Ladies and gentlemen, good day, and welcome to the FL3I Limited Q1 FY 'twenty six Earnings Conference Call hosted by Elara Securities India Private Limited. 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. Karan Duharani. Thank you, and over to you, sir.
Good morning, everyone. On behalf of Elara Securities, we welcome you all to Q1 FY 'twenty six conference call of Affleck 3i Limited. I take this opportunity to welcome the management of Affleck 3i Limited represented by Mr. Anuj Kangasohan, who is the chairperson, MD and CEO of the company. We also have Mr. Kapil Bhutani, who is the 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 risks and uncertainties. Kindly refer to Slide 23 of company's earnings presentation for a detailed disclaimer. I will now hand over the call to Mr. Anuj Kangaswam for his opening remarks. Thanks, and over to you, Anuj.
We started this financial year with a significant launch of our Apple III Vision and our strategic action plan for the goal to deliver 10x Decatur growth. I'm happy to report that in Q1 FY twenty twenty six, we exceeded all our performance benchmarks to record our highest ever quarterly revenue, EBITDA, PAT and consumer conversions. We delivered revenue of Rs. 6,207 million, a growth of 19.5% year on year. Our focused execution on higher productivity and continuous innovation enabled us to achieve highest ever EBITDA of Rs.
$1,397,000,000, a two thirty nine basis points EBITDA margin expansion on a year on year basis and a 33.7% year on year growth in our EBITDA. Notably, it marked our fifth consecutive quarter of sequential margin expansion and it resulted in 37.6% year on year growth in our profit before tax from operations excluding other income. We achieved highest ever PAT of Rs. $1,055,000,000, a growth of 21.8% year on year. Our CPCU business drove 107,000,000 conversions at a CPCU rate of Rs.
58 and we earned CPU revenue of Rs. 6,200 million, an increase of 19.8% year on year. This performance stems from our strategic investments in intelligent platform solutions and our ongoing efforts to integrate AI deeply across our operations, augmenting the authentic intelligence of our teams and systems to deliver greater outcomes. We continue to demonstrate strength across all our markets. India and global emerging markets together contributed 72.3% to our revenues and grew by 18.1% year on year.
The market tailwinds remain intact, affirming our positive outlook for continued growth momentum. Developed markets registered 23.3% year on year growth and contributed 27.7% to our revenues. This growth is driven by our deeper customer engagements and local direct sales, resulting in the continued addition of new account logos and a sustained growth trajectory. Our localized operating structure across all key regions will keep us insulated from any direct exposure to online tariff developments or broader macroeconomic uncertainties. Further, with our diversified footprint across markets, verticals and use cases, we remain naturally hedged.
Our overall growth momentum remains strong. We have enhanced our platform capabilities with integration of Optics AI into Apple's unified consumer platform stack, a capability we showcased during our Investor Day in April 2025, and we have begun rolling it out to our premium clients. Optics AI is our advanced Gen AI powered creative engine that generates hyper personalized performance focused ads, generating contextual experiences in real time. We also achieved a significant milestone by becoming an Apple certified partner for reinforcing our credibility and credentials in delivering privacy first, ROI driven growth advertising on iOS. We received a new patent grant in India, marking our fourteenth patent grant to date, further enhancing our comprehensive tech IP portfolio.
The patent titled Method and System to Detect Advertisement Fraud augments our fraud detection capabilities across a plurality of connected devices and reinforces our focus on delivering quality user conversions for advertisers globally. This quarter, we have also featured three customer approved case studies in our presentation. The first case study highlights our Optics AI powered hyper contextual strategy to maximize conversions for quick commerce in India. The second highlights our Privacy First performance in scaling device ID less acquisition of iOS users, accelerating financial inclusion across Latin American markets. The third focus is on Gen AI led vernacular strategy that strengthened brand leadership and significantly boosted first time purchases for a large omni channel retail brand in Africa.
Apple continues to be recognized as a tech thought leader in the industry. We were ranked among the top five tech platforms in the MMA Star Smarties Business Impact Index across India and Indonesia, as well as we won top honors including 16 awards across various programmatic CTV categories at the CTV Asia Symposium. With convergence driven solutions, we are shaping the connected digital ecosystem with precision, scale and intelligence. Our differentiated CPCO model, strong strategic moat, focused localized execution positions us well to exceed the growth expectations in FY 2026. With that, I now hand over the discussion to our CFO, Kapil Pratani, to discuss the financial review. 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. We have commenced financial year 2026 on a strong note, continuing our growth trajectory from previous years. At the outset, I would like to take you through our key performance metrics on a consolidated basis. We delivered year on year growth of 19.5% in our revenue from operations, 33.7% growth in our EBITDA and 37.6 growth in our profit before tax from operations excluding other income.
This was driven by broad based momentum across industry verticals in both India and international markets. We concluded quarter one financial year twenty twenty six at a consolidated revenue of thousand $207,000,000 surpassing our robust quarter four top line by 3.1% sequentially. On a stand alone basis, India revenue grew by 21.9% year on year and 6.1% quarter on quarter, while on adjusted basis, our India revenue increased by 18.6 year on year and 7.2% quarter on quarter. This performance reaffirms the sustained demand of our platform offerings and our ability to deliver at scale while maintaining a prudent operational discipline. India and emerging markets together contributed 72.3%, while developed markets contributed 27.7% of our revenues during the quarter.
We continue to enhance productivity by scaling our platform operations and strengthening our intelligent automation capabilities. These initiatives combined with sustainable revenue growth have significantly strengthened our operating fundamentals. As a result, we posted EBITDA of 97,000,000 an increase of 33.7% year on year and 4.3% sequentially. We achieved an EBITDA margin of 22.5%, representing a strong two thirty nine basis point expansion over Q1 last year. Coming to OpEx.
