Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Q1 FY 2025 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that they are difficult to predict. 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 an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhanu Chopra. Thank you, and over to you.
Thank you. A very good afternoon to everyone, and thank you very much for joining the earnings call for RateGain Travel Technologies Limited for the first quarter and fiscal year 2025. It's great to connect again with all of you, and I'm excited to share some key updates from the quarter. Joining me on the call are Mr. Tanmay Das, our CFO, and Mr. Divik Anand, our head for Investor Relations. We announced our first quarter results for the fiscal year 2025 earlier today, and I hope you've had a chance to go through our financial results, press release, and investor presentation. They're also available on the stock exchanges and on our company website. Building on the record year that we've had, we've had a steady start to the new year with a balanced performance on both growth and profitability.
We continue to see good traction with our large enterprise and mid-size customers with our offering of AI-driven solutions, solving for key challenges for our customers by delivering insights at scale and helping them to acquire guests profitably. Given the strength of our product proposition and continued focus on product innovation, introducing new features and enhancements to meet evolving customer needs, we saw steady performance across our DaaS and MarTech segment. With a customer-first mindset, we're constantly seeking ways to deliver incremental value for our customers. While the travel industry growth remains steady, we are mindful of the growing global uncertainty and are confident that our resilient business model and adaptive approach will help navigate these challenges. With that, I would like to capture some of the key operating and financial metrics from the past quarter and year gone.
Our annual recurring revenue, ARR, now stands at a new high of INR 1,040 crores, growing at over 21%. We continue to see steady traction across all three segments, and with a strong pipeline of over INR 555 crores, we look to drive value for our customers. Revenues for Q1 grew by 21% to INR 260 crores compared to the same period last year. Steady revenue growth was complemented by an improved operational performance, with our margins coming in at 19.1% for Q1. It underlines the strength of the SaaS-based business model and execution excellence across the organization. Our new contract wins came in at INR 62 crores as we deepen our presence across some of our long-standing relationships, along with opening up of new use cases for our AI-driven solution.
We continue to see improvement across some key operating and financial metrics. Our LTV to CAC stands at an industry-leading number of 15.4x, and the revenue per employee stood at INR 1.3 crore, capturing healthy employee productivity and ability to scale up in a sustainable manner. In line with our vision of building an integrated tech stack focused on revenue maximization, we continue to drive product innovation by introducing new features and enhancements that meet the evolving needs of the clients and drive value for them.
Some of the key differentiators and recent enhancements that we continue to drive on our RevMax platform, which is really a central hotel commerce platform, are: number one, this platform represents combined power of the integrated ecosystem, which allows customers to drive marketing to acquire customers, booking engine to enable direct conversion, channel management to optimize distribution across all demand partners, and BI to present insights on the business. Number two, comprehensive omni-channel marketing to drive guest acquisition with built-in reporting to track performance across platforms, whether it's Metas earch, Google, social, display, connected TV and video streaming. Number three, entire ecosystem is powered by AI that leverages the strength of RateGain being one of the largest aggregators of travel data to automate call to action. So the system is self-learning, and this constant optimization helps to drive conversions, thus maximize revenue.
Number 4, system is 100% cloud-native. That helps drive scalability, security, and reliability. And number 5, customizable design built with no-code technology and user-friendly interface for easy integration into hotel brand website. This is an opportunity we are very excited about and working towards scaling this up in the next few quarters.... On the state of the industry, global travel industry continues to hold steady in the face of evolving situations in some pockets. The Skift Travel Index continues to hold steady at 104 in June, with key geographies, with Europe witnessing a strong summer season. Hotel industry continues to grow over 2023 levels, buoyed by improved occupancy, while we see vacation rental growth moderating. Recent report from leading consultancy firm highlighted that business travel in North America is expected to exceed 2019 levels by end of this year.
We recently launched the State of Distribution report in collaboration with New York University and leading hotel tech organization called HEDNA, to help our hospitality customers better understand the challenges facing the travel industry. A few key issues highlighted in the report is the difficulty in tracking travel intent, the existing distribution landscape, the effective management of internal data, and the manual effort that goes into reporting. In today's rapidly evolving travel landscape, the ability to track intent and grasp industry nuances is crucial. This initiative not only provides valuable insights for our customers, but also gives RateGain an opportunity to showcase our innovative products and services that are designed to address these challenges and offer a deeper understanding of the industry. With that, I will briefly touch upon the performance across each of our business units.
