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Route Mobile Ltd
Earnings Call Analysis
Q2-2024 Analysis
Route Mobile Ltd
Route Mobile has managed to beat the typical seasonal downtrends of July and August by recording their highest ever revenue. Even with current global economic challenges, they achieved substantial year-on-year growth in both revenue and Profit After Tax (PAT) exceeding 25% in H1 FY '24.
Significant collaborations like the deal with VI India this quarter, which centers on international A2P termination and firewall management services, project revenue potential close to $100 million. Furthermore, the company is deploying firewalls in Southeast Asia and partnering with global e-commerce entities, enhancing their standing for reaching their target of 20% to 25% annual revenue growth.
The anticipated completion of the Proximus group deal by Q4 of '24, coupled with efforts by an integration governance committee, is likely to cement Route Mobile’s status as a comprehensive global CPaaS player.
The board's decision to approve an interim dividend of INR 3 per share is indicative of the company’s strong performance and confidence. Looking ahead to FY '25, the impact of recent large deals and the full-year effect of Proximus synergy benefits are expected to be reflected positively in financials.
The merger with TeleSign is projected to offer revenue and cross-selling synergies, particularly Route Mobile leveraging the digital identity platform in emerging markets with high gross margins. OpEx savings and direct cost synergies from economies of scale and technological advancements are geared to propel Route Mobile toward a $1 billion revenue and 15% EBITDA margin target by 2027.
The company processed over 31 billion transactions in Q2 FY '24. This is the highest volume of billable transactions recorded by the company to date, showing an increase from INR 26.9 billion in Q2 FY '23 and INR 29.5 billion in Q1 FY '24, with a moderate decrease in average realization per billable transaction. EBITDA grew by 16% year-over-year, demonstrating a healthy operational performance.
Route Mobile's strategies and deals are set to showcase its cost leadership at scale while maintaining impressive industry-leading growth rates.
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Good evening, ladies and gentlemen. I am [ Yosuf ] moderator for this conference. Welcome to the conference call of Route Mobile Limited arranged by Concept Investor Relations to discuss its Q2 FY '24 results. We have with us today Mr. Rajdip Kumar Gupta, Managing Director and Group CEO; Mr. Gautam Badila, Group's Chief Strategy Officer and Chief Investor Relations Officer; and Mr. Suresh Jankar, Chief Financial Officer. [Operator Instructions]
Before we begin, I would like to remind you that some of the statements made in today's earnings call may be forward-looking in age and may involve certain risks and uncertainties. Kindly refer to Slide #2 of the presentation for the detailed disclaimer. Please note that this conference is being recorded.
I now hand the conference over to Mr. Radjdip Gupta, Managing Director and Group CEO, Route Mobile Limited. Thank you, and over to you, sir.
Thank you, [ Yosuf ]. Good evening, everyone. I hope this finds all of you in good spirit as we near the festive season. I have some exciting news to share tonight. Even though the month of July and August typically see down turns for us given the holidays and usual dip in global volume. Route Mobile has not just preserved the volume but also sold and registering our highest ever revenue. in fact, even amidst of the global challenges, our year-on-year growth in both revenue and PAT in H1 FY '24 has exceeded over 25%. This past quarter has been pivotal for us. marked by securing several significant deals that promises to propel our growth trajectory.
Here are some of the standout agreement we have clinched. First off, collaboration with VI India this quarter. It's a major international A2P termination and firewall management services deal and one we are particularly proud of. Our history with Idea and now our reengagement with the merged entity, Vodafone Idea underscores our platform's robustness. This association alone has the potential to bring around $100 million in revenue.
We are gearing up and in process of deploying our firewall, which will go live very soon. In Southeast Asia, we clinched another major international A2P termination and firewall management service deal and it's already live and running.
Finally, there is a global e-commerce giant we partner with. In Q1 FY '24, they are onboarded and live with us now. In fact, now we are expecting to gain more traffic from international destination, including India. This win -- This big wins make me confident in saying we are on track for our annual revenue growth of 20% to 25%. And frankly, we might just hit that top mark.
Additionally, since Q1 FY '24, we all had several milestones. We got -- some of them are, we got a note as a major provider in Gartner CPaaS Magic Quadrant [indiscernible] '23 and were featured in 4 Gartner hyper cycle report this year. We have forged a significant partnership in Bangladesh with Robi Axiata Limited focusing on RCS business messaging.
