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Vaibhav Global Ltd
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Ladies and gentlemen, good day, and welcome to Vaibhav Global Limited's Q3 and 9 Months FY '23 Earnings Conference Call. [Operator Instructions].
I now hand the conference over to Ms. Richa Shah from Adfactors PR. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us on Vaibhav Global's earnings conference call for the quarter ended 31st December 2022. Today we have with us Mr. Sunil Agrawal, Managing Director; Mr. Nitin Panwad, Group CFO; and Mr. Prashant Saraswat, Head of Investor Relations.
We will begin the call with opening remarks by Mr. Sunil Agrawal on the business operations, key initiatives and a broad outlook, followed by a discussion on the financial performance by Mr. Nitin Panwad. After which, the management will open the forum for Q&A session.
Before we get started, we would like to point out that some statements made or discussed on today's call may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties we face. A detailed statement and explanation of these risks is included in the earnings presentation, which has been shared with you all earlier. The company does not undertake to update these forward-looking statements publicly.
I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.
Thank you, Richa. I welcome you all to Vaibhav Global's Q3 FY '23 earnings call. I hope that you have reviewed our results and the accompanying presentation that provides details on the business operations and the current market conditions. I will now take you through the performance for this quarter. Sales for the quarter were INR 724 crores, down by 3.6% from INR 750 crores in the third quarter of last year. However, the top line is increasing over pre-COVID period of Q3 FY '20 with a strong growth of 28.5%. This performance is with the backdrop of current moderating consumer demand amidst inflationary environments.
In our U.K. market, many of the major delivery partners are facing strikes, which had an industry-wide impact on deliveries. Further, during the quarter, we faced this cyberattack, which resulted in temporary disruptions to our U.S. and U.K. businesses. The company has demonstrated resilience in current economic environment as our revenue growth would have been flattish year-over-year if we meet the impact of cyberattack and delivery disruptions. Our gross margin continues to remain strong at 60.6%. Our vertically integrated business model allows product differentiation with lower ASP and helps us maintain market-leading gross margins.
EBITDA for the quarter has been at 10.5% in Q3 versus 8.1% for Q2 and 11.4% in Q3 of last year. Our sustained efforts on cost optimization helped a sequentially improved EBITDA margin, which bottomed out in Q4 FY '22. During the quarter, our Germany business continued its growth momentum and is now clocking approximately EUR 1.5 million revenue every month. Other business metrics are also trending positive. Today, we are dispatching more than 3,500 pieces a day. In terms of customer engagement, our CSAT score in Germany is 96%. We are under discussion with other affiliates to gain more households in Germany.
At Shop TJC U.K., the free channel upgrade continues to give positive outlook -- outcomes in terms of new TV customer acquisitions. New TV customer acquisition rate which was negative prior to upgrade continues to be positive with year-over-year growth every month. Customer acquisition growth was, however, overshadowed due to historical inflationary levels and weak consumer sentiments. Our D2C brand, Rachel Galley is performing very well with 200% Y-o-Y revenue growth on a low base. In U.S., even though retention is inching downwards, consumer sentiments remain muted. We are taking positive measures to mitigate the impact of these headwinds on our business, including expanding product portfolio of under $10 and $20 products, content improvement, expand our TV footprint, digital and OTT promotions, et cetera.
We believe that these headwinds are transient and we are well placed to leverage the true potential of U.S. and U.K. markets. Our vertically integrated supply chain networks in 30 countries is the backbone of our business and a key differentiator. It is helping us with increased product availability. The low-cost manufacturing with value sourcing enables to serve value-conscious customers in our addressable markets in U.S., U.K. and Germany, thus achieving industry-leading gross margins. We reach TV homes through cable, satellite, telco networks and over-the-air antenna also called the OTA broadcast. Our products are also available on digital channels, including proprietary website, smartphone apps, OTT platforms and marketplaces.