Our inventory and data cost stood at 30.9% of our revenue from operations. This was broadly in line with our previous quarters, while we continued our platform collaborations on premium inventories and deeper ecosystem level partnerships. Our employee cost increased by 4.4% sequentially on account of annual release of appraisals and bonuses in few geographies, while year on year growth was marginal at 3.8%, driven by efficient integrated team strategies and adoption of AI supported workflows. Our recurring expenses stood at 6.8% of our revenues, declining by $31,000,000 on a sequential basis. Even with increase in marketing and trade promotion expenses as per plan to support our continued growth initiatives, the decline in other expenses is attributed to broad based efficiencies across miscellaneous expenses category, including benefit of equalization levy.
We achieved profit before tax of $92,000,000 reflecting growth of 21.2% year on year and 4.3% quarter on quarter. Notably, if we exclude our other incomes and solely analyze core operating profit performance, the underlying growth is even more pronounced. Our profit after tax stood at $1,055,000,000 dollars an increase of 21.8% year on year and 2.4% quarter on quarter. Our PAT margin improved to 16.5% of total revenue, up from 15.9% in quarter one last year. On a sequential basis, we maintained our TAC margins despite higher effective tax rate of 18.3% compared to 16.8% in Q4.
The lower ETR in Q4 was due to recognition of deferred tax in that quarter. We continued to prioritize efficient working capital management and as such there was no material change in our collection risk. Grounded in disciplined financial and risk management, along with efficient execution, we are well positioned to capitalize on the market opportunities to deliver sustainable growth through FY 2026 and beyond. With this, I end our presentation. Let's please open the floor for questions.
Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. We take the first question from the line of Karun Dorani from Elara Capital.
Firstly, congratulations to the management for a great set of results. My question was pointing more in terms of EBITDA margins. In the last eight quarters, we have seen a consistent improvement in EBITDA margins, and that's not been in the back of gross margins. They've held on, but it's been more in terms of the efficiencies around the cost side. Now so we just try to get some kind of color here in terms of outlook.
Where are we in terms of operating efficiencies? What is the headroom here for margin improvement from medium term perspective? What is the management aspiring as a band for EBITDA margins? And what will actually drive this? Is it AI initiatives?
Is it cost containment? Is it growth? What could be the things here? Yes.
Thanks for your question. We have already provided the medium to long term goal of achieving or medium term goal to achieve around 23% EBITDA margin, and we are clearly inching towards that on a quarter on quarter basis. As you already mentioned, over the last several quarters, we have seen margin expansion. And I think it is an overall efficiency that we are seeing in the organization across different markets and geographies. As I mentioned, our structure is very, very localized on how we are executing in different markets.
And there is a very heavy and clear mandate that every single employee in the company has to be upgraded in terms of the authentic intelligence where there has to be a day in, day out adoption of AI across all functions and roles in the organization, starting from me to the top management, everybody is leading here by example. And we are absolutely driving greater productivity. For those of you who have attended our Investor Day, which was in early April, we showcased some of those capabilities, not only how we are impacting consumer experiences with AI, some of that we have covered today also in the earnings call with Optics AI, to how we are looking at driving greater efficiencies for the advertisers as another stakeholder and how we are driving efficiencies internally for all employees in the company using AI across the board. So, you would see margin expansion happening on all of those accounts across the three stakeholders where we are making AI becoming a very, very effective tool for us. Also, expanding the strategic moat of the organization in terms of how we are keeping ourselves future ready with our product innovations and so on, I think this is an area which is definitely adding to our competitive moat and you would see that trickling down to the margins consistently going forward.
Got it. Thank you. That's it from my side.
Thank you. The next question is from the line of Anmol Gurk from DAM Capital. Please proceed.
Yeah. Hi. Thanks for the opportunity, and congratulation on good set of numbers. Couple of questions. Firstly, wanted to understand if currently we are charging for Optics AI or it will act as a complementary product to win more volumes from new and the existing customers?
Okay. So on your first question, our response is that we have an integrated consumer platform stack as we go into the market, we call it the unified consumer platform stack. And Optics dot ai as an advanced GenAI powered creative engine is already actively deeply integrated within that stack. Now, how we charge our customers is for conversions. We're driving conversions for them.
And I think the business model of CPU conversion led business model is staying intact. So what we're seeing is that these capabilities are essentially enhancing Apple's platform's capability to deliver hyper personal, hyper contextual experiences to the consumers, thus driving better conversions for the advertisers, whether in terms of volumes or commanding better pricing or getting higher lifetime value users to get converted, and therefore effectively achieving both in terms of higher volumes of conversions as well as incremental pricing. As you would see, the CPU pricing has been constantly inching up. Now we had the aggregate price of INR58 for all the 107,000,000 conversions that we achieved in the last quarter. And all of this is part of keeping our platforms future ready and enhancing our competitive moat in the market.
So as our volume of business is growing, our pricing is also inching upwards. And I think this is the sign of quality platform defining and shaping the digital ecosystem.
Understood. Thanks for this, Anuj. And secondly, wanted to understand that how should we think about the margins currently in both India and developed markets? It would be great if you can give a breakup of that. And secondly, currently, what is the percentage of R and D expenses within our cost in the P and L right now?
Appreciate that. Maybe I'll get Kapri to take this question, Prahash. Kapri, over to you.
So coming on your question on the margins, we don't break down the margins on geographies as a target. We have a broad based target guidelines to our BU heads, business unit head, to attain a certain margin profile, and we we see that our sustained margin is coming from all geographies. Coming on to the questions of the cap the r r and d, we we don't call it r and d. We call it development expense. It is in line with the previous quarter.
It's hovering around 4,000,000 for this quarter also. And there is no significant increase expected.
Right, Kapil. Kapil, wanted to understand that how should we think about the levers going ahead on the margins, whether the margin expansion that we are talking about going ahead, would it come from India or developed markets or it would be more of the operating leverage in the overall business?
So I mentioned in my previous answer, we are looking for broad based margin expansions across all business units. All business units have their own EBITDA targets, and there is there's no particular preference that, okay, we should aim for margin expansion from particular geography. We, as our organization, are wired to get operational efficiencies from each business units, whether it is in India or whether it is developed unit markets or whether it is a platform or b platform. So our focus is broad based margin expansion, not any particular geography or particular vertical or particular platform.