We successfully launched route amplify our flagship event. It was a melting pot of industry leaders, where we share and gained insight into key areas like customer engagement and digital identity. Our new product revenue has shot up by staggering 64%. Our collaboration like the one enabling WhatsApp based ticketing system for Delhi Metro only goes on to prove our innovative product development.
Now for our deal with Proximus group, everything is on track. We are eying to wrap up by quarter -- Q4 of '24. We have even set up our integration governance committee pulling in as senior leaders from Proximus, Route Mobile and TeleSign, all working together to ensure smooth selling. And every step we have taken so far, it just reinforces our confidence in the partnership. I'm personally thrilled about what lies ahead, especially leading the CPaaS division post deal.
Last but not the least, based on our sterling performance this quarter, the Board has approved an interim dividend of INR 3 per share. A big thank you to all involved.
Now I will hand over to Gautam, who will share more about our financial highlights. Over to you, Gautam.
Thank you, Rajdip. Good evening, everyone. Seasons greetings to all of you. We have already uploaded our quarterly earnings presentation on our website as well as the stock exchange websites. Hope you had a chance to go through the presentation. I'll quickly summarize our financial and operating performance before opening the floor for Q&A.
The quarter gone by has yet again been an outstanding quarter, considering the seasonality of the business. The key highlights for the quarter gone by has been the last deals that we have won, as highlighted by Rajdip earlier. The throughput from some of these large deals should start to reflect from Q4 onwards. Hence, we believe that we will be closer to the upper end of our revenue guidance band of 20%, 25%.
More importantly, FY '25 looks very promising on the back of full year effect of these large business. plus the benefits of synergies that should start to flow to Route Mobile from the Proximus deal. In terms of the update on the customer transaction, as Rajdip highlighted, the regulatory filings are well on track, and it seems that the transaction, including the mandatory tender offer should close during Q4 FY '24.
In terms of the synergy that was called out at the time of signing, we have been able to further validate the same based upon the hindering work done so far. Based on the exhaustive work done over the past 6 weeks, by the integration governance scheme, we reconfirm that the overall EUR 90 million or USD 100 million EBITDA synergies stands completely justified.
Out of these some of the synergy buckets where Route Mobile will stand to benefit are as follows: In terms of Bucket 1, which is the revenue and cross-selling synergies. Route Mobile will leverage the digital identity platform of TeleSign in emerging markets. Digital identity as a product is a very unique SaaS offering, which is used to curb digital fraud and [indiscernible] gross margins, which are [indiscernible] 80%.
Route Mobile will also be making inroads into untapped large global accounts through TeleSign to service their requirements in emerging markets.
In terms of the synergy Bucket 2, which is OpEx savings and synergies, create a state-of-the-art product innovation lab in India to focus on new product initiatives, automation and AI and capabilities, drive economies of scale by consolidating the cloud infra, software licenses and vendors across the group and work towards a low-cost operating model through the shared service center construct and leverage the capabilities of our BPO arm, which is Call 2 Connect.
In terms of synergy Bucket 3, direct cost synergies, drive better efficiencies owing to higher economies of scale and deepen as well as expand our exclusive MNO connect. These initiatives will definitely accelerate our journey towards $1 billion revenue with 15% EBITDA margin target by 2027.
Just to further reinstate, these deals will pave the way for Route Mobile to be a global CPaaS player in true sense with an unparalleled reach and a very comprehensive product stack of its own products, coupled with licensed products from the group.
By virtue of this deal, we should be able to demonstrate "cost leadership at scale with industry-leading growth rates." As I said, this is only an interim update and will be fine-tuned further as and when these are further crystallized into the final operating model, we shall update you on the same.
Highlighting some of the key business metrics for the quarter and the half yearly numbers gone by. In volume terms, we processed over 31 billion transactions in Q2 FY '24, which is again the highest quarterly volume -- billable volumes processed by us till date, billable transactions increased from INR 26.9 billion in Q2 FY '23 and INR 29.5 billion in Q1 FY '24 to INR 31.3 billion in Q2 FY '24.
Average realization per billable transaction marginally decreased from [ INR 0.328 ] in Q1 FY '24 to [ INR 0.324 ] in Q2 FY '24, owing to increase in domestic volumes in India. In terms of geography, India continues to be our largest market by termination, accounting for 47% of our revenue by termination.
You may refer to Slide 20 of the presentation. Domestic volumes in India witnessed a double-digit growth despite the NLD price increase. We continue to witness very strong momentum on our next-generation products. New product revenues grew by 64% on a Y-o-Y basis and 53% on a Q-o-Q basis in Q2 FY '24.
