Ladies and gentlemen, good day, and welcome to the Affle (India) Limited Q1 FY 2023 earnings conference call hosted by ICICI Securities. 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. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. On behalf of ICICI Securities lead technology analyst, Mr. Aniket Pande, we welcome you all to the Q1 FY 2023 conference call of Affle (India) Limited. I take this opportunity to welcome the management of Affle (India) Limited, represented by Mr. Anuj Khanna Sohum, who is Managing Director and Chief Executive Officer of the company, and Mr. Kapil Bhutani, who is Chief Financial and Operations Officer of the company.
Before we begin with 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 some risk and uncertainties. Kindly refer to slide 23 of the company's Q1 earnings presentation for a detailed disclaimer. I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thank you, and over to you, sir.
Good morning, everyone. Thank you for joining the call today. I trust all of you are keeping in good health. Today, we celebrate Affle's third IPO anniversary together with our over 385,000 shareholders. This inspires us and instills in us greater responsibility and accountability to deliver cash flow positive long-term growth for Affle. We are elated to close yet another quarter of momentous growth. In Q1 FY 2023, we achieved our highest quarterly revenue and EBITDA run rate ever, our highest conversions and our highest CPCU rate ever. We delivered revenue growth of approximately 128% year-on-year this quarter, comprehensively beating our Q1 CAGR growth trend of 67% over the last three-year period.
Our CPCU business noted a strong momentum, delivering 61.9 million conversions during the quarter, an increase of 96.7% year-on-year at a CPCU rate of INR 52.1. We witnessed accelerated broad-based growth in ad spends driven by our unique ROI-linked CPCU business model, having achieved 45% organic growth, which was well above the industry average growth trend and coming across our top industry verticals in India and international markets. In the near term, while we are closely monitoring the geo-economic situation in developed markets, we remain confident of the long-term AdTech industry trends driven by the fast-evolving consumer behavior acceleration towards adoption of connected devices.
Our focused execution, powered by Affle 2.0 strategy, anchored on our two V's, vernacular and verticalization, and two O's, OEMs and operator-level partnerships, has enabled us to drive deeper verticalization for our advertisers across the E, F, G, and H industry verticals. This has strengthened our moat, and our direct customers' contribution has grown to 75.1% of our revenue in Q1 FY 2023. We continue to unlock innovative consumer experiences for the advertisers and to reflect upon our strengths. We have also included three case studies in our earnings presentation focused upon OTT, FMCG, and Fintech solutions. We also appointed four additional directors to our board in this quarter, further strengthening the board structure.
These additions are designed to support Affle's accelerated global growth momentum, provide greater accountability to the senior leadership, and to reflect upon the company's commitment to maintain highest standards of corporate governance with enhanced depth of expertise. With this, Affle's board will now comprise of 10 directors led by our independent non-executive chairman and will include four women directors, that is 40% of our board. During the quarter, Affle was also awarded Data Protection Trustmark, DPTM certification, for a period of three years by IMDA Singapore, making us part of a selective group of companies that made it to the DPTM certification, and this is a significant validation of our Affle 2.0 strategy.
We keep the consumers' interests and privacy concerns as central to our innovation, and we continue to focus on our endeavors to deliver consumer-centric technologies following the highest levels of data security and privacy standards. We further enhance our platforms while penetrating deeper across both new and existing markets, as well as further verticalizing our capabilities towards high-growth emerging industry verticals. We are a differentiated business, fundamentally inspired to deliver deep tech-powered futuristic use cases and innovation-led profitable growth globally. Our investments across the products and platforms are performing well, contributing meaningfully to our overall growth, healthy margins, and resulting in positive cash flow from operations. We continue to leverage upon the market opportunities, drawing significant moat from our entrepreneurial culture, tech innovations, and sustainable value creation powered by Affle 2.0 consumer platform stack.
We look forward to further leveraging our scientific and strategic expertise while keenly promoting Affle 2.0 culture of diversity, equity, and inclusion across the organization, enabling a sustainable ecosystem towards holistic stakeholders' value creation. With that, I now hand over our discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you, and over to you, Kapil.
Thank you, Anuj. Wishing everyone a good day and hope all of you are keeping safe and well. Continuing our growth momentum of clocking over 120% year-on-year growth in the last three quarters, our FY 2023 revenue stood at INR 3,475 million, a robust growth of 127.9% year-on-year and 10.3% quarter-on-quarter, contributed by both organic growth and Jampp. Our EBITDA for the quarter stood at INR 687 million, an increase of 95.9% year-on-year, a strong growth of 17.1% quarter-on-quarter. In this quarter, our data inventory cost was sequentially stable at about 63.3% of the revenue. Our employee cost increased by 1.6% quarter-on-quarter.
We remain bullish on the business and continue to expand the teams for growth across platforms, markets and verticals. Over this quarter, our employee expenses were down by 106 basis points as a percentage of this revenue. Our reported profit after tax for quarter was INR 545 million, an increase of 52.6% year-on-year. Our quarter one last year and the previous Q4 of FY 2022 included higher other income than recent quarter, primarily on account of gain on fair valuation of financial instruments and investments. Our effective tax rate is higher than last year and is inching towards long-term tax rates primarily on account of deferred tax assets of our acquired businesses getting adjusted.
