Rategain Travel Technologies Ltd

NSE:RATEGAIN

Earnings Call Analysis

RateGain Reports 18% Revenue Growth with Record Operating Margins Amid Strategic Expansion

In Q2 FY25, RateGain Travel Technologies achieved a revenue growth of 18.1%, reaching INR 217.73 crores, while annual recurring revenue hit a record of INR 1,109 crores. The operating margin improved to a record 21.7%, up 190 basis points from the previous year. Despite a loss of a major client (4% of revenue), the company remains optimistic, predicting a 15% growth for the full year. They continue to invest in AI-driven solutions for enhanced customer outcomes and aim to expand their footprint in key markets, supported by a strong pipeline of contracts.

Strong Revenue Growth and Profit Margins

In the second quarter of fiscal year 2025, RateGain Travel Technologies reported notable earnings driven by strong performance across all segments. The company achieved a record revenue of INR 217.73 crores, marking an 18.1% increase year-over-year. This revenue growth was supported by the company's diversified revenue streams, particularly its DaaS (Data as a Service) segment, which grew by 20.2%, and its Martech offerings, which increased by 18.3%. Importantly, RateGain's EBITDA rose by 30% to INR 60.2 crores, leading to a remarkable EBITDA margin of 21.7%, up from 19.8% in the previous year. This strong operational performance reflects a disciplined approach to growth and cost management.

Annual Recurring Revenue Highlights

RateGain's Annual Recurring Revenue (ARR) reached a new high of INR 1,109 crores, growing over 18% compared to the prior year. The company continues to enhance its customer base, currently counted at 3,225 customers with a gross revenue retention rate of 91% and net revenue retention rate at 105%. This illustrates RateGain's ability to maintain and expand its customer relationships effectively.

New Customer Acquisition and Market Challenges

Although the company reported adding 89 new customers in the past quarter, it also faced a setback with a significant client loss on its Martech side, which accounted for approximately 4% of its revenue. This loss stemmed from a German client being acquired by a larger U.S. chain that chose to internalize its marketing capabilities. This unexpected development highlights potential vulnerabilities within client retention and may impact the company’s growth trajectory moving forward.

Guidance and Future Outlook

Looking ahead, RateGain has moderated its year-end revenue growth forecast to approximately 15% due to the aforementioned client loss and anticipated pricing pressures in certain contracts. They had previously projected growth in the region of 20%. Management remains optimistic about recovering from these challenges, citing a robust pipeline and recent contract wins, including a $2.4 million deal. However, they anticipate a challenging environment in the short term, particularly affecting revenue growth in the second half of the fiscal year, with expectations of slower growth around 10-11% for the second half.

Operational Efficiency and Strategic Move

The company reported improved operational efficiency, evidenced by a year-on-year increase in EBITDA margins. RateGain's focus on leveraging technology and artificial intelligence is seen as a key differentiator in enhancing its competitive position. Management expressed confidence in sustainably managing operations, underlying their strategy of integrating more AI capabilities across services, which not only optimizes performance but also enhances customer satisfaction.

Commitment to Mergers and Acquisitions

In the context of strategic growth, RateGain has expressed a keen interest in pursuing acquisitions but remains cautious due to potentially high valuations. While they have evaluated several acquisition opportunities, management highlighted the necessity of ensuring compatibility and mitigating risks involved. Overall, they believe that the right M&A activity, conducted patiently, can unlock significant value for stakeholders.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Q2 FY '25 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 the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference call is being recorded.

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

[Bhanu Chopra, executive]

Thank you very much, and a very good afternoon to everyone. And thank you very much for joining the earnings call for RateGain Travel Technology Limited for the second quarter of 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.

So joining me on the call are Mr. Tanmaya Das, our CFO; and Mr. Divik Anan, our Head of Investor Relations. We announced our second quarter in H1 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 presentations that are available on the stock exchanges and on our company website.

I'm happy to report that the company has delivered another notable quarter marked by talent growth, record margins and healthy performance across key operating metrics, underlining the strength of our business model. Our balanced and disciplined approach has been key to delivering a strong operational performance, leading to another record operating margin of 21.7%, demonstrating the resilience and efficiency of our SaaS-based model. Our treatment to sustainable growth remains our core focus. Our AI-powered charge solutions continue to empower leading hospitality and travel brands, providing actionable insights, drive site profitability and optimize decision-making. We continue to make inroads into key accounts, poaching partnerships and enhancing footprint in emerging markets.

Looking ahead, we are dedicated to advancing customer excellence through strategic investments in product innovation and forming partnerships that yield long-term value. With a robust pipeline and clear vision, we are well positioned to capture new opportunities and strengthen RateGain role as a leading technology partner with our Tailor data-driven solutions powered by AI.