In terms of operating overhead in Q2 FY '24, employee benefit expenses decreased primarily due to rollback of performance-based stock options and cancellation of ESOP owing to resignation by few employees.
The increase in other expenses was primarily due to foreign currency translation loss of INR 91 million, an increase in travel and business promotion expenses. both totaling to an increase of INR 30 million. The business promotion expenses was largely related to our flagship Route amplify event, which was held in Mumbai.
In terms of EBITDA, EBITDA grew by 16% Y-o-Y from INR 1,094 million in Q2 FY '23 to INR 1,268 million in Q2 FY '24. There was a sequential growth of 2.5%.
From a balance sheet standpoint, average receivable rate stood at 73 days and average payable base stood at 64 days. Normalized cash flow conversion in H1 FY '24 was very strong at 77%. You may refer to Slide 16 for the same.
With this, we open the floor for Q&A.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Ronak Chheda from Awriga Capital.
Congratulations on the results, first of all. I have 2 questions. First question is on the e-commerce giants business, right? We've done a multi-geography deal. So can you just explain on this further? And how much of this business would broadly split into India and the other emerging geographies? How should one think of the deal itself? That's the first question.
Gautam, let me just answer this question.
Yes, yes, sure. Rajdip.
So Ronak, I think India is going to be at least about 50% of the revenue and remaing 50% will come from international. We have signed a contract with this e-com giant for 10 countries and including U.K. and some of the Asian countries as well as well. And I think the connectivity and the binding is already done and the testing is also done and we already started getting traffic for India. So we believe by next quarter, maybe by this quarter, we can see more traffic. But in terms of split, I think 50% revenue will be India and remaining 50% will be international.
Understood. That was helpful. My second question is on -- you actually touched upon in the opening remarks on the synergies, which would flow from the merger process and some business coming from TeleSign. I mean how soon can we start looking at that in the results itself. Will we wait for the deal to complete? And then this will flow? Or we should start seeing it from this quarter itself?
Gautam?
Yes. So see, I think we can, at this point in time, working on wire frames. But even before the deal, TeleSign was a partner with Route Mobile, and we used to help them for some part of their termination into emerging markets. That continues as is. In fact, the throughput on that has increased to some extent. But I think the lion's share of synergies will start to flow post closing.
Okay. Understood. And just last bookkeeping question on your working capital. I see the receivable days have gone up. Should we read too much into it? Or this is just a quarterly phenomenon?
Yes. I mean, you shouldn't read too much into it. In fact, a few days post the closure of the quarter. I mean, we received a one-off one of the payments from a large OTT player. So I mean, we also have to account for, I think, July, August, and even September to an extent. I mean, these are typical holiday seasons, I think in most of these places. So I think that you couldn't read too much into it. I think from a free cash -- for our operating cash generation standpoint, I think probably done fairly well.
Understood. These are my questions. best of luck for your future quarters.
Next question is from the line of Nikhil Choudhary from Nuvama.
First question is regarding Vodafone Idea. I hope you understand that given the contract of prefiling by both the country ones are also contacting you. We just want to understand how basically you accounted for USD 100 million in unipotential? And any rough time line in terms of when you will be able to materialize it, that's my first question. I have a follow-up.
So Nkkhil. Hi. I think, as I said already, the deployment of our firewall is already in process. And based on the current time line, which we have given to Vodafone Idea, we are looking out to go live by in December. So that's the current time line we have.
And what was your other question?
How we quantify $100 million? And time line for [indiscernible] recognition.
So it's very simple math, right? If you see the number of subscribers, what Vodafone Idea has about $200 million and you multiply it by particular SMS. And then you say $0.05 per as SMS cost. I think that is the kind of math we have done at our end while giving this number to the market. and you believe that the number may be more than $100 million, but we are a little bit conservative in giving that $100 million number.
So is this
Entire revenue because of our exclusivity will flow through Route Mobile. So this revenue I mean whosoever gets the pie of it will happen necessarily to minute through Route Mobile. So we get the 100% pie of this revenue to Route Mobile.
So is it fair to
Again Rajdip for Gautham, that [indiscernible] million will start flowing from quarter 4 of '24 and next 12 months, we can see a top line to [indiscernible]
So we can consider quarter 4?
Yes, you're right.
Second question is in terms of ILD revenue. This quarter, while NLD has done quite well, which you have highlighted, ILD, we have seen a decline. I think it's maybe due to volume decline. Can you please help us understand what led to that?