Our normalized profit after tax was INR 552 million, an increase of 93.5% year-on-year, after adjusting fair valuation gains and share of our associate. Please refer to slide number four and five of our earnings presentation. We remain focused on working capital management and continue to see robust cash flow from operations. Our collections were robust and the ratio of our cash flow from operations to our profit after tax stood at 99.9%. This shows quality of our customers and robustness of our operations. Further, Affle is well diversified in regards to markets served, tech use cases, platforms, customers, publishers, and with reasonable cash in hand to invest further in our organic businesses, we stand confident to deliver long-term sustainable growth. With this, I end my presentation. Let's open the floor for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Aniket Pande from ICICI Securities. Please go ahead.
Hi. Thank you for the opportunity to host you. I just have one broader question, Anuj, and then I will get back in queue. You know, if I look at the top-down approach for Affle actually, okay, it continues to remain a bit bleak actually. The ad outlook has, you know, increasingly dimmed in recent weeks in the midst of signs that rising inflation is beginning to affect consumer spending, okay. We have seen that in U.S. television networks and news publishers also are feeling the effects of slowdown in advertising market, okay. Recently, the latest indication that an ad spending retrenchment previously flagged by giant technology companies also spreading quite aggressively. Secondly, in India also, Anuj, we have seen that the recently listed startup companies on their concalls have commented about reducing ad spending.
I do understand that ad spends are equally important for organization to increase their reach, okay, but like startups have entered into a bit of economic downturn right now. Will it have a broader impact on digital advertising business? In all this scenario actually where does Affle stand? Are we facing any headwinds? The last thing would be our pipeline continues to remain strong as we are more focused towards mobile ads rather than display ads. Thank you.
Thanks for your question. I think the first thing about recent weeks and commentary largely talking about developed markets, US, Europe-based commentaries that are coming out, it's important to note that Affle's exposure to Europe is negligible and US or developed markets in all is not as significant because we are deeply anchored on global emerging markets. In the emerging markets, especially markets like India, Indonesia, Africa, LATAM, there is, you know, the penetration of advertising into digital is still under-calibrated. We are seeing that in these markets, the average, let's say if the total ad spend is INR 100, only INR 25 out of that INR 100 is going to digital, and that needs to grow to INR 50 over time, you know, to be even sensible. Digital is still catching up in emerging markets.
Even if the budgets are being reduced, even if that were to be true in emerging markets, we think that the digital advertising will still continue to see significant growth. If the average growth of the industry was expected to be in the 30%-35% range, let's say it will, it will still be in the 25%-30% average industry. It will continue to be a strong growth momentum for digital in emerging markets. Don't compare that with the commentary of Europe and US or, you know, companies which are talking about traditional media advertising as well as digital in one breath. Make that distinction. Developed markets and developing emerging markets will have a clear difference in the way they respond to what's happening in the world today on the macro factors.
Within that, digital spends will be way more protected than the traditional spends. Either the traditional will get reduced or it will move to digital as the case might be between developed and emerging markets. There we are in a pretty strong footing. As far as tech startups linked thesis is going, anybody running a sensible long-term business should balance, you know, what they're spending on advertising versus what their revenues and profitability is. I think it's a good sign that a lot of these startups are looking at being way more sustainable on financial fundamentals. That is a very welcome thing by Affle all along. Even when we work with startups, we always look for those startups which are more sensibly minded in what they are spending.
Now, as far as Apple is concerned, we have a large part of our business anchored on enterprise customers are not going anywhere anytime soon. Typically, when we look at our customer mix, we see at least 80%, 90% of customers should be there for next three-five years. We are also selective on who we are scaling up on our platform. That's one. Secondly, that in terms of, the conversion focus of our business model, the ROI link conversion focus, it is deeply in line with what the advertisers are doing, whether traditional advertisers or even the startups who are becoming more ROI-centric. They're never going to say that they're going to reduce their sales.
Therefore, if Apple is delivering them ROI link conversions, it will be almost, like, wrong for them to say, "Okay, I'm going to reduce the number of conversions that I'm getting from consumers." That's not what anybody is saying they'll reduce. What they're saying is, "I want to get as many conversions as possible with consumers with a more effective advertising spend." Therefore, Apple's propositions and business models are becoming more compelling to customers who are tightening their control, right? Who are saying, "I want a bigger bang for my buck. I want to get the same kind of revenue with less advertising," right? Therefore, what this means is that they must embrace a conversion link, the ROI link business model.
Therefore, I tell my sales teams very clearly that in these times, this is where our business model, our business proposition becomes way more compelling than ever before. Let's go out there and win. I remain bullish about our growth. Now, of course, had the macro factors not been, you know, what they are, maybe there could have been even more growth. Are we completely insulated? No. Will we still continue to deliver superior than industry average growth? That's what our pipeline says, that's what our strategy says, and that's what we are going to execute on.
Thank you so much for that detailed answer. Thank you.
Thank you. We have our next question from the line of Mayank Babla from Dalal & Broacha. Please go ahead.
Yeah. Hi. Thank you for taking my question. My first question is regarding Jampp. Just for a little more clarity for the year-over-year comparison, could you give us the, you know, contribution from Jampp as far as the user conversions and the average CPCU rate is concerned?
Well, I would give you a financial overview that Kapil will provide shortly. On a qualitative basis, I can tell you that the acquisition of Jampp on a year-on-year basis has seen a significant integration benefit together with Apple. Where now we are seeing Jampp almost operating close to 10% of profit on bottom line contribution from its business at the end of, you know, completing one year together with us. We are seeing a meaningful level of, you know, momentum towards scaled growth with the differentiated propositions, with the ability for them to pitch a, you know, conversion-linked CPCU-based business model. We are seeing a positive qualitative as well as quantitative impact that we have had in the last one year.