With that, I would like to capture some of the key operating and financial metrics from the past quarter. Our annual recurring revenue, ARR, now stands at a new high of INR 1,109 crores growing at over 18%. We continue to see steady traction across all our 3 segments with a strong pipeline as we look to drive value for our customers. Revenue for Q2 grew by 18.1% compared to the same period last year with well-balanced growth across all 3 verticals. Our new contract wins came in at INR 127.6 crores as we deepen our presence across some of our long-standing relationships continue to add new customers who seek to drive better outcomes and maximize revenue with our AI-driven solution.

We continue to see improvement across the key operating and financial metrics. Our LTV to CAC standard an industry-leading number of 15.1x with a steady revenue per employee, capturing healthy employee productivity and the ability to scale up in a sustainable manner. At RateGain, we are approaching gen AI as a cultural change instead of looking at it as a product or technovation. Throughout the organization across functional internal customer-facing as well as our customers. We're working to create an AI-first mindset to ensure that our product, sales, marketing and people to think of AI an alternative to existing problems.

Some highlights of the innovation that our product teams are incorporating on the customer side. We are now using gen AI some reason our DaaS products to help summarize key highlights and actionable insights for our customers. We have launched now rate behavior intelligence, which uses AI to determine [ Pate's ] competitive pricing behavior on price changes. [ Revo RMS 2 ] for car rental companies we continuously improved the [ Volcano peer ] demand forecasting and thus improved pricing recommendation.

As part of our Revmax platform, we have recently launched the voice module when we're building an assistive channel, and they have AI agents for taking reservations and handling customer queries on behalf of other. In our paid digital marketing, we are using end-to-end AI-enabled platforms to drive better [ ROS ] on behalf of our customers. Internally, we are using AI in the following ways. There is an extensive use of co-pilot leading to higher developer productivity. This developer productivity will help us focus on creating better products and faster deployment. We are using AI in our marketing and sales function for increasing reach, were targeting and capturing intent as well as improving conversion.

Finally, we're using AI and [ HR ] in helping us find the right talent, determining employee sentiment and taking through active action. We're also proud to be working with Google in [ AW ] and workshops as well as we partner for gen AI [indiscernible] in building solutions for the travel industry.

On the state of the industry, global travel industry continues to hold steady in the face of evolving situations with some [indiscernible]. [ Skift ] travel index stood at 107 in September, showing steady growth in the APAC geography with all countries growing year-on-year basis and Europe demand continued to hold steady as well. The summer of 2024 was unique for the industry with both political and global events impacting travel demand.

Few trends that have emerged in 2024 are Asia Pacific continues to show growth year-on-year with some Middle East destinations still growing in spite of the ongoing uncertainty, providing an opportunity to grow in new markets. Leisure travel is seeing resilience as travelers seek memorable experiences. Luxury travel continues to show growth across markets providing a significant opportunity to capture their marketing spend. Business travel is slowly climbing back to pre-pandemic levels with a stronger focus on cost control, presenting an opportunity to grow the need for competitors intelligence. Large hotel chains are looking to expand into newer markets and reach new audiences giving an opportunity for new travel aggregators to streamline B2B distribution.

I'm also extremely proud to mention that RateGain was featured as a case study by the New York University School of professional studies [ Jonathan ] and [indiscernible] of hospitality. It's a great honor for NYU SPS to have captured the growth of RateGain into a global technology player in the rapidly evolving travel industry. Building a global brand requires synergy across different stakeholders along with identifying the right opportunities. We're trying to bring the industry together to address the problems we face today and the challenges we can expect tomorrow, and we are just getting started.

With that, I will now briefly touch upon the performance across each of our business units. The DaaS business continued -- contributed to 32% of the total revenue for H1 FY '25. This vertical grew at a healthy pace with continued traction across key enterprise accounts in addition of new logos across airlines, OTAs, car rentals and crews. As you might have seen from recent press releases, we've added some great logos in our air segment, including high airways and some fast-growing airlines, the [ Gurita Angola Prialt ] and Flight Centre Travel Group. We continue to make inroads within this space, our air vertical continues to be a key growth driver within our DaaS vertical.

We also continue to deepen relationships with key customers across hospitality and OTA. With our newly launched navigator platform, we're seeing traction and have had some win backs here and have a healthy pipeline. Given our ability to deliver large volumes of data, we continue to see incremental volume demand coming from our existing enterprise customers driven by evolving customer behavior, steady travel demand and product innovation.

Our distribution segment accounted for 20.6% of our total revenue. We were recognized as a strategic partner by Agoda and as a preferred partner by Trip.com, which is a validation of the high-quality connectivity solutions we enable for our hotel partners. This enables our hotel partners to grow further with a reliable partner and drive efficiencies in how they distribute the inventory. These recognitions are a validation of the strength and reliability of the platform and the value we are driving for our customers and partners. We are also integrated with PCA now, a leading PMS in Latin America that will enable us to further enhance our footprint in the LatAm region. We've had some key new [indiscernible] wins in this segment along with expansion with some of our existing partnerships. We're confident of healthy growth within our distribution segment going forward. We continue to make inroads with our Revmax platform across midsized chains in the APAC and Middle East and are focused on scaling up in the coming quarters. We continue to ask features and enable further integrations to help create [indiscernible] cross forward.

