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Ladies and gentlemen, good day, and welcome to Matrimony.com Q2 FY '24 Results Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhisek Banerjee. Thank you, and over to you, sir.
Good evening, everyone. On behalf of ICICI Securities, I would like to welcome you to the Q2 FY '24 Earnings Conference Call of Matrimony.com. From the company, we have Mr. Murugavel Janakiraman, MD and CEO; and Mr. Sushanth Pai, the CFO. Over to Mr. Murugavel for his opening remarks. Thank you, sir.
Thank you, Abhisek Banerjee. Good evening, everyone. Wishing you all a very happy Diwali. Despite quarter 2 being a seasonal quarter, we've achieved a 7.8 percentage year-on-year growth on matchmaking billing. This was in line with what we had indicated during the quarter 1 call. In quarter 2, on a consolidated basis, we achieved a billing of INR 117.1 crores, a decline of 6 percentage over previous quarter and a growth of 7.3% year-on-year. Revenue of INR 121.6 crores, a decline of 1.4% over previous quarter and growth of 5.9% year-on-year.
The key highlights for the Matchmaking business are as follows. Billing for the quarter was INR 114.9 crores, a decline of 6% over previous quarter and growth of 7.8 percentage year-on-year. Revenue was at INR 119.2 crores, which was a decline of 1.1 percentage over the previous quarter and a growth of 6% year-on-year. We have added 2.6 lakhs paid subscription during the quarter, which was a decline of 7% over previous quarter and growth of 7.4% year-on-year. The average transaction value for Matchmaking business increased by 1.2 percentage over previous quarter and 0.4% year-on-year. This was in line with our customer acquisition strategy.
I'm also happy to share that we have launched a new version of BharatMatrimony app and website to delivering an enhanced user experience and functionality. We also enhanced capability to connect with matches over shared interests such as lifestyle and hobbies. People can find matches based on hobbies and interests. We expect these initiatives will add further value to our customers.
Now coming to the Marriage Services business, revenue was INR 2.4 crores, a decline of 10% over previous quarter and a growth of 1.6% year-on-year. We've been working towards achieving breakeven or profitability, so we are taking steps to make that happen. The EBITDA loss for the quarter was INR 2.1 crores, down of -- which is down from INR 3.1 crore over the previous quarter.
On the billing and revenue outlook for quarter 3, matchmaking revenue year-on-year growth we expect to be at a similar level as compared to quarter 2. On wedding services, revenue losses are expected to be at a similar level of Q2.
Let me now pass on to Sushanth to comment on the key profitability highlights. Sushanth, over to you.
Thanks, Muruga. Our EBITDA margin for the Matchmaking business in Q2 is at 21.3% as compared to 24.1% in Q1 and 23.1% a year ago. Marketing expenses are at INR 46 crores as compared to INR 43 crores in quarter 1. In this quarter, the provision for the disputed Google service fee is for the full quarter. However, in quarter 1, it was only for two months. Along with some increase in marketing, this was the main reason for the decline in EBITDA margins in Matchmaking business. Excluding marketing expenses, our margins in matchmaking is stable at 60%.
On a consolidated basis, our EBITDA margins in Q2 are at 15.1% as compared to 17.2% in quarter 1 and 16.3% a year ago. Tax rate in the quarter is 24% as compared to 23.2% in quarter 1. Profit after tax is at INR 12.53 crores, a decline of 11.6% quarter-on-quarter and growth of 7% year-on-year. Our share of loss from the associate, which is Astro-Vision, is INR 1 lakh. Return on capital employed, annualized, is at about 17% as compared to 21% in quarter 1. Our cash balance is at about INR 337 crores.
On the outlook for Q3 margins, our profit after tax in quarter 3 is expected to decline slightly on a year-on-year basis mainly due to lower revenue growth and Google service fee provision. Also, just to recollect, in quarter 3 of last year, we had a onetime gain on account of land sale for INR 5.8 crores. I would like to end with the customary safe harbor statement. Certain statements during this call could be forward-looking statements on our business. These involve a number of risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. We do not undertake to update any such forward-looking statement that may be made from time to time by or on behalf of the company unless it is required by law.
With this, we can open the floor for Q&A. Over to you.
[Operator Instructions] The first question is from the line of from Capital.