Further, our 4Rs framework, widening reach, new customer registration, customer retention and repeat purchases remains to be our key levers for growth. The reach of our TV networks by the end of Q3 FY '23 was approximately 129 million TV homes, which is 2% higher Y-o-Y. We've been expanding our customer base by leveraging diverse product portfolio and omnichannel presence. Our unique customer base is at 0.5 million. New registrations on TTM basis at 3.2 lakhs. New customer acquisition on TTM basis stands at 2.4 lakhs, which is lower by 1% Y-o-Y, but significantly higher by 79% over pre-COVID period of Q3 FY '20.
On a sustainability aspect, we are glad to announce that recently, we successfully conducted and passed the SMETA 4-Pillar audit for 2 of our units. SMETA audit signifies highest standard of labor, health and safety at our manufacturing facilities and recognizing our efforts towards sustainability. Another important aspect of sustainability efforts is our mid-day meal program, your purchase [ speaks ]. Recently, we crossed a milestone of 73 million meals with a run rate of approximately 54,000 meals donated every single school day. We are also closely monitoring the economic landscape and are adapting our strategies as necessary to take advantage of any opportunity that may arise.
Overall, while we are aware of the current macro headwinds, we remain optimistic about the future and are confident in our ability to navigate these challenges and achieve our goals. Considering current macro indicators, we expect to achieve flattish to 2% top line growth in Q4 and end the fiscal year with negative 3% to negative 2% top line growth. For FY '24, we expect to deliver revenue growth of 8% to 10% range with strong operating leverage over current year. However, our midterm outlook remains intact, and we expect to deliver mid-teens revenue growth in subsequent periods with decent operating leverage. Further, the Board of Directors of company have declared an interim dividend of INR 1.5 per share for the quarter. We look forward to maintaining a balance between growth, investment and quarterly payouts to generate sustainable value for our stakeholders.
With this, I now hand over the call to Nitin to discuss financial performance. Over to you, Nitin.
Thank you, Sunil, and good evening, everyone. A warm welcome to Vaibhav Global's earning conference call. While Sunil gave some details on overall performance and business status in the just concluded quarter, I will now take you through our financial performance for the quarter and 9 months ended 31 December 2022 in detail. Broader economic challenges are there since last few quarters continued to impact our growth scenario. Quarterly revenue of INR 724 crores were on the backdrop of muted consumer sentiments resulting in revenue decline of 3.6% year-over-year. While the quarter 3 financial year '23 top line reflects temporary impact on current macro environment.
However, growth of 28.5% over pre-COVID period of quarter 3 FY '20 is encouraging. In local currency terms, Shop LC USA had a decline of 11.3% in sales, which was majorly driven by mute consumer sentiment and cyberattack in last quarter. However, the decline -- declining retention rates in U.S., we hope that it might trigger the consumer sentiments positively and may create a new opportunity in U.S. economy continues to evolve. In Shop TJC U.K., growth in new customer -- new TV customer acquisition on Freenet TV platform continued during the quarter, reassuring our investment in upgrading our channel solutions. However, weak consumer sentiment in U.K. over-weighted the growth prospectus and [ have seen ] Q3 revenue has shown a decline of 10.9% year-over-year.
Performance in U.K. were also partly affected by cyberattack and disruption in delivery market during the quarter. As Sunil had mentioned already that had this attack and delivery disruption did not happen, our revenue would have been flattish year-over-year in Q3. Shop LC Germany is scaling up well with revenue and customer numbers increasing every month at operating level, we are confident to breakeven in this territory by H2 FY '24. Our TV revenue was INR 441 crores and digital revenue was INR 269 crores. TV revenue declined by 5.5% year-over-year and digital revenues grew by 0.4% year-over-year.
Our focused investment in omni channel has been relatively better performance and digital segment for us. On comparing against pre-COVID period of Q3 FY '20, the growth is encouraging with TV growing by 18.7% and digital by 50.2%. While the current macro situation is volatile, long-term growth perspectives are promising in our addressable markets. Our sustained investment in growing omni channels have resulted in 59% of new customers being acquired digitally. Omni channel distribution promotes cross-selling potential, encourage customers to transact on both TV and digital platforms, which gives them a unique shopping experience. Omni channel customers also have a significantly higher lifetime value than customers who buy only on TV or only on digital.