So I think as I said, seasonality, right? We always need to understand that H1 is 45% of our revenue and H2 is almost 55%. Now Diwali and all the other festive season is going to start in the month of this quarter, especially. So we will see the growth. And I think there's nothing, the dip is basically based on the seasonality and nothing to worry about. And we have seen the growth in this particular in fact, October month, and we see the growth going to come in November and December as well on ILD business.
Sure. Sir, just last question from my side. You have highlighted in your cash flow statement about INR 297 crores basically deposited for firewall deal. Other than the filing by your competitor INR 57 crores, is that you basically just on the fiber deal? And you have highlighted a recently deposit 3 to 6 months of payments to telecom operator. I just want to understand how big is the maybe the other contract? Or what kind of ROI we are looking at? If my calculation is right maybe
So can you please repeat your query, I didn't understand what was the query. So we have given this INR 297 crores to 2 operators. And for 1 operator, a partial payment was made last quarter as the final payment will be done once we are close to going live.
So Gautam what I want to understand is the quantum of Vodafone firewall deal based on disclosure by the competitor who lost the contract was about INR 57 crores for annual, right? So I just want to understand, and given it was 1 of the biggest firewall, what basically led to deposit of INR 300 crores, which is much more.
Okay. Okay. No, let me just correct you. I got your question. So there is 2 stream of revenue, okay. First is the firewall revenue, which is firewall deferred by 365 Square to Rote Moblie company, and there's a revenue share between 365 Square and Vodafone okay? That is a separate [indiscernible] then when all the traffic, which flows through Route Mobile platform to Vodafone Idea, that's additional revenue we generate. So I think if you're talking about 1 firewall revenue, which is separate, I think that number comes to the number which you are talking about.
Then there's additional revenue potential and margin with Route Moble generates traffic directly with working with OTT players. So you have to consider it in that way. And that is the potential we have seen in this overall deal, and we believe that our platform is going to play a very critical role to mitigate -- to at least mitigate the risk for the grey routes which was still there on their network. And we identified certain gray routes which has been used. And with our firewall, we believe that we will mitigate those risks [indiscernible] . And we will definitely deliver the commitment which we are already made to Vodafone Idea.
Sure, Very helpful. Good luck for coming [indiscernible],
Nikhil, I mean the deal I mean from when it was with the erstwhile partner and move to us. I think the price has also moved quite a bit. So the deal value per se, I think, would have more than doubled, right? So it is not an apples-to-apples comparison from that perspective. So I think we also have to kind of take that into our account.
Understood.
Next question is from the line of Sarvesh Gupta from Maximal Capital.
Sir, just on the realization piece, so I think we were expecting some increase in the realization, but because of the mix, it has come down a bit but net of come mix impact, is there what has been the realization increase for this quarter, like-to-like?
Yes. If we adjust for the sharp decrease in our domestic India volumes, the average realization would have marginally gone up.
Okay. Okay. And we understand the seasonality, but I think the Y-o-Y growth has come down a bit in this quarter. So any particular color that you can provide?
No. So the base has also kind of increased quite a bit and Y-o-Y, I mean, we demonstrated, you're talking about it from an H1 standpoint or quarterly standpoint?
Q2 Y-o-Y versus Q1 Y-o-Y, I was alluding to
sequential?
Stronger, No, not Q2 over Q1. I was saying Q2 versus last year, Q2 and Q1 versus last year Q1. So this Q2 versus lats year Q2 growth rate has sort of come down a bit compared to what we saw in Q1?
No. So last year, I think there were a few acquisitions also that kind of baked-in. And now everything has been kind of consolidated with a larger base, I think we're talking about for this year, growing at a 20% to 25% on a Y-o-Y basis. And within that, I think basis, some of these deal wins we're talking about hitting the top end of that band.
Understood. And finally, sir, you mentioned about some revenue [indiscernible] employees, et cetera. So it is like some bar codes [indiscernible]? Or these are some of the efforts towards the rationalization
No, no, no. It's not towards rationalization, so what has happened here and I think we have called it out multiple times in previous calls also, a lot of the cost, I think that was there in terms of the employee benefit expense was attributable to the ESOP cost, were wearing a lot of that cost was [indiscernible] , front [indiscernible] rather and in the past, I think when we had issued this or granted this ESOP 2021 scheme a lot of these ESOPs were rolled out to employees and there were performance criteria.
So wherever, I mean, employees have not been able to perform, those ESOPS have kind of been relinquished. On top of that, there are some cases where emplyees have resigned and since some of those ESOPs have been kind of rolled back. So it's completely [indiscernible] performance and owing to the resignation of new employees.
