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Earnings Call Analysis
Q1-2025 Analysis
Tanla Platforms Ltd
Tanla Platforms delivered a commendable 10% year-on-year revenue growth for Q1 FY '25. Despite a seasonal decline sequentially, the company managed to hold its ground in a competitive market. Adjusting for the impact of exiting a significant deal with Vodafone Ideas Limited (VIL), which resulted in a cumulative loss of approximately INR 120 crores in revenue, the organic growth would actually reflect an impressive 13%. This illustrates Tanla's resilience and ability to pivot despite market disruptions.
Notably, the company's shift towards rich media has started to pay off. Revenue from over-the-top (OTT) channels has experienced a remarkable 177% growth year-on-year, boosting its contribution to revenues from 18% to 20%. This robust growth in OTT is attributed to the successful onboarding of new clients in FY '24, who contributed around INR 60 crores in Q1 revenues. Such strategic focus on emerging channels is a positive indicator of Tanla's adaptability to market trends.
Tanla remains committed to innovation with the launch of its Messaging as a Platform (MaaP) service for Google RCS (Rich Communication Services), which went live in July. This is expected to kickstart a new revenue stream in Q2 and scale up quickly, with management anticipating significant revenue contributions by the end of the financial year. Their partnership to tackle scam issues on a global tech messaging platform indicates proactive engagement with large enterprises, thus adding to their brand credibility.
Tanla has attained notable recognition, being designated as a visionary in the CPaaS Magic Quadrant by Gartner for two consecutive years. This achievement highlights its increasing market strength, especially amid shifting dynamics in international messaging and the consolidation among CPaaS players. The company's strategy focuses on retaining large customers, with 12 out of 20 continuing to generate substantial revenues.
Looking ahead, Tanla maintains optimism regarding Q2 and Q3, which are typically stronger quarters for domestic messaging. They anticipate recovering volumes in enterprise growth, which was subdued but expected to rebound in line with seasonality. Moreover, the firm has an impressive cash reserve of approximately INR 800 crores, with plans for its use to be determined in the near future, potentially facilitating strategic acquisitions or buybacks.
The management acknowledged the challenges faced in the international SMS landscape, primarily due to market migration to OTT platforms like WhatsApp, which has eroded traditional messaging volumes. Yet, the executives expressed confidence that Tanla's business is stabilizing after significant contraction, suggesting that the worst effects from previous lows are behind them, paving the way for improved performance.
Exiting the VIL deal was portrayed as a calculated decision, allowing Tanla to focus on its core strengths rather than enter agreements with minimum guarantees, thus safeguarding its margins. Overall, this earnings call demonstrated a firm commitment by Tanla Platforms to innovation, strategic pivots, and customer satisfaction, underlining a proactive mindset in navigating the evolving digital landscape. Investors could view these developments favorably as indicators of both resilience and forward momentum.
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Ladies and gentlemen, good day, and welcome to Tanla Platforms Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Ritu Mehta. Thank you, and over to you now.
[ Good evening, everyone ], and welcome to our Q1 earnings call. Joining with us today are Uday Reddy, Founder, Chairman and CEO; Deepak Goyal, Executive Director and Chief Business Officer; and Aravind Viswanathan, CFO. Uday will share his perspectives on business imperatives and strategic progress made. After opening remarks, we'll be happy to engage with participants and address their questions.
Before I hand it over to Uday, let me draw your attention to the fact that today's discussion may speak to statements that are forward-looking in nature. All statements other than statements of historical facts could be deemed forward-looking in nature. Such statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. A detailed disclosure in this regard is made available in the presentation, and it is uploaded on the website. Audio recording and transcript will be available on the website soon. I now hand it over to Uday.
Thank you, Ritu. In addition to Aravind and Deepak, Abhishek, who is our new CFO, is already on the call. He has joined a couple of days ago. A very warm welcome, Abhishek.
Thank you.
Yes. So good evening, everyone. I'm sure you had a chance to go through our results in detail, but let me capture some of the important points. We delivered 10% year-on-year revenue growth and was flattish on a sequential basis on a seasonally weak quarter. We've improved our gross margin percentage on both Y-o-Y and sequential basis, right. The numbers don't reveal the full picture.