Understood. And Anuj, one last question that for this FY 2026, should we expect growth to be above 20% like we have guided earlier?
Thanks for that question. Look, we are deeply growth oriented and a bottom line sensible organization. We are looking at an organic consistent growth pattern or a sustainable consistent growth pattern of about 20% on the revenues. And our goal is in the medium term to achieve 23% EBITDA margin as we continue our margin expansion goals. And I think this is something that we are pretty confident that FY 2026, especially now how it has started in Q1 and also how we are seeing the trend so far at the July for Q2, I think we are on a good track right now.
The overall confidence that we are deriving from this is, see, when we started this quarter of this financial year, nobody, none of us would have predicted that there would be a war situation in India. None of us could have predicted the escalations in The Middle East that happened. Some of us could have predicted some tariff related concerns at macroeconomic level. But all of this, the way it panned out or even the airlines related concerns, I mean, a lot of these things can impact sentiment, it can impact advertisers' thinking in a particular short term period. And even with all of these that we certainly did not factor in when we started this financial year or this quarter, have still delivered the quarterly results that we are presenting to you today.
So, it shows that we are very, very resilient, and I'm very proud of the way our team is executing and the competitive moat and the resilience of our platforms in the CPU business model, even in, let's say, tougher geopolitical macroeconomic situations shows resilience. So now with the first three months already reported today for this financial year, the fourth month, which we are in July, I mean, we can already see that we have a pretty strong consistent growth momentum at this moment, which should yield us a good outcome for FY 2026. And I think that's why our commentary is that this is sustainable and we are confident about beating expectations.
Sure, Anuj. Thank you so much for answering my questions.
Thank you. The next question is from the line of Arun Prasad from Avanish Par.
So can you just give a broad based commentary on what end categories which are doing very well? I know it's most of your categories is probably doing very well, but any category you would like to specifically call out, say, which is showing some signs of slowdown or some kind of macro headwinds? And what which are the category which is kind of turning around and may offset the strong sectors slowing down?
All right. So the way we categorize our businesses in categories B, F, G and H, we are seeing strong momentum in categories E as well as in category G. We have not seen any pullback or slowdown, possibly with some of the global factors that I mentioned in response to the earlier question. Had those not been there, we could have done more. But I think we take the current results as in line with our expectations and plans and, in fact, exceeding that.
So I think that is good. And categories E and G were obviously continuing a good growth momentum. In category F and H, we would also say that we are resilient. Now there could be cases where some customers, due to their own internal factors or due to macroeconomic factors may shift budgets from one quarter to another and so on. But in terms of the medium term and long term trends across categories, EFGH, we see very broad based growth and momentum across all the geographies, and we are pushing with direct sales and deeper customer engagements in each of these markets locally.
So and we are only increasing our efforts in these areas. So, I would expect the trends to continue given that this last quarter was a challenging time from an overall macroeconomic or geopolitical position, and the results are quite strong and the momentum continues to be strong. So, in categories E and G, we see strong growth momentums. In category F and H, we see still good resilience coming from the base of customers that we have, and we are only increasing that.
Just a follow-up, Anuj. Within category F and H, there are so many subcategories or an outsider like us to track. It would be helpful if we can within the subcategories, if we can call out, then probably for us, it will be helpful to track it from our side.
Fair enough. Fair enough. So, I talk about category theft in terms of resilience, in fintech, for example, it's a sensitive category where people would delay decisions to maybe do some investments or delay some decisions to take some loans or so on and so forth. So, I think fintech is a category where we were positive about the resilience that we saw and even against the headwinds that were there. Similarly, healthcare, hospitality, hospitality also we saw as per week travel and transport, I mean, in all of these situations when there is war, I mean, are shut, travel airlines are changing plans.
A lot of even with all of that, I think we have seen good resilience because we are naturally hedged in terms of covering ourselves across different geographies or different use cases, and we are able to make sure that whatever budgets are available in fintech, hospitality, they should prioritize going to us because we are a conversion led platform. So we are resilient in these categories, which are, let's say, the categories one could have said were more vulnerable in these times. But even in this quarter, we were resilient in them.
Understood. Understood. My second question is on the margins. I think we heard you and Kapil articulating about the margins. Just if I have to zoom out and ask, I mean, think ahead a little bit.
At some point of time that operating leverage that you are seeing, probably your competition will also catch up. So do you see any risk to the gross margin itself because all of this operating leverage, people having I mean, industry having slightly higher margins and EBITDA. At some point of time, this will reflect in the CPI rates bid by the customers and CPM rates and all those things. So should we trade with the caution that probably the gross margin can contract, which will offset the operating leverage at the EBITDA margin level? Is it the right way to think from a, say, fairly three, four years period of time?
Not yet. Not yet the right way to think. Maybe since you talked about zooming out, let me help you to have a visualization of how zooming out would look in our case in our industry. On one side of zoom out is the advertisers. On the other side of the ecosystem is the consumers.
Now let's look at the consumers. All of us are spending increasingly more time on our devices and especially with AI, Gen AI, it's only the dependency on our digital devices and users for all kinds of things is only increasing. Therefore, the time spent on the devices, screen time is increasing disproportionately. Consumers across the world are becoming more and more comfortable transacting online and the average value of those transactions is also going up. Consequently, the advertisers when they are spending their money and specifically in our business model, which is a conversion led business model, it's not a cost plus pricing model, right?
It's a conversion led business model. What the advertisers are seeing is the average lifetime value of a digital consumer is actually going up because there is more volumes of conversions and the average value of those conversions is also going up because the consumption digitally and the transactions digitally are actually increasing and the comfort is increasing with the consumers. When we look at emerging markets like India or let's say Latin America or even Middle East Africa or Southeast Asian emerging markets and so on, we are seeing a lot more consumers coming online still. There are still millions of hundreds of millions of more people coming online. And the ones that are already online, they're actually or are spending well, their comfort is increasing and they're actually going for higher value transactions also online.
