Rategain Travel Technologies Ltd

NSE:RATEGAIN

Ladies and gentlemen, welcome to RateGain Travel Technologies Q3 and 9 Months FY '25 Earnings Conference Call. [Operator Instructions]

 

Please note that this conference is being recorded. 



I now hand the conference over to Mr. Bhanu Chopra, Chairman and Managing Director of RateGain. Thank you, and over to you, Mr. Chopra.

Thank you, and good afternoon, everyone, and thank you for joining the earnings call for RateGain Travel Technologies Limited for the third quarter of fiscal year 2025. It's always great to connect with all of you and share the key updates that we have from the quarter. 



Joining me today are Tanmaya Das, our CFO; Mr. Divik Anand, our Head of Investor Relations.

 

So we announced our Q3 FY 2025 results earlier today. And I'm hoping you've had a chance to review the financial results, the press release, and the investor presentation available on the stock exchanges and also on our company website.

 

So for this quarter, RateGain has delivered another steady performance marked by balanced growth, strong margins, and healthy operating metrics, all of which reaffirm the resilience of our SaaS-based business model.

 

Our strategic focus on long-term scalable growth has been key to navigating external challenges and maintaining the strong momentum. Our focus has also been on increasing our share of revenue from large enterprises to create more predictable growth over the long term.

 

As part of this effort, we are in now the advanced stages of discussions with marquee logos across verticals, demonstrating RateGain's ability to seamlessly scale its infrastructure and deliver value to customers.

 

Due to a significant increase in these deal sizes, we've experienced decision-making delays in some markets. This delay can be attributed to strategic restructuring and cautious spending, particularly in the U.S. and Europe markets over the last year, where political events, including the elections, led to cautious enterprise spend.

 

As we step into 2025, the outlook is more positive. Recent insights indicate a stabilizing economic outlook with a slight uptick in consumer confidence and business investment, signaling cautious optimism across global markets. This shift is expected to drive new opportunities, particularly in travel and hospitality. This presents an opportunity for RateGain to drive higher revenue through increased bookings and ad spend while delivering solutions for high-frequency travelers, helping our clients capture and retain this demand.

 

Now let me share some key highlights of our performance in this quarter. Our annual recurring revenue, ARR stands at INR 1,115 crores. This growth has been driven by sustained traction across business segments, continuing in deepening client relations and with a healthy pipeline of opportunities, including some large deals. We expect a pickup in momentum in the quarters ahead.

 

We've grown our revenues by over 16% for the first 9 months of the fiscal year '25 with steady growth across verticals and continued traction within both MarTech and DA. We continue to demonstrate efficiency with our LTV to CAC ratio of over 14.2x, one of the highest in the industry, and revenue per employee remains at a strong and sustainable level, emphasizing productivity improvement.

 

In terms of product strategy, we prioritized expanding our footprint in the mid-market segment as well as boosting investments aimed at enterprise accounts. To support this, we have undertaken several initiatives across our product portfolio, including the following. We are investing in AI to enable hoteliers to leverage agentic AI and no-code platforms, enhancing their direct booking capabilities.

 

I'm excited what our product and engineering teams are developing, and we'll soon be sharing more details with you. In Q3, we launched Demand Booster, our digital marketing solution designed to empower hoteliers to maximize direct bookings and improve return on ad spend. With accurate and timely insights, commercial teams across hotels can capitalize on high-demand periods, adjust bidding strategies, dynamically changing audiences to meet their revenue goals. As part of UNO, Demand Booster makes it easier for hotels to manage their paid advertising efforts to drive direct bookings seamlessly. 



In air, with feedback from over 40 airlines, we are making significant upgrades to our platform, combining AI capabilities to change the way revenue managers make decisions. Airline pricing has remained largely unchanged for the past 2 decades, and we are committed to changing that and making it easier to increase revenue. Our product and engineering teams are also leveraging the billions of data points we process to offer valuable insights by analyzing patterns and providing recommendations based on the data we process through distribution channels. This will enable hoteliers to make quicker, more informed decisions before their competition and impact revenue. 



