Affle 3i — Q2 FY25 earnings call

Call held 11 Nov 2024

Management summary

Affle delivered a landmark performance in Q2 FY25, hitting record highs across revenue, EBITDA, and PAT. The company is successfully navigating global markets with balanced growth between emerging and developed regions. Management is heavily focused on GenAI integration and premium inventory placements to drive margin expansion and long-term sustainable growth.

Highlights

  • Achieved highest-ever quarterly revenue of ₹5,429 million, representing 25.9% YoY growth.

  • EBITDA reached a record ₹1,133 million, up 29.9% YoY with a margin of 20.9%.

  • Profit After Tax (PAT) grew 37.7% YoY to ₹920 million.

  • CPCU business delivered 95 million conversions at a rate of ₹57.1, with CPCU revenue up 35.2% YoY.

  • Developed Markets showed robust growth of 27.5% YoY, contributing 26.6% to total revenue.

  • India and Global Emerging Markets grew 25.3% YoY, contributing 73.4% of revenue.

  • Operating cash flows for H1 FY2025 stood at ₹1,459 million with an OCF-to-PAT ratio of 81.7%.

  • Management reaffirmed guidance for 20%+ revenue growth and even higher EBITDA/PAT growth for FY2025.

Key financials

  1. Revenue 5,429 Mn +25.9%YoY
  2. EBITDA 1,133 Mn +29.9%YoY
  3. EBITDA Margin 20.9%
  4. PAT 920 Mn +37.7%YoY
  5. CPCU Revenue 5,416 Mn +35.2%YoY
  6. CPCU Rate ₹57.1

What they filed

Q1 FY27: revenue up 20.3%, net profit up 20.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue543 602 602 621 647 +19%717 +19%724 +20%747 +20%
EBITDA113 131 134 140 146 +29%163 +24%161 +20%168 +20%
Net profit92 100 103 106 111 +21%119 +19%120 +17%128 +21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue ContributionRevenue Growth
India & Global Emerging Markets73.4%25.3%
Developed Markets26.6%27.5%

Guidance & targets

Revenue

  • Annual Revenue Growth Revenue · FY2025 · High confidence 20%+
    we are confidently on track to deliver 20%+ revenue growth in FY2025 and even higher growth in terms of EBITDA and PAT this year.

    — Anuj Khanna Sohum, MD & CEO

Profitability

  • EBITDA and PAT Growth Profitability · FY2025 · High confidence >20%
    we expect strong profitable growth for the company, that is stronger than the revenue growth with margin expansion.

    — Anuj Khanna Sohum, MD & CEO

Other

  • Long-term Topline CAGR Other · Next 5 years · Medium confidence 20%
    if you do a 5-year modelling for our company and look at it on an annual compounding of top line at around 20% and bottom line at around 25%.

    — Anuj Khanna Sohum, MD & CEO

Margin

  • Effective Tax Rate Margin · FY2025 · High confidence 18.9%
    As guided in Q1 FY2025, we see this effective tax rate to be the normalized tax rate for us.

    — Kapil Bhutani, CFO

Risks & concerns

  • Inventory and Data Cost Calibration

    medium

    Costs stood at 61.1% of revenue as the company shifts toward premium inventories and deeper OEM partnerships.

    Management acknowledged

  • Real Money Gaming (RMG) Recovery

    low

    Management notes the segment is evolving and has a 'more robust foundation' after the GST-related shake-up, but hasn't fully bounced back to previous levels.

    Analyst acknowledged

  • Ad Latency in CTV

    low

    Management believes tech challenges like latency will be overcome and views CTV as just one of many consumer touchpoints.

    Analyst downplayed

Areas of evasion (1)

  • Specific breakdown of revenue share vs. bidding-based inventory buying (cited as trade secret).

Q&A highlights

3 direct
Impact of US Antitrust Legislation Direct
The thesis is clear that we are net-net seeing a more bullish outlook towards the non-walled gardens. It is not only the antitrust issue... but also the data privacy laws... Platforms like Affle would actually benefit much more.

Clarifies that regulatory pressure on 'walled gardens' like Google/Meta creates a tailwind for independent ad-tech platforms like Affle.

Asked by Deep Shah, B&K Securities

Increase in Intangible Assets Direct
The investment in the YouAppi platform started in quarter 2 last year... we had marked about 50% of our capital raise in the preferential capital towards developing the GenAI technology over a period of time.

Explains the balance sheet spike as a strategic investment in GenAI and platform integration rather than just capitalized costs.

Asked by Swapnil Potdukhe, JM Financial

Seasonality and H2 Outlook Direct
October, November, December is typically the best quarter of the financial year for us. Last year, we were able to beat our Q3 performance in Q4 and this year again, we are keeping similar outlook.

Confirms strong momentum heading into the festive season and suggests Q4 could potentially outperform Q3, contrary to historical seasonality.

Asked by Ashwin Mehta, Ambit Capital

1 min read 5 chapters

Detailed narrative

Record-Breaking Quarterly Performance

Affle achieved its highest-ever quarterly revenue of ₹5,429 million in Q2 FY25, a 25.9% YoY increase. This growth was mirrored in profitability, with EBITDA rising 29.9% to ₹1,133 million and PAT surging 37.7% to ₹920 million. The company's CPCU (Cost Per Converted User) business remains the primary engine, delivering 95 million conversions at an expanded rate of ₹57.1.

Strategic Expansion in Developed Markets

Developed markets outperformed the company average with 27.5% YoY growth, now contributing 26.6% of total revenue. Management attributed this to strategic realignment and platform consolidation efforts, particularly the successful integration of YouAppi. This diversification helps de-risk the business from over-reliance on any single geography like India.

GenAI and Intellectual Property Moat

Affle is aggressively investing in GenAI, having filed 15 unique patent applications related to the technology. These investments are already yielding results in vernacular content creation and operational efficiencies. Management expects GenAI to drive further margin expansion by increasing employee productivity without a linear increase in headcount costs.

Premium Inventory and Margin Trajectory

EBITDA margins expanded by 65 bps YoY to 20.9%, driven by a shift toward premium inventory placements and direct-to-advertiser relationships (which now account for over 70% of business). While inventory and data costs remained stable at 61.1% of revenue, management anticipates further efficiencies in these costs over the next 2-3 quarters as platform integrations mature.

Long-Term Growth Roadmap

Management provided a bold 5-year outlook, modeling a 20% topline CAGR and a 25% bottom-line CAGR. They expressed high confidence in beating competitors in emerging markets due to their 'on-the-ground' presence compared to global giants. The company remains open to calibrated M&A, targeting acquisitions that can reach 20% EBITDA profitability within the first year of integration.

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