Rategain Travel Technologies Ltd

NSE:RATEGAIN

Earnings Call Analysis

RateGain Travel Technologies Reports Strong Q1 FY 2025 Earnings with Notable Growth

RateGain Travel Technologies kicked off fiscal year 2025 with robust growth, reporting revenue of INR 260 crores, a 21% increase year-over-year. Annual Recurring Revenue (ARR) soared to INR 1,040 crores, up over 21%. Notably, EBITDA rose 32% to INR 49.8 crores, with margins improving 150 basis points to 19.1%. The company secured new contracts worth INR 62 crores, reflecting strong demand for their AI-driven solutions. Looking ahead, they anticipate continued growth, with expectations for full-year margin improvements of 150-200 basis points, and a pipeline of INR 555 crores poised to drive future revenues.

Strong Start to FY 2025

RateGain Travel Technologies Limited kicked off its fiscal year 2025 with promising results, reporting a 21% year-over-year revenue growth that reached INR 260 crores. This strong performance is indicative of a recovering travel industry and solid adoption of AI-driven solutions among customers. The company's Annual Recurring Revenue (ARR) surpassed previous highs, now at INR 1,040 crores, reflecting a 21% growth as well.

Improved Profitability and Operating Metrics

In addition to revenue increases, RateGain showcased enhanced profitability, with EBITDA rising by 32% to INR 49.8 crores. The company achieved an EBITDA margin of 19.1%, an increase of 150 basis points from the previous year's quarter. Notably, revenue per employee increased to INR 1.3 crores, highlighting improved productivity and operational efficiency within the organization.

Customer Retention and Expansion

RateGain reported an impressive gross revenue retention rate of 91% and a net revenue retention of 105%, underlining its strong relationships with clients. The firm emphasizes a 'land and expand' strategy, leading to a remarkable 32% revenue growth from its top 10 clients, demonstrating effective upselling strategies.

Challenges in U.S. Market and Distribution Segment

Despite positive growth, RateGain acknowledged challenges in the North American market. They noted a cautious sentiment among clients which could potentially delay deal closures. The Distribution segment exhibited slower growth due to volume pressures and seasonal impacts, causing the management to remain focused on a revitalized pipeline of new contracts and potential deal closures in upcoming quarters.

Guidance and Future Prospects

Looking forward, the company projected a revenue growth target of 20% for FY 2025, supported by significant deals in the pipeline, notably in the DaaS and Martech segments. Continuous investment in product innovation and customer-centric solutions is expected to drive growth, with an aim to achieve margins of 150 to 200 basis points improvement year-over-year.

Strategic Focus on Integration and Product Development

The management emphasized the importance of their integrated technology stack as a competitive edge. RateGain aims to enhance its offerings through AI-driven solutions in their Revmax platform, which is pivotal for helping clients optimize guest acquisition and retention. The company has plans to introduce new features to refine its service offerings further, enhancing client dependability and market share.

M&A Activity and Market Positioning

In the realm of acquisitions, RateGain's management expressed confidence in the ongoing evaluation of potential opportunities. Although there has been a noted reduction in promoter holding due to strategic decisions, the company remains committed to its growth targets, aiming to become a $1 billion revenue entity, all while ensuring fiscal discipline in valuations and acquiring suitable assets that align with their long-term strategic goals.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Q1 FY 2025 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that they are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Bhanu Chopra. Thank you, and over to you.

[Bhanu Chopra, executive]

Thank you. A very good afternoon to everyone. And thank you very much for joining the earnings call for RateGain Travel Technologies Limited for the first quarter and fiscal year 2025. It's great to connect again with all of you, and I'm excited to share some key updates from the quarter.

Joining me on the call are Mr. Tanmaya Das, our CFO; and Mr. Divik Anand, our Head for Investor Relations. We announced our first quarter results for the fiscal year 2025 earlier today, and I hope you've had a chance to go through our financial results, press release and investor presentation. They're also available on the stock exchanges and on our company website.

Building on the record year that we've had, we've had a steady start to the new year with a balanced performance on both growth and profitability. We continue to see good traction with our large enterprise and midsized customers with our offering of AI-driven solutions, solving for key challenges for our customers by delivering insights at scale and helping them to acquire guests profitably.

Given the strength of our product proposition and continued focus on product innovation, introducing new features and enhancements to meet evolving customer needs we saw steady performance across our DaaS and Martech segment. With a customer-first mindset, we're constantly seeking ways to deliver incremental value for our customers. While the travel industry growth remains steady, we are mindful of the growing global uncertainties and are confident that our resilient business model, an adaptive approach will help navigate these challenges.

With that, I would like to capture some of the key operating and financial metrics from the past quarter and year gone. Our annual recurring revenue, ARR, now stands at new high of INR 1,040 crores, growing at over 21%. We continue to see steady traction across all 3 segments and with a strong pipeline of over INR 555 crores, we look to drive value for our customers.

Revenues for Q1 grew by 21% to INR 260 crores compared to the same period last year. Steady revenue growth was complemented by an improved operational performance with our margins coming in at 19.1% for Q1. It underlines the strength of the DaaS-based business model and execution excellence across the organization.