Having a wider product basket across platforms is a great opportunity to increase wallet share of the consumers. Our Budget Pay feature provides consumers with the convenience of buying on EMI. During the quarter, the product sold via Budget Pay contributes 38% of our total retail revenues. This feature has added a level of affordability, especially during the current inflationary environment, which also helps in further improving customer engagement. Our non-jewelry segment comprising fashion accessories, lifestyle products, beauty products and apparels. Today, it contributes 28% of total retail revenues. Over the past few years, share of non-jewelry has increased multiple indicating our ability to take higher wallet share out of the same customers.
Closing to a growth of being vertically integrated, we were able to maintain gross margin of 60.6%. EBITDA margin for the quarter was 10.5%, which has shown sequential improvement for the past few quarters. Our cost initiatives better pricing and narrowing losses in Germany helped achieving our double-digit EBITDA margin during this period. Profit after tax for the quarter was INR 39 crores against INR 69 crores as of last year. Our balance sheet continues to remain healthy with robust cash flow generation, operating cash flow and free cash flow of INR 121 crores and INR 96 crores, respectively, reflects year-over-year improvement over operational efficiency and CapEx reverting to normal levels.
ROE and ROCE of 9.5% and 14.5%, respectively continue to suggest effect of lower profitability. We foresee current revenue pressure as transient. Being late to recent macro headwinds and near-term challenges in operating environment, we are also committed towards creating sustainable value for stakeholders, and I'm pleased to announce that the Board has approved third interim dividend for the year of INR 1.5 per equity share. Considering current macro indicators, we expect that the top line will be flattish to 2% in quarter 4 and end this fiscal year with a negative 3% to negative 2% top line growth. For financial year '24, we expect to deliver revenue growth of 8% to 10% range with strong operating leverage over current year.
We remain committed and are confident to deliver strong returns for our stakeholders in the mid- to long term and expect to deliver mid-teen revenue growth in subsequent periods with decent operating leverage. While our financial performance may not have been as strong as we had hoped, we are taking steps to improve and remain confident in our long-term success. We have a wider product portfolio with omni channel presence and believe that continued focus on our core competencies will drive growth in coming years.
Thank you. Back to you, moderator.
[Operator Instructions]. We have a first question from the line of [ Abhilash Kiran ], an investor.
Can you explain in detail on the sourcing front for our various products that you already have in Q3 lifestyle products, how do we decide on in-house manufacturing versus outstation? Can you elaborate on that on detail?
So, we decide on what product line are we good in manufacturing and what product line is best to outsource from outside. So most importantly, the product idea starts with the product idea. So product development is done by our in-house units as well as samples are submitted to us from the outside. And that are then presented to our merchandisers and buyers. And then whatever the product segment, which would be successful at the front end at the retail units, is then brought back from respective units. So we respect the ingenuity and the creativity of outside vendors. If somebody has presented a new product and interesting product from outside that we believe would be good for us, we will buy it from them, not copy and manufacture it ourselves.
Having said that, we have more than 250 people within our product development team that constantly comes up with new ideas, new product. And so more and more manufacturing is going towards our own units. So predominantly, jewelry will be manufactured by us and apparel, the ladies fashion garments are manufactured by us.
On the designing part, so that entire designing is done for our products in-house.
Mostly, unless some third-party vendor would come up with unique design with their own design team and offer those products to us. In that case, we will negotiate the price with them and buy from them. But within jewelry and Fresh & Apparel is a very small amount that we buy from outside. We buy like home product or beauty product or accessory handbags that we buy from outside.
Sir, can you explain like why that these parts are not manufactured inside in-house? Is it due to -- for what reasons are these not manufactured in-house?