Let's now take a closer look at the performance of each of our business segments. Our DaaS business contributed 32% of our total revenue this quarter, fortifying RateGain's expertise for fulfilling the requirements of marquee customers that continue to rely on RateGain for providing access to accurate pricing intelligence at scale, which is proven by the expansion of our existing relationships with some of the largest airlines in Asia Pacific as well as global OTAs.

 

Our distribution business accounted for 20% of our total revenue. This segment has grown at a slower pace compared to other segments, mainly due to volume pressures seen on certain demand channels. We continue to drive investments to engage more effectively with large and midsized clients, along with our focus to scale up the recently launched RevMax platform that we are calling UNO.

 

The UNO platform continues to see healthy traction with main focus on mid-market and small hotel chain. Demand Booster, our offering to improve return on ad spend has gained significant traction among some of the world's most awarded hotel properties, helping them optimize their direct booking efforts. 



Our MarTech business had an excellent quarter with businesses under pressure to deliver better returns on ad spend to increase the cost of ad delivery. Our Adara offerings delivered another strong quarter, surpassing the sales record set in the previous quarter.



Our measurement capabilities as well as access to diverse travel audiences are now being leveraged by leaders in finance, e-commerce, retail, entertainment parks, creating a new standard that can unlock more revenue. Adara continues to adapt with enhanced features and new measurement capabilities to support campaign performance. Our investments are delivering benefits, reinforcing the value of choosing us.  



Now let me shift to our people strategy. Our employees are the backbone of our success. This quarter, we achieved our lowest-ever attrition rate of 9.6% reflecting our ongoing commitment to retaining and nurturing top talent. Our focus on building capacity and developing future leaders continues to drive progress with initiatives like the management development program, first-time manager program and young professionals' program, equipping our teams with the skills needed to grow and succeed.



To further accelerate our US expansion, we welcomed Toby March as our Executive Vice President, Americas. At RateGain, we remain dedicated to fostering talent, enhancing leadership, and creating an environment where our people thrive. Our efforts have been recognized through multiple awards. RateGain was named the best B2B travel technology provider by the Economic Times Travel & Tourism Awards. We were also ranked amongst the top 10 in the Forbes India Select 200 and listed on the Deloitte India Technology SaaS 50 for the sixth consecutive year.





Before I hand over to Tanmaya, I want to highlight that RateGain is on a strong growth trajectory with a clear focus on product innovation, customer success, and operational excellence. We have expanded our sales development representative team with a focus on mid-market and smaller business segments. The move is already showing promise helping us onboard new customers and we remain optimistic that this approach will continue to enhance customer acquisition and revenue growth. We are confident that our strategic investments in AI-driven solutions will continue to drive value for our customers and stakeholders.



With that, I would like to now invite Tanmaya Das, our CFO, to provide a detailed overview of our financial performance for Q3 FY 2025.

Thank you, Bhanu, and a very warm welcome to everyone on this call. The company has delivered a steady quarter with healthy operating performance and continued focus in operational excellence contributing to a record margin of 22.1% of EBITDA, an expansion of 180 basis points over the same period last year. Our structured approach has allowed us to deliver on key operating metrics, leading to margin expansion as we realize the benefits of scale. 



We continue to see steady growth in key geographies with a healthy pipeline into. We are committed to scaling up our newly launched products and deepening our relationship with key logos. As the global environment settles down and we see prospects of a pickup in investment within the sector, we are confident of capturing the opportunity delivering value for our customers. Some of the key financial and operating highlights from the quarter gone by, the company reported a record revenue of INR 278.7 crores with year-over-year growth of 10.6%.  This was on the backup steady growth across MarTech and DaaS segments with some pressure on distribution as we continue to see pressure on one of the key demand channels that we provide connectivity to. 





We continue to see healthy volume demand from our large customers in DaaS across OTAs, AR, and car rental companies. We continue to see steady logo growth within the AR segment and with that, our DaaS segment grew at 9%. Our PDM offering continues to find flavor with travel and hospitality brands with Adara delivering strong performance again in the past quarter. With our differentiated and focused offering on digital marketing to drive guest acquisition, our MarTech segment grew at 20% for Q3. 