The DaaS business contributed to 32% of the total revenue for Q1 fiscal year 2025. This unit grew at a healthy pace, with continued traction across key enterprise accounts and addition of new logos across airlines, OTAs, car rentals, and cruise. As you may have seen from recent press releases, we've added some great logos in our air segment, including Malaysia Airlines, and our air vertical continues to be a key growth driver within our DaaS vertical. We also continue to make inroads with key clients across both OTA and car segments, deepening relationships with larger enterprise brands. We're seeing some early signs of traction with our newly launched unified rate insight platform for hotels, that is called the Navigator. We're starting to make inroads with customers in Europe and Asia-Pac, and are optimistic on growing this vertical further.
Given our ability to deliver large volumes of data, we continue to see incremental volume demand coming from our existing enterprise customers, driven by strong travel demand and product innovation. Distribution segment accounted for 20.4% of our total revenue. This segment has grown at a slower pace compared to other segments, mainly due to volume pressures seen on certain demand channels that we provide connectivity to. With that said, we are seeing expansion on certain key relationships that we have, and with recent partnerships that we have established, we are confident of growth picking up here. We've witnessed good traction and continue to see opportunities for our RevMax platform with mid-sized chains in the APAC and Middle East, and continue to focus on scaling this up in the coming quarters. We continue to add further features to create best-in-class product, as I mentioned earlier.
Our MarTech business contributed to 47.7 of our total revenues for Q1, backed by healthy growth in the paid digital media segment and continued traction in our social media management segment with some leading hospitality brands in the North America geography. Based on focused efforts from the team, we carry forward the sales momentum with three closures and healthy pipeline growth. With a continued focus from hotels on driving direct ROI, our PDM offering continues to see increased traction with hotel chains across Europe and APAC region. With recent changes to Digital Markets Act and Google changing settings on campaign management, there's an opportunity for our product and how we can help drive more traffic to ... for our hotel partners.
As we have moved towards an integrated PDM offering, the value we are driving for large travel brands bases the strength of the travel intent data is really allowing us to drive market share within the DMO segment, and we have closed some marquee deals with large enterprise DMO brands across retail, financial services, airlines, and hotels, making RateGain the partner of choice. With added measurement capabilities and partnerships that we have established, we continue to strengthen our product proposition. As we complete another quarter with remarkable achievements, I'm thrilled to share our outstanding milestones on the people front. We continue to see improved attrition rates, which now stands at a new low of 10.9%, reflecting a strong commitment to retaining and nurturing top talent. Our focus remains on nurturing talent, promoting from within, and creating a diverse, inclusive, and equitable culture that propels us forward.
In recognition of this, we were recognized as one of India's Great Mid-Sized Workplaces, 2024, an accolade that underscores our dedication to creating an exceptional workspace. As we focus on building a future-ready workplace, we're excited to introduce AI in our HR practices, enhancing our ability to support our employees more effectively and streamline our processes. Our commitment to our employees' growth, well-being, and inclusivity remains at the heart of our success, and we look forward to building on these achievements in the coming quarters. With that, I'd like to now ask our CFO, Mr. Tanmay Das, to take you through the performance of Q1.
...Thank you, Bhanu, and a very warm welcome to everyone on this call. I'm delighted to report that the company has delivered a robust quarter with steady revenue growth, coupled with healthy margin expansion of 150 basis points, demonstrating execution excellence and the value we are delivering to our customers. With focused approach from the team, we continue to see steady performance across key operating metrics, including customer retention and revenue per employee. Our land and expand strategy continues to give good results, with healthy revenue growth across our key customers. We saw 32% growth in revenue from our top 10 customers and healthy revenue expansion in Europe and European geography.
We remain focused on market, making the right investments in product, inorganic opportunities, and talent to strengthen our return ratios and create long-term value for all stakeholders, and in line with our vision for becoming the leading global travel tech provider. Some of the key financial and operating highlights from the quarter gone by, the company reported a record revenue of INR 260 crore, with year-over-year growth of 21.2%. This was on the back of strong growth across our DaaS and MarTech verticals, growing at 18% and 33% respectively. Our distribution vertical witnessed slow growth, with volume pressure across some demand partners. There is seasonality effect in Q1, and we are hopeful with the order book and pipeline we have of growth picking up in this segment throughout the year.
EBITDA grew ahead of revenue at 32% to INR 49.8 crore for Q1 FY25, with the margins expanding by 150 basis points from 17.6%-19.1%. Q1 carries the impact of annual wage hikes, and the improvement in EBITDA margins is on the back of operating leverage kicking in as we scale up in a sustainable manner. The PAT grew by 82% to INR 45.4 crore, compared to INR 24.9 crore in the previous year. The company continues to have strong customer relationships with low churn and a focus to expand existing relationships to build sustainable and reliable revenue streams. Our gross revenue retention improved to 91%, and our net revenue retention stood at 105%. Our customer base currently stands at 3,299 customers.