So a matter of scale. So we want to go into the manufacturing of a product line that has already matured or is at scale or we can scale very quickly. So in future, the product line is [ case ] within our business and would sustain our own manufacturing, we will definitely go there.
So that helps. Sir, how much time does it take to recover the customer acquisition cost to your respective lifetime value across various platforms?
So on TV, the store for acquiring and selling the same. So it's very difficult for us. It's impossible for us to differentiate what is acquisition costs and what the selling cost. So we don't look at it that way. How we look at television broadcasting is that within 18 months, the TV cost, the broadcasting cost should be 10% to 12% of our revenue. So we look at it in 18 months basis. On our digital customer acquisition, we try to acquire customers at 1/3 the lifetime value of that customer. And different channels have different lifetime value.
For example, Google, Facebook has about $70 to $100 lifetime value, whereas OTT, like Roku or a Fire TV or Apple TV, there is about $2,500 lifetime value. So we try to keep our customer acquisition costs at 1/3 the lifetime value of below 1/3 lifetime value.
This is for the various platforms like acquisition through Facebook and Google?
Yes. Facebook and Google lifetime value is between $70 to $100 and the lifetime value through connected TV or OTT, if you call, is about $2,500.
Understood. Sir, can you explain more on the delivery front across various regions? How do we manage the last mile delivery?
Yes. So at all 3 locations, we have contracts with the local shipping companies. For example, in U.S., we have contact with DHL and FedEx. So depending on the distance and the weight and the value of the item, our software offers the most optimal service and our operator automatically prints that respectively. In U.K., we have serviced through Royal Mail and Evri, and DPD and Amazon. So 4 providers. And within 4 providers, our automatic software prints the most at optimum label for us. In Germany, it is all DHL and DPD that distribute our products.
Understood. Sir, last question from my side. So you have mentioned that you generally don't sell products, which have a gross profit margins lower than 60%. So sir, have we ever considered or are there products which can generate higher traffic but might be -- might generate less gross profit than 60%. Are we open to that? Or are we going to stick to these gross profit margin above 60%?
Yes. So we have designed our business on Zara if you know Inditex. So Zara model is all in-house brands and minimum makes [ 54, 55 ] margin at around INR 25 billion revenue. So our model is that we would source product or even third-party brands to be sourced, but only that will afford our gross margin of 60%. If it is lesser than that, we just don't entertainment that brand. So that, in fact, would exclude, say, Apple or Samsung or Dell products for us. And we are happy to stay in the space where our brands would, over the years become more ubiquitous and known and would have developed equity value within the brands.
[Operator Instructions]. We have next question from the line of Sachin Kasera with Svan Investments.
Sir, I wanted to first [indiscernible] question. So the higher EBIT improvement in terms also because of the higher other income. So what exactly is there some operating part of this higher other income? Or is this just a one-off in that?
So, other income includes the foreign exchange gain, which is around $800,000. So it's around INR 8 crore in terms of rupees. Apart from that, the other income is mainly will be received through interest or the cash back from credit card companies.
Sure. Secondly, you did mention that you have reached the pre-COVID December quarter, your revenues are much higher. But even when you compare the margin level, it's significantly lower. Is it mainly to do with the investments that you have made in Germany? Or is it also to do with the fact that the high investments we made in sales and marketing in the existing markets. And hence, it's an impact and as most of this now the margin should be significantly better.
So yes, as we mentioned, the majorly, it is related to the investment we have done in Germany. And also that we have started investing in our digital to grow our digital sales and also investment in our broadcasting. So both compared to financial year '20, so both areas we have invested so both impacting our EBITDA margin. But majorly, it is related to Germany.
Sure. And lastly, considering the current subdued sentiments internationally, what gives us the confidence of being able to deliver 8% to 10% sort of revenue growth next year?
I'll take that. Sachin, we have -- our Germany is scaling up and our [ LatAm ] that we had acquired in U.S. last year, which had additional investments and the digital investments we made and as well as the D2C brand that we launched Rachel Galley and TAMSY. So we are seeing them tracking better and we'll run the multiple simulations. And based on those simulations, we feel confident to give 8% to 10% growth in next financial year.