Our new contract wins came in at INR 62 crores as we deepen our presence across some of our long-standing relationships along with opening up of new use cases for our AI-driven solutions. We continue to see improvement across some key operating and financial metrics. Our LTV to CAC stands at an industry-leading number of 15.4x (sic) [ 15.7x ], and the revenue per employee stood at INR 1.3 crores, capturing healthy employee productivity and ability to scale up in a sustainable manner.

In line with our vision of building an integrated tech stack focused on revenue maximization. We continue to drive product innovation by introducing new features and enhancements that meets the evolving needs of the clients and drive value for them.

Some of the key differentiators and recent enhancements that we continue to drive on our Revmax platform, which is really our central hotel commerce platform are: number one, this platform represents combined power of the integrated ecosystem, which allows customers to drive marketing to acquire customers, booking engine to enable direct conversations, channel management to optimize distribution across all demand partners and BI to present insights on the business.

Number two, comprehensive omnichannel marketing to drive guest acquisition with built-in reporting to trial performance across platforms, whether it's metasearch, Google, social, display, connected TV and video streaming.

Number three, entire ecosystem is powered by AI that leverages the trend of RateGain being one of the largest aggregators of travel data to automate call to action. So the system is self-learning and this constant optimization helps to drive conversion, thus maximize revenue.

Number four, system is 100% cloud-native that help drive scalability, security and reliability.

And #5, customizable design build with no code technology and user-friendly interface for easy integration into hotel brand website. This is an opportunity we are very excited about and working towards scaling this up in the next few quarters.

On the state of the industry, global travel industry continues to hold steady in the face of evolving situations in some pockets. The Skift travel Index continues to hold steady at 104 in June with key geographies with Europe witnessing a strong summer season. Hotel industry continues to grow over 2023 levels buoyed by improved occupancy while we see vacation rental growth moderating.

Recent report from leading consultancy firm highlighted that business travel in North America is expected to exceed 2019 levels by end of this year. We recently launched the State of Distribution report in collaboration with New York University and leading hotel tech organization called HEDNA to help our hospitality customers better understand the challenges facing the travel industry.

A few key issues highlighted in the report is the difficulty in tracking travel intent, the existing distribution landscape, the effective management of internal data is the manual effort that goes into reporting. In today's rapidly evolving travel landscape, the ability to track intent and grasp industry nuances is crucial. This initiative not only provides valuable insights for our customers, but also gives RateGain an opportunity to showcase our innovative products and services that are designed to address these challenges and offer a deeper understanding of the industry.

With that, I will briefly touch upon the performance across each of our business units. The DaaS business contributed to 32% of the total revenue for Q1 fiscal year '25. This unit grew at a healthy pace with continued traction across key enterprise accounts in addition of new logos across airlines OTAs, car rentals and cruise.

As you may have seen from recent press releases, we've added some great logos in our Air segment, including Malaysian Airlines and our air vertical continues to be a key growth driver within our DaaS vertical. We also continue to make inroads with key clients across both OTA and car segments deepening relationships with larger enterprise plans.

We've seen some early signs of traction with our newly launched Unified Rate Insights platform for hotels that is called Navigator. We're starting to make inroads with customers in Europe and Asia Pac and are optimistic on growing this vertical further. Given our ability to deliver large volumes of data, we continue to see incremental volume demand coming from our existing enterprise customers driven by strong travel demand and product innovation.

Distribution segment accounted for 20.4% of our total revenue. This segment has grown at a slower pace compared to other segments, mainly due to volume pressures seen on certain demand channels that we provide connectivity to. With that said, we are seeing expansion on certainty key relationships that we have and with recent partnerships that we have established, we are confident of growth picking up here. We witnessed good traction and continue to see opportunities for our Revmax platform with mid-sized chains in the APAC and Middle East and continue to focus on scaling this up in the coming quarters.

We continue to add further features to create best-in-class product, as I mentioned earlier. Our Martech business contributed to 47.7% of our total revenues for Q1, backed by healthy growth in the paid Digital Media segment and continued traction in our social media management segment with some leading hospitality brands in the North American geography, bases focused efforts from the team, we carry forward the sales momentum with pre-closures and healthy pipeline growth. With a continued focus from hotels on driving direct ROI, our PDM offering continues to see increased traction with the across Europe and APAC region.

With recent changes to Digital Markets Act and Google changing settings on campaign management there's an opportunity for our product and how we can help drive more traffic for our hotel partners. As we have moved towards an integrated PDM offering, the value we are driving for large travel brands, basis the strength of the travel intent data is really allowing us to drive market share within the DMO segment, and we have closed some marquee deals with large enterprise DMO brands across retail, financial services, airlines and hotels, making RateGain the partner of choice.

With added measurement capabilities and partnerships that we have established, we continue to strengthen our product proposition. As we complete another quarter with remarkable achievements, I'm thrilled to share our outstanding milestones on the people front.