EBITDA grew ahead of revenue at 19.9% to INR 61.5 crores for Q3 FY '25 with the margins improving to new high of 22.1%, up from 20.3% last year. This is on the backup operating leverage kicking in and a balanced approach. Our PAT grew by 40% to INR 56.5 crores compared to INR 40.4 crores in the previous year.



For the first nine months of the year, the company reported a revenue of INR 816 crores with year-over-year growth of 16.4%. This was on the backup steady growth across vertical with DaaS growing 15%, distribution at 4% and MarTech at 23% for the first nine months. 



EBITDA grew by 27% to INR 171.5 crores for nine months with the margins coming in at 21%, up by 170 basis points from the same time last year. The 9-month EBITDA expansion is aided by healthy growth in our high-margin business DaaS vertical, improved efficiencies within our distribution segment, and continued traction on paid digital media market offerings. 



Our PAT grew by 61.6% nine months compared to the same time last year, coming in at INR 154.1 crores, up from INR 95.4 crores. The company continues to have strong customer relationships with low churn and a focus to expand existing relationships and we continue to see traction across our large customers.



In line with that, our revenue from our top 10 customers grew by 22% on a YTD basis and we continue to maintain our focus on land and expand approach to mine these key customers on the back of our integrated product offerings. Our customer base currently stands at 3,244 customers. We closely track and strive to outperform on key operating SaaS metrics and for the nine-month FY '25, our revenue per employees was at INR 1.3 crore.  



With continued traction across key customer segments and in key geographies we have a healthy pipeline which currently stands at INR 507 crores. We continue to have a strong balance sheet with our net worth currently at INR 1,620 crores, and our cash and cash equivalent balance at the end of the quarter stood at INR 1,210 crores. 

 

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

[Operator Instructions] We have the first question from the line of Karan Uppal from PhillipCapital India.

Congrats on a very solid margin performance. So the first question is on the guidance. So shall we assume the guidance is intact that revenue growth of 15% and 150 to 200 bps margin expansion?

Yes. So on the guidance, we've had -- as I mentioned in my opening remarks, we've had some delays in certain key deals that we were expecting. So the good news is that one of those deals has come through and has been signed, and it is with one of the biggest software companies on the planet, and it is a very, very sizable deal. So I think it will take us a quarter or 2 to size up the rollout with them. So there is some delay on that account. There was another deal that we were expected to close, which we are hoping that we will close within this quarter. 

 

So net-net, I think there have been some delays in some deals that we expected and thus the revenue that would accrue from them. So on a revised basis, we see now the growth to be anywhere between 12% to 13%. That would indicate a single-digit growth in Q4.

And secondly, distribution has been underperforming for quite some time. You mentioned that there is volume pressure in certain demand channels, but you also mentioned that is seeing some good traction. So how should we think about distribution growth from the medium-term perspective? Yes.

So again, like I said, let me first address where we are seeing the pressure. So this is something that I talked about. It's one of the larger OTAs that is a sub-brand of one of the biggest OTAs that is sort of sunsetting and we continue to see the volumes decline on the sub-brand that is being sunset, and we will continue to see some pressure on that over the next 3 to 4 quarters until it's completely sunset. And on UNO, the distribution business, yes, there is some very, very good traction there. And like I said, we signed a very large deal with one of the biggest software companies on the planet. And I expect that that can have a very, very good impact on our distribution business. So it's not a question of if, it's a question of when. We are working with our partner to roll out with them, and I'd be able to give you a better sense by next quarter on this.

So Bhanu, for next year, we are reading on the press that the travel outlook is strong in the U.S. and Europe. So shall we expect FY '26 growth to be better than '25?