We have next question from the line of Pritesh Chheda with Lucky Investment Managers.
Sir, I was trying to interpret what we have put on Slide 31, where we are seeing a conscious investment for future potential and scale via accelerated investment in broadcasting and digital. When I understand your businesses, it's post gross margin, it's a fixed cost business in terms of largely the broadcasting expense that we incur. So when I look at your P&L, these numbers are flat Y-o-Y at about INR 730 crores. So the question is, have we added any cable, the TV numbers or some time back, we were like fully there in terms of U.S. and U.K. in terms of a cable TV connection. So just if you could highlight a little bit more on what you want to mean by this?
So, Pritesh, in U.S., the cable broadcasting, we still have about 15 million homes that we are not in currently. So those 15 million are cable and OTA homes. So we still -- after we have made this investment into additional cable homes, for example, Comcast, Cox and many national OTAs, we are still not fully distributed. And as we get the opportunity, we take them because we don't get those cable homes every day. We constantly follow up and sometimes they are fully distributed, they don't have any opening. Whenever the opening comes, we will take them. So that is in the U.S.
In Germany, we still have about 15 million homes that we are not in currently. After entering the country, we are majority distributed, but still there's a lot of potential over there. So this is mainly about broadcasting. And the next part of the digital was also digital marketing on our digital properties as well as our OTT as well as Amazon. So all 3 places, we have made investments in last quarter to get our footprint larger and acquire customers.
Some quarters back, let's say, some years back, we were saying that in U.S., whatever, wherever we want to beam in, we have beamed in and whatever residual is, is either expensive or it's not our target market. So it's not that it's an opportunistic entry and hence, we have taken it. That's how we should perceive it? Or...
So just for example, the Comcast is about 20 million homes that we were very small implementation in that. And a few years ago, they were asking quite high amount. But recently, we bought a reasonable broadcast opportunity and we took it. And we'll continue to look at those opportunities whenever they can come out there. So that 18 million to 20 million homes was an opportunity. Of that, we are already in about 10 million. There are still 8 million opportunity within Comcast. Cox is another 1.5 million and an OTA, the full power OTA, there's other 10 million homes opportunity for us.
So these are long deals or these are -- so these are multiyear deals that you have signed or these are deals windows for like a couple of years, 3 years?
So these deals are we sign for a year, but we have bid on these deals for within 90 days’ notice period, we can exit.
Okay. So you might not get a similar pricing maybe next year. Okay.
For pricing, even at any price, these may not be available because they are fully distributed from their cycle.
Okay, understood. Then on the Slide 15, you are mentioning about these households where you're not there. So we just want to recap. So in U.S. out of 75 million now in how many households we are there?
So, this was mentioned, we are about 8 million to 10 million homes, still short from fully distribution.
So from -- so you are in 65 out of 75?
I don't have exact number with me, how many we are out of this but OTA, the 17 million includes full power and low power. Now full power point of view, we are still 10 million homes, which have still potential for us to get in on full power. Now the revenue difference between full power and low power is about 5 to 7x. So when we'll get that opportunity, we'll take them in future as well.
And in U.K., if you could give a similar in 27 million, how much more left to reach?
Yes. So in U.K., we are fully distributed now all 27 million homes. But there are still opportunity for example, ITV is the #2, #3 broadcaster here in terms of audience. So if we get an opportunity to get a few hours on ITV broadcast, we will take it. So we already are on OTA -- full power OTA that is free view in U.K. But to get into the [ Nesti ] broadcast channel to get part time on that, we'll still take it. So there's, again, very opportunistic. Sometimes those wear times are very rare to combine. If it come, that only increases our reach to the audience that would not normally come to shopping genre. So shopping genre in certain area, they may not come.
Okay. Understood. And Germany, you said you have 15 more to go, so you are in 12 out of 27?
So Germany and Austria put together is, I think, 43 million. Prashant, if you can give an exact number.