We closely track, strive, and strive to outperform on key operating task metrics. For Q1 FY 2025, our revenue per employee stood at INR 1.3 crore, growing at 10% over last year. With continued traction across key customer segments and key geographical geographies, including APAC and Middle East, we have a healthy pipeline to go, which currently stands at new high of INR 555 crore. We continue to have strong balances, with our net worth currently at INR 1,497 crore, up 100% compared to same time last year. Our cash and cash equivalent balance as at quarter end stood at INR 1,079 crore. With that, I would like to close my remarks, and we're happy to open the floor for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge who wish 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Karan Uppal from PhillipCapital India. Please go ahead, sir.
Yeah, thanks for the opportunity. The first question is on the guidance. So what's the revenue growth and the margin guidance for the year? Tanmay, in your remarks, guidance comments were missing. Just want to check that.
So, I'll take that question. Yeah, so the guidance continues to be, you know, the 20% that we had, reiterated at the beginning of the year. This is on back of couple of very, very, you know, large deals that we are closing on. And also, you know, as you know, there are some challenges that we are seeing in the, North American market. And, we've also seen a couple of, you know, clients that have attrited out in, one in distribution and one in MarTech. Distribution was largely because of, non-payment of deals, and on MarTech, we had, like, a very large chain, that, bought like a mid-sized chain, which was a customer for us on the MarTech side.
So, you know, we've, we've seen some bumps, but, despite that, we are, you know, going all guns out and with these potential deals in the, you know, that we are closing in on, we are, confident about getting to the 20%.
Okay. Thanks. Thanks a lot. So, Bhanu, you mentioned about some challenges in the North American market. Could you please elaborate that a bit?
Yeah. So, you know, as you saw our pipeline, it's at its all-time high. And, you know, the deal closures typically have, you know, in this part of the year, are usually slower. So although, you know, we are seeing a lot of... You know, if you look at the hotel companies reports, et cetera, and all the commentary that we are seeing, you know, there is talk about challenges. So, you know, so although we have a very, very healthy and robust pipeline, I'm just trying to be a little bit cautious-
... in our commentary, you know, given the commentary that we've heard from the other hotel company CEOs. But usually it's the Q3 and Q4 that is, you know, that's very good for us in terms of, you know, closing out some of these, pipeline orders, given that the decision-making period, which is sort of the end of the fiscal for most of our large enterprise customers. So, you know, I'm hoping that, you know, we're able to convert a lot of these larger deals, that are in the pipe.
Okay, great. Another question is on distribution. So RateGain has been a strategic partner to Expedia, Booking, as well as Agoda now. And for Expedia and Booking, RateGain has been a strategic partner for a long time. But somehow it has not translated into the, you know, accelerated growth in distribution. So any comments around that?
Yeah. So we are actually, you know, seeing good amount of growth with our key partners, as you mentioned. However, you know, we've had a couple of challenges in our distribution business where, you know, one of the Expedia partner sites, you know, is getting consolidated. You know, and it was a big volume generator for us. And so we are seeing, as a result of that strategic direction, we are seeing those volumes, you know, get reduced on one of these OTA sites. And, you know, we've had one customer actually renegotiate, you know, given the larger volumes that they were driving, you know, we had to renegotiate on the pricing. So if you look at our volume growth, it has been quite significant.
Because of the larger volumes, we had to discount. I'm just trying to get the number on volume growth. Divik, can you share the volume growth? Because it has been quite significant in our distribution business. With, like I said, you know, with some of the key opportunities that we are pursuing, I'm confident of, you know, this distribution business to revive also. And, you know, given the RevMax platform commentary I gave in my earlier commentary, we are seeing some very, very good traction there, as well as, you know, some things that we are doing, new endeavors that we have to increase sort of our take rate on, on the distribution side of the business. So we'll share more in subsequent quarters of some of these initiatives.
But overall volumes, I have that now, you know, were almost up 50% from last year. So it was really, you know, because of some large customers where we had to win business, discount some of the per transaction fee. You know, the overall growth is looking good.
Okay. Last question is on M&A. Any update there? Last time we mentioned that we are looking at a couple of opportunities. So, yeah, any update would be appreciated.
Yeah. So we did get close to a couple of them. But unfortunately, you know, as we go through due diligence, et cetera, and we find things that we are uncomfortable with, you know, then we-
Mm-hmm.
We have to walk away. But I'm happy to report that, you know, we have a couple of opportunities that we are evaluating and in, you know, advanced discussions with. And, you know, we'll keep you posted as and when something realizes from those conversations.
Okay, great. Thanks. Thanks a lot, and all the best.
Thank you. The next question is from the line of Aastha from Kidder Advisors. Please go ahead.
Hello. Thanks for the opportunity, sir. I have a couple of questions. My first question is, sir, what differentiates us from our competitors? I mean, in India, we have seen STAAH, which has quite a good market share, right, sir? So how are we competing against them?