So I noticed you had put up a disclosure that you've secured the domain name, love.com or something like that, for casual dating. So I just wanted to understand where did this mindset change come from to get into casual dating. And what's the -- I mean, what is the company's plans over here? How much -- by when do you start to see user growth in this space? When do you really see this scaling? How much money will you invest in it? Do you plan to acquire someone? Or do you plan to grow this organically? Whatever you can tell us regarding this.
Yes. Thank you for asking the question. So basically, we don't want to get into casual dating. I just want to get that clarified. You want to get into a serious relationship domain, because what we kind of figured out was the casual dating in India, where there are players there in India in the casual dating space, there's also players like Tinder and all. They're seen as frivolous, and they don't stand for something meaningful.
So our ability has always been [ to help ] people to find the meaningful relationship. While Matrimony is there, people can come to the Matrimony, the intent is very clear, they want to get married. However, we figured out there are set of users who want to fall in love or want to have a serious relationship. We believe there's an opportunity in this space, so that's why we bought the domain, love.com, with an intent to launch service in the serious relationship space. That's what love.com is attempting to do. It's in line with our ethos and values and helping people to find a life partner.
In terms of investment, the product may be launched in the maybe next couple of months. We're working on it. And it's too early to tell what level of investment we're going to do. So probably maybe next quarter, we'll be in a position to give some comment on that because at this point of time, we're focused on getting the product [indiscernible] to understand how do we want to take their product forward or marketing other strategies. So we've not really worked on those aspects yet.
Could you at least share if you are going to grow this organically or you're going to acquire a company because your competitor, for example, I think a few years ago or a year ago, I don't really remember the exact time, had acquired Aisle. Because there's -- in this space, we had spoken earlier, too, in a private conference call, where we had discussed that these homegrown serious dating websites or casual dating, whatever you're going to call them, the homegrown ones, they just don't have it in them to grow beyond a certain level, UI bugs, all those issues...
I missed answering this question. Sorry about it. No, we do not intend to acquire anyone. So I think that's not possible at this point of time, we don't want to because we are into a serious relationship. I don't think anybody India were in that segment, I think that's our understanding. So we prefer to build it organically.
[Operator Instructions] The next question is from the line of Anurag Purohit from Anived PMS. Anurag has dropped off. The next question is from the line of [ Ankur Jain ].
I have two questions. The first question is on the Marriage Services business. So I just wanted to know the progress in that particular segment. I mean, do you see yourself in a stronger position now to charge subscription from more number of vendors or these Mandap owners. And what is the time line for breakeven that you have in your mind. That's my first question.
Yes. See, the business, we are working on various fronts, be it on the product side, technology front and our value propositions. And [indiscernible] have integrated, it appears to me that some of the fundamental things to be addressed. So while working on getting some of the fundamental things right, value propositions right to the customers, we've also taken a step to optimize our cost. So we see that the cost is going down. So we believe that somewhere in quarter 4, I think not the entire quarter, I think somewhere in quarter 4, we believe we can get to the breakeven on a cash basis or get close on a cash basis. So that's how we are looking at the business [indiscernible]. Once you get to the breakeven, once we get close to the breakeven, then probably our plan is to scale this business. But at this point of time, the focus is to optimize the cost, get the value propositions right and get to the breakeven, which we hope will some time happen in the next 4, 5 months.
And the second question is a little longer question. It is about the telecalling process in both Matchmaking and the wedding services business. So see, what I've observed in a classified business is that the moment a potential customer evinces the interest by sharing the mobile number, there is a mad rush among the vendors to chase the customer, and it annoys the customer. So one, I wanted to know how does that process work in the wedding services business of Matrimony. Like if there is a potential customer, do they share their mobile number? And what happens once they share the mobile number? Is it like disseminated to all the vendors who can call the customer. That is one I wanted to know how does that process work?
And the second question, again, related to this telecalling hygiene by the company executives. So again, in certain classified business, there are targets which are given to telecalling executives, and once they get the details of a customer, they want to upsell some package to that customer, and they call the customer umpteen number of times. And somewhere in the Google reviews of Matrimony, I found one review where a customer said that I had requested not to be called because I'm at work, but still I get a number of calls and that really annoys me. So I wanted to know how does the company manage the hygiene when it comes to telecalling, where the executives are given targets to nudge the customer to buy a particular package, but at the same time the delicate balance is managed so that it doesn't annoy the customer. So I wanted to know this both for wedding services as well as for Matchmaking business.