Over the last 4 quarters, we have seen a material shift in the market. We had flattish organic growth on Y-o-Y basis. We saw several disruption in international messaging business on the back of the consolidated -- consolidation between the CPaaS players globally as well as shifting of use cases to OTT channels.
We have exited ILD -- VIL ILD deal in this background. This would have had a cumulative impact of around INR 120 crores of revenues and around INR 30 crores of gross margins. But how did we react to this disruption? By focusing on things we can control, building great platforms, winning new customers and delighting existing customers with the new offerings and creating a winning culture, delivering the great service to our customers.
What did this translate to? We completely mitigated the above impacts with incremental growth on our focus strategic areas. If you normalize for ILD impact, we have grown around 13% organically as a company. Growth was led by our pivot to rich media, which is OTT contribution to revenues moved from 18% to 20%, an incredible growth of 177% year-on-year. This is also reflected in our customer metrics.
The new -- the clients we added in FY '24 contributed to around INR 60 crores of our revenues in Q1. Our customers greater than INR 1 crores was 329, and we have retained and grown our large customers. 12 of our top 20 customers after last Q1 continues to be in top 20 in that Q1, and the remaining customers are in the top 30. Our focus on customers and the new channels have helped us overcome the negative impact of market shifts and the worst of the base effect is behind us.
In parallel, we have not lost our focus on innovation. Our MaaP platform for Google RCS has gone live in July and expect the revenue stream to start in Q2. I expect RCS to scale up quickly and be meaningful by end of this financial year, and we are the best placed to capture this market. On Wisely ATP, we have signed a commercial agreement with a global tech giant to address the menace of the scam on their leading IP messaging platform. It's a great validation for Wisely ATP capability to tackle scams. Due to these confidentiality causes, we cannot disclose anything more than -- more on this engagement at this point of time.
In closing, I will say that Tanla is in market-leading position. We have recognized -- recognition from the industry analysts like Gartner as a visionary in the CPaaS Magic Quadrant 2 years in a row. We are moving up the ranks every year, and things are very encouraging. As a team, we are happy, we are hungry and humble. Our work is more than just technology. It is about empowering users. When your aspiration is inspiring, people wanted to be part of this journey. We have employees joining us from the most leading brands in the world of technology and consulting. We will continue on this mission in Q2, and I would like to thank all of you for the trust. We are going to keep working hard for you.
Thank you, Ritu. Now I'm going to hand over to...
Yes. We can -- here we can start the Q&A.
[Operator Instructions] The first question is from the line of Amit Chandra from HDFC Securities.
My first question is on the WhatsApp revenue. Can you hear me?
Sir, sorry to interrupt but there's a slight echo from the management line.
We can hear you clearly, Amit. Go on.
Okay. So sir, my first question is on the WhatsApp revenue, which is driving the enterprise growth. But if I see the WhatsApp growth quarter-on-quarter, it has been the lowest in the last 4, 5 quarters. So is it fair to assume that the WhatsApp has rescaled and from here, we can see some -- around, a bit moderation in growth? Or is it fair to assume that the momentum will continue?
And secondly, the enterprise growth ex of OTT has been soft for the last 3 quarters. And as you mentioned, it was due to a drop in volumes and also from the ILT volumes. So what's the update there? When we can see the volume growth recovering there? In terms of seasonality, quarter 2, quarter 3 is strong in terms of seasonality. So are we on track to have a good quarter 2 and quarter 3 in terms of the enterprise? So these are the first 2 questions.
Amit, are you done with your question?
Yes.
So Amit, let me take this. This is Aravind here, right? Hope you can hear me clearly.
There was disturbance in the line, yes. Now I can hear you clearly. Yes.
Sure. So Amit, WhatsApp, last year, when we probably started this, right, was at sub-INR 50 crores-a-quarter business, right? Today, we are close to INR 150 crores-a-quarter business. So obviously, we have scaled up substantially, right? And growth continues to be close to double digit sequentially, right? But it's probably not 50% sequential or 30% sequential that we have seen.