Yeah. So Star is not really... I mean, we do come across them, but, you know, they focus largely on the long tail of hotels, which are much, much smaller, a smaller number of rooms, like 30-40 rooms, as well as, you know, much smaller ADR rate, which is usually, you know, 2,000-3,000 INR. And as you know, the overall TAM that we go after is about 300,000 hotels, which are more sort of the, you know, mid-segment and upper segment in the hospitality industry. So the overall TAM is about 1 million hotels, but, you know, the ones that we target are about, you know, about 300,000, which are organized as part of a bigger group.
And in terms of our differentiation, the one differentiation between STAAH and us is that we are more after the mid-market and the, you know, and the upper segment. And the other differentiator is we are an integrated suite, where not only do we do distribution, but we help customers acquire guests through our digital marketing platform, as well as we have, you know, immense amount of data that we have made. We're able to help them on both guest acquisition, guest retention, engagement, and wallet share expansion.
Right. Okay.
The size of is a significantly smaller company than us.
Correct. Correct. So just to follow up on that, you know, apart from India, like, what's the market strategy in the U.S. market? What's giving us an edge over there?
Yeah. So, you know, as I talked about in our opening comments, also the fact that, you know, we are an integrated tech suite. We have, you know, thousands of data points around pricing, on travel intent. This enables us to offer, you know, one integrated tech stack that is all around our customers' guests, whether it's guest acquisition, guest retention, or guest wallet share expansion.
Okay. Okay. So my second question is related, more related to the business. I wanted to understand, like, you know, our revenue model. What drives our revenue? Is it the number of hotels, number of bookings? How do we earn our revenue? It's subscription model and transaction model, I know, but can you please clarify more on that?
Yeah. So, you know, it's, I would require a few minutes to actually explain this, but I would suggest maybe you can get in touch with our investor relations person, which is Divik, and we can do a separate call with you. But, you know, just at a high level, depending on the type of business it is, the revenue model is different. So in our DaaS, it's basically largely meant based on number of data points, and our distribution business is largely driven by, you know, the number of transactions. And in MarTech also we have a hybrid structure. But what is fundamentally, uniform across all three segments is that we have, like, a lower value. So irrespective of whatever the driver could be, there is a minimum engagement size that we have per contract.
So happy to get into more detailed conversation around this, you know, separately in the interest of time.
Okay. Okay, thank you, sir. I will get back in the queue for more questions.
Moderator, can we get to the next question, please?
The next question is from the line of Sanidhya from Unicorn Asset Management. Please go ahead.
Hi, sir.
Hello? Yes, you are audible.
Hi. Yes, questioning on the, distribution side. So you also mentioned in your last commentary that the growth would be somewhere between, like more than a single digit, maybe a double digit. But as I compare with the last, whole year or even first quarter of last year, there are very significant, like, no growth at all in the distribution segment in terms of revenue. Of course, you were guiding on, volume growth and price. So is that a continuous trend that we see for the whole year, or it is like just for quarter one or maybe quarter two?
Yeah. So, you know, as I mentioned, the last couple of quarters have seemed a little muted. But, you know, given, you know, given some large deals that we are pursuing and also, you know, we've monetized a couple of large deals in this quarter. So, I don't have the exact numbers, but I'm quite confident that everything that we are doing with our central RevMax platform, which includes distribution and some of the key initiatives around what we are calling Smart Distribution, this number should look significantly higher, you know, as we go into the future quarters.
Okay. Second, you know, the promoter holding, so there's significant reduction. Any particular commentary you want to give on that?
Sorry, I didn't follow your question. Can you repeat it again?
Yeah. Yeah. On the promoter holding. So there's been quite a significant reduction, and it has been the trend like that. So any comment on that?
Yeah. So, you know, the reduction was on account of a couple of things. One, we raised QIP money back in November, and then in the March quarter, my family had offloaded some stakes. But, as I mentioned in the press release as well, there is no more plans of any other, either fundraising at the company level or, any stake sales by the promoter family. We're quite confident in the future of the company, and we'll continue to retain the stake that we have.
And lastly, on the M&A side, so during this one quarter, and even on this interview, I saw that you mentioned that we were not getting the valuations correct as per our metrics. So can you highlight what kind of valuations we are looking as compared to revenue versus the acquisition cost versus what we were getting it, why we are not closing?
Because this is regarding valuations of target companies, you're saying, from an M&A perspective?
Yeah.
Yeah. So look, there is no, you know, standard multiple on revenue or EBITDA that we look at. Something that I've talked about, our valuation methodology is based on what are the cost and revenue synergies that we can drive in the business in our hands. And our goal usually is that we are generating an IRR of north of 20%, and that whatever we pay for the company- you know, the payback period is anywhere between 5-7 years, depending on the strategic importance of the company.