If you're comparing it specifically from Apple's organic growth perspective, I think in my commentary, I specifically mentioned that we have seen a 45%+ growth in our revenue on an organic basis year-on-year for this quarter that is excluding Jampp, which is consistent with what we saw even in some of the previous quarters. There is robust organic growth in our business, and it's 90%+ anchored on the conversion-linked business model. If you see the math of our business, revenue grew this quarter 127%. Okay? Now, if you look at the further breakdown of the math, the conversions grew about 90%+, right? 95%.
Right.
The CPCU rate grew around 25%. Used to be INR 40-odd, it went up to INR 50+. The growth in revenue is powered by two drivers, number of conversions as well as the CPCU rate. Now, the conversions are growing well, the CPCU rate is growing well, therefore, revenue is growing 127%. In terms of organic growth, we have seen 45%. If you're mapping it year-on-year, you take last year's data and you map it up. The number of conversions growth in non-Jampp would be higher because the CPCU rate is increasing more because of Jampp.
Okay.
The conversions is increasing more because of the organic business. I hope that answers your question.
Okay.
Kapil, if you want to add anything to it, please go ahead.
Yeah. You added, Anuj, the contribution on the bottom line, approximately 10% from Jampp, both in terms of EBITDA margin and profit margins, is inching up slowly as desired from the 0% EBITDA when we acquired Jampp. We are on track on long-term sustainable EBITDA trendline from Jampp also.
Got it. Thank you. My second question is related to Google and Android. Recently I was just reading that Google has stopped the unexpected pop-up ads inside the apps from next month onwards. A user will only be seeing ads if he or she chooses to get some rewards in games or in any other app. I just wanted to understand from you what sort of impact this might have, whether it be on the revenue or the inventory or data costs, and your view on that. Thank you.
I think in Kapil's commentary, he mentioned rather explicitly, we are a very diversified and balanced business, whether in terms of geographies, verticals, you know, use cases of, you know, how the consumer engagement is happening on device, in app and programmatic tech and, you know, all the entirety of the consumer journey that Apple captures. It's, you know, what Google is talking about is going to impact some percentage of the consumer's engagement on gaming only. All right?
Right.
Gaming is one of our top 10 verticals. In those top 10 verticals, just mathematically is well below 10% overall as our contribution. Within that, one of the use cases of gaming is being tweaked by Google to say, "This cannot be done and that can be done." Now, I believe the impact of that would be that we will see much greater conversions and engagements with the users in any case on the more meaningful rewards-linked conversions versus the intrusive kind of ads that come that actually irritate the consumer. What Google is trying to do is improve the experience of the consumer on the device with, and reduce the irritation factor, right?
Yes.
When the ad comes right in the middle of your playing the game and a big screen ad comes and you want to close it, and you can't close it. I mean, that kind of advertising is, I mean, bordering on spam-ish advertising.
Right.
What they're trying to do is reduce the spam.
Okay.
I don't think it has any material impact to us because the impact would anyways be to those who were focused disproportionately on gaming. Apple is not focused disproportionately on any one particular vertical. There's nominal, if not no impact at all.
Okay. Thank you so much. I have a couple of more questions. I'll get back in the queue for that.
Just one second. I'll take the opportunity. By the way, for those of you who have read, Google has also announced that they are no longer deprecating the cookie on their browser for some time to come.
Right. Yeah.
This was a talk for years. You know, Google was saying, "I'll do it in three years, in four years." Apple did it on their Safari, I don't know, maybe four years ago or three years ago. Everybody was waiting, Google will do it. Google said it will do it, but then do it eventually. I'm not adding any more color to it than what the facts are. I think that the point is that, Google is going to fundamentally do everything that supports the advertising revenues. I think all of us understand that.
Right. Just one very small question as reason.
Mr. Anuj, I request you to come back in the queue, sir.
Yeah. Thanks.
Thank you. We have our next question from the line of Arun Prasath from Spark Capital. Please go ahead.
Thanks for the opportunity. Anuj, you gave a broad color on the advertising market.
Mr. Prasath, your volume is low. Can you please speak a bit louder?
Sure. Hopefully this is a lot clearer. Anuj, my question is on the overall market, advertising market, especially in the emerging markets. You spoke about how emerging markets ad spending is strong. If you again split this ad spend in the emerging markets into multiple categories, one category which is seeing a lot more growth is the short video platforms. How Affle is placed in this value chain? Are we able to participate in or be part of this spending? Or are we yet to develop any capability to deliver ads within the short video platforms?
See, for us, you know, video as well as, you know, the team that we have around video on connected devices and Connected TV and connected households is a very strong team. Now, where are these short videos being consumed? These short videos are, if I'm not wrong, over 90% being consumed either on mobile devices or on the Connected TV experiences that people are having. Apple is having a strong play in this area. The overall growth that we are seeing in terms of advertisers shifting their spend towards mobile and digital in emerging markets is basically in emerging markets, what was lagging behind is catching up to what the consumers have already caught on to, right?
The consumers in emerging markets are deeply connected on the mobile device and going forward on other connected devices as well. That trend is very, very clear, and COVID times have actually accelerated that adoption curve and trend. In developed markets, the consumers have already moved on, and the advertisers have also moved on. In emerging markets, the consumers have moved to digital much more deeply. However, the advertisers are still catching up. The shift that I'm talking about from traditional spends to much more digital spend in emerging markets is a mega trend which will not get slowed down because of macro factors.