So there is obviously a base effect at play. But the good part is the incremental revenue, in absolutes, are not coming down, right? That's important because before a growth of 50% on 8% of the business vis à vis something on 20% of the business, right? Even a smaller growth, it contributes more to the overall company growth. So in that sense, I would say we are still very, very bullish on OTT growth, not just WhatsApp, like Uday mentioned in his opening remarks on RCS, on Truecaller. So that is something that we continue to be very bullish on, right? And I think that market is growing, and we are quite confident as far as that is concerned.
To your second question on the non-OTT, which is basically on the SMS side, you are absolutely right, right? Q1 is always a little seasonally weak. Q4 also is a little seasonally weak. Q2, Q3 are typically stronger, particularly from a domestic side. So I do think domestic will pick up in Q2, Q3, in line with historical trends, right? [ ING ], I think probably is close to bottoming out, right, because we've seen a lot of erosion there. So that's how we see the market as far as Q2, Q3 is concerned.
Okay. And on the Wisely ATP deal on WhatsApp, obviously, you're not disclosing the size, but is it fair to assume that this is similar to what we did with Google and maybe 2 to 3 years down the line, we can assume similar scale?
So first point is, I want to just clarify, Amit, that we have not announced which OTT it is. So I will not be in a position to comment on that. And at this stage, there are -- we really can't share anything more than what Uday mentioned in his opening remarks, right? When the time is right, obviously, we will share it. But right now, we are constrained to share anything more than what was shared, what is there in the public domain already.
Okay. And in terms of the margins, obviously, we have recovered margins in this. So how do you see the margins? Is it the drop in the platform revenue going to have some impact in revenues or maybe newer revenue streams that are getting added that are having lower revenues? Or we see these margins to be steady in the [ next few quarters ]?
So in a way, if you look at it, Amit, and I think that's an important kind of takeaway, right? Here, we have had an impact in the platform business because of one of the deals that we exited. And despite that, we have kind of held margins, right, because that's the kind of growth the platform business has done outside of that. So if you look at it, the business has kind of grown 30% plus if I normalize for this impact. And that's how we've been able to kind of hold it.
Now there is no impact going forward from a negative standpoint, right? So as some of our newer platforms scale up, that will definitely help shifting the mix towards platform. And that's how we see it, right? I don't think we will see a big shift directionally in a quarter or so. But if you look at as RCS scales up, as MaaP scales up, you will have more growth in platforms and the shift of mix will definitely help in the medium term.
Next question is from the line of Anil Sarin from [ K16 ] Advisors.
These have been tough times where international SMS revenue has been going down. I just wanted some very basic questions to be answered. When you say digital platform revenue, what exactly does it mean? Enterprise, I can understand. But digital platform, if you can just put it in layman terms, what it means? That's my first question.
So let me kind of explain that to you, Anil. Digital platform revenue is where we have deployed a platform where we get either a revenue share or a subscription fee where there is no cost of services, right, as part of it. So this business typically operates like a typical SaaS model, where, deployed the platform, you either get a license fee or you get a subscription fee or you get a revenue share fee. And there is no cost of services there. So this platform goes on a stand-alone basis and runs at very high gross margins, it is predictable, it has all of the SaaS elements. So something like a [ TrueBlock ], something like Wisely ATP, all of these will form under the digital platform business.
Okay. That's useful. Another -- just a bookkeeping question. What was the Vodafone revenue overall? And in the first quarter, what was the drawdown due to Vodafone not being there? So what was the revenue last year same quarter of Vodafone, which is not there in this quarter?
About INR 22 crores. Both revenue and gross margin more or less are similar there, right, about INR 1 crore difference. But Q1 of last year was around INR 22 crores of revenue, which is 0 in Q1 of this year. And almost that entire piece has flown into gross margin also, Anil. So it was INR 21 crores of gross margin, which has become 0 in Q1 of this year.