Understood, sir. Is there a way to quantify the deal with the large e-commerce company? Sort of a number are we looking at?
So we are is, we are in very early stages of our live traffic. Probably we can quantify this in more detail by next quarter or by this quarter end and once we have a next quarter earnings call.
Next question is from the line of Dipesh Mehta from Emkay Global.
A couple of questions. First of all, I just want to understand, I think you partly alluded about the guidance kind of thing. Now even for lower end, I think you indicated about last time, at least 20 percentage and in the earlier prepared remarks, you say 20 to 25 percentage and high chances of reaching upper end. S o which is roughly, let's say, 25% which record very significant acceleration in H2. Even to reach 20% you require 15%, 16% growth over H1
Another way to put 9% to 10% [indiscernible] to hit lower end. So can you help us understand, I understand about seasonality in December quarter, but it is materially higher, even including Vodafone.
Dipesh I think you also consider the e-commerce client,- which is -- which has gone live now and that effect is going to be in this quarter and next quarter. Plus the Vodafone deal. We are also working on certain more firewall deal, which we will announce very soon. But keeping all this in mind, I think we are very much sure that we will achieve our guidance which we have given to the market.
So more like 25% as you're confident?
Yes.
Yes, it will be closer to the 25% than 20.
Understood. Sir, second question is about the security deposit. I think we mentioned 2 MNO for the roughly around INR 300 crores kind of number. Whether any payment is related to Vodafone also covered here?
Yes, the part of it.
Okay. And in H2, you expect any material number or this number will taper up materially in H2?
No, H2 also I think there will be some bit of that will come through. plus 1 other deal that I think Rajdip talked about that happens.
Okay. In that case, your reported OCF might be still very muted,right way to understand it?
No, no, that's correct. But I think from a -- I think we've always been kind of very particular that some of these are capital kind of a CapEx kind of investments, where we are investing this for 2 years, 2 years payback, where the ROCE tends to be upwards of 25%. So I think once we are done with this additional -- this new deal as well, I think our plates will be completely full. And for the next 2 years, I think you'll be able to see meaningful year improvement, I mean, in OCF, not only a normalized OCF, but even the reported OCF.
Understood. So 25 will be much better [indiscernible] from reported OCF also.
That's correct.
And last question from my side is about new product, I think, very strong growth. So I just want to understand what explains and how you expect that trend to continue?
So Dipesh, I think we are investing heavily, and I think our focus is always on new product, along with messaging. And the kind of pipeline we have as of now, and we believe that growth is going to be significant in coming quarters.
Is it single product driving it in terms of what it.
No, no. No, it's a mix of product, which we have as a omnichannel stack, which we have. So it's a mix of all products.
Next question is from the line of Amit Chandra from HDFC Securities.
So my first question is on volume growth. So obviously, we have seen both NLD and ILD price hikes, and we have seen some volume drops because of the increase in price. So how do we see the volumes from here on in terms of the? Like the NLD volumes can also come down. because there has been a price hike and not on the volumes are down in this quarter. So you have an aberration? Or is it kind of going to something that they are finding some other alternatives?
So Amit, Rajdip here, our volume on NLD has grown. It has not gone down.
Yes, double-digit growth.
Yes.
Okay. And -- but overall at industry level, I'm just talking about =.
I cannot comment on industry level based on the customer base -- we have based on the customer we onboarded in the last few quarters. we see significant growth in those customers and due to which our volume has increased in spite of price increase at NLD level.
Okay. And in terms of the fiber deals that we are taking up. Obviously, these deals are based on upfront commitments in terms of volumes to these operators. So what confidence level we have? Or what kind of growth we are assuming in terms of the existing volumes that we are having on committing these higher numbers because you're saying that [indiscernible]
So around INR 300 crores for INR 800 crores kind of annual revenue and if I'm not wrong, this number was much lower in the earlier version okay?
I think you need to also. Come back what's your question. The earlier version was the price was half the current price, okay? It was about $0.02 or $0.03. Now price is $0.05. Okay. So you need to consider that.
Apart from you how confident we are, our firewall is deployed in 16 countries, okay? We are doing this job in multiple countries, and we have the insight, and we have so much confident about our product that deploying this product in with VI will definitely generate more revenue for VI and for Route Mobile.
And based on the insight we have got from our platform for various other countries, I think that is the confidence it gives us to make sure that we can achieve our numbers. So it is all about our product, we always believe that is 1 of the best in the market as of now.