Our Martech business contributed to 47.7% of our total revenues for H1 FY '25, priced by healthy growth in the paid digital marketing segment, with steady traction in our social media engagement segment, with some leading hospitality brands in the North American geography. With a continuous focus from hotels on driving direct ROI, a PDM offering that we refer to as demand booster continues to see increased traction with hotel chains across Europe and the APAC region. Given the integrated offering we have on this with our Revmax platform, we're excited about the projects of a holistic offering, where we will help drive more direct bookings for hotel partners. Our PDM offering under Adara continues to deliver strong performance on the back of brands looking to drive better outcomes from their digital margin campaign.

In fact, we had a [indiscernible] sales quarter in Q2, signing 89 new locals in the quarter and expect this trend to continue into Q3. The value we are driving to these brands paces the strength of the travel intent data, the short product proposition is really allowing us to drive growth within the DMO segment and close deals with enterprise customers across retail, financial services, entertainment parks, airports, airlines and hotels, meeting is our other partner of choice. With added measurement capabilities and partnerships that we've established, we continue to strengthen our product proposition.

With that, I also have some key updates and milestones on the people front. We continue to see improved attrition rates now at a new low of 10.3%, which reflects our strong commitment to retaining and nurturing totality. At RateGain, we proudly report a workforce composition of 72% male and 28% female. While this progress is notable, we recognize the importance of further enhancing gender talents across our organization. Our commitment to diversity stems from the belief that diverse perspectives drive innovation and better decision-making. In [indiscernible] our company culture, and we strive to create a more balanced and inclusive workplace. This quarter, we celebrated the graduation of participant on [ RG ] Gold program, our flagship RateGain Global Organizational Leadership Development Program in collaboration with MMMI and [ MS ]. This reflects our commitment to building a strong talent pipeline and nurturing leadership from within, ensuring we have the depth and diversity of talent to propel us forward.

With that, I'd like to now ask our CFO, Mr. Tanmaya Das, to take you through the performance of Q2 and H1 of the fiscal year.

[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 another quarter with healthy operating performance marked by healthy broadcast revenue growth, coupled with strong margin expansion of [ 190 ] basis points, demonstrating operational excellence and in line with the guidance given at the start of the year. This has helped us deliver a 19-quarter high EBITDA margin of 21.7%. We maintain a focus on profitable growth while investing strategically to drive sustainable value for our customers and stakeholders. This balanced approach enables us to deliver strong results and build a solid foundation for long-term success.

Some of the key financial and operating highlights from the quarter gone by, the company reported a record revenue of [ INR 217.73 ] crores with year-over-year growth of [ 18.1% ]. This was on the back of healthy growth across all 3 segments. Given the evolving landscape and change in customer behavior, the data volumes for our enterprise clients continue to rise. And as we continue to add new logos on the air side, our DaaS segment was 20.2%. Our PBM offering continues to find flavored travel and hospitality brands who are seeking to drive better returns from digital dollars, they are spending, adding a growth of 18.3% in our Martech segment. And with a steady rise in volumes growth picked up in our distribution segment to 14.6% for the Q2. EBITDA grew ahead of revenue at 30% to INR 60.2 crores for Q2 FY '25 with the margins improving to a new high of 21.7%, up from 19.8% last year. This is on the back of operating leverage kicking in on a balanced approach. Our PAT grew by 73.8% to INR 52.2 crores compared to INR 30 crores in the previous year.

For the first half of the year, the company reported a revenue of [ INR 53.3 ] crores with year-over-year growth of 19.6%. This was on the back of strong growth from all 3 verticals, as DaaS growing at 19%, distribution at 10% and Martech at 25% for the [indiscernible]. EBITDA grew by 31% to INR 110 crores for H1 with margins coming at 20.5% up by 180 basis points from the same time last year. The H1 EBITDA expansion is aided by healthy growth in our high-margin business drastical and with continued traction in medium Martech offerings. Our PAT grew by 77.6% in H1 compared to the same time last year, coming at INR 97.6 crores to [ INR 25 ] crore.

The company continues to have strong customer relationships with low 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 [ 105% ]. Our customer base currently stands at 3,225 customers. We continue to have a strong balance sheet with our network currently at INR 1,557 crores and our cash and cash equivalent balance of that quarter and stood at INR 1,131 crores.

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

[Operator]

Thank you very much, sir. We will now begin with questions. [Operator Instructions]. The first question is from the line of Karan Uppal from Phillip Capital.

