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Route Mobile Ltd
Route Mobile Ltd
NSE:ROUTE
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Good evening, ladies and gentlemen. I'm Tanvi, moderator for this conference. Welcome to the conference call of Route Mobile Limited arranged by Concept Investor Relations to discuss its Q3 and 9 months FY '23 results.
We have with us today Mr. Rajdip Kumar Gupta, Managing Director and Group CEO; Mr. Gautam Badalia, Group Chief Strategy Officer and Chief Investor Relations Officer; and Mr. Suresh Jankar, Chief Financial Officer. Later, we will conduct a question-and-answer session. [Operator Instructions]
Before we begin, I would like to remind you that some of the statements made in today's earnings call may be forward-looking in nature and may involve certain risks and uncertainties. Kindly refer to Slide #2 of the presentation for the detailed disclaimer. Please note, this conference is being recorded.
I now hand the conference over to Mr. Rajdip Kumar Gupta from Route Mobile Limited. Thank you, and over to you, sir.
Thanks, Tanvi. Good evening, everyone and wish you all a very happy new year. I want to thank the entire RML team for delivering a staggering performance quarter after quarter. We have yet again exceeded our expectation in the quarter gone by.
It gives me great pride to highlight that we have surpassed our pre-IPO FY 2020 audited revenue of INR 9,563 million and adjusted PAT of INR 843 million in just this quarter of Q3 FY 2023 by clocking our best quarterly revenue of INR 9,857 million and adjusted PAT of INR 1,010 million.
This is despite the recent COVID issues, the Russia-Ukraine war, supply side issues and current headwinds in various markets. Our focused approach to deep domain expertise, and most importantly, our modular approach of creating multiple levers of growth across multiple geographies have been the bedrock of our success. We continue to progress our -- progress significantly growth and quality deals wins all across the globe and including India.
Some of the key highlights of Q2 FY -- since Q2 FY '23 are as follows. We won a couple of exclusive end-to-end deals with mobile network operator. RML is now exclusive partner for international A2P messaging for a leading MNO in Sri Lanka as well as for Uganda Telecom Corporation in Uganda.
While there is a lot of discussion about mobile network operators stepping into our domain, this deal win justifies why Route Mobile is an invincible partner to the MNO. Further, there are various other unique opportunities with MNO that we are working on. And I'm confident that there will be more such partnerships that we will announce in days to come.
In terms of our geographical expansion, Route Mobile has its presence in GCC region with entry to the Kingdom of Saudi Arabia with CITC license win. We formed a step-down subsidiary in Mexico as a part of our LatAm expansion strategy and step-down subsidiary in U.K. to focus on mobile identity and other products. Route Mobile has been awarded the Best Governed Company Listing Segment: Emerging Category at 22nd ICSI National Awards for Excellence in Corporate Governance.
Enterprises are increasing their adoption of new products, and we continue to witness strong momentum. The worldwide growth of digital transactions carries a substantial increase in digital fraud, which presents a critical challenge for all the stakeholders. To address this issue, we are launching a mobile identity management product that will help enterprises to gain actionable insights and curb digital fraud and provide a simple and more practical solutions such as password-less authentication.
Our solution is already live in Colombia and Peru and is being used by marquee enterprise, including banks. For our email business, we have upgraded our e-mail infrastructure, which was delayed, but -- due to the hardware supply challenges, this new set up will enable us to build large enterprises for e-mail businesses, that includes banks. We are indeed very optimistic about our e-mail play.
Our senior management team has been doing a fantastic job during Route Mobile's superlative performance across multiple geographies. To accelerate our next phase of growth and profitability to maintain our razor-sharp focus, there will be some realignment at the senior management level, including hiring a few seasoned industry professionals to drive dedicated SBU. We shall make relevant disclosures concerning these at the appropriate time.
Last but not the least, the Board has decided to meet on January 26 to discuss the proposed interim dividend considering the superlative performance of the company in Q3 FY '23. With this, Gautam will walk you through the financial highlights in more details. Thank you. Over to you, Gautam.
Thank you. Thank you, Rajdip. Good evening, everyone. Wishing all a very happy new year 2023. We've already uploaded our quarterly earnings presentation on our website as well as on the stock exchange websites. I hope you had a chance to go through the presentation. I'll quickly summarize our financial and operating performance during Q3 FY '23 and 9 months FY '23 before opening the floor for Q&A.
At the backdrop of our best quarterly performance till date, we have indeed demonstrated that we are one of the largest CPaaS companies and one of the most diversified players in the emerging markets, if not the largest. Further, the undercurrents in the business continue to be very robust despite the recessionary headwinds. We will definitely surpass our FY '23 revenue guidance of 60% by a margin.
The key takeaways from our financial performance in Q3 FY '23 is the superlative growth. We demonstrated Y-o-Y revenue growth of 75% and Q-o-Q revenue growth of 17%, with focus on improving profitability. We have done fairly well on both counts, as highlighted in Slide 18 of the presentation. In fact, as Rajdip highlighted, we have surpassed our pre-IPO FY '20 revenue and adjusted PAT in a single quarter, that is Q3 FY '23.