So we are actually working on our budgeting. In fact, the last week or so, we've had a strategy session where we had the entire global team here. And I'm quite energized by all the discussions that we've had, and we are putting it together. I do think that there is a very, very large opportunity in front of us, and we will -- something that I've talked about that we have now multiple products. So there is going to be some level of investment we need to make into our sales and marketing efforts. And we've done that over the last, I want to say, a quarter also where I talked about in my opening remarks, there is an SDR team which was kind of nonexistent, which is like an outbound team to enable lead generation. We've invested in building a team of almost 20, 25 people there. 

 

So from a marketing perspective, we are doing a lot more events now. We have built our own version of events where in every city we are going and organizing what we call lunch and learn. So I'm pleased to share with you guys that this quarter alone, we are doing almost 60 such events, and we intend to scale it up. So I think there are some investments that we have made that are showing very good traction, but to be able to size up what additional investments we need to make and what will be the impact of that, I think I'll be in a better position to advise on that in the next call.

And last question from my side is on M&A. So how are you doing the M&A currently? Anything we can close soon? The other way to look at it is cash is 16% of the market cap. So are you considering dividend or buyback if M&A is there on the horizon?

Yes. So I think there are 2 parts to the question. So on M&A, our pipeline continues to remain quite robust. In fact, since the beginning of the year, we have had quite a number of inbounds as well, and we are looking to process that. 



However, I do think that there is a lot more activity in travel and hospitality tech. There is the emergence of other software companies that are sector-agnostic. RateGain is one of them has come into this team. And generally speaking, it does feel like because of the eagerness and the potential of this industry, there are people who are willing to pay a lot more than we are. 

 

So it does feel like there is competitive pressure and the app as a result, has become a little bit more expensive, but something that I've been saying all along is that we will continue to stay very, very disciplined about doing the deals at the right value. And given the number of deals that we are pursuing, I'm quite optimistic that despite this richness in valuations, we should be able to materialize something, especially companies that are turnaround opportunities, which we have demonstrated with Adara as well. 

 

Now the second question around the cash on our balance sheet is, do we intend to do any buyback or dividend? No, we do not because I do believe that opportunities will present themselves, and we need to have the cash to act on.

We have our next question from the line of Saumil Shah from Paras Investments.

Sir, for the last quarter, our EBITDA margins were around 22%. So can we assume that this is a base case margin and from here on, gradually, we will increase it to 25%? And can you give us your guidance for EBITDA and revenue for FY '26?

Yes. So I do not think that we can consider this as the base margin going forward. Frankly, I feel that we have underestimated the amount of investment that we need to make, especially in our sales and marketing infrastructure. Something that I've talked about is a big, big advantage for RateGain really, our moat is that we have an end-to-end stack that allows customer acquisition, customer retention, engagement, and wallet share expansion. 

 

And I think what we underestimated is that the same amount of salespeople, although we have a very large sales and marketing go-to-market motion, we've underestimated the kind of ecosystem around sales and marketing that we need to continue to do, so I do think next year is going to be a year of investment in building out our go-to-market motion. 

 

I talked about how we're building an outbound team that we call the SDR team. We need to build a sales enablement team, that continuously educates and empowers our salespeople. We have deployed a lot of AI tools that assess our sales focus. We want to really build our partnership program, which has been kind of fragmented in the company, but there's a huge opportunity to go out and build up our resellers and value-added resellers. We want to invest in that. We want to invest in building out global account structures where we have really, really dedicated focus on some of these key accounts that we have because we do currently struggle with, for instance, a very large account, let's say, a Marriott hotel, getting 2, 3 salespeople, bombarding them with different products and capabilities. And we will continue to invest in building out more salespeople. 



So I feel very good about the product capabilities that we have built, and all the AI-led innovations that we have built. In fact, there are some very, very cool capabilities around AI agents that we have built for hoteliers, and we'd love to demo to you guys on the demo day. But we do feel that we have all the capability and now we need to channel it through building a much stronger force from our sales and marketing motion. 

 

One of the analogies I always give is about how our different products are at different stages. I've talked about babies, teenagers, and adults. And it's as you know, your teenage boy or daughter has a great amount of potential, but they're not producing the results that you want to see and you have to then calibrate to channel their energy to get the results that you want. So I do feel like we are at that moment, and there is some very, very good focus going on building out and recalibrating our sales and marketing motion. 



