Ladies and gentlemen, good day and welcome to the Apple India Limited's First Quarter FY 'twenty two Earnings Conference Call hosted by Dollar Capital. As a reminder, all participant lines will be in the listen only mode, And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dollar Capital.
Thank you, and over to you, sir.
Yes. Hi. Thank you, Shansu. Good morning, everyone. On behalf of Dalat Capital, we welcome you all to the Q1 FY 'twenty two conference call of Apple India Limited.
I take this opportunity to welcome the management of Apple India Limited represented by Mr. Anuj Panasoham, his Chairman, Managing Director and CEO of the Company and Mr. Kapil Bhutani, who is Chief Financial and Operations Officer of the company. Before we begin the discussion, I would like to remind you that some of the statements made in today's conference call may be forward looking in nature and may involve risks and uncertainties. Kindly refer to Slide 21 of the company's earnings presentation for a detailed disclaimer.
I will now hand over the call to Mr. Anuj Panasuram for his opening remarks. Over to you.
Good morning, everyone, and thank you for joining the call today. I trust all of you are keeping in good health. We celebrated our 2nd IP anniversary on August 8, 2021, and what better way to mark the anniversary than to conclude the quarter with our highest revenue, highest conversions, highest PPC rates and highest cash on our value sheet, anchoring our continued focus on sustainable long term value creation. We achieved approximately 70% year on year revenue growth in Q1, comprehensively beating our Q1 CAGR growth trend of 41%, which is well above the industry average growth trend. We attained INR 120 crores plus quarterly revenue and further strengthened our position in the ecosystem with enhanced platform and product capabilities across the global emerging markets.
Our Apple 2.0 strategy anchored on the 2 Versus is enabling us to unlock innovative vernacular consumer experiences in partnership with mobile OEMs and operators across emerging markets and driving deeper verticalization for our advertisers across the E, F, G, H industry verticals. As a result, our direct customer contribution has grown to 71% of our revenue in Q1 FY 2022. Our investments across products and platforms are performing very well, contributing meaningfully to overall growth and enabling us consistently stay ahead of the curve by fortifying our market position. Our scalable platform has consistently delivered profitable outcomes, resulting in healthy margin and cash flow positive operations. The world is undergoing a paradigm shift with accelerated connected experiences, redefining the digital priorities of advertisers globally and especially across emerging markets.
We are optimistic of the emerging industry trends, and we continue to disrupt both traditional and digital marketing business models by leveraging artificial intelligence and machine learning capabilities to drive user engagement and conversion across the connected devices. We pride ourselves for our differentiated ROI linked TPCO business model. And to elucidate this, we also included the overview of 3 emerging market case studies in our earnings presentation for India, Indonesia and Malaysia. We look forward to taking you through our platforms and case studies during the Analyst and Investors Day that we plan to organize later this year itself. Absolute delivered a broad based growth coming from both India and international markets.
Our CPCU business model and business noted a strong momentum delivering 31,500,000 users conversion during this quarter, an increase of 85% year on year at a healthy INR42 PPCU rate. Our India and international contribution balance at about 50%, 50% each will see a change in favor of international from the next quarter due to the consolidation of JEM and our greater on ground presence in the TAM. Our efforts towards enhancing our team globally and building local on ground presence in key international geographies are paying off well and will augment the next level of growth in the long term. As in this quarter, while India faced a devastating second wave of COVID-nineteen, the resilient nature of our business enabled positive growth trajectory. I'm extremely grateful to all the athletes who not only ensured continuity of growth business plans, but also helped the company provide support to local communities during such times in crisis.
Apple is committed to nurturing a culture that drives innovation, thought leadership and collective growth. Keeping with our record and trends of recognition in Axlex, Apple, which is already a great place to work, certified, also received a special badge of honor, commitment to being a great place to work. We are focused on our strategic goals, executing on our long term priorities and investing wisely. We are also proactively adopting ESG to drive to deliver all round sustainable growth to all our stakeholders. With that, I'll now hand over this discussion to our CFO, Satubu Ghani, to discuss the financials.
Thank you, and over to you, Gato.
Thank you, Anuj. Wishing everyone a good day and hope all of you are keeping safe and well. I would like to thank our investors for supporting the company during its QIP. Our strong cash flow and balance sheet with highest cash balance as of date will ensure that the company continues to invest to drive long term sustainable growth through innovation, market expansions and consolidations. In Q1 FY 2022, the company devoted revenue from operations of 1525,000,000 dollars a growth of 69.8 percent year on year.
Our EBITDA for the quarter stood at 351 $1,000,000 an increase of 56% year on year and in terms of OpEx and inventory and data cost was at 58% of the revenue from operations in the previous annual trends. You would have noticed that our employee cost sequentially increased by 14.5 percent, this trend continues from past few quarters as we are enhancing our teams to deepen our access across global emerging markets. We have made any additional investments during this quarter in our strategic minority investment which continues to grow and we have recorded gain on fair valuation of our investment during the quarter. To provide clarity on our business operations, we have normalized profit after tax for the one time item in our earnings presentation uploaded on the stock exchanges. Our profit after tax for the quarter stood at $357,000,000 and year on year increase of 90.3%.
Normalized profit after tax after adjusting the gain for any investments was $295,000,000 an increase of 57.2% year on year. We remain focused on working capital management even during the 2nd wave of COVID our collection assets were resilient. Our cash flow from operation was 396,000,000 and the operating cash flow to PAT ratio was 134.2 percent which shows quality of our customers and robustness of our operations. With this, I would like to end our presentation. Let's please open the floor for questions.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer The first question is from the line of Rahul Jain from Dollop Capital. Please go ahead.