Right. As of now, we are in Germany or we have started beaming in Austria also?
We started in Austria from day 1 last year also. So they are pretty combined markets, and they all -- they ship out to Austria already. So combined market, we still have 15 million opportunity there.
So if you want to share our outlook on the carriage cost next year, inclusive of the OTA channel, cable, will there be a rise and there is -- you're going to add something or we saw a step up this year and next year, we need not see the rise?
Again, Pritesh, this is very opportunistic. We don't know when we will get. So I cannot give a guidance on that. But what we are giving guidance is a strong leverage next year because this year's profitability was quite subdued. And how we are seeing -- we already bottomed out from a margin point of view. As you saw in current quarter, we're already double digit. So year-over-year, our margins will continue to expand.
[Operator Instructions]. We have next question from the line of Sumesh Guleria with WealthCulture.
Sir, my question is regarding to EBITDA margin. So right now, we have reached [ 10.5% ] EBITDA margin gain. And you have mentioned that it's kind of bottomed out. So financial year '24, what kind of number we can expect from the company?
So we don't give guidance on EBITDA for the next year. But what we can say the confidence that you would have a strong leverage over current year. And year-over-year, you will see growth in every quarter.
We have next question from the line of Nilesh Shah from Envision Capital.
Sunil, just wanted your color in terms of -- you've mentioned about introducing products in the $10, $20 categories. What kind of products these would be? Would these be in our traditional jewelry or our lifestyle segment? Or are we looking at some other kind of products, number one. And number two is, what impact will this have on our margins? I mean would this be margin dilutive? Or are general fundamentals of 60% gross margins would be applicable for this category. So if you can just kind of share your thoughts on this, please?
Sure, Nilesh. So I'll answer your second question. For us, 50% margin is a bottom line. So we would not bring any product category or any product segment, which should go against this business principle. So to answer your second question, no, our margin will stay above 60%. The first part of the question is $10, $20. We already have a time dedicated to $10 and $20. What I meant to say in my remarks is that we are in view of the current economic sentiments, we are accelerating that space a little bit more. And with that, the customer acquisition is higher, customer engagement is better and the return rate is low.
We have next question from the line of [ Rohan Mehta] an investor.
I had a couple of questions. If you could just shed some more light on the cyberattack that had happened and the impact from our operations.
Sure. So around 12th of November, we had a cyberattack on U.S. and U.K. servers. So for about 2 days, our business was disrupted almost completely. And after that, we started -- actually online business came back up within 24 hours and our TV business came after 2 days. And our shipment was blocked for about 1 week, both U.S. and U.K., we could not ship products that customer has ordered. But overall, if we had not had this impact and also postal disruption in the U.K., we would have been flat year-over-year this quarter.
So sir, are we going to be making any investments in cybersecurity going forward?
Yes. So we already have good cybersecurity, but such an attack, we came back up within 2 days. And normally in such attack, people have about 2 weeks for them to take. So we were able to -- we had all the backups on cloud. And whatever our on-prem server apps were, we were able to move it on cloud and started from there. Now all our apps are on cloud, and we have beefed up our security through [ SEFA and Sorforce ]. And we are fairly confident of repairing any such attack in the future. Now you can never guarantee them, but we feel fairly confident that we have now good position, good situation.
Right, right. Fair enough, sir. So you spoke about the German market. So is growth in line with our expectation of forecasts? Or has there been any impact in terms of the general global economic scenario and the inflation that we hear about?
Yes. So if it was not for inflation or current subdued environment, we would have been profitable earlier. But we are still feeling fairly comfortable to become a breakeven in H2 of next financial year. For the full year, we won't be profitable, but we will be breakeven in -- breaking even in H2 of next financial year.
Understood, sir. Understood. One last question, sir. In terms of the countries where we source our products, is there any specific region or country wherein we are able to make better margins if you source from those countries or...