And just adding to what Rajdip said, it is -- I mean, because of the robustness of the product, I mean we have been servicing Idea of sometime there. I mean, I think for the longest period of time on the firewall, I mean we were the first ones to kind of get this product to kind of initiative and approved by an operator in India, right?
So it was only after the merger that is switched to another partner. But in a year's time, we realize the uses of our platform and switch it back to us. So it's not just merely on the commitment. I think commitment was not factor, I mean to kind of get strong in our favor. It was the robustness of the platform, the capabilities that we have and [indiscernible] we have with the global audience that helps us have this kind of revenues for an operator.
So another thing, Amit, just to give more clarity out there we work almost with all the OTT players globally now okay, including we name it everyone. And India in the market, we always -- I think we have a firewall deployed with BSNL. Based on the data points which we have received from BSNL firewall, and we are 100% confident that what kind of volume or Vodafone Idea should have on their network and based on that calculation, what we have got from BSNL, we give this kind of commitment. And we are very much sure that we will achieve that. So as the India market understanding, we have a very clear understanding with our current firewall with BSNL right now.
Okay. And these like these commitments is like for every year? So every year, we will have to put up this kind of money?
not exactly. It's just 1 security deposit we have to pay and based on a month-on-month basis, we have committed the current volume, which we are sure that we will achieve that.
Amit, just to kind of revalidate that INR 297 crores is not for Vodafone, it is [indiscernible] mobile network operators, just to kind of lay the math correct on that.
Next question is from the line of Swapnil Potdukhei from JM Financial Limited.
So I have a couple of questions. First one is on your deal with TeleSign. And last quarter, I remember you had mentioned that you -- there were some monthly revenues that you were trying to -- that you were supposed to get from TeleSign and over a period of time that revenue was supposed to increase. So just want to understand like what's the update on that? Where were we at the end of last quarter and the current quarter? And how long will it take for the entire potential revenues from TeleSign to flow through Route Mobile [indiscernible]
Sure. So one, I think even prior to the deal, I think TeleSign and Route Mobile were partners you are working together. But as I said, [indiscernible] mean we've been working closely on various integration framework. So the throughput has increased. Definitely, it has increased, and we've been adding more value on to TeleSign I mean because of our strong entrenchment into the emerging markets.
So that continues as is, and we're still working as partners but the day we are to close this deal. I think we believe we'll be able to get significantly more traffic coming from TeleSign to Route Mobile. I think that is -- because today, I mean, because of certain competition sensitivity and certain legal battles, we are not able to kind of completely be as transparent as what we can be subsequent to the deal. And once the deal closes, I definitely, I think we believe there will be a significant increase in the throughput.
Any numbers you can share?
I mean, it's too early for us to say. As I said, I mean, we've done some interim work on this. Let us let us come to the final leg of that wire frame. At that point in time, we'll definitely come and give you more crystalizing of how things will pan out.
Okay. The other way to look at this is like I was looking at your Tier 1 CapEx revenue share. Now that has been declining quite a bit. So I just wanted to understand, is this the impact of ValueFirst acquisition by 1 of the competition?
Partially, yes.
Okay. And as and when TeleSign revenues ramp up, we will see some increase in the revenue share from this particular metric?
Possibly yes, yes.
Okay. right. And just on the balance sheet side. So I see that your borrowings seemed to have increased. I mean, if I were to add up the long-term and short-term borrowings that are up to around INR 150 crores, now we do have a decent amount of cash as well.
My question is as to what is the reason that we are seeing this increase in our borrowing number on a Q-on-Q basis?
So some part of that softer is also some bit of it discretionary management where we kind of -- since you have to pay that in dollars, we don't convert nearly by an amount, we keep that as deposit kind of create kind of treasury structure. So some of these borrowings that we have is again backed by fixed deposits or to security. I mean, partly, I mean, the flattest that's given. So it's also some bit of the treasury management.
Okay. And just last bit on working capital. I know someone asked in the beginning also this question, but an increase of DSOs from roughly around 60-odd days to 73 is decently a high number and so if you can give some explanation
Yes. So there was 1 particular large OTT payment, I mean, which we received just after the quarter has closed -- had closed. So that led to that bit of a blip.
So from a normal basis, what should be the number that we should be expecting? p
It should be around that 60, 65 days.
The next question is from the line of [indiscernible] from BM SPL Capital
So I basically have 2 questions. The first one is could you just give me a sense on Route Mobile's presence in the fraud prevention space, how big is this fraud prevention space to do Route Mobile right now? And how do you see Route Mobile's presence growing in this space and the offerings in the space that Route Mobile has. That's the first question.