No, I think you were highlighting that. Okay, any specific number you want to give, like, what you were getting or what we were giving, any number to that, and any significant coming thing that we have on in hand, I think?
Yeah. So, you know, like I said, we don't necessarily because the, you know, each asset is different, so we don't ascribe a particular multiple to EBITDA or revenue on a, on a standalone basis of the target company. We usually look at what will it be in our hands, depending on the synergy that we have with our business, what kind of cost synergies can we drive, and then our ability to cross-sell and upsell if it's an adjacent product to our, you know, large portfolio of customers. And depending on that is how we ascribe value. So there is no, you know, fixed formula on a multiple of revenue or EBITDA that we are willing to pay.
We look at the, you know, the financial model, which we prepare for, like, let's say, like, the next 10 years, et cetera, and then we look at what kind of IRR would we drive on the purchase price. Our goal is to drive north of 20% with a payback of 5-7 years.
But I just wanted any numbers you can give for what kind of valuations we were getting as an offer versus what we were offering. Any gap, what was the kind of gap that we were getting? Just wanted that clarification.
Oh, okay. So you're referring to the companies that we recently evaluated, is it?
Yeah. Yeah, exactly.
Yeah. So we've looked at, you know, offers which are in the range of... I mean, the ones that we made offers to were in the range of 2-3 x revenue. And, you know, no deal has happened for those companies, so, you know, those companies are still available.
Okay. And I just mentioned that we are taking somewhere around 8 times the value multiple. So anything that is less than, like, 4 x is an accretive acquisition time. I think that's from my perspective. Definitely, you are seeing from the IRR and other cost synergies is there. So just wanted to highlight, like, are we looking at any new potential acquisitions in this quarter, maybe next? Like, if anything on comment.
Yeah, look, we've been, you know, quite disciplined buyers, and I don't intend to change that. We are very confident that the model that we have prepared has enabled us to do, you know, four acquisitions, and it has been very, very fruitful. It has been very, very value accretive. And look, I'm building the company for long term, and every decision that I take is not gonna optimize for the short term. So we are always gonna optimize for the long term. And basis that, we feel fairly comfortable and confident about, you know, how we ascribe value to target companies.
No, definitely, sir. I just wanted to say that, so we raised a large round of QIP, and therefore the-
Mr. Sanidhya ?
Yeah, thanks. Thank you.
Mr. Sanidhya, please give the other participants a chance to ask a question. You can get back in the question queue.
Yeah. Thank you. Thank you.
The next question is from the line of Pratik Nandu from Edelweiss Public Alternative Asset Advisors. Please go ahead, sir.
Between 4%-5%. If I look at the growth for the last 3-4 quarters-
Mr. Pratik?
Hello?
Mr. Pratik?
Yeah.
Sorry to interrupt. Could you please begin again?
Yeah, sure, sure. I'll do that. So, Bhanu, my question was on the distribution part. If I look at the growth in this quarter and then compare it with the growth for last few quarters, there has been a sequential, not exactly sequential, but the growth rate has tapered off, right? From Q1 of last, where we were at around 26%. And you mentioned that, you know, you have given some kind of a pricing, you know, discount, so to say, which was more volume-led. So, you know, given the fact that you also highlighted on the call that we have an integrated kind of an offering, and if I am not wrong, the kind of services that we provide for in overall scheme of things for our customers in terms of their top line, it's not even 1%.
So, you know, It's just that, you know, why is there the need to give a volume-led discount in the first place? And does that mean that some other part of our businesses will also see some pressure, like this in the future? So can you just, you know, help me connect as to, you know, our full integrated offering and the need to give a discount, you know, for our distribution? That's something which is, you know, contrary, on the sides of it. If you can just explain, that would be great, Bhanu.
Yeah, sure. So on the volume discounts, you know, we usually do not entertain those, and I've talked about how almost 70% of our contracts have now CPI or inflation-related increases annually. You know, this was a one-off case where it was a very, very large customer, and the footprint that we have with them is quite significant. And in order to continue to maintain a strong relationship with them, and quite frankly, our pricing with them was a historical pricing that, you know, was signed many years ago. And it was, you know, related to a company that we bought, that it did require revision.
So I would say it was kind of an anomaly in the system where we had this one contract where we were charging significantly, and given the importance of this large customer, we had to entertain lowering the price. So I don't see this as a systematic trend. I just see this as a one-off. I think what has impacted our distribution business in terms of our growth, like I said, is, you know, there is an OTA where it was, you know, a significant part of the transactions that we were generating. And, you know, that's a systematic trend that has over, you know, really the last 18 months, where the transactions from that OTA continued to, you know, wind down.