So I would go a different way. So we go to the country and the product where we can make our 60% margin or up. Otherwise, we don't even touch any other places that we can't do those margins. So we -- as I mentioned earlier in my remarks, we buy products from 30 countries and then merchants scour them from whatever will be the right product from all over the place. And then we put in the best possible product for the limited airtime we have on TV or limited space that we have online within our criteria of how much forward inventory we can keep, how many SKU we want to keep and how many inventory turns we would have.
We have next question from the line of [ Aniket Rekar ] an investor.
Sir, I have a few questions. So sir, as we know that COVID situation, which has been there in China, how does this impacting in terms of sourcing?
Yes. So since we source from 30 countries and our majority of sourcing is from India. And we are pretty agile. So we do not have any issues in getting our product or our requirement fulfilled.
So sir, do we plan to expand this business model in India as well?
Perhaps down the road, Aniket, but not at this time because long distance shopping in India is still not profitable and still is in discovery phase. So our -- once we are -- once Germany is successful and profitable and scaling well, we may look at Japan next before coming to India.
And sir, one last question. How many new products do we target to add every year?
So on an average, we launch about 100 new products every day.
100 new products every day?
Yes. So, it can -- it will be less, a little more, but that is about the velocity that we have.
We have next question from the line of Sachin Kasera with Svan Investments.
Just one follow-up question on Germany. You mentioned about breakeven next year. So one, are we referring to the EBITDA or the net [ Q1 ]? And secondly, currently, I believe we had $1.5 million revenue monthly run rate. At any point of time or at what type of revenue run rate will the German operations become at the par with the company average?
So the current run rate was EUR 1.4 million, about $1.5 million, and the profitability comes at EUR 2.5 million. That is a current state. But now for next year, we may get more airtime or we may have additional expenses. So we believe that it will need to be around EUR 3 million for breakeven at that level of expense. So this is what we're expecting in H2 of next year, we're expecting about EUR 3 million per month net revenue.
But that EUR 3 million you're expecting a net breakeven, sir?
Yes. So we don't have any taxation because we had accumulated losses, only depreciation and the base of gross block is not large. So it is on PBT level. So pretty much that is a net level.
And do you expect in financial year '25 or '26, Germany should come to the company level? What is your -- any broad sense on that?
Yes. So at financial year '24, '25 we will be profitable for the full year. But next year, H2, we will be breakeven. For the full financial year, we won't be breaking even. But even after considering the losses in Germany, we will have strong leverage year-over-year next year.
Sir, my question was that in which financial year will be operations of Germany, the EBITDA margins be at par with the company average level that we are having? So next year, we'll break even. But when do we reach the company level of margins? Is it '25, '26, which year you think?
So we created the model, but that model is not to shrink of me and that I would not even give the guidance such far out. So that's a good question, Sachin. We can't give guidance on that. Okay. The other question is related to Japan. You said that some potential in Japan. So is it that once at least Germany reaches almost closer to the company averages, then we look at a new venture because as we mentioned, that new venture has some sort of investment impacting margins. So internally, what is the type of numbers we are looking? Are we looking at least Germany reaching the company level before we take up any other larger like Japan?
Yes. So we look at Japan approximately 3 years' time from now.
[Operator Instructions]. We have next question from the line of [ Abhilash Kiran ] an investor.
Sir, can you explain why the full power OTA 10x more expensive than the low power OTA? And you had also mentioned that they're productive around 6 to 8x the normal cable. So can you explain that in detail?
So the full power OTA are affiliated with the CDS, ABC, NBC or FOX. So they have a lot of audience available to them because they are linked to the national programmers. And therefore, they have a large distribution, they're large companies as well. And the customers who would want position on their platforms. They are on low power, they have no national affiliations and they are very small players. So no large customers are looking to distribute on them. So full power OTA has more leverage into getting the better prices themselves, but still at our spend to sales ratio, they are very profitable for us.
So sir, out of the 75 million households in the U.S., can you give the breakup on full power OTA, low power and normal cables, what will they generate to the cost?