Yes. Hi. Congratulations on strong quarter and also touching the record, CPC and conversions. So I would like you to enlighten us on how our business is shaping on a couple of dimensions, such as changing privacy policies, increased shift of media budget towards digital, any specific vertical within E and G H that is driving your momentum? And also the pricing trend, both in terms of our CPC rate and the inventory costs across key markets?
Thank you for your question. Well, privacy policy, as I have mentioned in our, I think, JAMS specific investors call that also happened, I think there a good amount of discussion on that. We see this as a long term trend, which has already got some history to it. If you see the Personal Data Protection Act in Singapore or GDPR, it has been around for several years. And what these regulations do is provide the consumers the opt in and opt out mechanism at any point in time that the digital ecosystem must honor and comply with from a regulatory requirements perspective.
Then when we see further the privacy policies and what is the impact on what's happening on the larger Internet specific ecosystem, say, what's happening on Ios or what's happening on Android, what's happening on the browser and the cookies, I think what we need to look at is, 1st and foremost, the fundamentals of this business. The fundamentals are like this. The consumers are on digital screen. The advertisers are shifting the budgets comprehensively towards digital. The regulation comes in and says, please, all ecosystem players, you need to respect the consumer data and deal with it in a proper responsible manner, take consent, store it properly, share it properly and do not misuse it, right?
So this is the overall framework within which Apple takes a certain stance and says, okay, what am I going to do with respect to the cookies on the browser? And Apple took a stance on that many, many years ago. Google also responded many years later, and Google has still not done anything on the cookies yet. But the ecosystem is responding for sure to these kind of large assents. And Apple's business is deeply insulated from anything to do with the browser or anything to do with cookies on the browser because our business is not dependent on that, right?
While our privacy policies and all are fairly comprehensive and they'll cover it, but the investors need to know that Apple's business is deeply anchored on the in app ecosystem, deeply anchored on emerging markets where the consumers are decisively using Android as their platform of choice and iOS impact on emerging markets is miniscule. So overall, Apple's business is deeply anchored on the on device and the in app ecosystem. The on device ecosystem works in partnership with OEMs and carriers, and there is a fair amount of control and emphasis that the OEMs and carriers also have beyond just accepting a standard version of Android because they have control over the version of the OS and the experience and what happens on the device. And we are deeply partnering with operators and OEMs around the world to make sure that we have that shared influence on the ecosystem play and our position is strong there. We're also looking at the Android ecosystem very closely and seeing that, hey, let's look at how has Google responded on the cookies, which has been an issue that has been around for many, many years.
And we know that the cookies on Android or Google Ecosystem is only going to have some variation or change in 2023 or so. Now what's going to happen on the devices? And what is already happening on iOS, if you look at Apple rolled out set and changes, it requires a much more clearer consent from consumer on iOS devices. And we have seen that the digital ecosystem, whether it is a larger company, and most of them have reported results already, have actually done phenomenally well. And they are all anchored in a market like North America, where iOS contribution is almost 50% of the total market share.
So what we are seeing is that the digital spends of the advertisers are continuing to grow in developed markets as well as in emerging markets, irrespective of the need for greater consent. Apple's overall position and outlook is that every single jurisdiction in the world and every single platform, digital platform, will need to comply with privacy regulations. And we are already showing signs that Apple that we have brought our platform, the credited as the Singapore standard with respect to the Personal Data Protection Act and other aspects. And we are ready for these regulations to come across emerging markets as well. Mean, whether it's India, Indonesia, Africa, LatAm market, all of these jurisdictions in the next 3, 4 years will have regulatory policies as well as some opt in mechanisms on iOS and Android.
But the fundamentals of business are like this. The consumers have a choice. Do I opt in and take ads and take enjoy an app or a service for free? Or do I predict ads and be willing to pay? And I think the balance of trend would lie in favor of a lot of the consumers, especially the reviews as well as the rural consumers who are going to continue to view the next 1,000,000,000 devices or the next several 1,000,000,000 devices will necessarily, in my view, go for opting in.
And so the trend will continue to see that the advertisers and consumers will post go for digital advertising and provide their necessary options and compliance. In terms of digital budget shifting, I think I've already answered. I think the consumers are clearly married to connected digital devices. Advertisers will necessarily need to shift. In my view, at least 50% of the total ad spend must happen on digital devices across emerging markets as well.
And we will see continuous CAGR growth on digital advertising spend growing. In terms of our focus on which verticals will deliver better growth, our view is overall in the top 10 verticals that Aspen has anchored over 90% of business on, which is category B, F, G, H, we have seen consistent growth across these verticals and advertisers large and small in these industry verticals adopting digital much faster than what we have seen in the previous times, and that's reflected in our growth. I mean, it's clearly the advertisers are bringing in more budget, wanting more. And we have also seen the innovations that we are delivering that it's not just online conversion, it's not just new online conversions, but repeat online conversions. We're also seeing offline conversions and some of the case studies or reviews that we have shown in our earnings presentation will give you some flavor of what's happening so that gives you a sense of where this is headed.
In terms of PPCU trend, achieving INR 42 PPCU, which is our highest, is actually very comparison. Given the fact that volumes are growing. And volumes obviously growing because record number of conversions at notionally higher, but still important to see that it's INR42 if you see and it's not INR42. And as we grow our business into more international markets as well as make decisive, certain vertical focus impact on developed markets, I think the C2 rate will see a positive upward lift progressively just because of the market dynamics and mix. And we are in a value driven business.