In volume terms, we processed 27.7 billion transactions, which is the highest quarterly billable volumes processed by us till date. In terms of geography, India continues to be our largest market by termination, accounting for over 45% of our revenue by termination. You may refer to Slide 6. And we are on track to surpass our guidance of USD 175 million revenue from India in FY '23.
We continue to witness very strong momentum on the next-generation products across multiple geographies. We have demonstrated Y-o-Y growth, I mean, for the new products of 53% and Q-o-Q growth of 19%. You may refer to Slide 19 of the presentation.
With respect to certain one-off costs, bad debts amounting to INR 58.4 million were written off in Q3 FY '23. It relates to Mr Messaging's pre-acquisition period. The said amount shall been adjusted while computing the EBITDA for Mr Messaging for the purposes of calculating the deferred payouts for the shareholders of Mr Messaging. There was also a reversal of ESOP expense to the tune of INR 82.5 million, owing to resignation of some employees. With this backdrop, let me walk you through the financial performance.
In terms of Q3 FY '23 performance, revenue from operations grew by 75% from INR 5,628 million in Q3 FY '22 to INR 9,857 million in Q3 FY '23. There was a sequential growth of 16%, rounded off to 17%. Route Mobile's organic revenue growth, excluding revenue from entities acquired during FY '22, was 34% on a Y-o-Y basis and 17.2% on a sequential basis.
Billable transactions increased from INR 16.3 billion in Q3 FY '22 and INR 26.9 billion in Q2 FY '23 to INR 27.7 billion in Q3 FY '23. Average realization per billable transaction increased from INR 0.31 Q2 FY '23 to INR 0.36 in Q3 FY '23. Gross profit margin expanded from 21.1% in Q3 FY '22 and 22.3% in Q2 FY '23 to 22.4% in Q3 FY '23.
Adjusted EBITDA grew by 66%. EBITDA grew by 17% sequentially from INR 1,094 million in Q2 FY '23 to INR 1,283 million in Q3 FY '23. EBITDA margin was 13% in Q3 FY '23 as compared to 12.9% in Q2 FY '23. Effective tax rate for the quarter was 17%. Adjusted profit after tax grew 63% on a Y-o-Y basis and 10% on a sequential basis. Adjusted PAT margin was at 10.2%.
For 9 months FY '22 -- sorry, 9 months FY '23, revenue from operations grew by 86% from INR 13,760 million in 9 months FY '22 to INR 25,606 million in 9 months FY '23. In terms of certain KPIs, for 9 months, Route Mobile's organic revenue growth, excluding revenue from entities acquired during FY '22, was 36% on a Y-o-Y basis.
Billable transactions increased from INR 34 billion to INR 79 billion in FY -- from 9 months FY '22 to 9 months FY '23. Average realization per billable [indiscernible] in 9 months FY '23. We had a net revenue retention of 125%. You may refer to Slide 16 of the earnings presentation.
We added over 700 new customers in the 9 months FY '23 across all products. Gross margin -- gross profit margin expanded from 20.9% in 9 months FY '22 to 22.4% in 9 months FY '23. EBITDA grew by 72% from INR 1,879 million in 9 months FY '22 to INR 3,237 million in 9 months FY '23.
In terms of operating leverage, EBITDA as a percentage of gross profit stood at 57%. EBITDA margin was at 12.6% in 9 months FY '23. Effective tax rate was 12.3% for 9 months FY '23. Adjusted profit after tax grew by 93% from INR 1,450 million in 9 months FY '22 to INR 2,803 million in 9 months FY '23. There was improvement in adjusted profit margin, which inched to 10.9% in 9 months FY '23. We on-boarded 66 new employees during Q3 FY '23 and 61 employees left during the period.
Net cash as of December 31, 2022, was INR 7,482 million as on December 31, 2022. Operating cash flow for 9 months FY '22 -- '23 was marginally negative, owing to some strategic business initiatives towards a large firewall contract and discharge of a prior GST liability under reverse charge mechanism. We believe the EBITDA to OCF conversion will start to trend 50% and above from Q1 FY '24 onwards.
With this, we open the floor for Q&A. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhishek Bhandari from Nomura.
Sir, I just had questions around the competitive intensity in the industry. Some of your peers have been reporting very weakish revenue growth.
Mr. Bhandari we are not able to hear you. We request you to please repeat your question.
Sorry for that. So let me start again. Sir, I just wanted to get your views on the growth outlook for the industry in medium term as well as the competitive intensity as some of your peers have been reporting fairly weakish revenue growth, though the volume growth is still on the 15% to 20% range. So maybe around the pricing, are you seeing stabilization? And also what do you think could be a medium-term growth outlook?
And also to that, what do you think is the competitive part, especially from some of your peers in the CPaaS itself, like Twilio, as well as the telecom companies who are trying to enter into this space.
Rajdip here. Am I audible?
Yes, sir.
I think, first of all, you need to -- I just want to clarify again, our entire growth is not just coming from one market. Our growth is coming from various different markets. And I think on a competitive side, I think there are 4 or 5 large CPaaS players all across the globe, and we are one of the top Tier 1 aggregator as per the Roku report.