In fact, when the macro factors become tighter and all of these companies' marketing and advertising spends come under a stronger sort of a review that, "Hey, where is the ROI coming?" You will see a faster adoption towards digital and a faster trimming down from traditional to digital. That, if you segment it, yes, digital has many formats, and Affle is diversified across all those formats, video, short video inclusive of it. In fact, one of our case studies that we have shown is talking about video and Connected TV and connected households in this earnings presentation itself.
Anuj, just to add to Anuj, we work with short video formats, both on the sides, as a client also, and a customer also, and on the publishing side also. Apple has capabilities to place ads in short video formats.
Okay. That's helpful. My second question is more from the Bobble divestment that you have said that in your notes and your accounts, that you are considering the sale of Bobble investment. Our understanding is that Bobble was supposed to help you through getting a lot of first-party data. What has happened in this front?
Now, Anuj
Right. Let me take that question. Our strategic intent and relationship with Bobble is a five-year-long partnership where we are the exclusive partner with our SDK integrated within the Bobble keyboard to leverage the monetization capability, so that we can bring the consumer experiences, the consumer recommendations, and to enhance the consumer experience while delivering conversion for the advertisers. Now, that is a five-year partnership. That is, I mean, obviously more anchored together with the fact that we also are a significant investor. In the last three years, we have been the only investor who's invested in Bobble, right? Whether it's year 2020 or 2021 or 2022.
Now, in 2022, we are looking at maybe more investors coming into Bobble, and therefore, there could be an opportunity for us to sell some part of our equity and take, you know, a great sort of ROI return on investment on it, while still holding one of the highest investors' position in the company on their cap table and continue to be a long-term strategic partner. What we are also doing, the equity ownership position and the commercial strategic relationship are two independent arm's length transactions. What we are looking at is also to strengthen our own cash position in the company by saying, "Okay, can we..." Because, Bobble is today, you know, an associate company of ours, a 25% ownership that we have earned in Bobble over the period of time.
We're looking at the optimal position for us would be to take a minority, but a significant, major investor position within Bobble, but not necessarily to bring it, you know, to become an associate of our company, which as a public listed company, has several other implications on Bobble. So I think we are very bullish about what we can do on a strategic basis together with Bobble, and that includes, you know, leveraging consumer insights powered by data, leveraging the ability to have that touch point 100 x a day to connect with them. But Bobble is not necessarily a company that Affle would want to own more than a 20% or a 51% this point in time. I'm not closing those possibilities.
At this point in time, our strategic intent is to be more broad-based with multiple keyboard partners, multiple publishers, and there are other keyboards that already work with us. We don't want to show that we are so deeply in Bobble that others start feeling threatened. You see? We want to be deep with Bobble, yes. At the same time, we want to work with other keyboard companies as well around the world. As part of the plan, it makes sense to keep our ownership at a certain level and not beyond that.
Just to add to what Anuj Khanna Sohum said.
Sir, I request you.
Just to add.
Sir.
Just to add to what Anuj said.
Sir, I request you to come back in the queue, please. Thank you.
Sure, sure. I'll do that. Yeah.
We have our next question from the line of Nikhil Chandak from JM Financial. Please go ahead.
Anuj, you know, my question was on the same Google privacy norms, et cetera. If I read the blog correctly, the official blog by Google, it's not that they have abolished the plan completely or they canned the plan completely. You know, third-party cookies, disabling third-party cookies. The decision has just got postponed to 2024. What I wanted to understand is, you know, if you could specify what impact can this have, assuming this goes ahead in 2024 or in 2025, for example. You know, Sohum, it's very tough to believe that this can't impact the company. We've seen the kind of havoc got created on Meta because of the Apple IDFA changes.
It's very tough to believe that if Google does actually go ahead, maybe with a delay, that this can't have an impact on Apple. If you could explain how, you know, what will be the exact impact, assuming this change happens in 2024, 2025, whenever?
First of all, cookies are only applicable and relevant in a browser scenario. Meaning that somebody is going to a website from a mobile browser or a PC browser, and only then a cookie comes into play. Affle's business has almost not even 1%-2% impact of anything to do with the browser. Our business is almost distinctly on-device partnerships with OEMs, operators, in-app, like on apps which are downloaded on the mobile devices or even on connected TV, and working with those apps either directly by integrating with SDK API or through programmatic means. Affle's business today or in fact for the last 17 years, ever since I started Affle, our business was always on-device, in-app, mobile-embedded experiences for consumers.
It was never about the browser on mobile, because I always felt since inception that the browser was maybe a little bit too slow. Having said that, then even those whose business is on the browser, I believe that by the time Google is going to implement cookies, as in replace cookies, it will implement something that will be even more effective and efficient for advertisers and advertising than the cookie. Because Google wants to enable advertising to continue while addressing, you know, the obsolete technology of cookies, if I may call it that. Cookies have been around ever since internet has been around, and there has been no evolution in that for almost 25-30 years. This needs to change.
To be sure, none of the changes proposed by Google would have an impact on Apple with what you're saying.
Yeah. The two changes that were talked about today on the call, one was within gaming apps, Google is saying that certain types of ads which are intrusive and potentially spammy should not be allowed. That has nominal or no impact. Second topic of Google that we talked about today was about cookies, because that's largely limited to websites and browser. I can tell you, whether today or in 2023, 2024, as of today, there is very little exposure that Apple has to anything to do with the browser or websites and cookies. Again, no impact of that.