We are not a cost plus business model. We look at ROI linked pricing. We look at ROI linked value creation for the advertisers, and we are fundamentally adding value to our customers. And therefore, we command a fair share of that back. And as volumes continue to grow, we keep pushing and nudging our ability to extract higher LTVQ rates from advertisers as well.
So I'm pretty bullish about the overall sense and the sustainability of our growth and bottom line performance over the long term.
Mr. Jain, do you have any further questions?
Yes, sorry. So just on this CPCU trend of of course, through higher international exposure will definitely increase. Will that be applicable to JAMF integration as well?
Well, absolutely. I think JAMF is largely present in LatAm and America in certain key verticals. And we, as our own platform, would comprehensively enhance their capability to go for deeper ROI linked business model. And that would necessarily help not just improve the DPC rate, but JAM's own margin profile and profitability over time. So as we continue to do what we have already done very well with AppNex and MediaSmart, which is not just acquiring, but fundamentally adding value at a platform level, at a business model level and then at an operational level to be bottom line and margin centric and focused.
I mean, our organization is deeply focused. I mean, we don't leave, if possible, even a single cent on the table, right? I mean, we are going to negotiate. We're going to be tough, and we're going to not just fight for growth, but also for defending margins and delivering cash flow positive performance as you have seen consistently from us. So that is what we will impact into the lives of JAMF, and we will see great outcomes, I'm sure, in the current financial year itself.
Sure. Appreciate that. I'll jump back in the queue.
Thank you. The next question is from the line of Mohan Kumar from GM Financial. Please go ahead.
Okay. Congrats on a great set of numbers. My first question is 3, 4. We've seen a really strong Q1. What is the organic growth rate that we can actually expect for this year?
Will JAM actually have now better run rate than they had last year, given that they've finished like 1 month of having chances. But do we have some clarity on whether the revenues will be higher than last year? And the final question is with respect to the connected TV apps that you have, you guys have signed a couple of clients over the last couple of months. And with Jamf kind of giving growth into the U. S.
Where connected TV is a bigger ecosystem, can we expect a larger growth rate over that over the next year or so?
Great questions. Thank you. Indeed, Q1 has been a fantastic quarter for us. And typically, if you see our quarterly growth trends, organic growth trends, you would find that Q3 is generally the peak of our performance in any given financial year. So Q1 and Q2 is higher and then Q3 is the highest and the Q4 is somewhere between where Q2 or Q1 were.
And so overall, within this year, we should see very healthy organic growth without JAM. And then when we look at JAM getting added, you're absolutely right in inferring that with Apple onboarded, we will definitely look at, 1st of all, unit economics of Gen, at what CPCU rate can they sell, what kind of conversion can we drive and extracting higher value on unit economics and turning it fundamentally profitable at each unit economic sort of assessment and then pressing the accelerator for growth, right, because we as an organization are looking for all around well balanced growth, not just driving revenue growth and revenue growth and not impacting the bottom line profitability and connection. So we will, 1st and foremost, focus on JAM's unit economics and then there'll be accelerator for growth, and that's our strategic execution part. My aim would be to grow it better than whatever they did last year on top line as well as improve the bottom line substantially. And I've given some guidance on that in the GAM specific call the last time in terms of what our ambitions are with them.
With respect to Connected TV, thanks for bringing it up. This has been our organic investment into the Connected TV product because we have already verified and done the feasibility in partnership with certain customers and campaigns to ensure that this is already revenue generating and that we can run it profitably. And doing that in emerging markets where connected TV is at a very, very nascent stage today. I can safely say that we are thought leaders, first movers in bringing this out for the advertisers and the partners in the ecosystem. So our focus will continue to be on Connected TV across emerging market spread because that has always been our first execution ground and we've got a very emerging market focus.
When should we take these new initiatives onto Jant? I think we will give it some time. Let us first ensure that the core business Pajant is upgraded with the Apple 2.0 strategies on verticalization, going deeper on vernacular, going on operator OEMs and verticalizing it to get the CTCO business and the margin profile going. Once we solve and put jam on that growth trend, we can also incrementally add whether with jam for our own on ground presence and develop markets on Connected TV. But let us build the Connected TV success in emerging markets as part of our strategy.
That's how we are executing. This is our home ground. This is where we are strong.
Thanks a lot, sir. And just a follow-up question. So you mentioned that cash on the books is the highest it's ever been. You still have some proceeds left from the QIP. Can we expect announcement of a deal over the next quarter?
Or I don't want to put you in situation, but you've got to say something new that you don't want to. But can we expect a new announcement of an acquisition, Saito Do 1, in the near term? And we've been reading a lot about the end of service battle that has kind of phased out. So I just want to kind of hear something from
the bosses now on where are we there and are
we actually planning to buy the end of the quarter completely? I mean, if there's something you can't share, I'm more than happy to kind of land the slide.
Well, having a strong balance sheet is important. I think it builds confidence But if you look at the But if you look at the history of our company, all our investments have been largely funded through internally accrued cash flows. And I love the discipline of the way the organization has executed on that. And just because we have cash from QIB, there should be no added pressure to go ahead and deploy it. But the reason why we did the QIP was because internally, we already knew that JAMF was breaking up and this would be useful to have done at that time and the timing was perfect.
We raised the QIB in the 1st week of May and we announced the JAM agreement signing on 9th June. So you can see that we raised money just in time and deployed it with efficiency in a deal that was very sensibly balanced. So is there any other deal that will come in the future? Certainly. Is there any time horizon, this financial year, next financial year?
