Brainbees Solutions Limited — Q3 FY25 earnings call

Call held 8 Feb 2025

Management summary

Brainbees (FirstCry) delivered a milestone quarter, turning PBT positive for the first time since listing. While top-line growth in Q3 (14%) was slightly moderated by a delayed winter and the advancement of festive spending into Q2, the company showed strong margin expansion across all segments. Management remains focused on long-term unit economics and 'Page Industries-like' profitability, despite increased competitive intensity in the Middle Eastern market.

Highlights

  • Achieved first-ever consolidated Profit Before Tax (PBT) positive quarter at ₹6.9 crores

  • Consolidated Adjusted EBITDA reached an all-time high of 6.4% (₹138.5 crores), up 30% YoY

  • India multi-channel Adjusted EBITDA margin expanded to 11.2%, the best in four years

  • 9M FY25 Revenue from operations grew 19% YoY to ₹5,729 crores

  • Consolidated Cash Profit After Tax for Q3 stood at ₹94.1 crores

  • Annual Unique Transacting Customers (AUTC) grew by 17% across India and Middle East

  • Gross Margins improved significantly to 37% in Q3 FY25 from 34.5% in Q3 FY24

  • Globalbees segment showed continuous improvement with Adjusted EBITDA margin rising to 1.4%

Concerns

  • Aggressive Horizontal Competition in Middle East

Key financials

3 periods

Headline

  • Adjusted EBITDA Margin (Consol)
    6.4%

Q3

  • Adjusted EBITDA
    ₹138.5 Cr
    YoY +30%
  • Cash Profit After Tax
    ₹94.1 Cr
    YoY +25%
  • Gross Margin
    37%

9M

  • Revenue from Operations
    ₹5,729 Cr
    YoY +19%

What they filed

Q1 FY27: revenue up 14.7%, net profit up 633.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue596 711 616 591 711 +19%750 +5%680 +10%678 +15%
EBITDA16 49 20 3 41 +156%28 −43%27 +35%25 +733%
Net profit7 38 15 3 28 +300%46 +21%32 +113%22 +633%
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

  • India Multi-channel
    11.2% Adjusted EBITDA Margin₹169 Cr Adjusted EBITDA17% AUTC Growth (9M)
  • International (KSA & UAE)
    13% Revenue Growth (Q3)-15% Adjusted EBITDA Margin11% GMV Growth (Q3)
  • Globalbees
    29% Revenue Growth (9M)1.4% Adjusted EBITDA Margin
  • Education (Preschool)
    35% Revenue Growth (9M)23% EBITDA Margin

Guidance & targets

Margin

  • India Multi-channel EBITDA Margin Expansion Margin · per year · Medium confidence 150 bps+
    in a long journey of next four to five years you will continue to see our margin expansion because our levers for margin expansion pretty much remain the same.

    — Supam Maheshwari, MD & CEO

Market Share

  • Industry Growth CAGR Market Share · next 4-5 years · High confidence 13-14%
    the overall industry is going between 13 to 14%... we have been compounding at a far higher clip than that and our internal obviously aim is slightly higher.

    — Supam Maheshwari, MD & CEO

Risks & concerns

  • Aggressive Horizontal Competition in Middle East

    high

    Two new horizontal e-commerce players in UAE/KSA are splurging on promotions, impacting FirstCry's short-term growth in the region.

    Both acknowledged

  • Delayed Winter Impact

    medium

    Delayed winter in India moderated high-margin fashion and winter wear sales in Q3.

    Management acknowledged

  • Stagnant Average Order Value (AOV)

    medium

    GMV and Order growth both being at 17% suggests stagnant order values; management attributes this to seasonal category mix.

    Analyst downplayed

Areas of evasion (2)

  • Specific timeline for Middle East break-even given new competition.
  • Specific basis point target for India margin expansion in the next 12 months.

Q&A highlights

2 direct
India Margin Expansion Trajectory Partial
We still have grown 70 bps, on a nine-month basis... maybe we would have had a higher sort of a cohort leading to more higher sales [without the winter impact].

Analysts are concerned that margin expansion is tracking below the previously stated 150bps annual target.

Asked by Percy Panthaki

Competitive Intensity in Middle East Direct
There were two new Horizontal entrants into the market... splurged and created a lot of promotional activity. We consciously stayed away from these elevated promotional activities.

Reveals a strategic choice to prioritize margins over market share in the face of aggressive new e-commerce competition in the UAE/KSA.

Asked by Sachin Dixit

COCO Store Closures and Quick Commerce Direct
For our offline stores, quick commerce is not a right comparison... these [38 closures] are largely set of Babyhug stores... suboptimal outcome in terms of the footfall expectations.

Management clarifies that store closures are due to real estate/catchment issues rather than disruption from quick commerce.

Asked by Sudhir

2 min read 5 chapters

Detailed narrative

Profitability Milestone and Cash Generation

Brainbees achieved a significant milestone by reporting a consolidated PBT of ₹6.9 crores in Q3 FY25. This was supported by a robust consolidated cash profit after tax of ₹94.1 crores. The company's focus on unit economics is evident in the consolidated Adjusted EBITDA margin, which reached an all-time high of 6.4%, up from 5.6% in the previous year.

India Multi-channel: Efficiency Over Expansion

The core India business saw Adjusted EBITDA margins expand to 11.2% in Q3. Despite a 70 bps expansion in 9M, management admitted they are tracking below their 150 bps annual ambition due to seasonal headwinds. Interestingly, the company closed 38 COCO stores for the first time as a 'cleanup' exercise to optimize footfalls and wallet share, while still adding 115 stores on a gross basis during the 9M period.

International Headwinds in the Middle East

The International segment faced a challenging Q3 with revenue growth of 13%, impacted by two new horizontal e-commerce entrants in the UAE and KSA. These competitors engaged in 'elevated promotional activities' during Singles Day and Black Friday. FirstCry chose to stay away from these promotions to protect margins, resulting in a slight moderation of growth but an improvement in Adjusted EBITDA from -16% to -15% YoY.

Home Brand Dominance and Margin Levers

Home brands like Babyhug continue to be a primary driver for gross margin expansion, which improved to 37% in Q3. Management noted that home brand share is growing at a higher CAGR than the overall India multi-channel business. This strategy, combined with better negotiations with third-party brands and a higher share of COCO sales, remains the key lever for reaching long-term profitability goals.

Globalbees and Education Segments Scale

Globalbees reported a 29% growth for the 9M period and a significant jump in Adjusted EBITDA from 0.6% to 1.4% in Q3. The Education business (franchisee preschools) also showed strong momentum with 35% growth in 9M and healthy EBITDA margins of 23%, proving to be a profitable, asset-light addition to the ecosystem.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Services earnings calls