So net-net, do I believe that we will continue to expand on our margins in the short term. No, the answer is no. By how much? I will come back to you in the next quarter. I do think that we may see in the short term, some compromise on our margin. But in the long term, I remain convinced that our business can be a 25% to 30% margin as we look to scale the business and get to, let's say, an INR 2,000 crore plus revenue.

And as you mentioned, sir, this year, we are expecting a 12% to 13% revenue growth. So can we assume that we can compensate for the lower growth in FY '26?

Sorry, I didn't follow the question.

This year, we are going to grow our revenues by 12% to 13%. So what I wanted to know is in FY '26, can we compensate this lower revenue growth maybe in FY '23, we can have a 25%, 30% plus growth?

Like I said, I will come back as we just finished our strategy session this week and last week. And I'm very, very optimistic about everything that I heard and the opportunity that we see ahead of us. So I'm very bullish on the future prospects, but translating that to numbers, we are doing that as we speak, but I'll be able to give you a more definitive response next quarter.

And sir, as the previous participant asked you, we have a significant portion of cash in our books, which is affecting our return ratios. So just a suggestion, sir, as soon as we can, I mean, have some plans for acquisition, it will be better for us.

Yes. No, I understand your perspective. I am building the company to be the #1 travel and hospitality tech company. And the pace of growth will have ebbs and lows. But I do feel that we need to focus more on making the right kinds of investments and being patient. We have delivered on the acquisitions that we have done, and we'll continue to deliver on them. So from an investor point of view, I understand, but I am confident that this money will get utilized.

We have our next question from the line of Deepak from Sundaram Mutual Fund.

My first question is with respect to DaaS So what portion of revenue in DaaS segment is only data? And what proportion of revenue is, let's say, more value-added service like rate parity and analytics pricing recommendation? Just wanted to understand how this mix has changed over the year ex of Adara because right now, if I look, we are at a revenue base of INR 85 crores to INR 90 crores and to grow 15% on this base would not be as easy as what it was 2 quarters ago. Just wanted to understand how do we wish to scale this in DaaS segment further.

So I would not have how much is the breakup that is completely raw data. Usually, the bigger customers want raw data. And then like you said, we also do a lot of value add in terms of parity and analytics and now what we call Gen AI summaries where we're actually using generative AI to give summaries on rate behavior intelligence, which is sort of a new offering. And then on the car rental side, we actually go one step further where we are making recommendations on how you should price. 

 

So the holy grail here is to actually build a complete platform that is around revenue management. So we are building those capabilities where we could almost be like a copilot to a revenue manager, which is like a big function in travel and hospitality industry. So we continue to scale that. Again, like I said earlier, in terms of growth prospects on this particular segment, I'll be able to give you a better view in the next quarter. But I do see our Rev AI platform getting a lot of traction. 

 

I do see us -- if I talk about customer segments, we've grown quite substantially in the airline segment. We almost added 24 logos in the last year. And there is a huge opportunity where we think we can continue to grow the logos, especially in the airline segment, and continue to deepen our relationships with some of the bigger players because even from a data perspective, just pure data perspective, something I indicated in one of the earlier calls also is -- and you heard Prime Minister Modi talk about it in the AI Summit also, data is everything, right? 

 

And we are sitting on billions and billions of data points. So it uniquely positions us and there continues to be, especially with the larger players, just is crazy amount of appetite to get more data. And that's what I was hinting at there is one existing big customer where we are negotiating a very, very large deal on just continuing to serve them large volumes of data.

My second question is with respect to distribution. So in April, we announced a tie-up with Oracle Cloud to promote our channel manager offering, right? So what is the update on that? I mean are we seeing Oracle Cloud PMS user base adopting our distribution offering? And what are the other partnerships that we are focusing on? Because it seems to be making all kind of right strategic announcements for this segment, but somehow it is not fructifying in the revenue. So just wanted to understand that.

