. And we should be ensuring that we should be back on spending 8% to 9% of the top line on advertising, at the same time making sure that this particular advertising results into appropriate return both in terms of user growth as well as revenue growth in future.
Got it. And Abhishek, one more question. So what I was looking at is that when we are seeing that our -- and we have included Amazon's and Uber taxi services on our app itself. So how are we incentivizing this addition? So it's just for customer attraction that we are doing this particular additions? Or we would be churning some revenue going forward from this venture?
See, some of these particular capabilities that we have brought in at this point of time are mainly to have higher user engagement. In terms of monetization, our monetization, obviously, happens mainly from the SME front. We want to ensure that users -- more and more users should come on our platform, users should spend more time on our platform. If user is engaging more, they would end up giving visibility to my SME base. And these SMEs are the ones that we want to monetize. Overall, database, obviously, is 21.8 million listings. And we have -- we are just at about 360,000 paying customers. So there is ample scope to grow there. So we are not really that worried about how will monetization happen for these particular user-related items or features that we are adding to our platform.
Got it. Okay. And any guidance on the number of employees that -- are we looking at some additions in -- I mean, our JDAs or any guidance on that part?
See, in terms of employees, we, obviously, split it into 2 broad categories: sales, nonsales. In nonsales, I don't see any major additions. We would, in fact, want automation to help us reduce dependency on manpower. On sales front, definitely, feet-on-feet cold calling team, that is the one that actually is giving us good revenue growth, is gaining good traction. We would want to add there. Subsequently, once that particular cold calling team is able to onboard a particular customer, the telemarketing team does a very good job of renewing that particular customer for the second year. So there could be subsequent additions in telemarketing as well. So sales is broadly where we would want to add. Nonsales is where we would ideally want to do as much automation as possible.
Ladies and gentlemen, we take the last question for the day from Mr. Rajiv Sharma.
Just a couple of questions from my side. Firstly, you've taken a price hike in FY '18 early. Now in the 45 days of this year, have you taken any price hike in Tier 1 markets? And do you worry that there could be some churn if you were to take another price hike in Tier 1, in particular? And when it comes to this whole mid-teen revenue growth, are you thinking of price hikes or improving realization in Tier 2 or Tier 1? And my second question is, what are the different kind of -- what is the difference you see in Tier 2, Tier 3 markets versus Tier 1 on the paid campaigns, in the nature of paid campaigns?
See, on a price hike, there are 2 types of listings that we sell: premium listings and nonpremium listings. In case of premium listing, any price variations are taken care by the in-house [indiscernible] itself. A particular category, if that category is witnessing higher traffic, automatically at the time of renewal, system itself adjusts that particular price of that particular category pin code or category area accordingly. So we don't need to do any manual intervention for those particular premium listings. In nonpremium listings, which are primarily the entry-level listings, that is where we had taken certain price hikes last year. So far, in last couple of months, we have not taken any specific price hikes, though we keep tweaking our pricing in nonpremium as well. For example, if we realize that a category like grocery stores or chemists [indiscernible] they are available in abundance, but we don't have much paid campaigns in those particular [indiscernible] we might actually -- we actually decide to probably reduce prices in order to get revenue from those particular categories. So that way price hikes partially is already embedded in the system, partially via manual intervention, which has not taken place in last couple of months or so. Secondly, difference of campaigns between Tier 1 and Tier 2 cities. See, Tier 1 cities, most of the campaigns originated at a time when we were present primarily in Tier 1 cities based on our voice calling service. So Tier 1 customers are the ones, which actually were accustomed to leads quantifying all their returns based on just the SMS or the leads that they were receiving. In Tier 2 cities, since we entered at a time when Internet had already penetrated, there the starting of the campaign itself begins on a note that we explain to the customer that in this particular Internet era, the split of traffic is so much traffic these days originate from Internet platforms, et cetera. So to that extent, Tier 2, Tier 3 clients are much more acceptable or much more understanding of the Internet story that is playing out in India.
Okay, that's helpful. Going back to the question number one. Just trying to understand if your system is throwing up any major price increase on the premium listing so far, and do you see a trend, which could be there? And in nonpremium, would you like to tweak anything this time given that you've already done last year? And will that be too much for your clients?
Okay. See, in premium listings, we have to understand that we actually get revenue from, say, more than 3,000 categories. 3,000 categories [indiscernible] categories, which might be going down. There might be certain categories, which might be seeing a surge in traffic. Just as an example, GST consultant. Last year, this particular category saw more than 10x jump in traffic. So this particular category may be last to last year, a particular client might be able to secure in this category, say, maybe INR 25,000, INR 20,000. But the same category last year would have commanded more than INR 100,000. So there could be such categories where surge of traffic is disproportionate. So it's a -- what matters is both the category level as well as the geography. There could be geographies where traffic growth is much higher. Those traffic particular geographies would see much higher growth in traffic. In nonpremium listing, at this point of time, we would want to get as many SMEs in the ecosystem as paying rather than thinking much about charging that particular SME higher for same value of service. We would want to take higher share of SME's advertising spend by offering more products, rather than saying that, okay, for nonpremium itself you were paying INR 1,000 last year, you would now have to pay INR 1,200. We would rather want to bundle some of the offerings, such that, that particular customer sees that, okay, despite paying INR 1,300 this year, we are getting better value for money versus last year.
Ladies and gentlemen, at this point of time, I would like to give the floor back to speakers for final remarks.
Thank you, everyone, for joining us. As I mentioned earlier, FY '18 saw us turning around the business. And we're exiting the year on a strong footing. We are pretty confident of achieving newer heights in FY '19. User growth, revenue growth, along with healthy EBITDA margins, all 3 shall continue to be our focus areas. In case you have any further queries, please feel free to reach out. That's it from our side. Thank you.
Thank you very much, sir. Thank you, speakers. Thank you, participants. Thank you for joining the call with us. You may now disconnect your lines. Have a great evening ahead. Thank you.