We'll wait and see. But what I want you to know is that we are only doing strategic transactions, very carefully calibrated, and we are deploying this money as if it is generated through internal accruals and cash flows, very, very careful in terms of how we saw any investments, whether it's internally on our products or externally on inorganic acquisitions. With respect to Industrials, given that this is an Apple India Limited call, let us all be absolutely clear that Apple India Limited has fully exited its position with respect to industrial waste. Any battles that are being pursued are strictly being done by the promoter group companies, Apple Global Private Limited, and I'm not authorized to speak on that. It would suffice to say that Apple India is a pre exhibit from industries, carries absolutely 0 list with respect to any legal cut throughs that are going on.
And in business, not everything goes as planned. I guess, in this world, could have been scripted as a different story, but it is very good. And I mean Apple is going to be tough. It's going to continue to focus on its own business and let Apple Google primary do what it must do and let the course of the laws of the land decide where it falls eventually. But that's all I would like to say for now.
It would suffice to say I'm quite happy with where things are overall.
So definitely, I worked on a great set of numbers and all the best of future quarters. Thanks a lot. Just to clarify, Amit, one question was there. There is no revenue from JAM recorded in this quarter. JAM consolidation will happen only from 1st July.
So the question was making a sense that we have 1 month of JAMK in our results. There is no JAMK inclusion in our results.
So I get that. I was mentioning that we are done. We closed it at the end
of June and we've got one month to get some clarity on how JAMK is going to play out for the rest of the year. Thanks for the clarity. Thank you, Himans. All the best.
Thank you. The next question is from the line of Richard from Nomura. Please go ahead. Richard from Nomura, your line is unmuted. Please unmute the line from your side and proceed.
Maybe we can take the next question and come back to Richard later.
Sure. As there is no response, we take the next question from the line of Vikash Mantri from MoonFort Ventures. Please go ahead.
Hello. Very good morning. Thanks, Anuj, for a great set of numbers and congratulations to you and you are delivering consistently a good outcome. I have very small question that what is the churn rate of our customers?
Well, let me answer that with the 2 lenses. We are an ROI linked CPCU business model business, which means that we work with customers and campaigns with a very clear disclaimer to them that look, I'm only going to drive your campaign and to the extent that I'm seeing healthy conversions with consumers. And if any advertisers campaign is onboarded and we keep advertising and the consumers are somehow not converting for that particular advertiser, Apple would essentially go back to the advertiser and say, look, I can't be running your business. I'm not getting enough conversions with consumers. So we are a consumer platform company.
And as a consumer platform company, we have a very wide basis of access and reach to consumers. The advertisers whose campaigns are performing well with us are seeing clear ROI linkage. And therefore, there is an extremely high recurrence and retention rate. Having said that, we do not promise any particular customer any minimum conversions on a recurring basis because of the nature of our business model. We basically go for driving the campaign and see how the consumers convert and respond and optimize for maximizing that.
But there is absolutely no minimum commitment with an advertiser or something like that. So the advertisers who have been generate by the conversions that we drive have been necessarily working with us multi years, quarter on quarter and so on. And we are seeing a very, very strong retention trend. We haven't given out any specific numbers. But you would see this particular time, we have given one very important trend, which I think is a mega trend in our industry and it's a very important trend to note even for us, and we monitor it rather closely, which is related to the direct customers' growth, primarily, which is powered on the ESBS categories.
What this means is that the number of advertisers who are working directly with Apple, not through some other intermediary or agency. And therefore, their data and the 1st party data that you're receiving from these advertisers is direct with us is 71% of our revenue. This is this used to be in FY 2020 about 57%. And before we went public, FY 2019, I remember it was much higher. So I think the over the last two and a half years, we have seen a systematic shift where we are able to work directly with our advertisers and the trend has been even more clearly established during the COVID times where the advertisers are coming direct and working with our platform.
This is a very, very healthy trend and this should give you an indication with respect to the quality of customers and also the cash flow should give you an indication that we are largely collecting significant amount of our profit is getting collected in cash flows. So it's a very, very good quality of business overall. That's right. But still can
you give me the number of retention? It's over 97%, 98% what is about it? Can you give this? Let
me work with the approval of our Board and see when do we start revealing it on a consistent basis with respect to customer retention and cohorts and so on. But at the moment, we are where we are, and I try to give you the answer so that you can derive comfort from the numbers that are already reported.
That's right. Thanks, Anuj, for making such a great company, at least from India. And only last question is that how many of our customers are VC funded and others are normal?
Okay. This is a great question. I gave you the qualitative insight. So most of the times, we are working with larger enterprises, and we also work with a long tail of customers. But we're prepared to say that our company has always been done with a very comprehensive risk management framework.
So we don't take deep exposures with customers who are dependent on the next round of funding or something like that. Most of our customers are large customers or a significant part of our revenues is coming from those customers, which you and I would qualitatively assess that these companies would still be around for the next 5 years. So I think we have a very safe profile of customers. And before we take on bigger business or volumes growth from any customer, we do this risk assessment on creditworthiness. So you can be assured that Apple is when it reports revenue, it is doing it with lens of collecting it.
Thanks a lot, Anuj, for doing the great work and lifting thoroughly, and we are really beneficiary of that. Thanks a lot.
Thank you. The next question is from the line of Prashant from Nomura. Please go ahead.
Hi. Thank you for taking my question. Congratulations on the question for the
story.
So a couple of questions, right? One is related to the AppianX ecosystem. You've done a couple of acquisitions and one acquisition and one investment, right, which
is the Covertec and Bobley. Layer. Could you just help us understand what is happening in those areas?
Do you expect traction to come from these acquisitions? And any color on monetization strategy would be super helpful there? Color for you.