Okay. That's very useful. Also, in the OTT business, what is your market share now? OTT is a very broad word, but let's say, WhatsApp, last time you had mentioned that you are #2 in WhatsApp or was it #1? So basically, just talk about your market share? And who are the main players in WhatsApp and Enterprise business in India?
So it's kind of difficult to give a market share per se, right? But I would say we would probably be at an aggregate level. It's a guesstimate. Across all OTTs, at this stage, we will probably be around 25% of the market, right? But we're kind of gaining a lot of share, right? I think this number would have been closer to 20% last year, right, or even lower. So that's really what has happened as far as the OTT side of the world is concerned.
Okay. One thing, like, now that you're adding, that makes sense. A couple of questions on that. How does RCS compare technically on this both these aspects? What are the use cases that RCS has which will help create, take share in the OTT market?
So I would say that historically, right, if you look at -- I think RCS, where we feel will play a big role, will be to starting with on the promotional side of it, right? So if you look at it, RCS -- I don't know if you have seen an RCS message, Anil, it's rich media message, right? So it has a huge improvement in click-throughs on promotional that we've seen from a use case standpoint, right? It also has conversational, but I would say probably WhatsApp, at this stage, is superior on conversational. But on typical promotional messaging, I think RCS is very, very good.
There's a lot of use cases that we have built on RCS, right, including workflows, rich media in terms of delivering messages with PDF and attachments where you see a differentiation. So I think it holds, to start with, somewhere between SMS and WhatsApp. And the full potential of that channel has to be explored, right? And I think it's a little bit of market development that we will end up doing, which will give us a head start in terms of capitalizing on the market.
So Anil, basically, -- Uday here. Basically, I'll tell you the difference between RCS and WhatsApp. WhatsApp has got its own application. So I, myself, confirm it. You use every day, I can use this for a dedicated application on your handset sitting, okay? So unless you have a WhatsApp application, you cannot communicate with your contacts, okay, right?
Whereas RCS normally sits in the -- your SMS inbox. It doesn't need any separate application, right? So whenever you receive RCS, it goes and sits in SMS inbox. So that's a basic difference. When it comes to functionality, it is absolutely probably absolutely the same. RCS is same as WhatsApp in most of the use cases.
Okay.
Am I clear, Anil?
Yes, that is helpful, Uday. If you can just -- so this would be in terms of pricing, it will be cheaper than WhatsApp and more expensive than SMS? Or how -- I mean, what would be the value proposition to the ultimate customer why he should choose RCS over WhatsApp or over SMS?
It's a good question, Anil. So WhatsApp is owned by the Meta, as you know. But whereas RCS is -- in terms of technology, it is owned by the Google, but it is driven by the mobile carriers. So mobile carriers are the one who are going to decide the price. So as you rightly said, that SMS is in between -- sorry, RCS is in between SMS and WhatsApp in terms of pricing.
Okay. Okay. Great. One last thing. You said Wisely ATP, you have sold in the international market. So what is the outlook in terms of your distribution and branding initiative such that we hear more good news about Wisely ATP in the international market? Domestically, you have already highlighted, Uday, that probably there is more effort that needs to be done by the government. So better to try to push on the international side. So if you can talk -- without getting into specifics of the order, what is it like? What are you doing over there?
A couple of things, like, the platform, the global messaging platform that we just announced a couple of days ago is a global contract, okay? So the minute we find a scammer, the minute we find a scamp, all we have to do is -- the minute Wisely ATP finds a scammer and scam, we need to push these details to that platform and they bring down the -- not only the links, but also, they go ahead and close the account, okay? So that is -- so it's a global contract. That's number one.
Yes, like, we are trying to sell in India. Let's hope for best. But in international market, we have not really -- I mean, this solution, to the international -- and the telcos, unless, and they see the results -- good results in India, we don't want to really rush to the international market.
Okay. And on -- just last question on ATP. What is the outlook for the rest of the year domestically with the banks or with other users?
So Anil, we're not giving any guidance, right? So let's hope for best. We are putting all our efforts. So whenever there is an update, definitely, we will update the market.
All right. And once again, congratulations on your -- all the presentations and the shareholder letter and the Chairman's message. Those are things which really help in understanding the company. So please keep up the good work.