So the advertiser is seeing a higher value user coming to them. Consequently, the willingness to pay at a CPU price rate is already seen in our trend lines, right? The CPU price is going up. When you zoom out and you want to look at it this way, then see will people do more conversions online? The answer is yes.
Will the average value of those consumer transactions also go up? The answer is yes. So therefore, our ability to price it effectively with the advertiser also goes up. And therefore, we should be able to defend that for many years forward. This is how we look at it.
Largely understood, but just one follow-up on this topic. Now with the operating leverage playing out, is there any sensitivity to the growth? I mean, now we can sacrifice some margins and deliver higher growth? Or it is right now decoupled at this point of time?
Well, the answer is, if we were to, let's say, decide to compromise on pricing or margins and go for higher revenue growth, we can certainly do that. We could have done it all along in the last five to ten years. And what is stopping that is the DNA of our organization. Our organization across a decade plus more since inception till now is wired for across the board for bottom line sensible quality revenue based growth and expansion. There are so many scenarios where we reject customers' revenue.
The sales team would go out and say, we have this campaign, can we run it? Our team would look at it and say, well, this is not likely to deliver or will not have the right kind of margin performance. So, it's not the kind of quality of revenue that we see. This campaign is a one off, will go off. So, investing time or our algorithms learning and optimizing those campaigns may not be worth it.
And therefore, we do say no to revenue if we don't see it as a high quality revenue and if we don't see it as contributing margin. Now, will this philosophy change in the organization? I doubt so very much. And why should we change it? There is enough quality revenue to pick, which is going to help us to get to the 23% EBITDA while delivering 20% organic growth overall.
So there is no reason for us to compromise our pricing or to dilute the strength of our DNA, which is rare to find in digital businesses, by the way, where a company is so bottom line sensitive and so conservative on its balance sheet as well, and we will continue to be like that.
Very helpful, Anat. Thank you. All the best.
Thank you. The next question is from the line of Vijay Jayant from Citi. Please proceed.
Yes. Hi. Thanks for the opportunity and congratulations on a good set of numbers. My first question is, you mentioned you became Apple certified partner this quarter. If you can talk about how that exactly impacts your ability to win new business and are there particular categories within EFGH where it is especially useful?
If you could elaborate on that. That's my first question.
I think, Afrolit's track record as a company that has been in this business for over twenty years now and constantly future ready bringing innovations is very, very stellar. And the track record is very strong. When we are one of the four certified partners globally listed on Apple's website, and we all know that Apple is very careful on who they partner with, who they promote, who they kind of see as their partner. It enhances the trust and the credibility quotient for our advertisers globally. It enhances the pride and the spirit of the employees saying that this is a great organization.
I mean, we are already fundamentally there. I mean, it's not that the certification is changing us. It's really just another credential that is validating who we already are. And then when we go out, win awards in industry thought leadership positions across the markets, whether it's on a particular use case or another, it enhances our ability and strategic moat to grow not just revenues, but also respect with our customers. Our ability to charge better, our ability to retain customers and grow customers better increases.
So we are basically winning trust and credibility and thought leadership through such credentials.
Got it. Thanks, Rajan. My second question is, if I look at both Google and Facebook are massively investing in their Gen AI infrastructure. And if I see Google's result, it seems like and with them moving on to ad AI mode, looks like ad loads are going to be fewer and they'll probably deliver higher conversions to some of what you were also seeing earlier. So my question is, for you, will ad served by you on Google and Facebook going to, you think, generally rise given these companies clearly have a leadership in in GenAI on a global scale. Right? How do you think about that?
See, when an advertiser spends their budget, just like when, let's say, your investment fund looks at investing, similarly, advertisers are seeing that they have a budget that they need to invest in the advertising channels in a particular financial year. And for all the last twenty years since I've been leading Akhul, I've seen that, that the advertisers would say that they park aside a certain budget that they spend these large walled gardens like Google or Meta and so on. And then they have a separate budget that they are spending on non Google and Meta platforms. Now so I think the competitive dynamics in the market, I mean, so far, I have not been asked the question that why should I run the campaign on Apple when I can maybe run it on Google or Meta. So I think that's not a question the advertisers ask of us.
So as far as our continued growth trajectory is concerned, think of it as a parallel sort of growth trajectory and the non Google and the non Meta advertising budgets are increasing at least at par or if not faster for the non Google, non Facebook part of the ecosystem. And then our platform is a consumer platform, so we are having a deep integration with Google and Facebook as well, and we are fully capable of taking our advertisers' budgets and telling them instead of spending on Google and Meta directly, you can go through our platform and look at it overall that, hey, this consumer is who you want to target and drive conversions from and therefore let Apple optimize the campaign to get this consumer conversion for you irrespective of whether the consumer is shown an ad on Google or Meta or in, let's say, a long tail chess app that this user plays. So, for an advertiser, it makes a lot of sense to consider that. And increasingly, we are seeing scenarios where we are able to win some of those budgets. And Google and Meta don't mind that because we are essentially channeling it on their platform.
So, are seeing it as an integrated partner with them. However, this is a very small part of our business today, and we see this as an area of growth, not an area which is on a competitive lens causing any issues to the non Google Facebook part of our business because those budgets are earmarked separately and the industry for last twenty years have operated in the same manner.
Got it. My last question, so your DM market outlook, I guess, with all the trade deals happening at the start of the quarter, obviously, there would have been a lot of uncertainty. And you've talked about India business also having a lot of headwinds in the quarter in general, right? But with that, I can see the India and EM market has actually accelerated in growth in the quarter versus the last few quarters, and it had decelerated to 16%. You have 18% now.
So in general, would you say both these engines, the DM market as a separate engine and EM in India market as a separate engine are looking up from here, both of them?
Yes. At the moment, I would say our confidence has obviously grown because even with all the geopolitical macroeconomic headwinds, we achieved what we achieved in this quarter. And at the start of the quarter, one could not have predicted all of these headwinds and the way they shaped up. So definitely, we are very confident. And I think the results are one thing is the results, but I think it's the on ground momentum that we see and the spirit within the team and the pipeline, all of those indicators continue to be very, very strong and resilient across all markets.