Sure. So when we look at Apple's overall business, when I was answering all the earlier questions, I made 2 very distinct points, and I would like to revisit them. First was on device engagements with consumers as part of our consumer platform. What does on device engagement mean? It means that we work with OEMs, we work with operators to make sure that our software and our ads and content and recommendations to consumers can be deeply integrated on the on device experience of the user at multiple touch points across the journey of the consumer on the device, even before the consumer has gone and launched a specific app that they have installed and is used by them on their device.
And then the second part of the ecosystem is what is called the in app ecosystem. And the in app ecosystem is when we are reaching and engaging with the consumers while they are using 1 or the other app on their device, which means that we now need to work with the app developers through ad exchanges, programmatic traffic or premium app developers through direct integration of our SDKs or through API server to server integration. So we have the entire technology stack to then work on the in app ecosystem. Now both of these ecosystems are very closely linked because the same customer is on the same device. And it's actually a continuous journey.
You open your device, you navigate through your device, you find an app and use the app, you close that app, you're back on the device. Again, you go to another app in some other folder and so on. So as a consumer journey is the natural interconnect between on device experience and in app experience, back to on device experience and in app experience. In the AppNex ecosystem, overall, within our plan, we are very clearly focused on the OEMs, handset manufacturers around emerging markets and we are working with them to integrate our technology at various touch points on the device. And the monetization strategy for both these ecosystems is actually very similar.
So as far as the advertiser is concerned, the advertiser is being sold conversion, ROI linked conversion and it does not matter to the advertiser whether the conversion is happening on the device, whether it's happening on this touch point or that touch point, as long as we deliver a conversion, which necessarily happens within the app of the advertiser, that's when we earn our revenue. So the monetization strategy is common. The reaching out to the consumer strategy is either on the device or in app and it is blended perfectly on the device and I think this is where our strategic differentiation lies. Your question was also about DiscoverTec, which is a small acquisition that we did Jan 2021 this year and the bobbin AI minority investment, which we have doubled down on in
the last quarter At the
same time, we have invested in the acquisition of ZEM. I think both of these are strategic, and we are seeing great momentum there. We have exclusive monetization capabilities into our platform on Bauble. And we are increasingly seeing greater monetization happening there. With respect to Discover Tech, I mean, we are this is still very, very small, but we are already seeing impact because we already had launched our global OOBE platform product in January this year, and it was done before the completion of the Sabotec acquisition itself.
So these are growth areas for us and then we are very, very bullish and I expect to beat the industry average growth trends progressively and consistently with all of these investments in products, which already with all of these investments and products, which are already proven to generate revenue, and we just have to consistently scale it one step at a time.
So the revenues, let's say, entities start coming from do we have anything in numbers from these investments or it's largely something which will come in, let's say, Q2 this year?
It's not significant. The numbers are not significant. I think as they become significant, we will certainly update. But I think overall, I think that all these platforms are seeing great adoption. It's great adoption in the ecosystem with partners and we most importantly, if you look at companies like, let's say, digital turbine or you look at hiring stores or even any private companies that are in the space.
Today, you can absolutely certainly stand tall and say that Apple products, platforms are addressing the end to end consumer platform opportunity and in consumer journey, both on demand as well as in app like no other platform. And we are so deeply focused on emerging markets, while none of these companies are anchoring on the emerging markets. So we have an extremely strong moat and competitive advantage on these products and platforms for emerging markets.
Okay. Fair enough. And a mandatory question on the privacy policy. Just wanted to understand 2 parts to that story. 1, do you foresee that a lot of these investments could shift towards areas where they've got 1st party data?
That is one second. When you look at one of the largest here in the U. S, right, or probably the largest pricing in the ad tech space, right. They've talked about investing in creating their own UID site. While obviously for us, given Android ecosystem maybe the risk is not as large as the iOS ecosystem, right.
But still are we hedging our bets through creating an alternate mechanism where we are still ring fenced to that in cases Google adopts something like
that, we still have a
play at it at a much larger scale? Thank you.
The best way to get first party data is to be directly connected with OEMs and operators, directly connected with the advertisers. And we are I think we are in a very, very strong footing there as a company.
So that's as far as
first party data is concerned.
So I
think our company is in a very, very good position with respect to 1st party data, both with the advertisers and publishers. Now most of these players that you're talking about, they get 1st party data largely from the publisher side only, not from the advertisers because they are not on the conversion business model. And this biggest player that you're referring to, I believe it is the trade desk that alluding to and they're launching their own UIP and so on. And let me tell you why there is urgency for them to do that is because a lot of their business is still on the PC, on the browser. Even if it is on mobile, it is still like a lot of the business is still browser and cookie enabled.
So they are trying to derisk from the cookie to have an ID which works together. And the same goes for a deal like Cristio. So I think the new ID side of this, I mean, we have investments like internally within our platforms, we have a unique identifier for each device. Are we going to open it up for the ecosystem or are we going to do something bigger on that front? I think I'll reserve the options for later.
It would suffice to say that in terms of 1st party engagements with both advertisers as well as on publishers, we are in pretty good stead. And I don't see budgets necessarily shifting in one direction or the other. It will be broad based digital advertising spends are going to grow in every single bucket of digital advertising that one can see globally.
And can I squeeze in one more? Is that okay? Just if you were to look at, let's say, employee expenses,
right, we've expanded a fair bit over the
last, I think, 3 to 4 quarters, right? We're expanding on ground presence across several of these markets. When do you expect the benefit to start coming of those investments? That's it. Thank you.