And the second question is I don't quite understand this deal. I'm sure you've got this question before because they were Proximus was trying to list TeleSign which is public knowledge, and that's back sale and now they've done this deal through Route where the promoters are infusing money into Proximus into TeleSign. So I'm just trying to understand, could you give us -- I don't know if you'll be able to answer this, but could you give us some sort of indication as to a few years down the line, do you see TeleSign and route operating on the 1 entity?
Too early to comment. So honestly. Gautam will you add something to this?
Yes. I think the immediate focus right now is to kind of get the deal consumated. Once the deal is consummated some of these strategic thought process, which I think will be discussed at this point in time, as Rajdip said, I mean, none of these things are kind of there under wrap.
No. But why was the deal structure this way then?
Because cross-border mergers are not possible in India, and hence, the deal had to be subsiding this way. But if you look at I think
I think Gautam, I have already explained so many times about the whole deal rationale as I think you can refer to multiple increase of mine and media also. I think I have explained very clearly why I choose Route Mobile and why I wanted to -- sorry, TeleSign and why I want to [indiscernible] back to TeleSign.
So probably if you want to know more about, you can just give a separate call to us, and I am happy to answer all your questions.
Okay. That's fine. Could you answer the second part, which is about sort the fraud prevention segment and Route Mobile's presence there?
So in the partnership with TeleSign. TeleSign is 1 of the leader in digital fraud and digital identity product. We were the most evolved stack as compared to anybody in this current as ecosystem. We believe that partnering -- bringing their entire stack to all the emerging countries where we have our presence. Right now, our stack is not evolved as what TeleSign is, and we are definitely going to work with TeleSign to use their stack in all the emerging countries where we operate for and potential wise, I think digital identity has a huge potential in next 2 to 3 years down the line, you will see that impact on our revenues as well.
Currently, it's -- you would say it's meaningless. The Route Mobile [indiscernible] to the segment. Is that the right assessment?
Just to understand, there are multiple APIs needs to be opened by operators. Okay. For since we have APIs, operator, we are dependent on all -- and in India, only Vodafone and JIO has opened their API for [indiscernible] Airtel is still thinking about it. The market still is not ready in India. But in other markets, if you go to Europe or U.S., it is already available, and that's why TeleSign has a decent amount of revenue coming from VI business. Now we have made inroads to JIO and Vodafone Idea, and we got the API access where we are going to use TeleSign's chat to sell this product in Indian market or in the Indian country market -- emerging markets. Understood.
Understood. Great. And I'll get back to you guys on this because I read everything about the deal, but I still had questions as to because.
We are happy to answer your question.
And because it is at least to me, I can call me also to understand more than why I have invested. I'm happy to answer it.
Next question is from the line of [indiscernible] from RW Investment Advisers.
We's will move to our next question from the line of Harsh Chaurasia from Vallum Capital.
Congratulations, sir, on a good set of numbers. there was a doubt like recently, there was an event from What's Up India. There was a lot of progression on the business messaging part. So I just want to know how Route Mobile what the business offerings are unique from the business [indiscernible] of part of What's Up India? And how are we still relevant in this market? like when you at times, we are being so on the
I think if you attended that event we were also part of that event, and we also have been invited by WhatsApp to be part of that event. And just to share about our relevance in this market that recent deployment with Delhi Metro were the first company to have this ticketing system built for Delhi Metro, which has the conversational chat along with the conversation of commerce integrated within the same app and including our own bot, which is a robot.
So I think we, as a company, have built our stack, which is now capable enough of handling payment along with the conversation chat as well, along with the bot. So we are very much bullish and we have seen the growth in our revenue in last quarter, and we have seen the same growth in this quarter also coming from WhatsApp for what's the business messaging as well.
Next question is from the line of [indiscernible] Retail Investor.
Yes. numbers. I just wanted to follow up on the question which was just asked around WhatsApp. As you see, even Amazon today sends WhatsApp instead of SMS. So just wanted to understand how -- what kind of impact will it have on your margins as well as if and when globally, the OTTs also shift to WhatsApp business messaging instead of SMS? And what kind of efforts are we putting in to grow this side of business as well?
So Parth, our new product growth is 64% last quarter, right? And as far as Route Mobile is concerned, we are a platform company. Any customer coming to Route Mobile platform, they have an option to select the channel they want to communicate with either it's WhatsApp, RCS, e-mail, voice or SMS, right? So end of the day, we as a platform company going to provide them all the bouquet of services that the customers select. We spend enough money to build the stack in-house and now as a 1 single company, which has every single channel of communication available in 1 platform, probably we are the only in India who has the entire stack within 1 platform.