We continue to see improved attrition rate, which now stands at a new low of 10.9% reflecting a strong commitment to retaining in nurturing top talent. Our focus remains on nurturing talent, promoting from within and creating a diverse, inclusive and equitable culture that propels us forward. In recognition of this, we were recognized as one of India's great mid-size workplaces 2024, an accolade that underscores our dedication to creating an exceptional work space.

As we focus on building a future-ready workplace, we are excited to introduce AI in our HR practices, enhancing their ability to support our employees more effectively and streamline our processes. Our commitment to our employees' growth, wellbeing and inclusivity remains at the heart of our success, and we look forward to building on these achievements in the coming quarters.

With that, I'd like to now ask our CFO, Mr. Tanmaya Das, to take you through the performance of Q1.

[Tanmaya Das, executive]

Thank you, Bhanu, and a very warm welcome to everyone on this call. I'm delighted to report that the company has delivered a robust quarter with steady revenue growth, coupled with healthy margin expansion of 150 bps, demonstrating execution excellence and the value we are delivering to our customers.

With focused approach from the team, we continue to see steady performance across key operating metrics, including customer retention and revenue per employee. Our land and expand strategy continues to get good results with healthy revenue growth across our key customers. We saw 32% growth in revenue from our top 10 customers and healthy revenue expansion in European geography.

We remain focused on market making the right investments in product, inorganic opportunities and talent to strengthen our return ratios and create long-term value for all stakeholders and in line with our vision for becoming the leading global travel tech provider.

Some of the key financial and operating highlights from the quarter gone by. The company reported a record revenue of INR 260 crores with year-over-year growth of 21.2%. This was on the back of strong growth across our DaaS and Martech verticals growing at 18% and 33%, respectively.

Our Distribution vertical witnessed slow growth with volume pressure across some demand partners. There is seasonality effect in Q1, and we are hopeful with the order book and pipeline we have of growth picking up in this segment through the -- throughout the year. EBITDA grew ahead of revenue at 32% to INR 49.8 crores for Q1 FY '25, with the margins expanding by 150 basis points from 17.6% to 19.1%. Q1 carries the impact of annual wage hikes and the improvement in EBITDA margins is on the back of operating leverage kicking in as we scale up in a sustainable manner.

The PAT grew by 82% to INR 45.4 crore compared to INR 24.9 crore in the previous year. The company continues to have strong customer relationships with lower churn and a focus to expand existing relationships to build sustainable and reliable revenue streams. Our gross revenue retention improved to 91%, and our net revenue retention stood at 105%.

Our customer base currently stands at 3,299 customers. We closely track stride -- and strive to outperform on key operating DaaS metrics -- and for Q1 FY '25, our revenue per employee stood at INR 1.3 crores, growing at 10% over last year. With continued traction across key customer segments and key geographies, including APAC and Middle East, we have a healthy pipeline to grow, which currently stands at a new high of INR 555 crores.

We continue to have strong balance sheet with our net worth currently at INR 1,497 crores, up 104% compared to same last year. Cash and cash equivalent balance as at quarter end stood INR 1,079 crores.

With that, I would like to close my remarks, and we're happy to open the floor for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Karan Uppal from PhillipCapital (India).

[Karan Uppal, analyst]

The first question is on the guidance. So what's the revenue growth and the margin guidance for the year? Tanmaya in your remarks, guidance comments were missing. Just wanted to check that.

[Bhanu Chopra, executive]

So I'll take that question. Yes. So the guidance continues to be the 20% that we had reiterated at the beginning of the year. This is on back of a couple of very, very large deals that we are closing on.

And also, as you know, there are some challenges that we are seeing in the North American market. And we've also seen a couple of clients that have write it out one in Distribution and one in Martech.

Distribution was largely because of nonpayment of dues. And on Martech, we had like a big large chain that was -- like a midsized chain, which was a customer for us in the Martech side. So we've seen some bumps, but despite that, we are going all guns out and with these potential deals in the -- that we are closing in on, we are confident of getting to the 20%.

[Karan Uppal, analyst]

Okay. So Bhanu, you mentioned about some challenges in the North American market. Could you please elaborate that a bit?

[Bhanu Chopra, executive]

Yes. So as you saw our pipeline, it at it's all-time high. And the deal closure typically has in this part of the year, are usually slower. So although we are seeing a lot of -- if you look at the hotel company's reports, et cetera, and all the commentary that we have seen there is talk about challenges. So although we have a very, very healthy and robust pipeline, I'm just trying to be a little bit cautious in our commentary, given the commentary that we've heard from the other hotel company CEOs, but usually, it's the Q3 and Q4, that is -- that's very good for us in terms of closing out some of these pipeline orders given that the decision-making period, which is sort of the end of the fiscal for most of our large enterprise customers. So I'm hoping that we were able to convert a lot of these larger deals that are in the foray.

[Karan Uppal, analyst]

Okay. Great. Another question is on Distribution. So RateGain has been a strategic partner to Expedia, Booking as well as Agoda now. And for Expedia and Booking RateGain has been a strategic partner for a long time, but somehow it is not translated into the accelerated growth in Distribution. So any comments around that?