Got it. Thank you so much, Anuj. Those were my questions. Thank you.
Thank you. The next question is from the line of Rahul Jain from DOLLET Capital. Please proceed.
Yes. Hi. Thanks for the opportunity. Most of it has been answered. Just a bit more color, if you could share, Anuj, in terms of the developed market thought process.
You, of course, highlighted some of the uncertainty part. But how we need to see this annual growth? Will it be more skewed toward developing market meaningfully versus the way it was in the previous year where it was developed market led?
I would think that the 20% organic growth on revenue with 23% EBITDA margin mid term goal is a very realistic, achievable position from where we see and assess the market situation and the momentum at this moment. And in terms of developed markets, again, we are doubling multiple verticals, many advertisers in those verticals and our base is still small. The addressable market is large. So we are able to achieve our goals, whether from new budgets from new customers or from new budgets from existing customers or taking competitive budgets from existing competitors to our advantage. I mean, all of these levers are at play and we are very, very competitive in terms of winning the business that we need to win.
So, given that the base is small, our competitive moat and differentiation in what we bring to the market is very evident and the credentials that we carry, we believe that we will be able to achieve our goals in developed markets, in particular, as well as in emerging markets, are continuing to see positive momentum. So getting to 20% overall is very defensible for this financial year. That's how we look at it.
Thanks for the color. And lastly, for Kapil, there were some savings that we have drawn on the other expenses side. Can you share if these things are sustainable? Or there were element of savings specific to this quarter?
So some part of the saving is long term due to equalization levy and certain discretionary expenses or savings might go up and down. But, yes, largely, we will be in line with what we are doing in this quarter. Yes. So the one part of the saving is sustainable because of the equalization level.
And any increase in annual investment on platforms, we might see in FY '26 and the run rate, if you could share.
We we we, in our last call, mentioned that we'll be not increasing our capital outlay on the platform development expenses. Still, we have an inorganic acquisition, but for organic platforms at the moment, we don't expect additional outlay of budget as compared to last year.
Thank you.
Thank you. The next question is from the line of Swapnil Podhukha from GM Financial. Please proceed.
Hi, everyone. Thanks for the opportunity. I had a couple of questions. The first question is on the market environment currently in India. The reason I'm asking this question is like it seems that TreadDesk seems to be have become quite a bit more active off late.
What I hear is like they've hired few senior management people. They also seem to have onboarded one of the leading Quick Commerce players as their client. And the same Quick Commerce player was earlier working with us. So from that perspective, I just wanted to understand how things are for you in India currently?
Thanks for that question. Look, when the market is attractive and India is in a big attractive market and the fact that we are doing well here, it will certainly attract some of the global competitors here as well. Having said that, I think our competitive moat in India is coming from multiple dimensions. One, we are present across verticals. Two, our engagement is deeper with our customers.
We have direct customers. Central, you would have noted that we give this stat 75% of our revenues overall is direct customer. If you look at The Trade Desk reports, not just perhaps in India, but globally, their business is very agency led. I think 80% of their business or more comes from ad agencies and working. So there is a difference there.
And third, being on the CPU model, we have deeper integrations with our customers and deeper data integrations, first party data integrations with our customers. And all of these insights for the India market have been honed and built into our platform over many, many years. And the people that we have in India, our best people are fronting the business functions in India, whereas for somebody like a trade desk, clearly, R and D and data science teams or the AI teams are not building models or shifting models for India or emerging markets. They're a very small part of their business. So their tech moat versus ours, I would believe it will be weaker for them.
Obviously, they're not putting their best people to come and fight against our people in India in a competitive sense. So they have hired some people, but I would think that that's just something that they need to do to tell their public market investors expanding to India. But I mean, really in terms of competitive moat, I feel very confident that, okay, we have to go and compete with trade bets in any direct customer engagement, chances are that we will be very, very successful in more cases than not. There could be cases where they would win, but the market is large enough for us to compete well and to achieve our goals. I don't think we should be too worried about it.
And finally, I think the unit economics of working in India are harsh. And for a trade desk to make this into a profitable market, I would be very happy to challenge them on that. So they are putting a tick box at the moment to say, yes, we are in India, we're doing something in India, but I don't believe that they are on a strong footing for us to be worried or challenged by them at the moment.
Got it, Nish. The second question is on your medium term revenue growth forecasting. You did mention 20% revenue growth is possible in FY 'twenty six. But if I was to just take a medium term perspective, let's say, next three, four years, and especially given that EM and India have been growing less than 20% for a decent period of time now. So how do we see the revenue growth trending post FY 2026 especially?
Because at some point of time, your DM growth should see some moderation that the base effect that you called out may not that will catch up at some point of time and possibly your growth will narrow down to the broader market growth there. So if taking a medium term view, is that 20% growth sustainable, especially given EM and India are consistently growing less than 20% right now?
I think it is sustainable because I would say that the base is still small and the addressable market is very large. And we are seeing new dimensions of addressable market. Are we expecting that in emerging markets, we will also see gaming as a vertical becoming stronger over a period of time, which it is not at the moment, okay? So when we look at developed markets, gaming is a stronger vertical there. In emerging markets, gaming is a weaker vertical.
And we're going to see some very high volume and value verticals growing and becoming important in these markets, which have not been factored in perhaps the analysis that you're doing. So we're going to see market expansion. We're going to see more growth coming in certain verticals than what is factored in at the moment. So I'm pretty confident that achieving overall 20% growth is the minimum that I would model the company at for the next three to four years or even longer. I mean, we've already started my commentary and started this financial year or rather our third decade which has started in this financial year by clearly stating our plans and strategic action plans to achieve a 10x growth and to mathematically get to 10x growth even if we take the whole of ten years for that would at least require 20% organic growth and then augmenting that with inorganic growth, which we have the muscle power to execute on and the patience to wait for the right deal to execute on that.
So I think combination of organic growth at 20%, if ended by the fact that the base is small, addressable market is very large, there are many levers of growth yet to be tapped into for the future. And the fact that we will also be looking at inorganic selectively but surely will certainly give us the kind of momentum we're looking for. Your question was only for the medium term, three to four years, but we are taking a decade long due to this and we are pretty confident that we should find that kind of growth along the way.