I think -- our growth is coming from Latin America, Europe, Asia and other markets, and Middle East as well. So for me, I think competition is definitely there in global market also, but we are fairly balanced in Africa, LatAm and Asia and Middle East. And I think almost all the top aggregators of the world, they use our connectivity in this market. And that is the reason which you'll see there is a huge growth quarter-on-quarter from last 7 quarters, which we have reported.
Gautam, if you want to add anything to this?
Yes, sure. So from a growth perspective, I think -- I mean, the good thing is the organic revenue growth. I mean, we have surpassed the portfolio growth rate, that seeks volumes about our execution. And from the robustness of the business at this point in time from -- I mean, the month till date, the revenue run rate that we are clocking, we have not been kind of witnessing any slowdown whatsoever. And even for next year we have a good amount of visibility in terms of deals that we have won, the new volumes that will start to kind of kick in. And as Rajdip highlighted, we have multiple engines of growth, multiple levers of growth across multiple geographies. We're very bullish about LatAm, and we believe the LatAm growth trajectory will be very strong, I mean, in days to come. And we're investing in the right markets over there.
From a GCC standpoint, I mean, we've kind of now entered -- deeply entrenched into a lot of adjoining markets besides UAE. And we believe a lot of growth will start to come from some of those markets, like Saudi, Kuwait. And India, I mean, we definitely -- I mean, as we've always been highlighted -- highlighting that we have been late in terms of our India domestic entry strategy, but now we are kind of our presence felt and definitely taking a lot of market share from competition.
Just to add, I think our firewall product, I know the kind of deployment we are doing right now with various operators, there's one flight also showing that. I think that particular division is doing really good. And we are in talks with multiple operators as we speak. And very soon, we will announce some more exclusive partnerships.
Got it, sir. And sir, you mentioned at the start some kind of leadership changes with new growth plan. If you could elaborate a bit more. I don't want specific names or something, but what is the new structure you're thinking about? Or is there any difference, go-to-market you'll be thinking about from a new growth paradigm? Because it looks like the growth is now more focused on outside India. So maybe you could elaborate on that.
So Route Mobile is always -- I just mentioned, right? India is just one of -- one market for us. We operate from 22 markets. And every market where we're operating and we see a very solid growth over there.
In terms of the leadership change, I think we are hiring some top management, especially to take care of our Mobile Identity division. We are launching a product in Barcelona probably, which will be a very unique solution to mitigate the risk of digital fraud. And that is exactly what I think most of the fintech companies, most of the -- like banks are facing right now.
So probably since we're over there launching their first fintech solution in month of February. And to lead that, we are definitely hiring somebody from industry who has multiple years of experience to lead this product.
The next question is from the line of Manik Taneja from Axis Capital.
So first of all, congratulations for the good performance. I think I wanted your thoughts around the [indiscernible]...
Manik, your voice is not very clear.
[Operator Instructions] We have lost the connection for Mr. Manik Taneja. We'll move to the next question from the line of Mohit Motwani from Nuvama.
I wanted to ask a couple of questions. So first question was around the volumes, which were flattish quarter-on-quarter. So there would have been some impact on some of the geographies. So do you want to call out any geography where there was some more impact than the other geographies in terms of volumes?
I think you need to also understand, let me just give you a small example. One single SMS -- international SMS terminating in Bangladesh can charge 12 cents, and same in Pakistan, 14 cents. Where when we talk about India, ILD the messages are 4 cent.
So I think it's a combination of geography mix, like in which month we have a higher traffic and what price. So one should not look at my numbers without -- based on volume, based on the realization per transaction. Like as we speak, I think we are working very closely with one of the Sri Lankan operators where each SMS is going to be around 10 cents.
Sure. That's helpful. And can you give...
I'll just add to what just Rajdip said, right? So I mean just to kind of give you a sense on volume side, so I mean, we'll also need to account for -- I mean, Diwali -- while Diwali was in early October, but a lot of the promotional spend, including some of the sale by large e-commerce companies happened in Q2, right, which traditionally happens in Q3.
So to that extent, I mean, if you were to normalize it, I mean, there was volume growth that was there. And there was also a large ILD price increase that had happened in Q2 and some of that volume also had kind of shrunk because of -- I mean, whatever was noncritical had shrunk owing to that. But I think the large impact was because of Diwali being in early October, and hence, a lot of volumes were there in Q2, which was -- I mean, which needs to be normalized. Yes, over to you.
That's helpful. Can you also provide us the revenue for Masivian and Mr Messaging for the quarter?
Sorry, what do you want? Mohit, if you can repeat?
Can you provide us the revenue for Masivian and Mr Messaging for the quarter?
Yes, yes, yes. So one second. So Masivian, the revenue was about INR 601 million in INR terms. And for Mr Messaging it was INR 2,031 million in INR terms.
Sure. And for Masivian, considering -- I understand that Masivian is one of the strongest quarters. The Q4 of the calendar years as stronger for Masivian. So how was the year-on-year performance that you witnessed for Masivian in the Q4 of the calendar year?
So on a year-on-year basis, I think we are looking at over a 20% growth.
Okay. And just a last one from my side. What was the -- can you give us some color on the contribution of WhatsApp in the new product revenue. Not maybe a specific number, but some color on the contribution from WhatsApp?
We do report our new products revenue and it is a mix of, I mean, not only WhatsApp, Viber, various other new products. So I mean we don't call out in each of these products separately.