Any other changes you think? I'm sorry I'm harping on this, but any other changes, for example, to the Android platform or anything which, you know, potentially can have an impact, you know, 2-3 years down the line?
Google has talked about doing something which is a diluted or a much more acceptable version of what Apple did last year in 2021 with respect to IDFA and certain changes. Google has started to talk about doing similar changes, you know, many years later than what Apple did. Now, that has some implication. However, that implication is at least a few years out. What one can see, if on cookies, I mean, Google has reacted four or five years later or even much more later than what Apple did, then even on the in-app ecosystem, Google is not necessarily going to accelerate its path, as is evidenced from the track record. Most importantly, when Apple made these changes in 2021, what did Apple do?
Apple went and acquired Jampp, and together with Jampp, we went into the U.S. market with our revised sort of proposition for iOS and went and did really well in that segment. Which means that even after Apple did the changes that it did, Apple, together with its newly acquired subsidiary, went into the U.S. market, which is not Apple's home ground, and became one of the top 10, you know, successful platforms in the U.S. market on Apple's revised policy. Having negotiated Apple's changes in 2021 and making it into a business opportunity for us versus competitors, because the fundamental is clear. The consumer is not going away from mobile devices. The advertiser's budget is not going away from, you know, digital and mobile. These two things are the anchor pillars of our business thesis.
Within these two things, whether it is privacy laws or whether it is Apple changing something or Google changing something, one thing that they cannot change is the consumer is not moving away from these devices, and the advertisers consequently are not shifting the budget, budgets away from these devices. Therefore, as long as we find the technology solutions to implement and create the right ROI metrics, we will continue to thrive versus competition with business, like we did in 2021 and continue to in 2022 on Apple's platform in U.S. market together with Jampp. We are not nervous about it. Are we immune to it? No. I mean, of course, changes happen. I read every single bit of this progress with deep interest, and we build strategies to combat that and diversify our business to combat that. We are very comfortably placed where we are today.
Perfect. Thank you so much. All the best.
Thank you. We have our next question from the line of Anmol Garg from DAM Capital. Please go ahead.
Yeah. Hey. Hi, Anuj and Kapil . Just had one or two questions. Firstly, wanted to understand that from the last three quarters, we have not seen any improvement in our gross margin per se. When I'm talking about gross margin, I mean the data and inventory cost as a percentage of revenue. We have not seen much improvement over there. Do you think that the improvement in Jampp's margin is why is it not visible in the inventory cost? Is it because of a decline in the margins of India business? What can be the reason for the same?
No, I think the way you have to see the ability for improving these margins in Jampp business is to create much more operational efficiency in terms of how the technology cost is working as a function of the overall cost and how we are enabling incremental scale-up without incremental increase in the OpEx of Jampp, right? Our tech stack is actually leapfrogging, you know, Jampp and the acquired business. Why only Jampp? I mean, mediasmart, Appnext, and so on. The same playbook has worked. You acquire a company that is breaking even, you help that company to leapfrog much further without investing further in cost because they're leveraging Apple's backbone. Once that happens, the first.
That is the first year, because in Jampp only one year has happened, and we still have two more years to go before we bring them to the level of profitability that we enjoy in Apple's business organically. If you look at Apple's business organically is around 25% EBITDA. The acquired business of Jampp was 0% when we acquired them, and now it has come to about 10% on the bottom line contribution, and still work in progress. How will this work in progress happen? In the next year and the next two years, there will be a lot of areas of improvements, how to scale up more, how to bring more efficiencies, how to charge the advertiser a bit more while the data inventory cost stays the same.
As a percentage of revenue, it changes because you're now able to charge more because you're delivering more value to the advertiser for conversion. How can we increase our price without increasing data? There are multiple optimizations that are not yet happened with respect to Jampp. Now, to attribute and say that India margins go down, that is not true. I mean, if you look at on a standalone basis, transfer pricing adjustments across our countries and entities will continue to happen as per the policies that the auditors approve. Fundamentally, what we are seeing is the drivers of our growth are more conversions, more consumer conversions, defensible pricing of CPC rates organically over INR 40 , organic plus inorganic over INR 50.
The defensibility of our pricing, the ability to scale up on consumer conversions and to attract a diverse range of verticals with a diverse set of advertisers who continue to want to spend on this business model. That is what is driving our revenue growth and our margins. I mean, last several quarters, when you look at it, the efficiencies are absolutely there. Even between Q4 and Q1, we have seen 17% growth in EBITDA on a 10% growth in revenue. Even if you take the immediate sequential quarter, you see that there are margin efficiencies that are coming on the bottom line. The other aspect that I want to touch upon and take the opportunity is that what exactly is data and inventory cost. While it is a line item on the P&L, it is fully expensed out in each reporting period.
Data and inventory is also an investment that Apple is making in our two V's, vernacular verticalization strategy. I mean, when we say vernacular verticalization, what does it mean? Are these just words that sound good? They reflect in how we are investing in the deeper data and inventory costs. Our data systems, our DMP platform, is verticalizing the knowledge and intent. It is building the intent of the consumer on the vernacular stack as well to see how we can go deeper with consumer recommendations and engagements on that basis. To do these two things, we've got to invest in data and inventory costs. We cannot just say these strategies and then not follow it up. We are actually following it up.
The correct way to account for data and inventory, which I believe in strongly, but I don't think the auditing and the accounting standards are up to the mark to do that and complicate life too much for everyone to understand, that some percentage of the data and inventory cost is actually an investment. It's actually a balance sheet event. It's not a P&L event. That investment that we are making into our strategy shows that we are bullish about how the future growth would come. Otherwise, one would not invest. I will report a higher profit in the short term and not invest into our strategy by having lesser data and inventory cost. Please do take this in context that we are fully expensing it out, but it has an element of investment in it. Thank you.