So yes, on the Oracle Cloud, PMS. I don't have the exact numbers, but I don't think that at that point, it has created a material revenue uptick for us. But as I mentioned, there is one particular deal that we have done very recently and the mechanics of the deal give us the confidence that there will be a substantial uptick on revenue generation. I think the new business and strategic tie-ups that we are doing are enabling us on the distribution side to grow the business, and there's also good volume growth. 



But like I said, there was a significant partner, OTA partner, which is a sub-brand of one of the bigger brands that has been sunset. And that has kind of offset the revenue gains that we have had in the distribution business.

 

And there are some adjacent offerings that we are getting into, and I talked about UNO as a platform, which also is under distribution. So with all those investments that we have made, I do see a potential to gain traction. And like I said, the product capabilities have been built now. It's really about building brute force to go out in the marketplace and talk about it.

And one question on MarTech. So if I see as a general trend, there are lots of booking apps launched by hotel chains themselves and other operators as well. So the mobile booking pie in the total share is going up versus, let's say, desktop booking. I wanted to know, do we have the capability to run ad marketing campaigns to target the individual consumer in-app on mobile devices, asking from the perspective of my hotel shop and Adara.

Yes. So we do mobile advertising. I don't have the share of it, but we are happy to get that to you. But that is very much part of our whole suite of MarTech.

Sir, could you just highlight what was the volume and per transaction growth in the distribution segment for 9 months versus the previous 9 months?

You're talking of volume growth. I don't have that information really we'll provide you offline.

[Operator Instructions]. The next question is from the line of [Indiscernible] an individual investor.

So if you see our presentation, it shows a distinction between revenue by engagement, then revenue by travel type business or leisure, then revenue by geography, North America, Asia Pacific. Do we have such split which shows a distinction between revenue by business lines, business verticals, like how much do we get from airlines, how much do we get from hotels, from the OTAs, car rentals and so on and so forth? Or if you include this in the next presentation, is it possible? And what is the present demarcation?

Yes. So distribution by customer segment, we do have, but we do not disclose that in our public releases because of composition sensitivity. We can engage with you on a one-to-one basis.

No, that's fine. That's fine, not an issue. The second thing is that we had actually targeted doubling the revenue by 2027 if I'm not mistaken in our previous con calls. Do you still think we can achieve this or do we need to revisit your guidance?

So first of all, I manifest that every day, and I'm a big believer of manifestation. So that is the aspiration. And actually, that's -- if I had to share with the investors, our mindset is to drive to that revenue more than think about the margin so much because, like I said, at that scale, we will attain the kind of margins that we want to attain given the operating leverage and the strength of that business model. So yes, so the aspiration is still -- and I'm very much aware of the promise that we made. 

 

And so far, all the promises that we have made to investors since we have even listed, we have come through. So sometimes things can't happen in a linear fashion. If you look at also our growth over the past 3 years, it has been pretty robust. And I'm a big believer of the opportunity out there. And I think, like I said, we'll just have to recalibrate our go-to-market motion, which we are doing, and it will begin to reap benefits such that maybe we will grow faster and aspire to get to that goal.

[Operator Instructions]. The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives.

So slightly want to echo some of the concerns raised by other investors that there is a slight mismatch between some of the qualitative comments that we make and the quarterly performance, especially on the top line, right? And let me tell you where my concern is coming from.

 

One is that we have 60% of our revenue, which is subscription-based. We have one of the best metrics when it comes to net revenue retention. So all these -- some delays in deal win where we have cut the guidance initially from 20% to 15% and now 12% to 13%. For a SaaS model with a very high subscription revenue base, don't you think that such deals should not have such kind of a fluctuation or impact on our numbers? Even after we consider the impact of one-off, the impact of one of the clients. 

 

And secondly, also on margins, don't you think that SaaS business has a very high operating leverage where some of the investments that you want to make can be generated without impacting the margins, or it can be inherently generated with the business growth itself? So can you just help me understand while we report very strong SaaS metrics as well, as to why we sound a little bit less confident on near-term revenue growth and the investments that you want to make from the current levels of margins as well?

