Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Platform business gross margin grew 35% after normalizing for the impact of exiting a deal with Vodafone.
- ATP (Advanced Threat Protection) contribution to total consolidated revenues increased significantly, from 4% in FY23 to 18% in Q4 FY24.
- Strong growth in OTT (Over-The-Top) revenue, with a plan to double WhatsApp revenues from INR 365-400 crores to INR 700 crores.
- Positive outlook on international messaging business, with expectations of growth following WhatsApp's price increase.
- Continued investment in technology and top talent, indicating a focus on future growth and innovation.
Negative Points
- Platform business growth rate slowed to 10% in Q4, down from previous higher rates.
- Impact of exiting the Vodafone deal still affecting financials, with some residual impact expected in Q1 FY25.
- Challenges in converting ATP leads due to long sales cycles and internal discussions within customer organizations.
- Uncertainty around regulatory clarity on liability for scams, affecting the adoption of ATP by banks.
- International SMS revenue faced headwinds, with a sequential de-growth starting from Q2 FY24.
Q & A Highlights
Q: My question is regarding the presentation showing that in Q4, the platform business grew at a rate of 10%, which is slower than previous quarters. Is this the new normal, and why has it slowed down?
A: (Aravind Viswanathan, CFO) The slowdown is due to exiting a deal with Vodafone on firewall services. If normalized, the gross margin of the platform business actually grew 35%. The momentum is intact, and we are bullish on future growth.
Q: Will we see a jump in growth in the next quarter or after two to three quarters?
A: (Aravind Viswanathan, CFO) We don't provide specific guidance, but we are bullish on the performance for the year.
Q: UPI transactions are growing fast, but our business isn't growing at the same rate. Why?
A: (Deepak Goyal, Executive Director and Chief Business Officer) Banks are not sending notifications for every transaction, especially for smaller amounts, which impacts our messaging business.
Q: Can you provide details about OTT revenue as a percentage of total revenue for Q4 and FY24?
A: (Aravind Viswanathan, CFO) For Q4, OTT contributed around 18% of total consolidated revenues, and for the full year, it was about 12.5%. This indicates significant growth in our OTT business.
Q: Regarding ATP, we expected more licensing deals this quarter. Can you provide an update?
A: (Aravind Viswanathan, CFO) The sales cycle for ATP is longer due to its unique nature. We have signed our first client and are seeing traction, but the pace is slower than expected.
Q: Have the international SMS headwinds bottomed out, or will there be more impact?
A: (Aravind Viswanathan, CFO) The impact has largely bottomed out. We had some residual impact in Q3 and Q4, but we don't expect significant further declines.
Q: How do you see the growth rate for OTT from here on, and what is our market share?
A: (Deepak Goyal, Executive Director and Chief Business Officer) The OTT market is growing rapidly, with brands adopting it for utility messages. We estimate Meta's WhatsApp revenues in India to be around INR1,600 crores last year, and we plan to double our revenues from INR365-400 crores to INR700 crores this year.
Q: Can you quantify the impact of exiting the Vodafone deal and the expected impact on Q1?
A: (Aravind Viswanathan, CFO) The impact will be around INR5 crores in Q1. We are seeing traction in our platforms and don't expect a repeat of Q4's sequential impact.
Q: Why are ATP conversions slower than expected? Are there regulatory hurdles?
A: (Aravind Viswanathan, CFO) The sales process is long due to the unique nature of ATP. There is also some regulatory uncertainty regarding liability for scams, which is causing delays.
Q: Can ATP be taken overseas based on real-world data?
A: (Aravind Viswanathan, CFO) We are looking for regulatory clarity in markets like Singapore and Australia. Once regulations are in place, we can deploy ATP internationally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