Anuj , this is Kapil Bhutani this side. Just adding to it. You have to see the three quarters together. India per se did not go down in quarter four equal to what international market went down in because Q 3 is the highest quarter. Largely, it is a balancing act between the movement of Q 4 to Q3 to Q 4 to Q 1, where the budgets move, and this will be the Q1. Secondly, we don't see this as a decline. We can say it's because we had a nice quarter four as compared to international. India did not show any dip in quarter four as compared to quarter three. It is in line with overall numbers.
Second is the margin, what you observed gross margin instead. It is. There are two implications to it. One is the transfer pricing, which is getting affected because few operators have stopped billing from Indian entities, right? They are now billing from international entities.
They get billed to our international subsidiaries, and then there is a cross charge to it. There is a transfer pricing cost which is also going on. It's not just the factor of the margin on the standalone. However, because of the geopolitical reasons, few of the OEM have stopped billing from Indian entities. They say that we don't want to operate our Indian entities, and that is why we are getting incorrect invoices to our subsidiaries based out of India.
Sure, Kapil. Thanks, Anuj and Kapil for the detailed answer. I have just one more question.
Mr. Garg, I request you to come back in the queue.
Sure. Okay. Thanks. Thanks.
We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Am I audible?
Yes. Please go ahead.
Yeah. Thanks for the opportunity, and congratulations on very strong performance. One structural question, which is that, on this Apple privacy policy impact that we're hearing from several publishers that the monetization on the store has been impacted. I understand that you've been growing on this, because of your size and positioning. More than an overall industry sense, who in your view would take the hit, eventually? Is it the publisher side, or is it higher customer acquisition cost for the advertiser or the AdTech growth margin would be, the bigger hit? Second thing, on the Jampp side, we've been growing very well. If you could help, what is driving our momentum here? Is it, more about attractive pricing or better conversion efficacy? The clarification on Jampp margin, is it 10% margin or 10% contribution? Thank you.
Okay. That's three questions. I'll try to answer all of them in one breath. On iOS, I think the changes that you're seeing on the iOS platform, while it may, you know, happen at an ecosystem level, I strongly believe that they were very sharply pointed at the big technology companies or the big advertising tech companies like Google, Facebook and the likes. I believe that Apple has been kind in the way they have opened up their, you know, back-end platform capabilities and the kind of APIs and, you know, ability for platforms like us to integrate with them. I think we have seen a fairly good and transparent and sensible approach there.
We believe that the changes that are happening on iOS, the Googles and the Facebooks and the likes potentially, and not the relatively, let's say, smaller or upcoming stronger players like us. With respect to overall growth that we are seeing in digital advertising from brands, you know, who are working with us over industry verticals and so on, I believe that the fundamentals of a unique differentiated business model, which is giving ROI-linked conversions to the advertisers, is a key factor in terms of how we are achieving outcomes.
The second is that we focus on emerging markets disproportionately, and all the competitors that I can see as credible technology platform players who have invested meaningfully or have been around long enough to, you know, compete with us meaningfully, are all focused on developed markets disproportionately. They have, you know, relatively weaker focus or emphasis on emerging markets, whether it is in their R&D plans, whether it is in their teams that they assign or the strength of the offices that they open in the emerging markets. It is interesting for us to go and compete with all the top global names in the ecosystem in emerging markets where we are, you know, the strongest player, and then we have all these strong-looking names, but they are weaker in their presence and therefore we are able to beat.
Unique business model and clear competitive advantages in emerging markets make us a strong player to continue to win greater market share versus industry average growth rates in emerging markets. I believe you had a third question, but sorry, my memory has got skipped.
Yeah.
I won't remember the third one.
That is, Rahul, 10% of the margin on Jampp business.
That is called EBITDA margin or contribution to EBITDA?
Hello.
That is contribution to EBITDA?
That is, let's say Jampp is worth $100.
Jampp $100 contributing to-
Give 10 to EBITDA.
If we have INR 100 EBITDA, INR 10 came from Jampp.
No.
No. If Jampp
INR 10 of revenue contribution.
INR 10.
Okay. Jampp EBITDA margin are 10%.
Yeah.
Okay. Thank you.
Thank you, Mr. Jain. We have our next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah, thank you. Hi, Anuj. I'll just, you know, if we see the impact of Apple's IDFA and the recent macro environment, one thing which is, you know, picking up quite smartly is this, you know, this plan of putting out first-party ad networks via multiple properties, you know, multiple large datasets which are out there in the world. Can you just share some thoughts on, you know, how you see this impacting the market as a whole?
Because this obviously puts out a lot more credible and highly correlated data out in public domain, you know, which can improve the efficiency of the ad networks. Also, whether this will enable relatively newer startups in the space to catch up to the large datasets which we have, you know, collated over last many years.
First of all, if you look at emerging markets, as the focus, Apple, you know, devices or total ad spend on Apple would be negligible. Well over 90% of what is mobile in emerging markets is Android. What we're talking about when we talk about Apple IDFA or even the macroeconomic factors, we must straightaway take the context to developed markets. Europe, negligible contribution to Apple, not worried at all. U.S. market is a very large market, and Apple, it is very small as a percentage, even within Apple's scheme of things. You know, the numbers are so tiny that, you know, suddenly the macro factor is not impacting what Apple is making in that market today.