Yes. So I think there are 2 parts of the question. And let me address each part. So your first question is about everything appears very, very good. Key metrics look very good and thus why are we not growing and meeting the guidance that we had given? So SaaS business model is very simple to understand. The key things that you need to look at is what is the -- let's say, you start with a revenue of INR 100. And what is the churn that you experience? And then what is the new revenue you add and then where do you end? 



So let's say, at INR 100, very good churn number is 10%. So you arrive at 90%. And then how much do you sell new wins that you have and how quickly do you monetize those new wins because it takes time for some of the new wins to accrue? So the challenge we are having right now if you look at our new contract wins, it hasn't been as impressive as it has been in the past years. And I already alluded to why we've not had those new wins. Some of it was external factors, especially in the U.S., and we had elections in almost 70 countries and that kind of impacted, and there was like cautiousness on corporate spending. 



The second issue on why we haven't done new wins, I think is like I indicated in my other remarks, I think we underestimated the sales team hasn't grown as substantially as the number of products have. And so one is building out the sales team to be able to present the value proposition across all our products. Also enabling the sales team. So as you go from a couple of products to multi-products, it adds a layer of complexity. And that complexity can be solved by building an ecosystem and an ecosystem around that team which is what we are doing. 



So there is a lot of investment going into what I said, building out our SDR and enablement function, our partnership program and global account structure to get to close to our key accounts, and investing in also building out more sellers, et cetera. 



Now your question about why should it -- I think your question was why should it impact the margins? You're absolutely right. So the impact on margins is going to be in the short term and not long term. So meaning, let's say, if I added a couple of million dollars of investment in go-to-market, that will definitely yield results but there is a lead time to yield results on that additional $2 million. So over a period of time, you're absolutely right that there might be a short-term impact for a quarter or 2, but I usually see the sales and marketing investments do begin to pay back, let's say, after a couple of quarters. So it should normalize over a period of time.

Sure. My second question is on AI. While you have touched upon how you are using AI, Agent AI, so on and so forth. But I don't know whether you had a chance to probably maybe Microsoft CEO made a comment that SaaS companies could have an existential threat because of AI because maybe business logic, which used to so far be with the SaaS applications need not be there, and it could be very integral to some of the SLM models that these companies are building or some of the other companies are building. So how do you prepare for that kind of a risk? And some of the entries of horizontals that you have talked about, which is delaying our process or upping the prices of some of the assets that we want to buy. Is it because of that? And how should -- I mean, do you think AI can first create a disruption to some of our existing revenue sources before it becomes an incremental part of our revenue? I mean, do you see this as a risk or an opportunity?

Yes. So I see this not as an opportunity. I see this as a massive, massive opportunity for a company like RateGain because we are at the forefront of innovation. And let me demonstrate that to you with an example. So we are working on something called Viva, which is a hotel AI agent. So I think many of us have experienced not with the larger chains, but midsized chains, if you want to call the hotel and you have some questions about things to do around the rooms and rates, et cetera, your phone will go unanswered or whoever is on the other line does not have the capability to fully answer your question. 



So what we have built is a hotel AI agent that has the capability to answer any questions, discovery questions you have about the hotel or the city or you want to make a booking. And it's a marvelous innovation by RateGain. 



Now Satya Nadella might think that Microsoft has the ability to build a hotel AI agent as well. That is right. We can build a hotel AI agent as well. But what they don't have is integration into the hotel ecosystem, which RateGain possesses, which is integration to the hotel CRS, hotel TNS. So if you call the hotel and you're speaking to the AI agent and you ask them, what are the rates for the next 3 days, we have the ability to call out that information because we have integration to all the systems in place. So it is the RateGain embedment into this industry, the travel and hospitality context that we already possess that positions us in a very, very superior position compared to any of these companies. 



And that's why some of these larger companies, I alluded to it earlier, it was in Microsoft, but where we have done big deals. So I do think that AI is a revolution that will create a massive opportunity for RateGain. And I do feel everything that we are doing in all the investments that we have made in building Gen AI-led summaries, this voice AI agent, some of the things that we are doing on distribution with products like smart distribution and how we also on the MarTech side are we using -- building some use cases to give a sense to the hoteliers on how we can optimize their loyalty programs and their direct booking optimization. I think we are in a unique position because of us being vertically focused and understanding the domain that vertical-agnostic companies will struggle with.