[Bhanu Chopra, executive]

Yes. So we are actually seeing good amount of growth with our key partners, as you mentioned. However, we've had a couple of challenges in our Distribution business, where 1 of the Expedia partner site is getting consolidated. So we -- and it was a big volume generator for us. And so we are seeing -- as a result of that strategic direction, we are seeing those volumes get reduced on 1 of these OTA side. And we've had 1 customer actually renegotiate given the larger volumes that they were driving, we had to renegotiate on the pricing.

So if you look at our volume growth, it has been quite significant, but because of the larger volumes we had to discount, I'm just trying to get the number on volume growth. Divik, can you share the volume growth because it has been quite significant in our distribution business. And with -- like I said, with some of the key opportunities that we are pursuing. I'm confident of this Distribution business to revive also.

And given the Revmax platform commentary I gave in my earlier commentary, we are seeing some very, very good traction there as well as some things that we are doing new endeavors that we have to increase sort of a take rate on the Distribution side of the business. So we'll share more in subsequent quarters of some of these initiatives. But overall volumes, I have that now, we're almost up 50% from last year. So it was really because of some large customers where we had to win business, discount some of the per transaction fee, the overall growth is looking muted.

[Karan Uppal, analyst]

Okay. Last question is on M&A. Any update there? Last time we mentioned that we are looking at a couple of opportunities. So yes, any update would be appreciated.

[Bhanu Chopra, executive]

Yes. So we did get close to a couple of them. But unfortunately, as we go through due diligence, et cetera, and we find things that we are uncomfortable with, then we have to walk away. But I'm happy to report that we have a couple of opportunities that we are evaluating in advanced discussions with -- and we'll keep you posted as and when something realizes from those conversations.

[Operator]

The next question is from the line of Aastha from Pkeday Advisors.

[Aastha Jain, analyst]

I have a couple of questions and my first is question is, what differentiates us from our competitors? I mean in India, we have seen STAAH, which has quite a good market share, right? So how are we competing against them?

[Bhanu Chopra, executive]

Yes. So STAAH is not really -- I mean we do come across them, but they focus largely on the long tail of hotels, which are much, much smaller, smaller number of rooms, like 30 to 40 rooms as well as much smaller ADR rate, which is usually INR 2,000, INR 3,000. And as you know, the overall TAM that we go after is about 300,000 hotels, which are more sort of the mid segment and upper segment in the hospitality industry.

Because the overall TAM is about 1 million hotels but the ones that we target are about 300,000, which are organized as part of a bigger group. And in terms of our differentiation, the 1 differentiation between STAAH and us is that we are more after the mid-market and the in the upper segment.

And the other differentiator is we are an integrated suite, where not only do we do distribution, but we help customers acquire -- get through our digital marketing platform as well as we have -- the amount of data that we have amazed. We're able to help them onboard guest acquisition, guest retention, engagement and wallet share expansion.

[Aastha Jain, analyst]

Right. Okay.

[Bhanu Chopra, executive]

And STAAH is a significantly smaller company than us.

[Aastha Jain, analyst]

Correct, correct. Sir, just a follow-up on that, that apart from India, are we like -- what's the market strategy in the U.S. market, what's giving us an edge over there?

[Bhanu Chopra, executive]

Yes. So as I talked about in our opening comments also, the fact that we are an integrated tech suite, we have thousands of data points around pricing on travel intent, this enables us to offer one integrated tech stack that is all around our customers' guests, whether it's guest acquisition, guest retention or guest wallet share expansion.

[Aastha Jain, analyst]

Okay. Okay. Sir, my second question is related more related to the business. I wanted to understand like our revenue model. What drives our revenue? Is it the number of hotels, number of bookings? How do we earn our revenue? Subscription model and transaction model, I know, but can you please clarify more on that?

[Bhanu Chopra, executive]

Yes. So it's -- I would require a few minutes to actually explain this. So I would suggest maybe you can get in touch with our Investor Relations person, which is Divik, and we can do a separate call with you. But just at a high level, depending on the type of business it is, the revenue model is different.

So our DaaS is basically largely meant based on number of data points, and our Distribution business is largely driven by the number of transactions. And in Martech also, we have a hybrid structure.

But what is fundamentally form across all 3 segments is that we have like a floor value. So irrespective of whatever the driver could be, there is a minimum engagement size that we have for contract. So happy to get into a more detailed conversation around this separately in interest of time.

[Operator]

The next question is from the line of Sanidhya from Unicorn Assets.

[Unknown Analyst]

Am I audible?

[Bhanu Chopra, executive]

Yes you're audible.

[Unknown Analyst]

Question on the distribution side sir, you also mentioned in your last commentary that the growth would be somewhere between like more than -- roughly in single digit, maybe a double-digit growth. But if I compare with whole year or even first 2 quarters of last year, very significant -- like no growth at all in the Distribution segment in terms of revenue. Of course, you are guiding on volume growth and price. So is that continuous trend that we see for the whole year or is it like this for quarter 1 or maybe quarter 2?