Got it, sir. And the last 1 -- my second question which is fairly simple. So in terms of the EBITDA margin for the firewall deals with VI or even with other smaller MNOs. So what kind of EBITDA margin can we expect on the VI side with a larger deal and also on with the smaller MNOs?
So let the deal start, right? Too early to come in. And all our firewall deals are always over 25% -- 20% to 25% range. And so some of them are on 30% to 40% also.
Next question is from the line of Suresh Kumar, an individual investor.
Thanks for the opportunity. quick question on the overall guidance, medium-term guidance. I've seen various interviews from a and we spoke about $1 billion revenue for 2 to 3 years. And in some interviews, we're talking about a combined evening of $2 billion between TeleSign. So just wanted to get an update from you on what is the guidance that we can expect over the medium term 2 to 3 years?
Very much whatever guidance I have given during all my interviews, some stick with that guidance. We as an individual company level, we are definitely looking out to hit about $1 billion revenue in 2 to 3 years down the line. So there's no change in terms of those guidance.
Awesome. That's great means. And one last, again, on the industry-specific question. I mean we're doing great a great momentum across [indiscernible] deals. what are the biggest risks for you as a company as well as an industry? Are there any risks that you foresee? And how will we be prepared for it?
So I don't see the risk, honestly, because as a platform company, we have to innovate every single quarter and a month and as far as our product [indiscernible] we are ready with almost all the changes required -- market required in the coming years down the line. And if the particular channel is getting shipped from, say, to WhatsApp to RCS probably we have all the channels. So our job is the risk is only if we do stop innovating, then there's a risk. We as a company, we are keen in innovation. And I think we will keep on doing this on other channels also. For me, I think right now, I don't see any immediate risk on overall business question good luck for all of you.
Next question is from the line of Ronak Chheda from wriga Capital.
Again. Rajdip, just one strategic question for you. When we listen to the commentary of your global CPaaS competition - most of these players have been calling out slowdown in the messaging side of the business or the communication marketing side of the business. Post merger, when you control the entire CPaaS business of the group and the targets which we have.
Just wanted to get your thoughts on how are we thinking to direct the business because developed market seems to be maturing? Just your thoughts just on a strategic.
Ronak it is a very good question. But if you see the most of the developed market tech giants based out of U.S. their market is going to be the emerging markets, whether it's a Facebook or Google, right? The potential growth for all these large tech gaints are in emerging markets, and we are a company already champion of this market. We want to make sure that we empower TeleSign to go and win more accounts or more destination with the relationship with those tech gaints in that market. And we, as a company, will support them for delivery and termination in this market.
So that is a synergy we see and that is where we believe that both the company has their own strength in different markets. So one is champion of a developed market and another one is a champion of emerging markets, combined both the company can create a great value. for -- as one group.
Understood. So you don't see that as a challenge because
We are where the entire business is going to be focused for the next 3 to 5 years, from globally -- global CPaaS business point of view. That is what you see. Yes.
Next question is from the line of Sangam Kanada and Individual Investor.
Am I audible?
Yes, you are. Please go ahead.
Firstly, congratulations on the higher revenue. opportunity. My first question is how do the Proximus deal affect the upcoming revenues or earnings in positive or negative way? And the second question is, will the shares be delisted after the Proximus deal and build the key managerial personnel, we changed [indiscernible] the deal?
There is no plan for delisting Route Mobile and as I said, my responsibility for the overall group is going to more, and I'm going to lead the entire CPaaS business of both the companies.
Next question is from the line of Nikhil Choudhary from Nuvama.
Just one question on gross margin. gross margin has declined on O-on-Q basis and what basically [indiscernible] a big increase in new product revenue is a 53% Q-on-Q and were going to have much higher gross margin. So if you can you tell us what happened there?
Gautam you will answer this?
Sorry, sorry, Nikhil, can you please repeat it once again?
Yes. So our gross margin decreased by 30 basis points on a Q-on-Q basis and that happened despite of new product revenue increasing by 53% Q-on-Q, which has much more higher gross margin.
That's just a very small amount compared to the INR 1,000 crore revenue, right?
[indiscernible] concern of various, I mean, country mix, product mix, and I think the delta is so miniscule at I think the new products, their contribution is so small that it doesn't move the needle very much.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to Mr. Rajdip Gupta for the closing comments.
Thank you, -- thank you, everyone, and have a nice ending -- thanks a lot.
Thank you. On behalf of Route Mobile Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.