You know, I think when you take the question in the context of Apple, it becomes a question that is more intellectual for us to look at what's happening in the market, not how is that impacting Apple so deeply, yeah. Because the Apple is a percentage of the U.S. market, which is a small percentage of Apple's business, and as a percentage of total U.S. market is even more negligible. There is enough Android business in the U.S. market for Apple to go and win that and still continue to grow disproportionately in the U.S. market. I think all of these factors have to be taken into account. Now, is Apple IDFA change introducing new set of quality data into the hands of the market? The answer is no.
In fact, it is clipping the wings of accessibility of data through consent of the consumer, and therefore only a few select players would have that. Having said that, what they have crippled is Facebook and Google's ability to go beyond their own first-party on their third-party networks that they were doing, right? With other publishers and so on and so forth. That's the part that has impacted these guys quite a bit, right? I think there is a lot of assumption there in saying that what Apple IDFA is doing is to bring out quality datasets into the market. That's not true. These quality datasets, which are first-party datasets, already existed in the market with each of those publishers. Now, only those publishers who have consent will have those datasets. So data is becoming more premium versus commoditized.
Data is becoming harder to gain than to say that it has become easily accessible to everyone. At least that's as per my understanding. Having said that, for any investor who is not keeping pace with, you know, this conversation or the depth of this conversation must know one thing, Affle is disproportionately anchored on emerging markets. Over 80% of our business is emerging markets. Even in the developed markets, there's almost zero impact of Europe. Any worry about recession or deeper impact in Europe, please, you know, keep that out of Affle's sort of forecast and plans.
Any impact on the U.S. market, please know that or in combination with IDFA, Apple is very tiny with respect to how big the U.S. market is, and we are still aggressive out there because when the base is small, I think all of us agree it's easier to grow. Our base in the U.S. market is, you know, nothing almost. Even if we are in the U.S. market in a very small way, for us to grow in the Android side of the ecosystem itself, where we come across as, you know, the strong contenders as the emerging market leaders, there in the U.S., we are still able to win business on Android.
On iOS, we have been in the top ten in the first year after the iOS changes. We are quite bullish and confident. We are not completely changed, but we are in a very, very privileged position versus most competitors in the market.
Anuj, as a follow-up, you said that, you know, the first-party data is becoming more constrained or like, you know, people need to pay for to access those datasets. Is that something which impacts us as a business? Although like now we have collated a lot of data also. Also, you know, if someone is willing to invest, spend for those datasets. And I'm again, like when I'm focusing on emerging markets because those datasets will emerge here also in due course. Is that something which worries us?
Not really, because the islands of datasets never lead to the kinds of insights that we're talking about. In emerging markets, so first of all, the datasets that you're talking about are largely focused on iOS consent-based, IDFA-based first-party datasets. Okay? They existed even before. Earlier, the consent wasn't really as clinically required. This time the consent is clinically required. So they are becoming a little bit harder to get. Now, coming to emerging markets, there is no such scenario because 95% of the market is Android. iOS contribution on devices is, like 5% or lesser. So anywhere in emerging markets in the world, you'll find that 95% of the dataset is no change is happening right now, at least for next several years.
Now, where Apple is unique is the fact that we have data across, let's say, when you talk about India, we have data over 600 million connected devices, and this data is deeply verticalized across the top 10 verticals and vernacularized over 30 different languages. When we talk about this depth of data across industry verticals, across this kind of wide consumer demographic segment, it is really hard to get. You can't just go and say, "Okay, you go to one publisher or one particular party and buy that data." Even trading in that data, the consumer privacy laws are, I mean, they're not allowing some free trade that anybody can go and buy and sell data, right?
The access to that depth of data and information and the depth and breadth of data that we have over all these years of serving hundreds and hundreds of advertisers across these industry verticals, and therefore learning which consumer cohort is likely to convert for which particular vertical, and what is the correlation between them, there is no short-circuited way of doing it. Even if I were to tomorrow start another startup all over again with all my experience in Affle, I'll take at least three years to reach any position to give a fighting chance to you know have some budgets run out of Apple. I'm not eliminating the possibility. I'm just saying it is hard for somebody, even like me, for somebody to step out and do.
Thank you.
It takes time. There's no shortcut to it. It's not like suddenly it will happen.
Thank you.
Thank you, Mr. Garg.
Uh-uh.
This is Kapil from Affle. Just to clarify, because the question was not fully understood by Rahul. Just to clarify that the EBITDA margin from Jampp business is about 10% and contribution is less than 20%. I hope it is very clear because the question was getting confused between the contribution and the margin. The margin is less than. Margin is around 10%, and the contribution is less than 20% on the EBITDA.
Thank you, sir.
Thanks, Kapil.
We'll take our last question from Mr. Sushil Choksey from Indus Equity Advisors. Due to constraints in time, Mr. Choksey, I request you to ask only one question.
Sure. I hope I'm audible.
Yes, sir. Please go ahead.
Yeah, my congratulations, you know, on your third anniversary milestone, and my commendations to Mr. Anuj Khanna Sohum and the rest of the management on another steady set of numbers. I had a few questions, but I'll just ask two of them together. You know, at Affle, we've pursued a fairly robust M&A strategy. We've brought many new acquisitions into the fold over the last few years, and we're likely to do so in the future. Now, in this regard, what sets Affle apart from its peers in terms of being able to successfully integrate, you know, these acquired enterprises both into your ecosystem and culture so well? Has there been any prime catalyst for this? And, you know, I'm sure there have been some challenges faced in these integrations as well.