[Karan Uppal, analyst]

Congratulations on a broad-based growth as well as strong margins. So the question is to Bhanu. So Bhanu, your travel market is largely looking normalized now after 2.5 to 3 years of pretty strong growth but RateGain growth continues to be in strong double digits, almost 20% growth in H1. So is this reflective of the increased market share given the small size of ours. And also, is it also reflective of the good cross-sell and upsell which we are doing across the portfolio. So how do you characterize that growth? And what's the sustainability of this group?

[Bhanu Chopra, executive]

Yes. So thank you. So as you rightly noted, we've had some very, very robust growth and also frankly, on a much larger base from the time we last said we are now almost 3x [indiscernible] [ 300 doors ] now we are run rating at ARRs at INR 1,100 crores. So I think I would give credit to the entire RateGain team, [indiscernible] focused [indiscernible] on execution.

I also believe that the strategy to filled out additional capabilities to realize that vision of having one integrated tech stack is also paying dividends. Now that we have multiple products at capabilities. And I believe each of these product areas have since set room for growth and we continue to invest in adding adjacent features or capabilities that had a first position as a far superior partner to our customers because we are being viewed as a one-stop shop instead of having to deal with multiple vendors and the fact that all our solutions talk to each other and are seamlessly integrated, there is a huge value we can drive in terms of actionable insights in driving more revenue for our customers.

[Karan Uppal, analyst]

Okay. Great. Secondly, the guidance was missing in the prepared remarks. So shall we achieve the last guidance is impact on both growth and margins?

[Bhanu Chopra, executive]

Yes. So let me take a minute to talk about the future guidance. So as you also noted, there are several things that are happening. And like to address each one of them. So as you know, U.S. is one of our biggest markets, and we saw because of the elections are on track wins haven't been satisfactory. So we expected some larger way to come in, but I think because it's a delayed decision making we believe that some of this now that Trump is back in power, some of these decisions should get taken and you should be able to realize some of the larger deals that have been awaiting signatures.

The second thing that has happened is, which was sort of unexpected that we lost a very large client on our Martech side, it was equivalent to almost 4% of our revenue. I alluded to this in the last quarterly call also. And we were able to sort of put a size on the amount of loss. So obviously, 4% loss is a big loss and that impacts and ready to continue to grow at like 20%. So all efforts are to unpack this loss because it was kind of unexpected. And the loss was very really this German company, it was a [indiscernible] got acquired by a very large U.S. chain. So we didn't lose the business to a competitor this larger chain, it was on our Martech side, and they're using one of our Martech solutions and U.S. chain already has this capability in-house.

And the third sort of -- I would say and that we are seeing is on our couple of our larger DaaS contracts we are seeing some pricing pressure. So if you have to be known on what will happen to those contracts in terms of the pricing concessions we may need to give. So definitely, there are both macro-level challenges as you noted that the travel has kind of normalized, especially in Northern Europe also in APAC, we continue to see growth. And also some micro challenges that I mentioned about losing a larger client.

But on the flip side, I should also share with you all the positive news, where we -- as I mentioned in my commentary, we've had a great quarter on the Adara side. It was the best sales quarter ever. And just last week, we won other large contract in one of the larger chains. It was almost close to $2.5 million. So that gives me a lot of encouragement and optimism that there is an opportunity to, again, surpassed all previous records on the data side on sales in Q3. And similarly, we're seeing some very, very good traction on our Revmax platform that you're now calling UNO, then we had won some large deals in doing one with [indiscernible]. And I feel very confident that given this unexpected loss that we had that we were able to recover. But net-net, just on the conservative side, we've been guiding now for like a 15% growth.

[Karan Uppal, analyst]

Okay. 15% growth for the full year. Okay. And just lastly, on Adara. So if you can share what's the annualized run rate and the margin profile currently?

[Bhanu Chopra, executive]

I'll defer that to Tanmaya.

[Tanmaya Das, executive]

Yes. So annualized run rate will be close to around 48 or $49 million we expect to close and the margin profile is around [ 18% ].

[Operator]

The next question is from the line of Anmol Garg from DAM Capital.

[Anmol Garg, analyst]

Just a couple of questions. Firstly, if I look at total number of customers, then you indicated that we have added 89 new customers in this quarter. Over despite that, the total amount of customers have reduced by around 74, 75 during the quarter. Is this intentional in terms of paying down the nonprofitable sale accounts? Or is this something that we have seen as [indiscernible] during the quarter?

[Bhanu Chopra, executive]

So let me clarify the commentary that I talked about, the 89 logos that were only specific to Adara. Now be your overall question of some reduction in overall customers. So in case of, as I mentioned, in some cases, when we account for large hotel accounts we sometimes depending on how we do the invoicing, we count the number of customers basis the number of invoices even if it's [indiscernible] it same chain. So there was -- as a result of that, because of that loss of big account that we had, we see some reduction. And on our brand monitoring and brand engagement, also, we saw some nonprofitable accounts that we had cut down as well.