Got it, Ananshu. Thanks a lot for answering those questions and all the best.
Thank you. The next question is from the line of Deepak from Sundaram Mutual Fund. Please proceed.
Yes. Thanks for the opportunity. Am I audible?
Yes. You are Deepak.
Yes. So my first question is slightly long term in nature. So you must be aware that Gupam recently stated that they are going undergoing a major organized restructuring exercise, right? And the remarks made by the c of CEO was that it will likely impact, let's say, 45% of its US workforce. Now I partly believe why this is happening is it's because of how AI is disrupting the agency model, let's say, in terms of creative work as well as ad campaign execution.
Right? So keeping this context in mind, and since 25% of our revenue comes from, let's say, ad agency, do we see any impact for us in terms of growth trajectory? Or is it that I should read like this that our share of campaign budgets, which we get through ad agencies of advertiser stays intact and in future that our direct customer revenue mix will likely go up with increasing wallet share from their budget to us because of all this disruption which is happening in this agency model?
Deepak, did I just hear you say that the agencies contribute to 75% of the revenue? Did you say 75% or did
you say 2525%. Correct,
yes. So I think the first of all, whether it is an advertiser that comes and contracts directly with us or whether it is an advertiser who comes and contracts with us through their agency, for example, it could be any of the big agency groups or otherwise, we always ensure that we have direct deep relationship with the end advertiser, okay? And so our teams, our engagement or the, let's say, the tech integrations that we do for getting the conversion data points and so on with the advertisers has to be directly with them. Our tech integration will always be endpoint integration will be with the end advertiser, right? So we see the agency groups as an important partner because they claim the same ecosystem.
So having them as an important partner, as a friend is important. We are never going to influence an advertiser and say, Hey, just don't go to that agency, come to us directly. No. So we do respect to the channel. But if the channel by itself is rightsizing, restructuring or having any relevance issue with a particular customer, that customer will not stop spending on digital advertising.
And hopefully, if they were to say that, okay, they don't want to work with an agency or they want to go direct, then they approach us or also conversation leads to that, we would see a shift from the proportion of revenue that's coming from agencies to where it is coming direct. The fundamental question should be that are the advertisers going to keep spending on digital, whether through agency or directly? And I think the answer is more in our favor today that we're already doing 75% plus of our revenues directly with our advertisers. So, we should be less impacted versus if I linked it to the earlier question from the colleague from GA Financial, somebody like a trade desk where 80% of the revenue is through agencies because the whole team, their sales organization, the structure is DNA of the organization is to deal with and through an agency with their advertisers, they will see a much bigger challenge in this kind of a transition. So I feel that this is not in fact, I mean, one of our management meetings, this is a point of discussion that, hey, the big agencies are restructuring, what should we do?
Our natural orientation in the market, our internal organization is naturally ready to serve our advertisers as the endpoint and we would be very sensitive to the agencies who are going through a tough patch to see how we can be still their friend in this time as far as possible, But that doesn't impact our ability to earn revenues from the end advertisers.
The next question is from the line of Ashwin Mehta from Ambit Capital Private Limited. Please proceed.
Hi. Thanks for the opportunity and congrats on good numbers. So I think any sense in terms of how advertising spends in India are shaping up ahead of the holiday season that we see in the second half?
Sir Ashwin?
Yes.
Sir, your voice is breaking.
Just one sec. Is it any better?
Actually, it was totally fine. I could hear Ashwin very well. Ashwin, I can take your question. So in terms of the holiday season, let's just say with Raksha Bandhan around the corner, we're already seeing some positive tailwinds there from the advertisers in India. And we are very confident that the trend lines for the festive season would be in line with the seasonality trend that we have seen all along, where the quarter three will certainly be higher than quarter one and two and should be higher in a similar sort of sequential percentage range that we are used to seeing.
And I think the it's still early to go and start talking about October, November, December quarter. But I think there's nothing that we see which should dampen that or should suddenly make it an even more exceptional sort of seasonality spend, I think it should be in line with the natural course of business that we have seen. But yes, seasonality does affect advertising in a positive way. Festive seasons or festivals do or big events or where audience engagement is high or the audience spending is high, the advertising tends to go up. So I mean, Rajshavandam is already a positive for this quarter.
And of course, in Q3, we expect things to be like we have always seen, where Q3 should be the highest.
Sure, Anuj. And my second question was in terms of any updates on acquisition plans. Are we nearer to consummating something? And what are the areas that we are looking at?
Acquisition plans, you've seen our track record over the many years since we are a listed company and we have done acquisitions very successfully, integrated them successfully. And the last acquisition we did was over two years ago. And clearly, the integrations have all been successful. Therefore, using almost one point five years now since the acquisitions plus organic growth of over 20%, around 20. And I think the confidence in the team is high.
We have been evaluating, but we are waiting for the right time, right time and the right pricing and the right candidate. In fact, when we there were two sides to this macroeconomic situation, right? On one side, one was worried, okay, what's going to happen with the wars happening, with the trade tariff wars and other wars happening. But at the same time, we are mindful that when things get tough, we may find more attractive pricing for acquisitions, right? So, we are sitting and waiting appropriately in talks with at any given time, I would say, are evaluating anywhere between five to 10 companies, which we watch for many years, and we will wait for the right time.
I mean, let the we are not going to make an extensive acquisition. And our acquisition strategy, as you may have noted in the last five transactions that we would have done, is always very consistent and that hasn't changed. So there is no pressure or artificial pressure on us that, okay, let's just go and acquire something, no problem, even if there is a high price to be paid, we can wait. And it's not like we are waiting. We have the ability to build in house, right?
I mean, we are a very strong tech organization. We can build for our future for sure. And if we find the right thing to buy versus building, we will at the right price at the right time. So we are actively evaluating, and I will not give you any short term, medium term guidance on it. When it happens, we will certainly report to the market.