Let me first go to wedding service. Wedding service, when the customers are interested in availing a particular service or photography, for example, once we understand the customer requirement, that leads us into only limited number of vendors, so not too many vendors. So that means not that customer is annoyed with too many vendors calling. However, the point I made just earlier, see, we have to understand what customer wants, what is the value service we want to offer? Is it the customer just want a phone call from vendor? In fact, you have just asked me some other fundamental question also. I think that's something we are working on those things. At this point of time, to respond, the customer inquiries are not from too many vendors. That's where most of the [indiscernible] work. We limit the number of vendors that leads this into.
However, we are looking at further improving it so that the customer is not annoyed with even a customer getting called for even, say, four vendors or five photographers. That's something because sometimes the customer wants four, five vendors also because it helps the customers to evaluate pricing and package to decide. However, instead of standard numbers that are going for [indiscernible] according to the customer requirement, occasionally, it might lead only to three vendors or five vendors. Still some of it is something we need to work on it and improve.
When it comes to matchmaking, matchmaking definitely, nothing like there's a control, it's not that the telecalling executives can make unlimited number of calls. We have close to 1,000 telecallers, and we have made a good number of calls on a daily basis. There's a limit. There's also a provision for a customer to sit, be it on the interface, also we send SMS after certain number of calls to give an option for a customer to check do not call.
The thing that one of the reviewers mentioned could be one of the [indiscernible] is that probably because it could have not happened to telecalling, probably could have been some other process. There are multiple processes. It could be in a process failure at one of their calling. As far as general calling, there's no unlimited calls, only limited number of calls. There's a provision. It's also communicated to the customer to ensure that the customer has a control over whether they want to receive a call or not. It's not that the customer is at the mercy of or not at the receiving end that they cannot stop the call. However, there are times people would -- while the customers are told that have not enabled the DND. When you're dealing with those, there could have been one or two misses here and there. So these are the exceptional cases, not the norm.
Got it. I just wanted to know about the hygiene part of telecalling.
Yes. It's very important for us because for us, the customer experience is paramount. We want to ensure that the customers are having a great matchmaking experience.
The next question is from the line of Sonal Minhas from Prescient Investment Management.
Sir, just wanted to understand with regard to the revenue guidance which you mentioned that for Q3, I think you mentioned there is a revision in guidance of Q3. I just wanted to understand the subjective part of it. Why is that so? Why were the new billings basically down? And secondly, what is the outlook for the year as a whole, assuming Q4 is -- maybe you can just extend into Q4 as well. That's my first question.
So basically, if you look at the first six months, the growth in matchmaking is around 7.2 percentage. So the quarter Q3 also looked a similar level of growth. While we are taking steps to move to a much better growth, we have still not reached double growth yet. We are hovering around the 7 percentage growth. We also expected the Q3 also to have similar level of growth in billing in matchmaking. So basically, we are taking steps, but we are still not able to move to that level of growth yet, but there are new initiatives or steps we are taking. We believe that as we progress, we can be able to move to a double-digit growth. Also, the Q3 is also [indiscernible]. For us, both quarter 2 and quarter 3 are seasonal quarters because quarter 2 had a lot of inauspicious period, quarter 3 will have, again, some bit of inauspicious and festival seasons. So both Q2 and Q3 gets impacted in terms of the revenue.
Got it. And sir, second question on this whole litigation with Google. just wanted to understand, is the current EBITDA indicative of the margins that the business is going to have assuming similar top line or there are more provisions we need to do going forward.
I think the provision would be at similar levels only. Sushanth, do you want to add anything to it?
On the Google litigation, as you are aware, we have appealed with the division bench and the hearing is in process. So on a best estimate basis, we have created a provision. The only difference is, in quarter 1, there was only for two months; in quarter 2, the full provision has come. So a similar sort of provision will continue in the coming quarters. Therefore, we have said in the next quarter, our overall PAT levels will be slightly lower than what we have achieved in the same quarter of last year. And in last year same quarter, we had a onetime gain on the account of land sale. And in this coming quarter, that will not be there. Despite that, we are saying it will be just slightly lower than what we had achieved in Q3. So the provisions will be very similar given that our top line is also growing at a very moderate sort of a pace.
[Operator Instructions] The next question is from the line of Anurag Purohit from Portfolio Managers.
My question is regarding revenue for this quarter because, historically, our revenue -- quarterly revenues always tends to be a percentage or 2 higher than the billings in the previous quarter. This quarter, there's a 2% decline compared to the billings of last quarter. Any particular reason for this?