Next question is from the line of [ Deepak Jagani ] from [ Shade Capital ].
I have a couple of questions. You mentioned in your speech ValueFirst [ incremental ] acquisition is to close this month. And since it's been almost a year since the last update, is it possible to share some hard numbers this particular unit achieved last quarter in terms of top line and EBITDA so that we can get an idea as to how big it can be?
So Deepak, Uday here. We are on the final leg of -- we hope we will get the final note from RBI in the next couple of weeks. So once we get a note from final -- I mean, RBI, we should be able to close the VF for an international deal, right? So that's number one. Number two, we are looking at INR 200 crores on an annualized basis, right, in terms of revenues on an annualized basis.
Sorry, INR 200 crores on the revenue and what would be the EBITDA?
So the EBITDA would be in low single digits, Deepak.
Got it. Okay. My next question is probably on the...
Mr. Deepak, sir, can you please come in a better reception as your voice is breaking.
Is it any better?
No, sir. It's still breaking.
[indiscernible]
Your voice is breaking. Can I request you to rejoin please? Next question is from the line of Amit Agarwal from Leeway Investments.
My first question is regarding news that came into the newspapers that Delhi Metro business has gone to our competitors. Any reason that they have been able to get that business and we were not able to do that? Is it because of the technology or pricing? What is the company's thought on this news?
So Amit, can you please repeat the question? Sorry, we didn't get that. The line was...
There was a news article that Delhi Metro business has gone to our competitor. What is the reason that they were able to get the business? Is it because of technology? Or is it because of pricing?
Deepak, do you want to comment on that, Deepak? Yes, we can hear you, Deepak. No, I think Deepak also in a network. Can you just pass on the -- let me come back. Amit, we will answer your question. Do you have any other questions?
Yes. My other question is regarding the platform business. Sir, we were told that platform business is a very easy model. Vodafone business could be shifted to other supplier, not to us because I was told that platform business is a patent business and to shift that business should be very difficult for other person to handle the business. Any comment on that?
In fact, we are the one who has sort of exited the deal. We have not lost a deal just because of the technology, okay? Vodafone Idea Limited was asking for minimum guarantees. Our position is very clear. We are not in the business of giving the minimum guarantees. We play to our strength, which is our core strength is technology. So we have exited this deal. And I'm sure it was a very, very good decision for Tanla. So we were very happy with our decision.
And my other question is regarding MaaP model. And is it a platform business or an enterprise business model?
So Amit, you -- MaaP is a platform business.
And how much revenue are you expecting in first year or...
Yes, we don't want to give the guidance, definitely, but whenever we deploy a platform, it is expected to face meaningful revenues on a yearly basis. We just went live with Vodafone, and it is expected to show some -- I mean, some of the revenues will flow in Q2 onwards then.
Q2 onwards, and on the industrial platform and...
Yes. Sorry. How much have we invested in this platform? And do we have any patents? We should be able to share an update early next week on that, I mean, on the IP.
On the patent side. From an investment standpoint, typically, we -- our investment is more holistic, right? So we've not called out a number, but you have a view in terms of what we are investing in platform every quarter, yes.
Okay. So my only question is that regarding the Delhi Metro...
Sir Deepak, are you back?
Yes, sir. Deepak, can I request you to unmute your line and go ahead with your...
Yes, I'm back. Am I audible?
Yes.
Yes. So what I was saying that there are many cities which are coming with metro services, and we have won Chennai Metro. We are providing excellent solutions, technology and use cases. Must have missed out on this one, but it's not because of any technology or anything.
So any further business from any metro that we can be hopeful of in future?
Yes, yes. So we are -- actually, we have a few deals in our pipeline, and we will -- as soon as we close those, we will let you know. But let me just tell you, this metro business is not like -- is very -- in terms of revenue or anything, it's not going to be like a very high revenue business or something, right? So we have much bigger deals in our pipeline.
Deepak, sir, we lost your audio. Can you hear us?