So while we are seeing, you know, growth in other parts of our distribution business, it's this one big OTA pairing that we had on our distribution business that sort of offset it. But on the, you know, on the larger prospects of our distribution business, like I said, the integrated tech suite that we have. I mean, if I look at the pipeline, it, you know, the biggest pipeline that we've ever had. And, you know, we're counting on some very, very large deals that should fructify. So I do not know the timing, but I do feel it's not a question of if, it is really a question of when.
But I do see, you know, given everything that we are doing on our distribution business, you know, both on having an integrated tech suite and also, you know, we are launching something called Smart Distribution. It's early days, which helps us increase where we participate in the value chain that will allow us to increase our transaction fee or take rate quite significantly. So I'm quite confident that, you know, distribution business is gonna be a significant growth vector for us in the coming years. You know, it's just a matter of, you know, some of these things playing out and us executing well on them.
Sure, Bhanu. Thanks a lot for that clarity. Secondly, Bhanu, on your comment on some of the North American hotel customers being slightly, you know, conservative in their outlook for the rest of the year. Is it that, you know, I mean, we have a substantial market share to gain, right, in terms of penetrating some of these customers. And is it right to assume that, you know, even if the overall market sees some kind of a slowdown, in terms of our ability to grow ex of the market will still remain fairly strong, especially-
Yeah.
in the North America?
Yeah. So thanks for asking that question, and you're absolutely right. In fact, you know, when things are going really, really well, usually some parts of our business, especially on the MarTech side, the tendency for the hotels is to say: Look, my hotel is full, why do I need you? Right. So as there is some amount of softening of demand for these hotel companies, our Demand Booster offering, which is part of our MarTech, you know, will enhance significantly. And the second thing that we also, and we've seen this with IT services companies also, is that the, you know, the trend for big companies to outsource also becomes higher when there is overall, you know, market, market pressures, you know, especially around recession, et cetera.
So I feel on both accounts, both on the Demand Booster part of our MarTech as well as, you know, the larger companies needing to outsource more, we should be beneficiary of that. And it's in that regard, I had, you know, made that comment.
Sure. Thank you so much, Bhanu. Last question would be on margins, right? Now, there is certain seasonality when I look at your margin on a quarter-over-quarter basis, and Q1 being the weakest, and then it keeps on increasing, right, as the quarters progress. And there is an element of rate hike, which comes into Q1, if I'm not wrong. But the broader thing that I wanted to check from you is that, you know, you mentioned all the IT services peers of yours, right, in terms of how outsourcing increases. But ours is broadly a product company rather than a service company, right? So, in terms of our aspiration of that 25% margin, right, is there a...
I mean, is there any margin room that we are keeping for ourselves in terms of investing back into the business? Right, because even some of your peers in the segment, in terms of SaaS or product company, are earning north of 30% margins, right? So, you know, if you can just help us understand as to when do we up our aspiration, right, to move beyond 25% margin? That would be helpful. That's it from my side. All the best, Bhanu.
Yeah. So yeah, so your observations are correct. Your first question about, you know, Q1 is slightly lower margin, and you're absolutely right. You know, we had, you know, we had the pay hike that happened in Q1, and the other big reason was there was a big move of our distribution infrastructure from data centers into the cloud, into AWS. Then we had much larger costs for that transition, and I'm happy to report that transition has gone down very, very successfully. And so we should see normalization of our infrastructure costs on distribution, and so, you know, Q2 onwards, we should see, a higher margins on our distribution business. And like you said, you know, the pay hikes also have an impact, and it normalizes as the revenue increases and operating leverage kicks in.
Your question about, you know, being north of 25% on margins. So, you know, I've stated this many times on the earnings calls also. So all our mature products are actually north of 30%. It's the reinvestment that we are doing into newer markets and newer products that we have launched, which brings down the overall blended margin to about 20% or so. And at scale, we've talked about getting to 25% in the next three years or so. So I do think that the opportunity is very, very large, and we want to continue to invest in capitalizing on this larger opportunity. So, you know, I do believe that, you know, we can be a billion-dollar company in revenue.
With that kind of aspiration and where we sit today, there is a long way to go. We will, you know, need to play a balancing act, and I would like to continue to reinvest, you know, the margins, the good growth, the good margins that we have on our established products into, you know, newer opportunities, newer markets, and doubling down on them.
Sure. Thank you so much, Bhanu, and all the very best.
Thank you.
The next question is from the line of Darshi Zaveri from Crown Capital. Please go ahead.
Hello. Good afternoon, sir. Thank you so much for taking my question. So a lot of my questions have already been answered. So just wanted to know, like in terms of the margin trajectory for current year, so in Q1, we did, like, around 19%. So for the full year, what kind of margin growth could we see? Like, could we see, like, a 22% margin for the full year?