[Bhanu Chopra, executive]

Yes. So as I mentioned, the last couple of quarters have seemed a little muted, but given some large deals that we are pursuing and also we monetize a couple of large deals in this quarter. So I don't have the exact numbers, but I am quite confident that everything that we are doing with our central Revmax platform, which includes distribution and some of the key initiatives around what we are calling smart distribution, this number should look significantly higher as we go into the future quarters.

[Unknown Analyst]

Okay. And secondly on the promoter holding, so there is significant reduction, any particular commentary you want to give on that?

[Bhanu Chopra, executive]

Sorry, I didn't follow your question. Can you repeat it again please?

[Unknown Analyst]

Yes, yes. On the promoter holding front. So there is quite a significant reduction, and it has been the trend like that. So any commentary on that?

[Bhanu Chopra, executive]

Yes. So the reduction was on account of a couple of things. One, we raised the QIP money back in November. And then in the March quarter, my family had offloaded some stake. But as I mentioned in the press release as well, there is no more plans of any other either fundraising at the company level, or any stake sales by the promoter family. We're quite confident in the future of the company, and we will continue to retain the stake that we have.

[Unknown Analyst]

And sir lastly on the M&A side, you give us -- on concall and even on the interview I saw earlier you mentioned you were not getting the valuation correct as per our metrics. So can you highlight what kind of the valuations we are looking as compared to revenue versus the acquisition cost versus what we were getting, and why we are not closing?

[Bhanu Chopra, executive]

This is regarding valuations of target companies you're saying from an M&A perspective?

[Unknown Analyst]

Yes. Yes.

[Bhanu Chopra, executive]

So look, there is no standard multiple on revenue or EBITDA that we look at, something that I've talked about our valuation methodology is based on what are the costs and revenue synergies that we can drive in the business in our hands. And our goal usually is that they're are generating an IRR of north of 20% and that whatever we pay for the company, the payback period is anywhere between 5 to 7 years depending on the strategic importance of the company.

[Unknown Analyst]

No, I think you were highlighting that -- okay. Any specific number you want to give? Like what you were getting, or what we were hearing and -- and any significant upcoming thing that we have in our hands right now?

[Bhanu Chopra, executive]

Yes. So like I said, we don't necessarily -- because the -- each asset is different. So we don't ascribe a particular multiple to EBITDA or revenue on a stand-alone basis of the target company, we usually look at what will it be in our hands depending on the synergy that we have with our business? What kind of cost synergies can we drive? And then our ability to cross-sell and upsell if it's an adjacent product to our large portfolio of customers. And depending on that is how we ascribe value. So there is no fixed formula on a multiple of revenue or EBITDA that we are willing to pay.

We look at the financial model, which is -- which we prepare for, like, let's say, like the next 10 years, et cetera. And when we look at what kind of IRR would we drive on the purchase price and our goal is to drive north of 20% with a payback of 5 to 7 years.

[Unknown Analyst]

Sir, I just wanted any numbers you can give. So what kind of valuations we were getting as an offer versus what we were offering? Any gap? What was the kind of gap that we were getting?

[Bhanu Chopra, executive]

So you're referring to the companies that we recently evaluated, is it?

[Unknown Analyst]

Yes. Yes.

[Bhanu Chopra, executive]

Yes. So we've looked at offers, which are in the range of -- I mean, the ones that we laid offers to, were in the range of 2x to 3x revenue. And no deal has happened for those companies. So those companies are still available.

[Unknown Analyst]

Okay. And so as was just mentioned that we are trading somewhere around 8x revenue multiple. So anything that it's less than like 4x is accretive acquisition, I think, that's from my perspective. Definitely, you are bringing from the IRR and other cost synergies as well.

So I just wanted to highlight that, like are we looking at any new potential acquisitions in this quarter or maybe next? Like is anything to comment?

[Bhanu Chopra, executive]

Yes, look, we've been quite disciplined buyers, and I don't intend to change that. We are very confident that the model that we have prepared has enabled us to do 4 acquisitions and it has been very, very fruitful. It has been very value accretive. And look, I'm building the company for long term. And every decision that I think is not going to optimize for the short term. So we are always going to optimize for the long term.

And this is that we feel fairly comfortable and confident about how we ascribe value to target companies.

[Unknown Analyst]

No, definitely sir. I just wanted to say that, so, we did a large round of QIP and therefore...

[Operator]

Mr. Sanidhya, please give the other participants a chance to ask a question. You can get back in the question queue. The next question is from the line of Prolin Nandu from Edelweiss Public ALTS.

[Prolin Nandu, analyst]

[Audio Gap]

Between 4% to 5% -- and if I look at the growth for the last 3 to 4 quarter...

[Operator]

Mr. Prolin, sorry to interrupt. Could you please begin again?

[Prolin Nandu, analyst]

Yes, sure. Sure. I'll do that. So Bhanu, my question was on the distribution part. If I look at the growth in this quarter and then compare it with the growth for last few quarters, there has been a sequential -- not exactly sequential, but the growth rate has tapered off, right, from Q1 of last -- where we were at around 26%. And you mentioned that you have given some kind of a rising discount, so to say, which was more volume-led, so given the fact that you also highlighted on the call that we have an integrated kind of an offering, and if I am not wrong, the kind of services that we provide for an overall scheme of things for our customers in terms of their top line, it's not even 1%.