Sure, Anuj. Thanks for the details. Just one clarification from Kapil. So Kapil, what is the reason for the other income falling over the last three, four quarters and the fact that our cash has been rising?
Thanks, Harshil. I think I answered this in my previous course. I mentioned again that the the deduction is largely on account of pay miscellaneous expenses and multiple line items.
No. No. I was talking about the other income, Poli, not the other expense.
Voice. I thought it was expensive. So other income is basically, last time, we had certain write offs of liabilities on the acquisition side, and that was the higher other income in quarter one last year. And there is a dip from there, but income from, say, investments or placements of funds is similar to, say, quarter four last year. The the the there is a slight dip in other income from last quarter four is on account of exchange adjustments of various assets.
Sure. Sure, Thanks for the clarification. And all the best.
Thank you. Before we proceed with the next question, I would like to request participants, due to time limitation, please limit your questions to two per participant. The next question is from the line of Samarth Patel from Equiris Securities. Please proceed.
Thanks for providing the opportunity, and congratulations on good set of numbers. I think you touched upon the colonization levy and savings because of that. But on the revenue side, by the removal of the acquisition levy, I think the advertisement cost on global platforms for Indian businesses have declined and which should have freed up some sort of digital marketing budgets, right? So do you expect this shift to benefit us? And how should the dynamics play out here?
If you can just double click into that, that would be really helpful.
Voice was cracking a bit a little. Can you just repeat the question?
Yeah. I was just saying that by removal of equalization levy, the advertisement cost on global platforms have gone down for Indian businesses, right, which should have freed up some sort of digital marketing budget.
So how do you see this benefiting us and whether the budget should shift to performance marketing players like us, or we should see some sort of increasing competitive intensity from the global players?
So this equalization change is universal for all players in the market, whether they are on performance marketing or nonperformance marketing. So it doesn't create any additional leverage. It's a it's a equalized for every participant in the market. Right? But, yes, this gives us a certain amount of savings to deploy in our growth activities.
Okay. Understood. That's it from my side.
Thank you. The next question is from the line of Lokesh Manik from Valium Capital.
Anuj and Kapil, my question was on Optics AI. If you can give a sense of more on the qualitative side rather than quantitative, what would be the penetration of this new technology in our current campaigns in this quarter? Just to gauge how the new products or technologies that we are introducing and how they are scaling. And just a suggestion, if you could include that in the forthcoming presentations as well. I understand for competitive reasons, you can't quantify it, but just to gauge maybe on a percentage term, 5%, 10%, what is the integration with the current campaign?
Thanks for that question. In my discourse earlier, I did mention that we have already integrated it as part of our consumer platform stack and that we have qualitatively already rolled it out to some premium customers. We also have shared a case study of our one of our customers out of the three case studies, one of them is an optics focused one where we are showing showcasing how we're able to create assets, ad assets or on the fly based on the different deals or different offers or different products or pricing that the customers are offering on the fly creating those digital assets. And we also have another case study where we're talking about the vernacular impact where we are able to create dynamic vernacular content, keywords and more around it. So, Optics AI is fully integrated from a tech stack perspective.
Of course, it is going to go through ongoing enhancements and capabilities and so on. But as it stands today, it is fully integrated in our core platform. Depending upon campaigns and customers, it will be deployed and used through our platform in most cases automatically and in some cases selectively. So, I think it's a step at a time. It's a matter of rolling it out globally within our teams, making customers more aware and so, could be it's already been used in many, many campaigns, but it's not been surfaced.
So, to the customer that, hey, this is Optics AI that has done this or that for you, right? I mean, it's only part of the core engine and the core platform. And so, I would say it's 100% integrated. And in terms of rollout to customers, I think we are seeing impact of it already on a qualitative basis and we have shared the case studies. Should we quantify what percentage has been rolled out?
I think it's kind of this is not something that we are pushing or tracking, but we would expect it to be 100% adopted across all campaigns within the course of, let's say, this year or beyond. So, I don't think that it needs a specific tracker. We should be very confident that it is necessary in every campaign. In every campaign, you want to achieve hyper contextual experiences for the consumers. And if we can achieve it through our technology, there is no reason to limit it.
And the advertiser in this case is not going to have a discretion to say, well, I want Opticshare or not. It is an Apple inherent internal deeply integrated platform capability that must be part of our convergence driven platform. So, it's not something that you should be concerned about in terms of adoption tracking. It's not a case of that, oh, whether the customers will accept the upsell or not. It is going to be part of everything that we do and it will enhance our capabilities, first and foremost, for the consumer, getting better experiences, driving higher conversions hopefully and enhancing our competitive moat.
So, this is going to happen and it is already happening in the first quarter itself.
Great. Great. That was very detailed. Thank you so much, Anduj. My second question was just a clarification.
This creatives that you create with optics.ai or the content that you create, the IP remains for the content with Apple or is it with the advertiser? How does it
to avoid any We are fundamentally enhancing the content and the creatives. Now, of course, we don't pass those ad units or creatives back to the advertiser to say, hey, go and run it anywhere else. But the content and the creative is very specific to an advertiser to be running on our platform. Right? So I mean, it's not like they will say that, okay, I've made this this ad unit or this asset that has been made by Apple for their campaign conversions.
Now they will say, give me that asset, I'll go and run it on somewhere else as well. One could get into that, but at the moment, this is not how it works. Now is it going to be called that this is IT belonging to us? Obviously not. I mean, we the tech stack the tech IP belongs to us, right?
But the creative access is the product of the advertiser that we are enhancing through things. So it is a shared commercial understanding, right, that we have made this for driving conversions on our platform. And so therefore, to that extent, it should be used only on our platform. So it does enhance our competitive moat, but I wouldn't go to the extent of saying that it's become our IP on the content and the creative side.
Next question is from the line of Omkar from Shree Investments.
As you have already alluded to your acquisition strategy that there is no hurry. But one thing is for sure that your return on equity is taking a hit because of all this. I mean, what do you have to say on that?