No, no, no. [ Specifically ], what Deepak is trying to say is this Metro -- I mean, we have been dealing with Chennai Metro for quite some time. And we have launched most of the solutions on the metro -- metro, the deal. And so it's nothing new to us. We have not lost the deal because of the technology to our competitors who are mobilized. And we don't see a huge potential for this metro business. It's, like, probably -- is sub INR 10 lakhs per month or probably even less than that. It's less than INR 10 lakhs per month business, right? So we don't even spend too much time discussing about these issues in our management meetings.
Next follow-up question is from the line of Deepak from [ Wayne Capital ].
Am I audible now?
Yes.
Sir, 2 quick questions. INR 800 crores cash, what's the plan? Buyback or acquisition?
So Deepak, we have not really decided on anything. We had a Board meeting yesterday, as you know. We have not really discussed on that. Whenever there is an update, definitely -- I mean, we will definitely inform the [ investing business ].
This the last question, in terms of ATP conversation with Indian banks, how do you see that panning out?
Yes. So we are showcasing this ATP to a lot of the banks. And let's hope for best, Deepak. Let's hope for best.
Next question is from the line of [ Kawat ] from [ Yogya ] Capital Markets.
Am I audible?
Yes.
So I have a couple of questions. So first of all, do Telesign -- it's a company for terminating messages in India or any other region?
Are you talking about Telesign? Telesign is an international aggregator. They don't have direct connectivity to -- so it's an international aggregator, [ Kawat ].
Okay. So the next question would be with regard to pricing. So how is the pricing trend for NLD and ILD messaging in India?
What's the pricing for NLD and ILD. Deepak, do you want to take the question?
Yes. So can you repeat the question? What -- you said about the pricing for NLD and ILD?
Yes, yes. So let me take the question now Deepak, if it's okay with you. So effectively, what -- it's a very -- I mean, in the sense that sometimes what happens is Jio and Airtel, if I'm allowed to say, has got direct deals with tech companies, large tech companies. They have long-term deals, which they closed long back, okay? Whereas Vodafone, to our knowledge, have not closed any long-term deals with any tech giants, right? So that's number one.
Number two, sometimes aggregators do bring the traffic to India and where, depending on the volume, depending on the commitment, they do get the differential pricing from the different carriers, right, so it's very difficult to say, but it's not one single price across all the price points. It differs from one aggregator to another, yes. The same thing applies to even NLD.
Yes. Okay. Understood. And my other question is in terms of our non-OTT business, you said that we did see some erosion earlier. Can you please explain what was the erosion about? And how are we confident that we are near bottom?
So we basically talked about erosion of business on the international messaging largely because of 2 things, right, one is that there has been, like Uday mentioned, a lot of the big enterprises have signed tech deals with the telcos. The other aspect is you've seen a lot of migration of messaging into OTT channels like WhatsApp and WhatsApp basically, right? And therefore, that entire volume market has shrunk. So that's really the impact.
Why do we think it may have bottomed out? We've seen a lot of erosion already, right? And now what we're seeing, at least in the last 3, 4 months is things have been a little more stable. But we'll have to keep watching it. I mean we can't comment forever on these, but at least we believe it's closer to the bottom compared to where it was a year back for sure.
Understood. And my other question was regarding the competition. So how is the competition shaping up in the CPaaS industry domestically? I think Airtel is working with its own CPaaS link. How are we placing them? And would any other telco player do similar to like Airtel did?
No, I think competitive environment is largely same, right, whatever you are talking about is a development of 2022, right? I think things have moved on from there. I would say it's a normal environment which you can expect in any industry from a competitive standpoint. I don't see any big shift in competition per se.
Yes. And would -- like, do you would do similar, sir, like ASIC? Or is it something, like, we do better as any telecom player?
So see, for us, everybody who is competing is a competitor. So we don't really differentiate on that basis, right? So the environment has not changed from what it was.
Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Ms. Ritu Mehta for closing comments.
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Thank you, everyone. That was the last question for today. In case we could not take your questions due to time constraints, please feel free to reach out to the Investor Relations team. Good evening.
Thank you.
Thanks.
Thank you very much. On behalf of Tanla Platforms Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.