So -- and it's just that why is it the need to give a volume-led discount in the first place? And does that mean that some other part of our businesses will also see some pressure like this in the future? So can you just help me connect as to our full integrated offering and the need to give a discount for our distribution that's something which is contrary on the size of -- if you can just explain that would be great, Bhanu.

[Bhanu Chopra, executive]

Yes, sure. So on the volume discounts, we usually do not entertain those. And I've talked about how almost 70% of our contracts have now CPI or inflation-related increases annually. This was a one-off case where it was a very, very large customer, and the footprint that we have with them is quite significant. And in order to continue to maintain a strong relationship with them -- and quite frankly, our pricing with them was a historical pricing that hadn't -- that was tying many years ago, and it was related to a company that we bought that it did require revision. So I would say it was kind of an anomaly in the system where we had this one contract where we were charging significantly.

And given the importance of this large customer, we had to entertain lowering the price. So I don't see this as a systematic trend. I just see this as a one-off. I think what has impacted our distribution business in terms of our growth. Like I said is, there is an OTA where it was a significant part of the transactions that we were generating.

And that's a systematic trend that happens over really the last 18 months where the transactions from that OTA continue to mine down. So while we are seeing growth in other parts of our distribution business is this one big OTA appearing that we had on our Distribution business, that sort of offset it.

But on the larger prospects of our Distribution business, like I said, the integrated tech suite that we have, I mean, if I look at the pipeline, the biggest pipeline that we've ever had. And we are counting on some very, very large deals that should fructify.

So I do not know the timing, but I do feel it's not a question of if, it is really a question of when. But I do see, given everything that we are doing on our Distribution business, both on having an integrated tech suite and also we are launching something called smart distribution. It's early days which helps us increase where we participate in the value chain that will allow us to increase our transaction fee or take rate quite significantly.

So I'm quite confident that Distribution business is going to be a significant growth vector for us in the coming years. It's just a matter of some of these things playing out in us executing well on that.

[Prolin Nandu, analyst]

So secondly, Bhanu, on your comment on some of the North American hotel customers being slightly conservative in their outlook for the rest of the year. Is that -- I mean, we have a substantial market share to gain right in terms of penetrating some of these customers. And is it right to assume that even if the overall market sees some kind of a slowdown in terms of our ability to grow ex of the market will still remain fairly strong especially in the North America?

[Bhanu Chopra, executive]

Yes. So thanks for asking that question, and you're absolutely right. In fact, when things are going really, really well, usually, some parts of our business, especially on the Martech side, the tendency for the hotels is to say, look, my hotel is full why do I need you, right? So as there is some amount of softening of demand for these hotel companies or demand booster offering, which is part of our Martech will enhance significantly.

And the second thing that we also -- and you've seen this with IT services companies also is that the trend for big companies to outsource also become higher when there is overall market pressures, especially around the session, et cetera. So I feel on both accounts, both on the demand booster part of our Martech as well as the larger companies needing to outsource more, we should be beneficiary of that and it's in that regard I had made that comment.

[Prolin Nandu, analyst]

Sure. Last question would be on margins, right? Now there is certain seasonality when I look at your margin on a quarter-on-quarter basis and Q1 being the weakest and then it keeps on increasing, right, as the quarters progressed. And there is an element of rate hike, which comes into Q1, if I'm not wrong.

But the broader thing that I wanted to check from you is that you mentioned about the IT services peers of yours, right, in terms of how outsourcing increases. But ours is a broadly a product companies rather than a service company, right? So in terms of our aspiration of that 25% margin, right, is there a -- I mean, is there any -- is there any margin room that you are keeping for ourselves in terms of investing back into the business, right?

Because even some of your peers in the segment in terms of DaaS or product companies are earning north of 30% margins, right? So if you can just help us understand as to when do we up our aspiration, right, to move beyond 25% margin, that would be helpful. That's it from my side, all the best, Bhanu.

[Bhanu Chopra, executive]

Yes. So yes. So your observations are correct. Your first question about Q1 is slightly lower margins, and you're absolutely right. We had -- we have the fee hike that happened in Q1. And the other big reason was there was a big move of our distribution infrastructure from data centers into the cloud, into AWS. And we had much larger cost for that transition. And I'm happy to report that transition has gone down very, very successfully.

And so we should see normalization of our infrastructure cost and distribution. And so Q2 onwards, we should see a higher margins on our distribution business. And -- like you said, the pay hikes also have an impact and it normalizes as the revenue increases and operating leverage kicks in.

To your question about being north of 25% on margin. So I've stated this many times on the earnings call also, all our mature products are actually north of 30%. If the reinvestment that we are doing into newer markets and your products that we have launched, which brings down the overall blended margin to about 20% or so.