So the benefit is already there. I mean, what you're saying is when you start investing and putting people on the ground in different markets or in different products, you start seeing that showing in the OpEx of the company on the P and L, but you'd also increasingly start seeing those markets delivering greater revenues over time. So I think within this financial year, second half of this financial year, it will support the organic growth trend by having people on the ground. So you will see a consistent pattern in our company, a good balance between investing organically, internally as well as doing consolidation opportunities on fair value and attractive valuation basis as and when the opportunities come. So I think summary point is that all our investments are done in a very carefully calibrated manner, and they are done with a view not just for long term returns, but within the financial year itself, we want to see turnarounds.
So it's a good balance of immediate outcomes as well as long term returns on a sustainable basis.
Perfect. Thank you and all the best.
Thank you. The next question is from the line of Mayank Babla from Dalla and Brochu. Please go ahead.
Hi, am I audible?
Yes, you are.
Thank you for taking my question. Congratulations on a great performance. So my first question was regarding the margins. So while you had commented that you've increased employee count on count, could you shed some light on the margin weakness despite improvement in CPPU rates?
Kapil, I would like you to take the question and I'll just take a breather for a moment.
The voice was not said. Can you repeat the question, please?
The margin weakness is purely attributable to the increase in employee count on ground because even our CPQ rates have improved. So could you shed some light on the margin weakness Q o Q and Y o
y? It's just that the EBITDA margins are about 2% output from the previous quarters, largely 1.5% is coming because of the employee expense is majorly attributed to that and there is some support other expenses which are also taking on it, And our GP margins are almost similar, which are also happening on the cost side of the data inventory. Primarily the contributor is increased in the trial cost.
Sure. Anzak, if you can, what would be the equilibrium level of margins going ahead, if it's possible for you to get some qualitative guidance?
Do you believe that we should be able to sustain at this current level of margins about 25% of EBITDA without adding to inorganic numbers into it. Organically, we are comfortable with 25% of EBITDA margin.
So related just number, what would be the latest employee count?
Is there a 425 plus exact count is not on KapoorMoney, it's 425 plus.
Okay.
So and just last question on
So I'll just help you with that. 425 plus is based on the full time contract, I mean, the full time employees who are in the direct employment contract with the company, but we also have certain functions where we have people on contract or outsourced and so on. So it's not the full reflection of the workforce, but it is the employee count answer can be best given to this extent right now.
Okay. So and just my last question directed towards Amit sir. In the JAM call, you had mentioned that JAM, you will convert from the cost per impression model to the current CPCU that we model that we have. So I just wondered your views on the what is the process and challenges in this conversion of business model?
So the I'll correct your question. So there's a cost per install, how it was being framed in the analyst I mean, the call that we have on JAM. And moving towards CPC business model essentially means that going to the advertisers and taking the ROI linked deeper funnel KPI and the advertisers would then necessarily need to share deeper first party data with respect to conversions. And so it requires a few things. 1, that educating the entire team on how to sell, how to position it And then it requires certain integrations on the cloud computing side, on the tech side, how do you receive that data, how do you process that data using the data science algorithms, how do you optimize it towards greater outcomes.
And so linking it to Apple's core platforms and the core cloud computing efficiencies with which we manage such higher volumes of data and optimization. So those are the 2 broad things that need to be done. And that's pretty much it. And once we do that, then it's about execution, execution, execution. And then optimizing it 1 vertical by 1 vertical, 1 market by 1 market.
And so within this financial year, I expect to achieve that with Jan. So we acquired we completed the acquisition on 1st July. So 9 more months of this financial year, the top 1st July, we should be able to achieve that. And we will then see good outcomes with respect to not just growth hopefully, but also on the bottom line. For JAM on stand alone JAM basis, we're not going to reach the kind of bottom line performance that Apple has already optimized itself for, but they will definitely show clear signs of improvement versus their own previous trends.
Okay. Thank you so much, Anant sir and Kapil sir, and best of luck for the rest of the
year. Thank you.
Thank you. The next question is from the line of Rajamohan Venkataraman, a professional investor. Please go ahead.
Yes. Thank you for the opportunity and congratulations on a great share of numbers as well as consistent delivery on your promises. Generally, Anuj, wanted to understand your broad perspective of open Internet to walled gardens as you see playing over the next 5 years? Are you seeing increased momentum in the open Internet market when compared to Wallet Gardens, especially since the last 3 years of Apple's privacy policy. And if it were true that the open Internet space is gaining in momentum, Though you consistently talk about the huge 10,000,000,000 connected devices opportunity for over the next 10 years, do you see the existing virtual cycle become more securely pronounced, especially after the pandemic?
And in this slide, are you more confident of hitting 10,000,000,000 devices than when you were when you initially set this target?
That's a great question. Thank you for asking that and keeping the emphasis on long term strategy and bringing the 10,000,000,000 connected devices vision and goal of our company for Apple 2.0 strategy for this decade. Let's go with the definitions first. What is open Internet? What is Volgadis?
Now these are I mean, these were not standard terms. I mean walled garden was a term that was coined with respect to the value added services with where operators were saying that only if your product is on our VAP site or the operator portal only then the consumer can do it or the billing is also controlled by the operator. This was actually for that industry. The same terminology has now been applied by several people on Facebook, Google, Apple and the ecosystem and saying these guys are closed or there's more walled gardens and
so on.
And then the companies like some of the other companies who don't work with Google, Facebook or are head on trying to go and compete with Google, Facebook in their space, specifically, let's say, trade desk. I mean, they coined the term Open Internet and we support open Internet and so on. And the way I see it is with more fundamental lens, where is the consumer? This business is not about where the advertiser is and where Google, Facebook are or it's really about where the consumer is. And if the consumer is spending time on a device or it is spending time within apps or it is spending time within certain apps which are now being labeled as walled gardens, it is the consumer's congative, it's the consumer's choice.