The next question is from the line of Dipesh Mehta from Emkay Global.
A couple of questions. First, about some of the industries which we report. If one to do calculation, BFSI seems to be showing some mutedness on quarter-on-quarter revenue growth perspective. So if you can provide some sense about industry-specific commentary about how you see demand trend. And obviously, growth has materially moderated in BFSI compared to your Y-o-Y trend in H1 compared to Q3, what we see. So if you can give some sense.
Second question is about the exclusive arrangement or a deal which we announced for SMS firewall solution with Sri Lanka telco. Whether the gross margin would be very different than our enterprise business where we get roughly around 20 percentage gross margin considering it is firewall deal or it could be largely operating like enterprise business, if you can give some sense?
And last question is about cash generation. I think partly earlier, Gautam alluded at about weak cash generation. I'm not clear about the negative or muted cash generation, which he said is for Q3 or for 9 months? If you can clarify, and how you expect it to play out for next few quarters?
Sure. Yes, Rajdip. Over to you.
So I'll address the second question about the firewall like margin. I think most of the firewall solutions are like a SaaS solution and then we become a gateway for those operators. It's about 30% to 35% margin. It is definitely a much higher than the traditional SMS margin. Yes, Gautam, you can take your next question.
Yes. So Dipesh, your query around the cash flows. I mean so when -- in my commentary, it was for 9 months FY '23. And this year, essentially, I mean, Q3 and Q4 will have some degree of impact because of the strategic business initiative for a couple of firewall deals. But from FY '24 onwards, it will result in high free cash conversion.
So just wanted to kind of update you to -- I mean about it. Coming to your query on -- your first query was around the BFSI, right?
The volume, yes. So BFSI revenue growth seems to be muted. If I do the way you give 9 months cumulative numbers...
I think, Gautam -- I think we need to just make it a bit clearer. We didn't see any kind of de-growth in the BFSI, like volume. Gautam, if you can just answer...
Yes. So I think in terms of financial services, you are right if you're comparing this with the -- so Dipesh, if you can just help me understand. Are you comparing it on a quarter-on-quarter basis or on a Y-o-Y basis?
So I'm comparing both ways. Q-o-Q, it is muted, so flat, in Y-o-Y also, if I look at your H1 growth and now Q3 Y-o-Y growth, H1, your growth used to be 75 percentage plus, almost 80% plus kind of number. Now it is less than half of it. So I just want to get some sense.
Yes. So as I said, I think some degree of this growth was also attributable to Diwali being early in the previous month. And we serve a lot of critical traffic from our perspective. So we are not seeing significant drop, I think, in terms of the transactional messages from BFSI standpoint.
So I think, Dipesh, you need to also understand, when we onboard a new customer, all of sudden that volume will be added to that particular quarter. But that, that volume will become stable, right, for the next quarter or next month. So there were certain banks we have added in the last few quarters, those volume has been added to maybe the last quarter. So -- but the same volume is going to continue with this quarter also. But there won't be that kind of a jump which has been in the last previous quarter.
So broadly, you are not seeing any demand pattern change across industries. Because your retail, if I look at it, retail is showing significant weakness, even telecom and allied services the way we report is showing some different trends compared to, let's say, earlier trends. But broadly, you're indicating, we are not seeing any pocket of weakness, particularly on industry side. E-comm also showing, if one look at Q-o-Q, it is double-digit down. Even Y-o-Y, it is down now. So I just want to get that sense, if across industry is there anything which you want to highlight?
I don't see there's any -- we always believe that -- I think we see lots of digital adoption happening all across the globe in all the markets where we operate. Like we operate [ magnum ] in emerging markets where we see the digital adoption ratio is increasing day by day, and we believe that this transaction is going to increase multiple in coming days, and we are very bullish about our growth in coming days. Yes, based on certain firewall deals, we may send just 10 million traffic, and we make $1 million revenue. So instead of sending 100 million and making $1 million revenue. So it all depends on the market mix also. We wanted to consider that way.
So Dipesh, we also processed a lot of ILD traffic, I mean, when it comes to financial services as well. And because of the price increase, as I said, the noncritical components of the communication, I mean, that definitely had impact because the price increase was significant.
So I mean, it's not only related to, I mean, domestic NLD traffic. It's a mix of NLD and ILD. And on ILD front, definitely, there was some volume dips which had happened and that's largely because of the price increase.
And last question, in other industries, any industry which is doing exceptionally well for us? If you can call it out.
So we have that already laid out in the presentation. So digital native continues to be strong. And we are kind of deepening our wallet share with most of the digital native companies.
Gautam, I'm referring to the industries which you have highlighted, the 6 industries. Outside of those industries, we're doing very well. So if you can prefer to highlight anything which is doing well outside of 6 industries you put in 50.
No, no. So as I said, digital native industry, I mean that continues to be as robust. I mean even at the size and scale that we're talking about...
So Dipesh, just let me give a perspective out here. I'd like to answer your question. As I said, if I'm serving Google for India, I'm not serving Google just for one country. I have a potential for serving Google for more than 100 countries. If I onboard one single OTT player as a customer, it is very simple for us to just provide a connectivity for the global market, okay?