I'm looking forward to probably hear some more constructive guidance on FY '26 in the next call.

[Operator Instructions] We have our next question from the line of [indiscernible] from MAS Capital One.

I remember back in 2023 when we acquired Adara for $16 million, a no-brainer deal considering it was once a $100 million business before it came in. Fast forward to 2025, are we finding it harder to come across such similarly attractive opportunities? Also in the backdrop, given that you've cited that Constellation software is your inspiration, which is known for executing thousands of deals in the last decade. So what are the learnings that you've taken from their M&A strategy and how have we applied them at RateGain?

Yes. So I think there are 2 questions here. So I think your first question is about are we finding it difficult to find the data type deals. Yes, absolutely. We are -- as I mentioned earlier, there is at least one player that has entered the space and wants to get deeper in travel and hospitality tech, and they are paying rich valuations, which makes it difficult for us to kind of strike the kind of deals that we were striking. 



I do think that we are turnaround specialists, and there are companies which have problems just like Adara did, and we were able to turn around. And those kinds of companies usually don't have many suitors because of the fear of unknown. So I do believe while good, stable companies will have many suitors and rich valuations, but companies with something wrong with them will not have any -- as many suitors, and we are definitely the ones that get excited by such opportunities because it enables us to get them at good attractive prices.

 

Your second question about learnings from Constellation. So they are -- I'll talk about some things that we have adopted and some things we haven't, I'll leave it for another day. But one of the key learnings from Constellation is their focus on learning best practices from each of the companies that they acquired. We've been also very, very fortunate to learn these best practices across innovation, go-to-market motion and build centers of excellence around each of these best practices. And that has really helped us across the organization. And it's a result of building these best practices across each of the functions that is enabling us to calibrate and grow the company as well as grow it profitably.

My next question, you see travel inspiration is becoming a major business driver with AI-led recommendations, personalized experiences, and influencer-led content shaping traveler decisions. How is RateGain leveraging data and partnerships to tap into this trend and position itself as key influencer travel demand rather than just optimizing bookings?

Yes. So thank you for bringing this up. There is actually something that we are building as we speak. I'm very proud of our product and engineering teams because we've built a no-code platform that can spin out travel inspiration-type websites in a matter of minutes because we have a lot of content, right? So I can build out 100 websites today. Let's say, somebody is interested in spiritual tourism, somebody is interested in galls, somebody is interested in wellness. So we have that ability given the content that we have and using no-code and GenAI platforms to actually build out what we call a no-code team website. 



So it has a lot of promise to act also as a demand channel for our customers. So this is something that we are experimenting on, and we've had some early success in building out some websites, but it's a work in progress and I'm very excited about this particular opportunity as well. But we are going back to how I categorize different initiatives, this is more in that duty stage right now, which we are developing and building. But it has a great amount of progress. As I've been saying, I wish I could share over a phone call on my enthusiasm and excitement on how AI and Gen AI is creating just tremendous, just massive, massive opportunity. 



And given the RateGain context in travel and hospitality, we are in a very, very unique position to capitalize on that. So again, it's not a question of if, it's just a question of when. I do believe as we -- the phase of consolidation, because we haven't done anything over the last couple of years, it has really served us good in hardening up the different functions in the company and recalibrating on our innovation and go-to-market motion. It doesn't show in the results right now, but I'm very confident it will show.

Ladies and gentlemen, that would be the last question for today. And I now hand the conference over to the management for closing comments.

Yes, I want to thank everyone again for taking the time out to attend this earnings call for Q3 FY 2025. As I have reiterated in the call, I see a massive opportunity ahead of us. It's been a consolidation phase. We are recalibrating largely on our sales and go-to-market motion, and I'm pretty confident about the future and continue to aspire on the promises to deliver on the promises that we have made to the investors. Thank you.

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