And at scale, we've talked about getting to 25% in the next 3 years or so. So I do think that the opportunity is very, very large, and we want to continue to invest in capitalizing on this larger opportunity. So I do believe that we can be a $1 billion company in revenue, and with that kind of aspiration and where we sit today, there is a long way to go. So we will need to play a balancing act, and I would like to continue to reinvest the margin, the good margins that we have on our established products into newer opportunities, new market and doubling now on them.

[Operator]

[Operator Instructions] The next question is from the line of Darshil Zaveri from Crown Capital.

[Unknown Analyst]

So a lot of my questions have already been answered. So just wanted to know like in terms of the margin trajectory for current year, so in Q1, we did like around 19%. So for the full year, what kind of margin growth could we see? Like could we see like a 22% margin for the full year? Hello? Was I audible?

[Tanmaya Das, executive]

No, I can take that. This is Tanmaya. So what we had guided to is a 150 to 200 basis point improvement over last year. So the first quarter, we saw an improvement of around 150 basis points. So we expect that we'll continue to show that kind of improvement throughout the year, year-over-year for each quarter. So I think you should expect like 150 to 200 basis point improvement from last year for the full year.

And each quarter will be comparable to last year -- last quarter of the same year.

[Unknown Analyst]

Okay. Fair enough, sir. And do we still stand by being a INR 2,000 crore target in 3 years?

[Bhanu Chopra, executive]

Yes.

[Unknown Analyst]

Okay. Fair enough. Sir, just like 1 question. I know a lot of people have asked this about distribution, but just wanted to understand like what kind of discount did you actually give because a 50% volume increase only lead to 4% value increase. So just wanted to understand that, sir.

[Bhanu Chopra, executive]

You know I'd not be able to disclose the numbers, et cetera, but you can imagine there was a significant discount. Yes. But like I said, it's not on distribution, this was more of an anomaly than a systematic trend, and it was more of a one-off.

[Unknown Analyst]

Okay. Fair enough, sir. And just like 1 last question in terms of acquisitions. Is that right now, expectations of the funding [ wind turned ] lowered and deals are happening. So it's becoming more difficult to find a company at the target price of valuation that we want so is that the reason or how do you see the market in terms of acquisitions?

[Bhanu Chopra, executive]

Yes. So I mean, look, there are -- in terms of like the pipeline is quite robust and we have been very, very active. Yes, it's a fair statement to say that people are holding out to get the values that they desire. But at the same time, I want to make a comment that if we are not buying those companies. It's not like they're getting sold at higher valuations. Those companies are not getting sold. So there are -- I think all of you are familiar with Adara also, it's a game of patience.

I know we raised the money 6 months ago and some market participants are getting itchy for us to do a deal but we have done well by being disciplined buyers. And I just want to ask for market participants to be patient because I'm confident the kind of deals that we have done in the past will happen also in the future.

[Operator]

[Operator Instructions] The next question is from the line of Madhuchanda Dey from MC Pro.

[Madhuchanda Dey, analyst]

I have a couple of questions. As you alluded to the discount that you had to offer to one of your key clients in the distribution business. I just wanted to generally understand you have explained it in detail. I mean do you see because of slight softness in demand from the hospitality sector, there is more competition on the travel tech side, I mean, are you experiencing both? And the resultant is a kind of leading to the demand of the client? Is that a possibility?

[Bhanu Chopra, executive]

No, we are not seeing competitive pressures, so to speak. Like I said, this was more of an anomaly given the strong footprint that this customer has across all our product portfolio. A lot of the -- in fact, like I said, we -- the pipeline is looking the best ever, the conversations that we are having looking significantly better than before. I think it's all about us executing in closing some of these deals.

And look, we -- when you are competing in the marketplace with a certain product, you have to constantly, in tech, innovate and find differentiators. So what I'm saying is we have found those differentiators. People are getting excited about them. We are very close to closing in on those -- some of those conversations. And that should result in sort of, hopefully, a traction and momentum that would translate into significantly higher growth numbers for our Distribution business.

[Madhuchanda Dey, analyst]

Yes. And then the other question is a housekeeping question to Tanmaya. This other income is purely because of the QIP money, which is sitting as large cash in the books, right? There's nothing exceptional in it, right?

[Tanmaya Das, executive]

No, no, nothing exceptional. Yes, you are right. All of our funds have been invested in whatever regulatory allowed fixed deposits.

[Madhuchanda Dey, analyst]

Okay. Thanks and all the best, and hope you do and exciting acquisition soon.

[Operator]

The next question is from the line of Hasmukh Vishariya from Tata Mutual Fund.

[Hasmukh Vishariya, analyst]

I have 2 questions. One on distribution itself again. So you mentioned -- Bhanu, you mentioned that this was definitely one-off, et cetera, but it was, let's say, volume-linked discount and that the client had share -- had been using a lot of, let's say, your products. But as we, let's say, scale our businesses with the clients those clients and gain market share and let's say sell more products to a particular customer. Can this be a medium-term sort of risk for our products from pricing perspective?

[Bhanu Chopra, executive]

No, I don't see it as a risk. As I've mentioned, Hasmukh, this was an old contract that we had acquired as part of our this co-acquisition and the customer actually had been paying significantly higher unit price than all other customers to begin with. So while a lot of the other customers unit costs got rationalized over the years, this particular customer didn't see that happen. So I don't see this as a continuing trend.