So OTT players and digital native customers, when they onboarded on our platform, we are serving from multiple countries, and that is the growth we see from last few quarters.
The next question is from the line of Manik Taneja from Axis Capital.
I had a few questions. First of all, with regards to the CFO to EBITDA conversion that Gautam alluded to at the start of -- in his opening remarks. What we've seen is that our cash flow conversion has suffered materially over the course of last 3 years. And -- so simply, how should we be thinking about cash flow going forward? Is there a structural reset in terms of the cash flow profile? That's question #1.
The second question was with regards to the competitive intensity. In the last 6 months, we've seen telecom service providers are becoming much more active, especially when it came to some of the -- one of the large contracts. So what are you seeing on the ground now?
And the third question was with regards to any potential price increase either on the NLD or the ILD side. Over the last couple of years, we've seen ILD prices go up. In the past, you've alluded to seeing a similar phenomenon happen on the NLD side, if you could help us understand what are you seeing on the ground?
Gautam, if you can answer the first question.
Yes, sure, sure. So Manik, just to kind of give you a perspective in terms of the cash conversion, right? I mean so over the last 3 years, we've seen structural changes in the industry. So right in the midst of COVID, all the traditional regional companies, I mean, the business was massively impacted, and it was only the digital [ service ] businesses, I mean, which continue to thrive.
And for almost -- and for all these large digital technology companies, our receivable cycle happens to be well within 30 days. I mean, so 30 days is the credit period. When the economy started to open up and all the regional traditional companies started to kind of come back to normalcy, that's when the working capital cycle started to prolong a little bit because most of these regional companies, the payment cycles are a little longer than most of the other digital native companies or large technology giant companies, right? So that actually led to some amount of free cash getting stuck in terms of increased receivables.
As we are kind of inching now towards a more stable environment where the change in the working capital, I mean, will get normalized as we move forward, it will lead to higher cash conversion going forward. But the only caveat in this is this quarter and the next quarter, we have 2 large strategic business initiative deals, I mean, from a firewall standpoint, which may warrant some working capital getting stuck. But from FY '24 onwards, the cash conversion will be far higher. And should -- that will trend towards northwards of 50% from a conversion standpoint.
So Manik, on your question of competitive landscape. As I said, like for me, we compete in a global market. And I think the opportunity for me is very high. When we talk about emerging market or a developed market, I think you are operating and we are serving customers in all the markets. So I think there are very few people, few companies who are in this space who are, you can say, top 5 CPaaS players probably there. And I think we are a campaign of emerging countries. And as I said, most of these CPaaS players, they use Route Mobile as a connectivity partner. And I think we see lots of growth coming from them to Route Mobile. So I don't see there is any change in long term because it's more about the partnership model we work with them rather than competing with them. Yes, but there are certain markets, certain domestic players where we go, we do compete with them in certain markets. According to me, I think, we are fairly well placed and we don't see much of competition in global market or the market where we operate.
Rajdip, my question was more around the domestic market because over there we had seen one of the large [indiscernible] get aggressive with one of the...
I think I've already, like in my first address, I've already clearly mentioned that we work very closely with operators. And one operator coming and trying to disrupt the market is not going to work at all. It's a very large market. And I think India, the digital adoption and transactions are increasing day by day. There is a huge market, and there's a market for everyone.
We will treat them as a competition. If there are 10 competition in Indian market, we'll take them as an 11th one. But the question is, again, you should have a DNA of CPaaS player to serve the customer. Onboarding a banking customer, it takes almost 6 to 8 months. And that is something -- a DNA, which we have built in or some of the CPaaS players has built over 7, 8 years or 10 years kind of thing.
For them, somebody like to have a multiple backup connectivity is also required. There are so many things required in your platform to serve a large banking customer. And I think probably they can win 1 or 2 banks or customers, but going and serving end number of customers of that scale is impossible for them, honestly.
But again, if there's a competition, we are happy to compete with them. And I don't think they are going to sustain with those pricing even if they go and close multiple deals.
The next question is from the line of Moez Chandani from Centrum Broking.
My first question was on the revenue per transaction, that's gone up significantly this quarter. So is there anything specific driving that? Or is it just because of a geographical mix change that's happened this quarter?
Yes. So it is largely due to the geographical mix. So rest of the world, we've seen significant increase, and ILD price were also increased for the Indian markets.
Okay. Sure. Understood. And also secondly, on your ESOP program, so I understood that there were some reversal of charges this time around. But with your new employees coming in, do you expect higher-than-expected costs in your ESOP program going forward? Or do you think that the current levels would sustain?
So in terms of the ESOP cost, yes. So I think I already kind of given that there was some rollback. And whenever our new employees will join, I mean, [indiscernible] definitely an employee agent program from our perspective. I mean it is there to attract good employees. So it will be there, but the scale and proportion of that may not be as high as what it was last year.
Sure. And lastly, on your cash flow, operating cash flow, so I understand that from FY '24 you would be at 50% plus operating cash flow. But could you give some indication of what your OCF to EBITDA number will be for FY '23. What sort of OCF to EBITDA percentage are we looking at the end of this year?
So I mean the endeavor will definitely be to kind of inch closer to 50%.
Sure. So around 50%?
That's correct.