Some time because billing of last quarter was INR 124.5 crores, but the revenue was INR 121 crores. It sometimes depends on which month of the period where sometimes revenue would have added up. So it gets here and there, some change there, but it's also how the package mix would [indiscernible].
Okay. And Sushanth, PAT might be slightly declining in Q3 versus Q3 of last year. How about EBITDA? Would that also witness some pressure versus last year or there would be some momentum, particularly coming from the marketing spend point of view?
Yes. So even the EBITDA, we believe there will be a slight decline mainly because the Google service provision fee affects EBITDA also.
Okay. There wouldn't be any counter from advertisement spend. I wanted to understand more on that particularly because from competitive intensity point of view, Jeevansathi is now saying that there is some respite in their marketing spend, but we don't see similar in Matrimony's marketing spend. So just wanted to understand more on that, how that direction would move for future.
Thing is that on the market spend, definitely, Jeevansathi has reduced their marketing spend. In fact, they vacated some other markets also. They continue to now invest only in two markets, which is North India and Maharashtra market, but definitely reduced their market expense. However, the other players continue to invest in marketing. Also, we see the marketing spend, which is sort of reduced in North and West because of -- overall spend in this category in those markets. But there's increase in marketing spend happening in other markets.
So net-net, the company increasing the marketing continue to remain because while Jeevansathi definitely, they have reduced the marketing spend. So if other players also reduce the marketing, we can definitely -- we also look at optimizing the marketing at this point of time because while there is -- North and West are reduced, but other markets -- marketing spend [ has shifted and all ]. But overall, the level of the marketing spend has remained at the more or less similar level.
Looking at -- not on an overall basis, I'm looking at other players also. So that's why, we'll continue to spend -- there is some reduction compared to what we spent in quarter 2, but we will be around INR 45 crores range on matchmaking. And that's how the marketing spend will continue. Still, there is some reduction in the marketing spend by industry players. Sushanth, do you want to add to this?
[indiscernible] campaigns and all of that.
Yes. We could increase in marketing cost and put on account of -- we launched a new TV campaign because we also launched a new product. We launched a new campaign on the basis of finding life partner based on hobbies and interests. When we launch a new campaign, there's average duration is higher, so the increase of cost of marketing spend. So that was the reason for some increase in marketing spend on matchmaking.
Okay. So essentially, Q3, there should be some spike on that front compared to Q2 of this year.
Yes.
I wanted to understand in terms of industry because you are still growing on a Y-o-Y basis. Jeevansathi's revenue are kind of now also has plateaued, too, at a certain level. How about Shaadi. What is your sense on that?
Actually, honestly, we don't have any idea about it because it's not a public company, we don't know any information about other players. But definitely, Jeevansathi given the we also move it a model and the set of combination of paid. The revenue has gone down. However, we don't have any information about other players. So we continue to take steps to grow our business. And while we have not moved to aggressive level of growth, but again we are taking steps to see whether we can move to double-digit growth.
[Operator Instructions] The next question is from the line of [ Drisha ] from Carnelian Capital.
Just a bookkeeping question. I wanted to know what is the amount of provision that we have charged on account of the Google litigation.
Yes. See, due to the sensitivity involved, we are not disclosing any specific numbers. All we have said is, on a best estimate basis, we have provided because Google has certain tiers and all of that and where we fall in. So it's not a very straightforward thing. But broadly, the way we see is that if not for that provision in this quarter, our PAT margins would have been at least maybe 300 basis points better than what it is.
Okay. And sir, by when do we have the next hearing or when is the resolution expected on this front?
See, we don't know. It all depends on how the court deals with it. Currently, the court is in the midst of this, and we don't know. It has to -- they progress -- they don't give us the dates in advance, so we have to wait for it. And also, in parallel, the case is also lying with the CCI as well. So that also needs to be our [ newest ] focus. So it will -- I think this will all take some time as we go along. We need to wait and monitor.
Sir, you alluded also in the previous question that the growth has been slightly -- you're expecting moderation in billing. So even the total number of billings has remained very sticky between [ 23 to 26 ]. What has really led to this stickiness, despite us putting in so much of efforts in advertising and all, we do not really see billing or number of subscriptions going up. So is it due to any -- we losing any market share? Or what is it that is basically not leading to the growth -- expected growth?