Depending upon where the consumer is spending more time, the advertising budget will normalize over time eventually, right? I mean, let's say all of us decide, we'll only go with WalletHub, we'll only use Google and Facebook and nothing else, what will happen? The advertisers' budgets will necessarily gravitate on the Vault Gardens only. If the consumers decide, no, I mean, not Google, Phase 1, like spending a lot of time on, let's call it, the open Internet apps and the experiences, then the budget would shift over there. Now what has happened over these years is that especially, let's say, emerging markets, Indian consumers, largely demographic profile is either heavily youth oriented or there are increasingly rural audiences that are coming up.
They don't have any specific ascendancy towards, let's say, a Facebook or a Google per se. I mean, WhatsApp continues to remain important, but things will change. In the next 5 years, there could be something else that becomes more exciting for the consumers and their attention and time would shift. Apple takes a very holistic stance on this, right? We are most of our business is coming from the open Internet side or the non Google Facebook side, but we are also having a very clear open path where we are integrated with Google and Facebook and on WhatsApp and so on.
Because if the consumer is there, why should I stop going to the consumer there? We are a consumer platform. Why should I say that I'll only target the consumer when he comes out of the walled garden and I'll stop targeting it when it goes in the walled garden? Apple doesn't have that view. We are consumer centric.
We're saying wherever the consumer goes right from the first time device to device will be changed to another device, wherever they go on the device, I will strive to make sure that Apple's platforms are able to reach and convert the consumer on all of those touch points without having any negative bias one way or the other. And that's how we run our business. In terms of how the trends are evolving and our goal towards 10,000,000,000 connected devices, we have taken some clear strategies on that front. 1, we are going deeper with the vernacular strategy. We're going deeper with OEMs and operators and partnering and investing in that space.
We are also clear on going beyond the mobile device to other connected devices such as connected TVs. I mean, we have invested in that very early. I mean, I think we're one of the first people in India and in other emerging markets to bring connected TV as a product and a proposition that advertisers can actually come and adopt together with us. And we are ahead of the curve there. We also launched something called household ID internally.
I mean, we don't open it up in a big fashion. But what this means is that the advertisers can come and say, I want to target certain location and certain households, which means there could be 10 devices within the household, 2 laptops, 5 mobile devices, maybe 2 connected TVs over time. And this could be a phenomena where we think that we want to go after targeting as a household for a certain kind of product and proposition. So I think these are capabilities that we have invested in organically. And I'm pretty confident that in the next direction of reaching out to more connected devices, launching into other emerging markets like Africa, LatAm and strengthening presence in other emerging markets.
We are also trying to see when we should make some foray into China and so on. It's all lined up to earn the 10,000,000,000 connected device there will be 6,000,000,000 new connected devices that will come. And so I think that this is my confidence is high and the commitment is strong towards achieving the TAP of RMB2.04 billion of RMB10
billion over time.
That's a great answer, Abhishek Shulam, and quite a confident answer too. The second was muted.
I'm sorry to interrupt. Mr. Venkateshaman may be requested to come back in the queue for a follow-up, please.
Just one final question, which I had.
Sure. Go ahead.
If I can squeeze in. Coming to operating leverage, let me take this question first finally and close it out. You have indicated to a natural scope of improving CTCO through internationalization and developed market penetration. Will this create opportunities for serious operating leverage improvement? And also want to understand operating leverage in your existing businesses, which have been at about 25%, 26%.
Can you say that you have reached the maximum in operating leverage in your existing businesses? Or is there a scope to further improve it?
Great question. So I'll answer very quickly, and not we have done the study. So let me give you a sense quickly. The unit economics of our business is if we take $100 of revenue, we are roughly investing about $60 of that $100 in what we fully expense out in our data and inventory cost. Now this is fully expensed out on the P and L, but I want all the investors here to know that a good part of this, the data part of it is actually an investment, which is not reflected on the balance sheet, but we are consistently investing so that we have deeper vernacular verticalized insight into our platform so that we consistent investment that we are making, and we expense it out.
Then comes the let's say, the 40% plus that is left. Within that, we see all our operating expenses and also the taxes and so on. And we typically see a profit after tax in that range of 19% to 20% or percent and so on. Have we maximized on the operating leverage for our organic business? The answer is no.
As we continue to scale, we will always see that the operating expenses will not grow as fast as the revenue grows organically, and therefore, there will be margin expansion. However, because of the acquisitions that we have done in organic acquisitions and all of those companies, whether it was MediaSmart, Afnex or the prior ones, all of them when we acquired them, they had one thing in common. They were not profitable. They also had another thing in common. They were just building even.
So they were not burning, but they were also not adding to the bottom line. And Apple acquired them at the appropriate valuation, which was obviously very good transaction for them and for us. And we have consistently worked on turning it around on the unit economics, 1 step, 1 step at a time and making them profitable in year 1, more profitable in year 2 and so on and so forth to bring them to the same level of efficiencies at Apple's core businesses. And with these acquisitions as well, you have seen that our PAS margin has been consistently in line and appropriately balanced because the organic business was expanding the margin, the inorganic one was averaging it down and the same thing will happen with Jans now in this year. And JAMK is a bigger transaction.
So you will see the mathematics of it getting added up. But if you take a few years to it, we will bring every single business to the highest possible extraction possible with respect to margin and value creation. So you will see expansion over time. But whenever there is any inorganic transaction, the math of it would add up and a new balance would be formed. And from there, we will then sit up again towards 25% EBITDA and higher.
Understand, Amrud, and thank you very much for your detailed answers and wish you the best.
Thank you.