[Anmol Garg, analyst]

Understood. Understood. And secondly, we have seen strong traction coming back in our distribution business this quarter. If you can indicate what has this led to led by? And will this traction continue going ahead as well?

[Bhanu Chopra, executive]

Yes. So our distribution business comprises of the large hotel chains that we do connectivity for our demand partners. And we also count who know our Revmax platform, which is the integrated tech stack also as part of our distribution business. And something that I've been saying all along is the big growth driver for us is going to be [indiscernible] and we saw some very good traction in the past sort of couple of quarters where now we have released the product, and we've had some large wins.

So I do see distribution to be a very, very big growth driver for us in the next couple of years. We haven't reached that the pinpoint on UNO, but I do believe that the market potential is quite significant. And compared to our competitors, our AI first mentality in how we are rolling out this product like how I talked about in my commentary about our voice module, which is truly AI-based modules, which can handle reservations and customer queries on behalf of hotels, which a lot of these mid-market and smaller hotels don't have put us in a very, very unique position. So there are -- there is a very healthy and last pipeline that we have on UNO. And we are very confident about the go-to-market strategy we are using where we are using what's popular in [indiscernible] expand where we land with 1 module and then sell the entire tech stack to the customer, and it's working quite well.

So yes. So to answer your question, I do see continued traction and hopefully, in the next sort of 2, 3 quarters down the line, also expecting larger numbers to grow in on account of UNO.

[Anmol Garg, analyst]

Understood. And just one last one. Is that -- as you indicated that we have lost a larger customer, can you also indicate the profitability of this particular customer? And how should we look at our EBITDA margins going forward? Will this have a larger impact in Q3?

[Bhanu Chopra, executive]

So on the EBITDA margin from a customer perspective, I will not be able to disclose that. But I can tell you that the numbers in Q2 account for almost 70% of this loss of this customer. And you have seen in our margin profile it didn't impact our margin. In fact, our margins are continuously going up, and we were at [ 21.7% ]. And so I'm pretty confident that our guidance on margin stays intact. And that's the beauty of the SaaS model as you increase revenue, most of that revenue falls to the bottom line and you have the power of operating leverage.

[Anmol Garg, analyst]

Understood. Understood. And just one last thing, because of the reduction of the customers, can we -- would there be any decline in revenues in the third quarter? Or do you have growth quarters for [indiscernible]?

[Bhanu Chopra, executive]

That is correct. We continue some growth in Q3 and Q4. I think my point about -- as I mentioned earlier, it impacts our growth. So we were adding 20% growth and we lost a customer that makes about 4% of our revenue per day. That's why I'm indicating a lower growth for the full year, which is more around 15% now.

[Operator]

The next question is from the line of [ Miten Sha ] an Individual Investor.

[Unknown Attendee]

Hello?

[Bhanu Chopra, executive]

Yes?

[Unknown Attendee]

Am I audible?

[Bhanu Chopra, executive]

Yes.

[Unknown Attendee]

Yes. Congratulations on posting a good set of numbers. So my question would be a little bit nontechnical, not related to the performance, I would like to pose is that if you see IP came out to the face value of [ INR 1 ] face value of 1. So I mean, just a question, if in case future the share price increases and all the things to a very high level of 4-digit figure will be optimistic. Why is the place at the face [indiscernible] 1? And I mean compared to industry stands of 10, any specific reason for that?

[Bhanu Chopra, executive]

So at the time of the IPO, we had announced -- actually, we've done the bonus shares right before the IPO. And as a result of which, it came down to 1. And your point about it going to 4 digits and it absolutely will or higher 4 digits? And how do we tackle that [indiscernible].

Yes. So well, look, I'm sure we are a company -- do I have a solution on that question today? No. But do I feel confident that we'll find a solution that would be favorable to all stakeholders, I'm very confident. So Yes, I may not be answering your question now, but at the appropriate time, I'm confident that we will be able to find the right solution.

[Unknown Attendee]

Sure. And just one more question. Is it possible to give a breakdown of the margin of customers like now. Who fits into the 1 million category and how many customers [indiscernible] into 1 million category or 500,000 or 100,000 category. Is it possible to give a breakup like that in the subsequent presentation?

[Bhanu Chopra, executive]

No. We will not be very comfortable sharing that information because as a public company, our competitors also have access to that data then. So unfortunately, we'll not be able to give you that breakup. But yes. But maybe we can on a one on one, give you some color on it.

[Unknown Attendee]

Sure, sure. I mean that answers actually. I really appreciate and thanks a lot for answering. Congratulations again.

[Operator]

The next question is from the line of Prolin Nandu from [ Elvis ].