Well, my short term answer is that we should do the right thing at the right time at the right price, and we should not take any pressure. And if some metric is getting impacted for a short period of time, we will be sensitive to it and but still do the right thing at the right time. So I mean, we are alert to it. And like I said, that we are actively working. We are always actively working on the.
Just to follow-up on that, as you have said that so for the decade, you are targeting around 10x growth. So I mean, organically, it is possible to grow 20% for, say, next four, five years. And on top of that, you add 56% kind of inorganic growth to the overall thing. So in order to go 10x in ten years, you need to do 25%, 26% overall growth. So but I mean, in the long term, say, in that means that means in ten years, is it possible to do organic growth of 20%?
And on top of that, the inorganic growth you are mentioning. So collectively, around 25% growth for ten years.
So let's put it this way, that if we do any acquisition, which we certainly will, and we have shown that in our track record over the last many years, that we do acquisitions and I'm telling you today that we are actively working, actively doing due diligence on many. And essentially, I'm telling you also about the timing of when to do it. We wait for the right moment to do the acquisition. What is the criteria for the acquisition? One, the company that we acquire should be able to keep pace out we will only acquire a company that we believe that we will be able to get to at least 20% EBITDA and we can grow it from where we meet it about 20% year on year on the top line.
So this twentytwenty rule has to be absolutely sacrosanct. And therefore, the acquisition strategy when seen or modeled together with our organic growth of 20%, which I believe would sustain beyond the three to five years that most of us are talking about. The math of it is that, let's say, the next five to ten years, how many acquisitions would we do? Let's say, at least one every two years. And if we do one acquisition every two years based on this criteria and modeling, I believe that the 10x would happen faster.
So if you look at the last five years track record of the company, we did achieve 10x growth in five years or so, five years old that we achieved 10x growth. I am now saying, okay, let's put a ten year plan for 10x growth and let's be a bit more conservative given that we are bigger versus what we were before. But even relative to the market size, we're still quite small. So I am pretty confident about our 10x growth plan, and it is anchored on organic growth of 20% being sustained and incremental inorganic additions, which will add step changes to where we are, but those step changes should also sustain at 20% continued growth. And therefore, we need to be selective about what we buy.
The last thing you want is to buy something that adds some inorganic number to us, but it doesn't deliver long term growth going forward. So I think it's super important that we do the right inorganic acquisition and not be under undue pressure for, let's say, and metrics at this moment. So I think what's right for the business needs to be done and you need to be taking comfort in the fact that actively working on this. It's not like we are sitting comfortably and saying, okay, let the cash is in the bank and we are anyways growing at 20%. So what's the rush?
That is not our DNA. We are actively aggressively in the market. Also, you look at AdTech overall globally, who is today a qualified buyer in AdTech to buy any other competitor? I think Apple is one of the only ones which has very little debt, has significant amount of cash, has a track record of doing acquisitions, is openly stating that I will do acquisitions. It's our criteria of acquisitions also clearly stated.
So anybody who wants to sell their company in AdTech today knows that they have to knock at Apple's door, whether it's an investment banker in Japan or in U. S. Or whatever, any company that is appointing anybody to say I'm selling, they're all knocking at Apple's door. So we have a strong case to be the first right to pick what we acquire, and we are watching carefully. And we will do the right thing at the right time.
I want to give you that confidence as well as if I may say assurance.
Okay. Thanks for the detailed answer. Just one clarification I needed. How much is the cash on the book currently?
Oh, god. I would request you to go back in the queue.
Oh, I don't want any answer. Just the numbers, sir. Thank you.
I think it's a natural package in our balance sheet reported.
Sorry?
I I will please refer to the earnings presentation just mentioned here.
Sure. Thank you.
Thank you. The next question is from the line of Sanjay Lada from Bastian Research. I would request you to please limit your question to one per participant.
Hi, sir. Thank you for the opportunity, and congratulation on a good set of numbers. My question would be on since we are digital advertisement, are we moving ahead from mobile to other digital platform or we want to remain at a mobile advertisement company? So the other platform would be we already spoken about in the past for the TV kind of things, so TV, desktop or any other platform. Are we moving to this direction?
Sir, we are calling ourselves consistently as a consumer platform. And yes, the label of ad tech or digital or mobile is comes with it. Now why is mobile such a dominant part of our discourse? It is because the consumer platform that we have and the consumers, people like you and me, are so disproportionately on our mobile phone. You would be surprised to know that I mean 90% of my time on digital devices is on the mobile phone and maybe 10%, 20% on connected TV at this moment.
But this will change and the dynamics might change. Now, wherever the consumer's attention and eyeball is, Apple as a consumer platform stack will necessarily incorporate that. So if you look at our discourse as we are a connected devices platform, including CTV, including wearable devices, as everybody ends up having smart watches or other wearables or even embedded technologies on our consumers, I think Apple would need to address all of those. So we are a connected devices platform and in that sense digital, but we are mobile first and very anchored on the mobile device because the consumers are anchored on that. And if tomorrow all of us decide that we won't use mobile devices, we'll use something else, Apple will absolutely as a consumer platform focus on those devices or those kind of experiences.
So, we will follow the consumer trends. And for the last two decades, the single most important device has been the mobile. And I would say for the next five years, it will continue to be that way. And the connected TV is becoming an important device. Available devices trends is also on the uptick.
So we are a connected devices platform, deeply anchored on mobile and connected TV at this moment and future ready, future proof with all our innovations are taking a broader sense for what other devices might come going forward.
Due to time constraints, we take that as the last question. And now I would like to hand the conference over to the management for closing comments.
Thank you very much for a very engaging discussion on our earnings call today and for your belief and continued support to Apple III. Are looking forward to on August 8, we complete six years of being a listed company. And with that, we would have reported to you over 24 quarters of public listed company results and consistently showing a track record of sustained momentum towards growth, not just in numbers, but in terms of intellectual property capabilities, future readiness of our platforms and so on. We remain very resilient and exceptionally hard working to deal with any scenarios going forward. We are looking forward to achieving 10x growth in this decade, and please stay tuned and look forward to having you all at the next trading call as well. Thank you.