Hello, was I audible? No, I can take that. This is Tanmay. So, you know, what we had guided to is 150-200 basis point improvement over last year. So the first quarter, we saw an improvement of around 150 basis points. So we expect that we'll continue to show that kind of improvement throughout the year, year-over-year for each quarter. So I think we should expect, like, 150-200 basis point improvement from last year for the full year, and each quarter will be comparable to the last year of the same last quarter of the same year.
Oh, okay. Fair enough, sir. And so do we stand by, like, getting our INR 2,000 crore target in three years?
Yes.
Oh, okay, fair, fair, fair enough. So I just, just, like, one question. I know a lot of people have asked this about distribution, but just wanted to understand, like, what kind of discount did we actually give? Because a 50% volume increase would only lead to 4% value increase. So I just wanted to understand that, sir.
You know, I'll not be able to disclose the numbers, et cetera. But imagine it was a significant discount.
Oh, okay. Okay, so fair.
Yeah, but like I said, you know, it's not... You know, on distribution, this was more of an anomaly than a systematic trend. And, you know, it was more of a one-off.
Oh, okay. Fair enough, sir. Just, like, one last question in terms of, you know, acquisitions. Is it that right now, like, maybe, you know, the expectations of the funding winters lowered and deals are happening, so it's becoming more difficult to find a target company at, you know, the target price or valuation that we want? So is that the reason or, you know, how do you see the market in terms of, you know, acquisitions?
Yeah. So, I mean, look, there are. In terms of, like, the pipeline, it's quite robust, and we have been very, very active. Yes, it's a fair statement to say that people are holding out, you know, to get the values that they desire. But at the same time, I want to make a comment that. You know, if we are not buying those companies, it's not like they're getting sold at higher valuations. Those companies are not getting sold. So, you know, there are, I think all of you are familiar with Adara also. It's a game of patience. I know we raised the money six months ago, and some market participants are getting antsy for us to do a deal.
But we have done well by being disciplined buyers, and I just want to ask for market participants to be patient, because I'm confident, you know, the kind of deals that we have done in the past will happen also in the future.
Okay. Fair enough, sir. Yeah, that's it from my side. All the best. Thank you.
Thank you.
Ladies and gentlemen, please limit your questions to two per participant. Ladies and gentlemen, please limit your questions to two per participant. The next question is from the line of Madhuchanda Dey from Moneycontrol Pro. Please go ahead, sir.
Hi. I have a couple of questions. As you alluded to the discount that you had to offer to one of your key clients in the distribution business, I just wanted to generally understand, you have explained it in detail. I mean, do you see, because of slight softness in demand from the hospitality sector, there is more competition on the travel tech side? I mean, are you experiencing both and the resultant is a kind of yielding to the demand of the client? Is that a possibility?
No, we are not seeing, competitive pressure, so to speak.
Mm-hmm.
You know, like I said, this was more of an anomaly, given the, you know, strong footprint that this customer has across all our product portfolio. In fact, like I said, the pipeline is looking the best ever. The conversations that we are having looking, you know, significantly better than before. I think it's all about us executing and closing some of these deals. And look, when you are competing in the marketplace with a certain product, you have to constantly innovate, and find differentiators. So what I'm saying is, we have found those differentiators. People are getting excited about them. You know, we are very close to closing in on those, some of those conversations.
You know, that should result in sort of, hopefully, traction and momentum that would translate into, you know, significantly higher growth numbers, you know, for our distribution as well.
Yeah, thanks. And then, the other question is a housekeeping question to Tanmay. This other income is purely because of the QIP money which is sitting as large cash in the books, right? There's nothing exceptional in it, right?
No, no, nothing exceptional. Yeah, you are right. All the funds have been invested in whatever regulatory allowed fixed deposits.
Okay. Thank you. Thanks, and all the best, and hope you do an exciting acquisition soon.
Thank you.
Thank you. The next question is from the line of Hasmukh Visaria from Tata Mutual Fund. Please go ahead.
Yeah, hi. Thanks for the opportunity. I have two questions. One, on distribution itself, again. So, you mentioned, Bhanu, you mentioned that this was definitely one-off, et cetera, but it was, let's say, volume-linked discount and that the client had share... has been using a lot of, let's say, your products. But as we let it scale, our businesses with the clients or mine, those clients and gain market share, and let us sell more products to a particular, customer, can this be a medium-term sort of risk for our products, from pricing perspective?