[Prolin Nandu, analyst]

Two questions from my side. Now you mentioned that since IPO, you have grown to 3x -- 3x per size. If I look at the trend, right, even before IPO what happens is that you have an organic growth of, let's say, 15%, 20% can you acquire an asset, the growth increase up because of that acquisition onetime? And then again, there is a lag effect of that acquisition for a couple of more years. And again, the growth increase back to 15% to 20%. Now given our size right in terms of how small we are in overall travel tech market, and also versus our peers. When you look at the organic part of your business, let's say, over the last 5-year period, are you satisfied with the kind of growth that you have seen and some of the operating metrics that you report on a consolidated basis it could be [ NNR ] , it could be a tax cost of acquisition and LTV, et cetera, et cetera. How would they look if we only were to evaluate the stand-alone business?

[Bhanu Chopra, executive]

Yes. That's a great question. So there are a couple of questions there, and I'll answer one by one. So your first question about our organic growth, am I satisfied with it? The answer is absolutely not. I feel that there is a huge amount of headroom for us to grow. I composite company in looking at across all our products. We had INR 1,100 crores, but there are lots of products that we have that individually are at maybe INR 10 crores or INR 20 crores. And I see the potential for each one of those smaller products and another call like [indiscernible] teenagers, I see the potential for them to also be INR 100 of crores.

So I do think that there -- I am very confident of the RateGain strategy on a go-forward basis. I am very confident of the simple [indiscernible] as that we have a set of customers that we need to sell to, and we need to gain their trust and sell them and more products. Does the entire thesis on which we're building the company, and we have a number of products that can see a much larger attach rate with these customers. So I am confident about our strategy. I do think that we need to implement a better execution, and we need to continuously get better execution, whether it is on the product side, largely around how we onboard customers in making it quite frictionless and seamless but also on a go-to-market motion. How we sell to enterprise customers versus mid-market? What are the different nuances to be taken care of from a go to market motion for each of the geographies.

So there is calibration going on continuously. So just as an example, we are now calibrating to help create a better sales pipeline by using a lot of AI tools, but also complementing that with what is called in SaaS and SDR function. So up until now, we didn't have an SDR function, but it will be last sort of 2, 3 months, we've invested quite heavily been building out an [ SDR ] function, and we now have got 20 people whose sole job would be to help create sales pipeline and opportunity. In addition to that, we've added, as I talked about earlier, a lot of -- I see a lot of opportunity in the APAC region. So we've added a bunch of sales even in the APAC region.

So I do believe the strategy is right, the execution to continuously be calibrated even the paces of all the products that we have, I do think that we should see acceleration of our growth. Obviously, all of us would like to see the acceleration of that growth after sooner than later. But I'm fairly confident that if we are putting our heads down, executing well, we can be well north of 20% on an organic growth basis [indiscernible].

[Prolin Nandu, analyst]

That's great Bhanu. Now second question is on acquisition, right? While we completely respect you being very, very conscious about the price that you pay and maybe some of the [ last ] acquisition that we have made on price to sales multiple might be difficult. But in some of the past meetings that we have had, you had mentioned that some of your targets are still not being acquired. From a seller's point of view, is there no urgency as such because I don't think so they are -- I mean, on its own, they are not that great businesses in terms of the return ratio profitability. So is there no urgency and still most of the targets that are there in the market still available? And we have a very successful template in terms of other acquisition as well.

So is it -- I mean, since we are not able to find a price, is there a midway or change in our strategy where we make some of the seller also maybe you buy 70% to 80% and give that 20% kind of an upside to the sellers. Is there a requirement for change in strategy which is there in the market? Because I mean those kind of multiples are difficult to come back to life in terms of what we have acquired. So anything on your M&A, if you can help in the context of whatever I mentioned.

[Bhanu Chopra, executive]

Yes. I told you all the [indiscernible] heard 90% of M&A sales. And while [indiscernible], we've been very, very successful and not just I've also referred to Constellation Software and other serial acquirers that do it quite well. And one common theme amongst good serial acquirers is just one. It is disciplined. So I don't look at is the seller eager to sell now because we've not been able to sell and is there an urgency? What is the change in environment? None of those factors are as important as a tabulate having a discipline of changing value creation through these acquisitions? What is the strategic value? And how does that translate into numbers? And I've talked about this. We have our IRR target payback period threshold. But I'm confident that we will continue to do acquisitions within those thresholds because we haven't done one. We have done 4 and we will continue to do that.

And it may also happen that we haven't done anything now for 2 years, but there is a chance that we might end up doing 1 or 2 together as long as our thresholds and internal metrics are deal matched. So my point around this is I think M&A is really a story of patients and discipline. Having done it successfully. And looking at our pipeline, I feel confident that we'll be able to consolidate something soon. And it may also happen that, like I said, we made to more than one in quick succession as we find these that [indiscernible].

[Prolin Nandu, analyst]

Sure. And one last point, Bhanu, right? I mean, last quarter, we heard some pricing pressure in distribution. This time, you are talking about some pricing pressure in DaaS, right? Is there something more to read in these as to the value that we are offering, it's not being held by the customer, and they are asking for price cuts. Is it more to it and move your rising pressure more going forward? Or how should one think about it?