[Operator Instructions] The next question is from the line of Amit Chandra from HDFC Securities.
So my question is on the partnerships that you have announced. So in terms of the A2P partnerships and the network firewall partnership that we have announced, so what is the timelines in terms of revenue that we can expect? And what is the revenue potential from the partnership in deals?
And also in terms of the acquisitions that we have done, if you can provide some more color in terms of the performance of these individual entities. So how they have been performing?
So I think -- Amit, Rajdip here. So revenue from this partnership, I think it will take about 10 weeks to deploy the entire firewall for this Sri Lankan operator. And we are looking forward to have this revenue to be part of our overall performance from April onwards.
Okay. And the earlier announcement that we made regarding the Uganda Telecom and the firewall deal...
So Uganda is already live. And we're already, I think, serving them now. So I think that is live.
Okay. Okay. And on the acquisition, sir, so if you can provide some color on how the individual acquisitions are doing.
Yes. So I think good thing is, I think both Masivian and Mr Messaging are doing really well. I mean, when we on-boarded Mr Messaging, it was at a run rate of $5.5 million -- EUR 1 million a month. I mean that has already trended up to almost EUR 7.2 million, EUR 7.3 million. In fact, in December, they're even outperform that. But December being kind of a seasonal month, we are, I think, fairly confident that I think that's -- this is already tending at EUR 7.2 million, EUR 7.4 million a month.
And in terms of Masivian, I think we've done a few investments last year in terms of expanding the teams. And even from a product line expansion standpoint, I mean, we are looking at creating a new product out of that team, I mean, in partnership with the Indian technology folks.
So at this point in time, I think we see Masivian, I mean, continues to kind of drive almost a 20% plus growth rate. [indiscernible] win a large $5 million deal, which is a multi-geography deal, and that was courtesy our presence across multiple geographies. So that is on their revenue scale, I mean, a significant contributor. And we are reasonably confident, I think, Masivian, I think this year also -- I mean in FY '24 also, will be able to kind of clock growth rates northwards of 20%.
Okay. And in terms of the strategy -- in terms of acquisition strategy, since you have been aggressive on the acquisition side, so how do we see in terms of the deployment of the cash that we are having? So are we planning some more acquisitions in some strategic areas? Or we are planning to grow the business more [indiscernible] from here on?
So Amit, let me just answer this question. I already said that we are launching a few products very soon. And I think this is [indiscernible]. And probably in terms of acquisition, we are not looking out to acquire any large companies or invest heavily on that side. Right now, we're focusing more on how to integrate and create up-sell and cross-sell opportunity between all the companies we acquired. And that is our focus for the next few quarters.
And I think we want to make sure all the integration and up-sell and cross-sell opportunity to be created well and which we have seen a very good like traction between all these companies where we started using each of their product fairly well. As I said, the mobile identity products, which we are launching is a brain child of Masivian and we both from Ooty, from Bangalore, the Route lab and the team from Colombia, they worked together to build this product, which is a very unique product and probably a product for the fintech market to be launched in India very soon.
Okay. Sir, I have one last question. So we have seen that there has been multiple price hikes on the ILD side, okay? So what is the thought process behind this massive price hike by the telcos? And is it an indication of the fall in volumes, so they are increasing the prices to offset the fall in volumes that we are seeing?
So Amit, I think if you see global market, like I think that's a trend going on all across the globe now. Any international OTT brands [indiscernible] all across the globe are paying higher price, and that is a very common trend. And India is still a very low price, if you say 4 cents as compared to 12 cents or 13 cents in Bangladesh or Pakistan.
But I think, yes, it's a completely [ prerogative ] of operator to decide and for us it is a pass-through. And operators really need to be like think logically before they increase pricing because if there really want to increase price, they may lose some traffic. But I don't think operators are going to increase price in India for the next at least for few years, 1 year for sure. Because we have seen certain degrowth in traffic, which somehow they are a little bit careful. This is my understanding. I might be wrong also.
But on the domestic side, there are some discussions people are talking about to increase pricing. I have no idea. We have not got any update from operators as we speak. And probably, I don't think because enterprises are definitely spending a lot of money on this kind of communication and probably increasing price at this point of time won't work for operators. So I don't think there's any price going to happen in the next 1 years, for sure. But I might be wrong also. Even if it happens, for me, it is just a pass-through.
The next question is from the line of Ashish Chopra from Goldman Sachs Asset Management.
My first question was actually on the cost side. If you could just explain the costs below the purchase of SMSs. I think the employee costs this quarter went up from INR 39 crores to INR 47 crores, while there hasn't been any material change in the total number of employees. And even the other operating expenses, which even after excluding that provision of INR 6 crores, I think that's gone up from INR 38 crores, INR 39 crores to the similar number of INR 46 crores, INR 47 crores as well. If you could just clarify the jump in these 2 expenses?
Sure. So us it's essentially, the employee benefit costs, we need to kind of -- so I think in this financial release, the employee benefit, you saw expenses, I mean that's been clubbed with the employee benefit expense and hence, that cost is seemingly higher. Earlier it was for specific line items. Hope that clarifies or you have something specific on that? .
Gautam, I was actually talking about the employee expenses, excluding the ESOP charges, which would have been INR 39 crores last quarter and is INR 47 crores this quarter.