What have been the chief learnings from these and, you know, how have they prepared you all for the future? On a quarter-on-quarter basis, there's been a slight dip in revenues from India. Has this been due to a lack of demand or seasonality? I'm guessing if it's seasonal, then it's likely to reverse in the coming quarters. Thank you.
I'll take the first question on the M&A strategy, and then I'll let Kapil answer on the second one. Now, the reason why our M&A strategy has worked out so well, especially with respect to mediasmart, Appnext, Jampp, which were acquired outside India, culturally different from us. One is in Spain. One, the founders are Israeli. The other one is Latin American, founders and entrepreneurs. What has led to a success across such a diverse sort of, set of dynamics and during COVID times actually? The first one is, the first reason for it to be strong is that we have a very clear Affle 2.0 consumer platform stack, which we had then presented together with Jampp, Appnext, mediasmart in December 2021 to all our investors and analysts.
This very clear strategy on our platform stack enabled the playbook to be very seamless to bring an acquired asset on board. Integration steps are clear. The acquired asset sees an immediate benefit, and the value system starts to unroll without becoming too intrusive or in the face of anyone. That's step number one. If any other company that tries to do an M&A strategy and doesn't back it up with a clear technology stack and a non-intrusive way of bringing value by bringing things together, they will have a tough time to do it. This is the one reason that makes it very simple, and that is more about technology and process, less about people and culture. Second, in terms of people and culture, we have been extremely conservative and very, very careful. If you look at the co...
The point that I'm making, there is exceptionally long courtship periods to iron out everything that could go wrong in terms of people and culture prior to getting married. Okay? So think of it in, I don't know, the analogy of marriage is that you date someone, you live together, you make sure everything is clear, fully compatible, then let's get engaged, then let's get married. So deep and long courtship periods. In the case of Jampp, eight years. In the case of mediasmart and Appnext, about five years to four years each, deeply connecting with them. And therefore, even during COVID times, we had the confidence to cross the line and to sign on the dotted line. That's second reason.
Of course, the third reason is that Apple's culture and Apple's own success creates a desirability and a pull factor, where all of these companies are happy and feeling pride in its association with Apple, right? I think the way they perceive us prior to signing the deal and how the employees perceive us after one year or two years or three years of the deal, I think we have risen in the internal credibility, perception and built pride for the Apple brand, and that pull factor keeps people together. I think these are the three factors that have led to a robust M&A success. We've been it may seem like we've been aggressive, but I feel we have been conservative and very careful and therefore successful. That's on question number one. On question number two, Kapil, over to you.
Sorry, I don't mean to interrupt. Just, you know, the last part of that question I wanted to ask about again. I'm sure there must have been challenges. What are your chief learnings been from those? I mean, have they prepared you all better for the future? In terms of the integration, I mean, the challenges.
I have to admit that the expectation of challenges was always high. You know, when we were nervous. Even after doing these long courtship periods, having the confidence to do the deal is one thing, but I cannot eliminate the deep nervousness that I was also feeling entering into these transactions, and I have to admit to that. In context to those nervousnesses around the challenges that will come about or may come about, the eventual challenges that did come about were actually almost insignificant. What kind of challenges come up? Well, sometimes there is an expectation of, you know, what kind of a long-term value creation that we can align as a path. Like, we may want a 10 years togetherness plan.
Well, most people don't think 10 years in our industry. You know, I mean, most of the startups or entrepreneurs are thinking maybe one year, two years, three years. They don't even know how to forecast beyond that. Affle thinks 10 years, right? When we started this year, 2020, Affle 2.0 was our strategy from 2020 to 2030. Graduating people to think that and to think it authentically, not just, "Oh, we had to give something because Anuj is saying." No. To actually believe, guys, we are going to be around together for that long, and 10 years passes really fast. That level of maturity and bringing that authenticity to plan for 10 years, it is never easy, even in an organic situation, right?
In your own management team, to get people to think that far and deep sometimes is a challenge. I dealing with the CEOs and entrepreneurs who have already got fixed in their ways over the years to expand that sustainable long-term thinking, that is still work in progress, but I am at it and I'm good at it, so I know I will get through it. That is the challenge that I wanna talk about, and I'll spend more time on it prior to the acquisition going forward than post.
Sure. I think that second question was, you know, on a quarter-on-quarter basis, India has seen a slight dip in revenues. I mean, has this been due to a lack of demand or it's seasonal in nature? I would guess if it's seasonal, it's likely to reverse in the coming quarters.
I answered this question previously also. It is to be seen in the light of Q3 to Q4. There was hardly any movement from Q3 to Q4. Generally, the Q4 is lower than the Q3. That is where it you have to see that it is in line with that. The Q3 to Q4 momentum was lower for the international market, and India was resilient in Q4, and it is in line with that only. There is no other way to read it.
Okay. Got it. Thank you so much.
Thank you. I now hand over the call to the management team for closing comments. Over to you, sir.
Well, thank you so much everyone for joining us today on our third IPO anniversary. I did mention earlier that we celebrate today with 385,000+ shareholders, and it is deeply humbling, very inspiring, and it instills clearly greater responsibility, accountability on our shoulders to deliver the sustainable cash flow positive long-term growth for Affle. I am looking forward to the journey ahead. Like I mentioned, we think long-term. We, you know, are making all our teams think long-term as well, and we look forward to meeting you as the journey unfolds. Thank you for believing in us and for supporting us.
Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.