[Bhanu Chopra, executive]

So as one of the other analysts asked about the overall travel has now normalized. So if you look at the big hotel companies and their revenues, these are all listed companies like [ IT, IHG, Maria ], et cetera. So there is a nearly pressure on them in terms of growth. And as a set of which when things are growing very, very well, there is a tendency to overlook. And as things tighten up, people usually tighten up their first string.

So as a result of that, we are seeing more pricing discussions. But fortunately, the value that we provide and the place that we are at, there are not too many other options that are available to these customers. So we are -- we're trying to hold tight and create more value. The other benefit that we have is, again, the benefit of adding more products so providing better value to the customers. So if you are negotiating on brand product, we have the ability to say, okay, I'll give you a 5% discount, but prices other products.

So it's creating those kinds of opportunities also. So it's not all doom and gloom. It's also creating some opportunities for us from a cross-selling perspective. And on the overall impact, I'd just like to be cautious and set the right expectations, but I don't see is to be an overarching concern. If you ask me what keeps me up at night is, as I talked about the strategies that is just owning him on our execution.

[Operator]

[Operator Instructions]. The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional [indiscernible].

[Rishi Jhunjhunwala, analyst]

So just one question mathematically. So I think Bhanu, you mentioned 70% of the impact of the client loss has already come into queue given that it was 1% of revenues, that's about 300 bps. So effectively, in one edge, we have grown at almost 20%, including the impact in 2Q on a Y-o-Y basis also. At your guidance, you're implying about 10% to 11% kind of Y-o-Y growth in second half? And including the 400 bps also, we are talking about 15% growth. So there is still slowdown in our revenue growth even if we don't take into account the impact of client loss.

So one, is this 10% to 11% math seem correct? And two, if you can just comment on the slowdown in the revenue growth ex of this in the second half, given that some of the headwinds around elections and other things are behind us.

[Bhanu Chopra, executive]

Yes. So Rishi, it's a portionally note given on track to vary for the first half has slowed down year-on-year. And although the pipeline has grown quite healthy, it's up almost 20%. So it's more of a cautionary note to investors but like I said, good things also emerge like we take the largest deal for Adara last week which was about $2.4 million.

So there are some very large deals that are getting signatures. And -- if those happen, that should make us look very, very good and also take this customer loss that we've had. [indiscernible] math that you were doing, didn't quite follow, but maybe we get a range of follow-up calls. But net of net, I do see some slowdown in our growth on the back of lower contract was a contract year-over-year are at 6%, which is quite low and that will definitely impact. But I do see -- I am hoping and optimistic about acceleration of our contract wins. As I said, there are a bunch of contracts up there and we'd have a positive surprise last week also. So that recovers [indiscernible] elections is behind us.

Because largely, if I see also just to give you a geographic being down as well. We are doing extremely well in Europe, U.S. -- I'm sorry, in APAC, LatAm which really the U.S. that we have seen the impact. I mean rest of the region even from the contract wins as well as revenue growth, it's the north of 20%.

[Rishi Jhunjhunwala, analyst]

Got it. And just very quickly, in case I missed earlier, if you can give the reason for that client loss and have we lost it to a to another vendor to in-house or the business has gone up? And secondly, any updates on acquisitions?

[Bhanu Chopra, executive]

Yes. So on your first question about losing the last customer. So basically, it was a midsize chain in Germany, and it got [indiscernible] by one of the larger chains in the U.S. and we were selling a Martech product to them. And the large change was using an in-house basically, they run all their trade digital campaigns in-house. So as a result of which we lost this to in-housing. But at the same time, again, there is -- I'm not factoring any of this potential positives. But very recently, we heard from the chain that they're not seeing the same level of traction on those campaigns they were seeing from us. There is an opportunity that they might come back and start again with us in the new year. So let's see, we'll keep you informed.

On your second question around M&A. So the pipeline is quite robust. We are in very active conversations with a couple of prospects. And you can say we are doing a preliminary due diligence on the valuation side, we're in sort of in the ballpark numbers but now it's really about us doing our due diligence. And I don't want to commit to anything because just very recently, also, we were in a place where -- so it's not always about valuations. We had a green on the valuation with this other company, but we found things that we were not comfortable and willing to take on board as well as a result of which we had to move forward. So yes, so there are a couple of companies where from a valuation perspective, pricing perspective, we are in the ballpark range we just need to be comfortable with whatever discoveries we are doing and our ability to [ Medicaid ] [indiscernible].

[Operator]

The next question is from the line of [ Deepak ] from [ Sundaram ] Mutual Fund.

[Unknown Analyst]

I had a couple of questions. One was regarding the total pipeline. So what I could see is last quarter, we had reported in [ 5 ] crores. And this quarter, we have mentioned our [ CCR9 ]. So is this because of all the reasons which we have discussed thus far that slowdown and the client loss and et cetera? Or is it something else to it?