One second, one second. Ashish, just one second, one second. Ashish, if you adjust the ESOP cost, right, I think the ESOP cost is not being adjusted. So if you adjust the ESOP cost for both the periods, the cost has actually reduced. .
Okay. Okay. Could you just share the employee expenses excluding the soft charges?
Yes, we can share it with you, Rajdip will share that with you. And your second query was on other expenses. So other expenses, if you adjust for the bad dates, I mean, with respect to Mr Messaging, there was an increase in the data center cost because of the increase of our global scale of operations, plus there were some employees where there was a commission structure. So there was increase in commission with respect to the performance of some of the employees.
Okay. Okay. So would the second element to be the nonrecurring one among the two, and the data center costs continue going forward. Would that be the right way as to think about it?
I think the data center costs will continue going forward. And the other one will kind of be a function of performance.
Okay. Okay. Got it. Yes. And the other question I had was, so I think in terms of seasonality, how should we think about transitioning from 3Q to 4Q? We've seen last time around when there was a sharp drop, and that was on the back of maybe most of your businesses, especially the overseas ones having a fairly strong finish to the calendar year.
But is there a certain kind of a defensible level of volumes below which you don't expect it to decline in the fourth quarter, particularly also considering the fact that the seasonality in the domestic side at least has been a little bit more muted this time around since some part of it already came in 2Q?
Hello.
Yes, sir, we can hear you, management members.
Yes, yes. Ashish, if I can understand your query correctly, are you kind of looking at what is the Q4 expected sort of a run rate?
Yes. Just in terms of -- I mean, if I were to compare the 4Q for this year versus the last year, I wanted to understand should the seasonality be lesser of a factor considering that we've already not seen as strong a seasonality in December quarter this time around in terms of volume growth, as you mentioned that some part of it had come in 2Q itself?
That's correct. That's correct. But having said that, so Q4 will be slightly muted than Q3. And that has actually been the trend historically as well. I mean if you adjust for -- I mean, if you look at the Q4 had 1 month of, I think, Mr Messaging's revenue. If you adjust for that, it was slightly muted to Q3. So it will continue to be a little muted.
And there was a specific operator deal that we had for the quarter, for the last quarter, which was about $57 million. And that contract is due for kind of bidding this month, this quarter rather. So adjusted for that, I mean, it will be slightly muted. But I mean from a full year perspective, the guidance will be upwards of 70% growth.
Okay. Okay. Okay. Understood. That's helpful. And Gautam, in terms of just the attrition numbers, so I think you mentioned around 61 employees leaving and 65 joining the organization this quarter, right? So which, I guess, on your base is almost like 8.5%, 9% for the quarter or on an annualized basis, more like 35%, 36%. Is that the normal -- I mean, is that par for the course with respect to the business? Or is that something that is much higher than your comfort levels? Where should we think the comfort levels on attrition to be for your company?
No. So it is a mix of two things. I think it is definitely I think, midsized, I think IT companies, I mean, they are also witnessing still kind of attrition trajectory. But in our case, I mean, there was some other aspects. I mean, so Masivian, I mean we were kind of looking at building a lot of this product side, so they have taken it to a level at the end. At a point in time, we realized that we have to bring that, I mean, and globalize it from a global launch of that product. So that's where, I mean, we had some amount of attrition at Masivian.
And then we were able to kind of add it or add it into our Bangalore, the center of excellence, right? So the intent was to kind of create a team and create kind of a working technology relationship between Masivian and the India team so that we could kind of look at launching the product, I mean, at a global scale.
So a lot of Masivian product stack is largely in Spanish. And the intent is, I mean, when you're looking at launching it across biggest markets, the intent is to kind of globalize it and have it more in terms of English. So that's where we've kind of done a little bit of chop and change, I mean, between the 2 entities. So that's also a large part of this increase, and then we [ having hiring ] here.
Understood. And one last bookkeeping one for me. Could you share the operating cash flow number for the third quarter?
One second. For the 9 months, it's about INR 6 crores positive.
Sorry, INR 6 crores?
Yes.
Okay. Okay. And you mentioned that this may soften up in the fourth quarter, given the firewall product deals?
That's correct.
The next question is from the line of Mohan Kumar, individual investor.
Congrats on a great set of numbers. Most of my questions have been answered. But if I may ask something a little out of the box. So when you're speaking to other funds around you, what is the biggest pushback you're getting with respect to what investors want to see or what the funds want to see with respect to company's performance?
If I look at the last few quarters, the company has consistently performed fairly well when it comes to whether it's top line or bottom line, but the stocks have not been that great. So I'm just trying to understand if that is something that you're hearing from investors that probably is facing a few flags here or there.
I think there are two ways to answer. So I think Gautam, he will answer -- let me answer and then probably he can answer. So honestly, we had great support from our investors. And I think we are getting support in terms of their inputs on different products which we launch. We always disclose with them also.
But I think how the market is behaving is something Gautam can answer your question. But definitely, we want to focus more on developing new products and try -- and we have the capability and the team now. And our focus is definitely going to be build something in-house and -- for a global market, which is exactly what we are building right now.