In fact, we make more money through price escalations every year, given 70% of our cost, 70% of our contracts now have the price escalation cost. So I am not worried about this playing out as a risk. I think I just -- because there's a lot of question about distribution. And so I just want to clear out, I don't see any reasons of concerns for our distribution business.

Like I said, some of the things that we're doing, I'm actually quite hopeful, and quite confident that this will be a big growth vector for us. I think in terms of being transparent and on the challenges, I think I talked about a couple of unplanned attrition that we had in our business where one customer because of nonpayment attrited and then we had one Martech customer also attrite because of a big hotel brand in the U.S. acquiring them. That created some unplanned attrition that we didn't have in our projections.

So is that concerns me more than all the questions that are being raised on the earnings call today.

[Hasmukh Vishariya, analyst]

Got it. Got it. And the second question I had on deal wins. So this quarter, the deal wins growth has been just 10% kind if I look at -- if I remember well, last 1, 2 quarters have been slightly weaker on the deal wins front. So how should we, let's say, tie-up these 2 numbers, 10% growth in deal wins vis-a-vis let's say 20% sort of guidance in revenue growth, how should we tie up?

[Bhanu Chopra, executive]

Yes. Like so how I was saying to you, the pipeline is at an all-time high. And we've seen some delays in execution of some of these decisions. But overall, conversation and deal activity is pretty, pretty high. So I'm hoping as the summer season concludes in the western part of the world, which was -- which is the current quarter we should see some of these closures to happen and it should help us get back on track.

[Hasmukh Vishariya, analyst]

Sure, sure. But just to just follow up on that. In an event of weakening, let's say, macro environment, right, if this deal gets pushed on, how should we look at, let's say, your growth for FY '25 in that case?

[Bhanu Chopra, executive]

Yes. So as I was mentioning, parts of the business get positively impacted as a result of the macro level situation. So I would say our DaaS and distribution business will mirror the macro level conditions, but are part of our Martech business, which helps produce more room nights for customers will get benefited.

And also the enterprise customers where they're trying to do some things in-house, see additional benefit in giving parts of that technology and using our products. When I said outsource it to us, I didn't mean outsource to us in terms of services, but outsource their capability in terms of using our products that suffice that capability, that trend begins to accelerate as well.

So if the macro level conditions, like I said, continue to play out, and as you know, almost half of our business is Martech related, parts of that should get benefited. I'm hoping that it evenly balances out. So we're still gunning for that 20%. And it doesn't include any of the inorganics that we are very much actively pursuing as well.

[Operator]

The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

[Rishi Jhunjhunwala, analyst]

Just a couple of quick questions. Just one on this volume discount, when does it come in the base in the sense from which quarter has it gotten implemented? And Bhanu, you told about the volume growth. Can you remind again how much is the volume growth in Distribution?

[Bhanu Chopra, executive]

Volume growth was 49%. In terms of the discounting I'll defer that to Tanmaya, and then it came into effect.

[Tanmaya Das, executive]

Yes, it came into effect this year but I think there are multiple factors why the growth is 50% in terms of volume but growth for this quarter is only 5%. It's obviously, Bhanu talked about a couple of our attrition, then there is a volume discount.

And then we talked about major OTA and not performing or declining in terms of their volumes. And there are also some onetime billings that have happened last year in Q1. So there are multiple factors. So you should not say that 50% growth in volume, but only 5% growth in revenue is attributed to the volume discount that we have given to this 1 particular customer.

So I'm saying there's multiple factors why it has resulted like this.

[Rishi Jhunjhunwala, analyst]

Yes. No, no. The only thing I was trying to understand is from which quarter onwards, it comes in the base and as a result, volume and revenue growth from that particular client will actually converge.

[Tanmaya Das, executive]

Yes, then this is the Q1 I'm talking about.

[Rishi Jhunjhunwala, analyst]

Q1 only. Okay. Fair enough. And just very quickly, this new contract wins, is there some sort of restatement because last year, I think the number that you had provided was INR 593 million and now it's INR 621 million. So it comes out to be 5%, but the presentation said 10%. So I was just trying to understand.

[Tanmaya Das, executive]

Yes. So when we -- okay, these are all sales sports records. So when we close on one contract, in certain contracts, there's a full value that is recognized, right? In certain contracts, it's a volume base. So you have to record that as an order book on an estimated basis. So -- and as we move along, the monetization starts, then in some cases, the value of the contract needs the statement. So we do restate in the system as well. So yes, these are -- some of the contracts -- some of the ACVs are needed to be booked on an estimate basis which needs to be resized as the years progress.

[Rishi Jhunjhunwala, analyst]

Understood. So last year's number has been restated.

[Tanmaya Das, executive]

Yes.

[Operator]

Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Bhanu Chopra for closing comments.

[Bhanu Chopra, executive]

Thank you, everyone, for your time today. And thank you for your support.

[Operator]

On behalf of RateGain Travel Technologies, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.