[Bhanu Chopra, executive]

So. Go ahead, Tanmaya.

[Tanmaya Das, executive]

Yes. So obviously, the pipeline, if you see year-over-year as growth of more than 20%. But we do periodic cleansing of the pipelines because sometimes the pipeline doesn't reflect the true picture. So we have been doing those cleansing in the last quarter. So now it's more accurate pipeline that can be cited. Obviously, there are closures who had a large quarter of closure of contract wins last quarter. So some of the pipeline has gone into close door, but it's a combination of both of them.

[Unknown Analyst]

And since in H1, we have already reached the highest margin and they're at around [ 20.5% ]. So in H2, do you expect with this 10% to 12% growth means what would be the margin trajectory -- EBITDA margin trajectory for H2?

[Bhanu Chopra, executive]

Look at the start of the year, we had given a guidance of 200 basis point improvement over last year. So that guidance remains same.

[Operator]

The next question is from the line of Madhuchanda Dey from MC Pro.

[Madhuchanda Dey, analyst]

I have 2 questions. These topics have been touched upon by many other participants as well. See you had rate capital quite some time back and looking for an acquisition. Now that the travel industry has done exceedingly well has stabilized fully. Have you found the price very expensive? Or is it out of your budget, which kind of limits the possibility of a deal happening in the near future?

[Bhanu Chopra, executive]

Yes. So as I had alluded earlier, there have been deals which have been in the ballpark valuation, but we were uncomfortable with some systematic risk that existed in the process that we were willing to take and as a result of which we had to [indiscernible] from them. In other cases, Look, we've evaluated almost 10 companies and made 10 offers in the last 12 weeks. A couple of them we did go forward, but add issues in due diligence, for the rest of them, we couldn't arrive on the right valuation. And as I mentioned earlier, I know a lot of investors are in for us to do something but I need to remind everyone that I'll repeat myself, M&A is a game of patience in this point. And I am not just optimistic, I am supremely confident that we will do the [ IP ] at the right price to create -- to continue to create the success story that we have demonstrated in the past.

[Madhuchanda Dey, analyst]

Okay. My second question is again on your guidance. There are 3 factors. Please correct me if I'm wrong. You always have mentioned that 4Q is a very strong quarter for you. Second, overall with U.S. elections behind that's a big uncertainty. U.S. there's a kind of planting in the U.S. Most of the technology companies are alluding to tech demand looking to come back in a big way and you have already delivered a 20% kind of growth in the first half. As you mentioned that the client loss, which is 4% of the revenue 70% of that is already there in the numbers of Q2, which means that about 100, 120 basis points kind of a spillover into H2. But with your guidance, growth in the second half according to my calculation is quite abnormally low at 11%. So how do I reconcile this?

[Bhanu Chopra, executive]

Yes. So way to think about a [indiscernible] business and trying to bridge future numbers is also really looking at the churn rates, which are very, very healthy [indiscernible]. So our journals about 10%. And the other important thing that you need to look at is the new sales number. And then the third if a minor point is looking at how quickly do we monetize our sales number or a book. So what you see in H1 as a result of rate shares were previously. But as you would notice, our sales numbers have not been that brief it at [indiscernible]. If there's only is doing a comparison year-over-year. So is there any result of lower [indiscernible].

And as I mentioned, either you ask you, where did you not sell? It is really the U.S. that we are not selling. And we have taken a lot of steps also. So while we have a good pipeline. Some of it could be blamed on [indiscernible] and makes that talked about elections, et cetera. But I do also feel that there is improvement we need to do on our to market motor and that we talked about how we are doing improvising, calibrating our sales [indiscernible] by investment [indiscernible] we've also ramped up on our marketing efforts, are we participating in more stores. We are -- we're also looking to revamp and hire more people in the sales team.

So there is a lot of focus in building that enable content to solve for the lower range that we've had in the upcoming quarters. And like I said, there is a good guidance. There is -- there is a very large deal that we did last week with one of the biggest entertainment results in America was close to $2.4 million -- $2.3 million, $2.4 million. And similarly, we are negotiating and have got global agreements on [indiscernible] on our distribution side.

Current we haven't delivered signifies makes me a little bit cautious and just want to set up the right expectations going forward.

[Madhuchanda Dey, analyst]

I hope you kind of reach your [indiscernible] in the second half.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Bhanu Chopra for closing comments.

[Bhanu Chopra, executive]

Yes. Thank you, everyone, for giving us the opportunity and participating in the call. I feel very, very optimistic about the future, the building blocks are [indiscernible], but never been stronger. I feel very strongly about the team that we have built, the innovations that we are doing on our products and the value we are bringing to our customers. And with that, we continuously work tirelessly every day to realize that [indiscernible] building into a billion dollar revenue company. So thank you, everyone.

[Tanmaya Das, executive]

Thank you.

[Operator]

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