And I think most of the investors, they always try to see new things to build, that I think which we are doing. And definitely, they want to grow -- they want to see the growth from where we are going to -- which markets we are going to focus on and how we are going to define a strategy for those markets and what is our growth plan for those markets. And I think these are the few things which we keep on talking with them. And I think we're getting great support from all our investor as of now.
Gautam, you can just add to that.
Sure. And thanks for asking this query. I mean, honestly speaking, we've been really, really happy with the way we have been performing over the last, not only the last 2 quarters, but I mean last -- I mean, since we IPO-ed and even before IPO, I mean we're doing really exceptionally well. And we continue to tread this path.
Honestly, I mean, it's more than micro. I mean it's got more to do with macro. I think there are challenges in terms of what's happening, I mean, globally, I mean, in terms of the tech space. There are -- I mean, some funds where there are write-downs because of their tech exposure and other things. So that's leading to some amount of realignment in terms of their portfolio. So some of these things have definitely impacted in terms of little bit of supply and other things.
But hopefully, I mean, with things kind of moving, I mean, from a macro standpoint towards normalcy, things would start to kind of -- and we should definitely start to get [indiscernible] in terms of, I mean, the way we have been performing. Our aspiration, I mean, is to kind of reach $1 billion revenue. And I think we are working in that path at this point in time.
And from our run rate perspective also, I think we are now close to -- I mean, we should be very close to $0.5 billion run rate, I mean, by next year. And we're also kind of now contemplating few other strategic moves, I mean, which would help us accelerate our journey to $1 billion revenue. And with finger crossed, I mean, hopefully, the Street should start rewarding, I mean, our performance.
Do you have any further questions? We'll move to the next question, which is from the line of Swapnil Potdukhe, JM Financial Limited.
So my question is regarding the new product sales. So if I see your numbers for the last 3 quarters, the growth run rates have come down significantly if I were to compare that with the last year. Now the question is like despite this low base of revenue, why haven't we been able to increase that growth run rate? I mean we are at 20% -- 19%. I think, if I see previous quarter, we were 8%. Is there a possibility that we can see some improvement going ahead here?
Definitely, yes, Swapnil. We are -- I think we do have an internal target for our sales people to focus more on new products in the global market. We are onboarding customers on [ WhatsApp ] not only in India, in Indonesia, in Middle East and in Africa also. So in the coming quarters, we will see the impact of growth in all the new products, including some of the products which we are building.
Can we expect that to go beyond this 15%, 20% that we're growing right now?
Definitely, yes. Definitely, yes.
In fact, just to add to Rajdip's point, I mean, the modus operandi for us going forward, I mean, is to create strategic business units. And I mean like the U.K. entity that we have started and formalized, the intent will be, I mean, for various other such new products to create dedicated teams to drive the core business.
And we believe, I think in days to come, I mean, the growth rates should only accelerate. I mean at the beginning of last year, I think we had guided almost doubling our revenue from $10 million of revenue. I think we are on track to achieve it. And now with this e-mail, I mean the platform upgrade, I think the e-mail trajectory also should start to kind of show good traction.
Okay. And the second question is with respect to the gross margins. Now given the new deal wins and expansion in some of the geographies, increase in ILD messaging, how should we start looking at your gross margins in the near-term?
So I said, see, I keep on telling you, on my previous call also that we are definitely looking to add new product revenue to our portfolio. And in coming days, we have the aspiration to increase our [ repeat ] from 25% to 30%, and we are working towards that.
In coming quarters, we will definitely try to achieve this number. As we are in very early stage and when I say the omnichannel adoption of -- this new channel of communication adoption ratio is very slow. And the way it is growing, and I think we are onboarding multiple customers every single quarter on different products, and we do see a lot of traction happening on it. And we do have internal targets for ourselves that to how to increase our GP in coming quarters down the line, and we are working towards that. And we will definitely see an increase in GP in coming quarters.
Will it be possible to quantify in some sense?
You need to also understand, Swapnil, we are working in different geographies, right? We work in the Africa geography, which is definitely very low in terms of GP. But if you go to Latin America, that is more than 35% GP. We work in certain markets where GP is almost, say, 14%, 15%.
So we are not just based on 1 country and 1 set of customer, [indiscernible] we can actually give a guidance for a GP. What we are trying to say out here is that we are definitely working on the product mix, which will increase our GP in coming years -- the coming quarters on the line.
Okay, sure. And just one last follow-up question around how should we think about the organic growth trends? If I were to exclude your firewall deals, there have been some of the sectors or competitors who have started calling out recessionary pressures. So in that sense, would we be able to continue to grow at around 30% that we have been growing right now? Or we should start looking at some tapering off there?
So Swapnil, if you see our growth in the last 5 years, we always increase by [indiscernible], 30%. And we will try to grow that rate. And again, the question is the product mix or other things. And I think, probability is we'll see there's a growth also, which Gautam already mentioned.
And we are still doing some of the integration with some of the large Indian banks, which is happening as we speak. Probably that traffic will make in this quarter or next quarter, probably we see the growth in those as well.
That was the last question for today. I now hand the conference over to Mr. Rajdip Kumar Gupta for closing comments.
I just wanted to thank you everyone. Thanks for your time, and have a very good evening. Take care.
Thank you.
Thank you. On behalf of Route Mobile Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.