So basically, while we are taking steps to good or better growth, and we are definitely putting our efforts, taking initiatives. Definitely, growth is around the corner because this category -- there are -- within our business, there are multiple services [indiscernible] matchmaking [indiscernible], Jodii. So there are some challenges as well. There are some segments, some markets, where profile growth is not happening. So the combination of multiple factors is not helping us to move to the double-digit growth. However, the good thing is that we are the one player continue to grow, continue to move up, [indiscernible] only company making a profit.
While our endeavor is to drive growth, but there are challenges there. As I said, it's [ packet to packet ]. While we are definitely working on it, definitely taking steps and all. So unlike other businesses, the Matchmaking business also have a set of specific issues because every year you have to acquire a new set of customers, and we have to convert them into paid users.
And there's some segment we are now seeing some growth also. So yes, the difference is like unlike other SaaS business, there is some place that we can continue to add to the base as more people get married. We are also taking steps like love.com and other initiatives. All these initiatives [indiscernible]. And that's on the growth.
On the Google issue, again, I just want to elaborate it. Yes, it's at the multiple forums, taking time. And definitely, we'll start -- there would be increase of profit, but [indiscernible]. Yes, as Sushanth said, it may take time, and we don't know how long it's going to take and all. [indiscernible]. We hope we will be able to overcome, and I don't know when. We'll also do everything possible to get this revenue from [indiscernible].
[Operator Instructions] The next question is from the line of Pulkit Singhal from Dalmus Capital Management.
The first question is on this Google issue. As a management, have we experimented in any micro market that if we take the users to a different page for payment, does that affect the user behavior? We can always segment the market in a small city and try it out. So have we done that?
Pulkit, yes, it's something we've not tried yet because most of the payments in India has happened through UPI. So we are not sure because most of the users in India are app users, almost 80%. So taking them outside of the app in India, they go to website. So we have not done. Definitely, something we have to figure it out. We have to work out beyond the case. We also need to figure out this extreme and see what kind of impact it will have and also. The pros and cons we have to evaluate. We have not done that yet.
You've not done that, but is that something you're willing to experiment and planning to expand?
No, no, definitely no, because, obviously, we don't want to kind of give hard earned money to Google. Definitely, Google is abusing their monopoly. That's what the thing we're fighting. And [indiscernible] pay are in a part the revenue. It's a taxing company. So I'll be very vocal about Google taking hard earned money of Indian companies. Even they're taking money outside of India as well. So the government is also losing revenue on tax as well. So we've been fighting. We're educating and highlighting the issue. Probably we'll be taking various steps to see how to overcome this challenge.
That's a good thing in your business model. I mean, you can actually experiment based on micro markets, based on small segments -- and therefore, see, I mean it will be a big thing because then you can pull it up and then mitigate these costs.
Absolutely. We are not saying that we -- definitely we'll experiment. So far because we -- till recently we were busy with launching a new version of Matrimony.com. So we have to look at what are the various experiments, what will help us to continue to have this revenue and, at the same time, able to overcome these challenges, either legally or otherwise also. We'll experiment, definitely.
Yes. I was saying that the app has been refreshed, and there's a certain update in the app and you made the marketing spend. Now this has happened, I think, two weeks ago as well as one month ago when I look at least the iPhone App Store. How has the user behavior or engagement changed post that? Are you seeing any trends or any uptick in engagement at least is what I was trying to understand.
Sorry, it was not clear in between. Through launch of a new version of app, definitely, it is much better, but still there are some teething issues, which we are working on and addressing it. It may take another couple of weeks for us to set all the customers with and the customers feedback fixing some [indiscernible] because it's a complete revamp, it's not some incremental changes what we have done. So while we have launched a few weeks ago, but still there are areas we need to improve. There are sections we need to modify. We are working on it. Maybe one month down the line, probably we would have moved to a much better level.
We definitely also -- when we launched a completely new version, it takes some time for user to get adapted to the new version. So now we're seeing that there's improved traction and increased engagement. And also, one more point is that when we launch a new version, it also takes time for users to download the new version. It's not that all the users are migrated to the new version of app. That also takes over a period time. So we believe that probably one month down the line, we would also address some of the small issues, and also we expect at that time a majority of users have downloaded the newer version of the app.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to the management for the closing comments.
So thank you so much, Abhisek Banerjee, and thanks, once again, everyone, for joining the call. Once again, wishing all a very happy and prosperous Diwali. I look forward to staying in touch. Thank you so much.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.