Yes, let me look at it. Nitin, do you have the data of how many -- 70 million OTA homes, how many are full power and how many are low power? How many homes, we have 70 million homes in OTA, of that how many are full power and how many are low power?
Right. So out of total 22 million homes in U.S., so low power is 17 million and high power is [ 2 ] million.
Nitin, how many high power units are still left to be penetrated? Like what will be the number of households -- total households in the overall 75 million U.S. households?
So, 22 million -- Abhilash, so total 22 million OTA homes, where all of those homes have full power as well as low power. So there are -- for example, when you look at the channel like Antenna, where no cable is needed. So you get about 30, 40 channels plus. So of the 30, 40 channel, the top 5 have our full power. And the rest of them are low power.
And sir, can you give the same numbers for U.K. and Germany.
Yes, in U.K., how many are free views?
20 -- 25 million.
Of the 25 million, how many are free views?
17 million. Rest are in total, 17 and 11 million is just potentially on 6 million, 7 million is overlapping with other satellite or cable providers.
And sir, in this non-jewelry segment, you had mentioned that non-jewelry segment has higher customer acquisition costs. So why is that sir?
Higher customer acquisition number, not the cost. More from non-jewelry than jewelry.
Okay, they acquire more from non-jewelry. Okay.
We have next question from the line of [ Heena Parekh] an investor.
Actually, I just had a few questions. I wanted to know the split between jewelry and non-jewelry products in terms of revenue?
So split between jewelry and non-jewelry in what?
In terms of revenue.
Let me take this question. So as I said in the remarks, so currently, it is 28% revenue comes from non-jewelry products and remaining, they were jewelry products.
And what is the EBITDA margin for jewelry and lifestyle products?
Heena, we don't monitor separately. We have interval, but we don't monitor separately that EBITDA margin for jewelry and non-jewelry. We consider as overall performance of the product based on their productivity, how the productivity is coming to reach [ item code ].
And so I mean, any estimate for the EBITDA for the next 3 to 5 years collectively?
Heena, as Sunil also mentioned that we don't give the guidance on EBITDA. But definitely that in the coming years, we will see operating leverage as revenue grows in coming years.
We have next question from the line of Aditya Mehta from G. K. Capital.
So apologies if my question might sound bit repetitive. As for next year, we are giving a guidance of 8% to 10% growth. So any just broad range of guidance, where we'll be at an EBITDA level, just a broad range?
So we'll have strong leverage over current year, Aditya. We don't give guidance on EBITDA level. But having been at 15% kind of EBITDA in the past, our aim is to get to that number as soon as possible. But during the next year, I don't think it will be 15% next year, but we will get there pretty soon.
So next year, most probably we will be in the double-digit range? Is it possible?
So we don't give guidance specifically, Aditya. But we'll have -- definitely we will do in current year and strong delivery in current year.
And sir, secondly, on the market share gains. So how are our peers performing in the respective markets?
Yes. So we've gained market share consistently over last 10, 12 years that you've been on here, and we are seeing the same in current financial year as well. So some -- we recently tried to look at it. Some of our competitors have not published their numbers yet. But whoever has published even the September numbers, we have seen for the 9 months rolling, we will gain market share against all of them. No, I can't say all of them. One company called aSource, so they have shown a flat year-over-year growth, but they had also acquired some companies locally in the U.K. last year. So we couldn't really split out their acquisition versus their own like-for-like. But otherwise, when you look at other competitors, we gain market share at least then.
Okay. So currently, we might be around 2% to 3% market share?
Yes, between that.
As there are no further questions from the participants, I'd now like to hand the conference back over to Mr. Sunil Agrawal for closing comments. Over to you, sir.
Thank you, Vikram. So I want to thank all the participants for your time and great questions. And I also thank you for your support to VGL during last past years. If you have any further questions, please feel free to reach Prashant Saraswat at VGL or Amit Sharma at Adfactors PR India, and we'll be happy to answer your questions. Thank you once again.
Thank you very much, sir. Ladies and gentlemen, on behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.