Thank you. Due to paucity
of time, may we request all the participants to please limit your questions to 1 per participant. Next question is from the line of Ruchi Bulte from BOB Capital. Please go ahead.
Congratulations for a very strong set of number. I have one question, Anoj, on your direct customer business. Could you explain us what are the factors which is driving this particular trend of elimination of agencies and intermission fees? And a follow-up to that, will this trend manifest into more sales and marketing effort for Assen?
Great question. So I would look at the positives of this trend first, and the positives of this trend are that you are having a direct integration with your customer, you're voicing them directly, you're contracting them directly, you're collecting from them directly, and that has huge advantages in itself. Having said that, when we talk about the agencies business, agency business is a very, very important business from a holistic cross channel, media, traditional, digital and there's a very different proposition. Now a lot of the large companies, global companies are mandated to work with agencies. They have to use it, the agencies, for all their advertising touch points.
And therefore, the agencies are super important partners for Apple. So we are a neutral entity as far as this trend is concerned. We are receiving this trend with open arms as it comes in favor of digital direct advertisers wanting to work with tech platforms directly like others, and we have been a beneficiary of the trend. But have we been a catalyst to make that trend happen? The answer is no.
We continue to be best friends with the agency groups, and we would never create channel conflict that, hey, we are with the agency and we'll try to tell the advertiser, hey, why are you with the agency? Nothing like that, right? So we are neutral. And when we work with the agencies, we treat them as our direct customer. When we work with the end advertisers as the direct customers, we respect that relationship just as well.
Does it mean we have to invest more one way or the other? Well, in some cases, yes, because when we work with agencies, you convert 1 agency, there may be like 10, 15 or 20 apps of their customers that they are promoting. And when you work with each one of them directly, you've got to contract it differently. But having said that, even when the agencies work with us, the end campaign is for the advertisers and we necessarily mandate to our team to ensure that the relationship is too poor because some advertisers may go and say we'll work with agencies once they get bigger Or some advertisers may say we don't need the agency now, we're going to direct. So we need to make sure that the end relationship with the customer as well as with the intermediary agencies is very, very strong.
So we have been investing both ways, and I don't see any dramatic change in the cost structure with respect to sales and account management for direct customers versus the agency based indirect customers.
Thank you. All the best.
Thank you. The next question is from the line of Pankaj Gugaradere from Sree Consultancy. Please go ahead.
I just wanted to know the margin compression in the international business quarter on quarter. So I've alluded to the fact that it's more to do with the employee cost, but there is a significant more than 50% drop in the margins in the international business quarter on quarter. Any particular reason for that, even the jam is not included in this quarter. So international business a different aggregation of different geographies. We have certain aggregate say different geographies have a different margin span.
So as the cyclic effect of all those geographies happen, there is a certain amount of compression on the gross margins on certain geographies, which will improve over the period of time. But is there any I mean, is there too much change in the geographies mix quarter on quarter that is giving this kind of margin compression or what is that is like? B. Balaji:] It is not only the cyclic effect, but also certain campaigns which give a higher margins or higher ROIs or lower margins, Harish. The combination of all is there and we believe that the fair numbers are these numbers only at the moment and we have an endeavor to increase the margins in international markets.
You have to appreciate that we have to we are not fully grounded on our feet in the international markets. There is a need to invest by giving away some margins in certain geographies. So those investments are built into the margins in international geography as we try to expand in those geographies. So as we are very well grounded in India, we are not very well grounded in all markets that is where the employee expense are being incurred to improve our footprint presence on those geographies to improve the margins. So these combined factors you have to take it forward.
So the current margins in this quarter are sustainable you are seeing and which you will try Yes, we are sustainable margins and we look forward to expanding our market reach in international markets,
Which is an assumption of volume.
As we get more as we increase our volume in international markets, as we increase our scale, we will see greater efficiencies coming in. And when we go to, let's say, certain new markets or within existing markets, if we open a new vertical, we work with the advertisers and we try to drive the conversion for those advertisers in these verticals and we need to invest. I think I mentioned that earlier, the data and inventory costs that we expense out every quarter has a good element of investment in that. I would say even like close to 10% of the total data and inventory cost is actually not because it is driving the conversion. It's being invested to learn, to optimize so that we can deliver greater growth going forward.
And so there is a good element of investment in the P and M itself, which is fully expensed out. And as we expand to new verticals and new geographies, well, we still maintain an overall balance in terms of our business, but we are clearly not running the company for just maximizing the bottom line. We are investing where the investments are well deserved, And that will show over time as we scale our business in more international geographies, we will actually see the margin profile moving back and then you'll see greater operating leverage coming on a consolidated basis.
Okay. Just one small clarification I need. Have you been talking to the exchanges regarding this ASM issue? With regards to this, there is the exchange don't discuss on ASM issuance. They have they don't give transparency on the ASM issuance, though we have reached out to the exchanges.
But they say they have automated systems which flags out certain parameters. They have about 8 to 10 parameters and they work around with that parameters. So we don't have full transparency on the ASM issues from the exchanges. Okay. Thanks a
lot. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you very much, everyone, for joining today and for your very detailed questions. I would want you to leave this meeting knowing that your company, Apple, is stronger, not just in terms of financial outcomes of this quarter, but fundamentally, strategically, with a long term view, much stronger on its products, platforms, people, its balance sheet, its cash position and all of that together. And also on corporate governance, I think we have adopted proactively the ESG to go ahead and take all of those efforts that are necessary to be a well governed company to deliver all around sustainable growth to all our stakeholders. With that, thank you for your time, and I look forward to our next engagement.
Thanks, everybody. Stay safe.
Thank you very much, sir. Ladies and gentlemen, on behalf of Dollop Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.