No, I don't see it as a risk. As I've mentioned, Hasmukh, you know, this was an old contract that we had acquired as part of our DHISCO acquisition, and the customer actually had been paying significantly higher unit price than all other customers to begin with. So while a lot of the other customers, you know, our unit costs got rationalized over the years, this particular customer didn't see that happen. So I don't see this as a continuing trend. In fact, you know, we make more money through price escalations every year, you know, given 70% of our cost, 70% of our contracts now have the price escalation clause. So I am not, you know, worried about this playing out as a risk. You know, I think I...
You know, just because there's a lot of question about distribution, and so I just want to clear out, I don't see, you know, any reasons of concerns for our distribution business. Like I said, with some of the things that we are doing, I'm actually quite hopeful and quite confident that this will be a big growth vector for us. I think in terms of being transparent on, and on the challenges, I think we, I talked about, you know, some couple of unplanned attritions that we had in our business, where, you know, one customer, because of non-payment, attrited. And then we had one MarTech customer, also attrited because of, you know, a big hotel brand in the US acquiring them. You know, that created some unplanned attrition that we didn't have in our projections.
You know, that concerns me more than all the questions that are being raised on the earnings call today.
Got it. Got it. Well, the second question I had on deal wins. So this quarter, the deal wins growth has been just 10%. And if I remember well, last one, two quarters have been slightly weaker on the deal wins front. So how should we, let's say, tie up these two numbers, 10% growth in deal wins vis-a-vis, the say, 20% sort of guidance and revenue growth? How should we tie up?
Yeah, it's like... So how I was saying to you, you know, the pipeline is at an all-time high. And, you know, we've seen some delays in execution of some of these decisions. But, you know, overall conversation and deal activity is pretty, pretty high. So I'm hoping as the summer season concludes in the western part of the world, which was, which is, you know, the current quarter, we should you know, see some of these closures to happen, and it should help us get back on track.
Sure. Sure. But just to follow up on that, in an event of weakening, let's say, macro environment, right? If this deal gets pushed on, how should we look at, let's say, your growth for FY 2025 in that case?
Yeah. So, you know, as I was mentioning, parts of the business get positively impacted as a result of the macro level situation. So, you know, I would say our DaaS and distribution business will mirror the macro level conditions. But our, you know, part of our MarTech business, which helps produce more room nights for customers, will get benefited. And also the, you know, the enterprise customers, where they're trying to do some things in-house, you know, see additional benefit in giving parts of our technology and using our products. You know, when I said outsourcing to us, I didn't mean outsource to us in terms of services, but outsource their capability in terms of using our products that suffice that capability. You know, that trend begins to accelerate as well.
So if the macro level conditions, like I said, continue to play out, and as you know, almost half of our business is MarTech related, you know, parts of that should get benefited. I'm hoping that it evenly balances out. So we're still, you know, gunning for that 20%, and it doesn't include any of the inorganics that we are very much actively pursuing as well.
Great, Bhanu. Great. Thanks a lot, and all the best.
Thank you.
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Securities. Please go ahead, sir.
Yeah, thanks for the opportunity. Just a couple of quick questions. Just one on this, volume discount. When does it come in the base, in the sense from which quarter has it gotten implemented? And, Bhanu, you, you told about the volume growth. Can you remind again, how much is the volume growth in distribution?
The volume growth was 49%. In terms of the discounting, I'll defer that to Tanmay, when it came into effect.
Yeah, it came into effect, but I think where there are multiple factors why the growth is 50% in terms of volume, but the growth for this quarter is only 5%. It's obviously, Bhanu talked about couple of attritions. Then there is a volume discount, and then we talked about a major OTA not performing or declining in terms of their volumes. And there are also some one-time billing that had happened last year in Q1. So there are multiple factors. So we should not say that 50% growth in volume, but only 5% growth in revenue is attributed to the volume discount that we have given to this one particular customer. So I'm saying there's multiple factors why it has resulted like this.
Yeah. No, no, I... The only thing I was trying to understand is, from which quarter onwards it comes in the base, and as a result, volume and revenue growth from that particular client will actually converge?
Yeah. Then this is the Q1 I'm talking about.
Q1 only.
Q1.
Okay, fair enough. And just very quickly, this new contract wins, is there some sort of restatement? Because last year, I think the number that you had provided was INR 593 million-
Yeah.
and now it's INR 621 million, so it comes out to be 5%, but the presentation said 10%. So I was just trying to understand.
Yeah. So when we okay, these are all sales force records. So when we close win one contract, in certain contracts, there's a full value that is recognized, right? In certain contracts, it's a volume-based, so you have to record that as a order book on an estimate basis. So as and as we move along, the monetization starts, then in some cases, the value of the contract needs restatement. So we do restate in the system as well. So yes, because some of the contracts are. Some of the ACVs are needed to be booked on an estimate basis, which needs to be resized as the years progress.
Understood. So, last year's number has been restated?
Yeah.
Okay. All right. Thank you so much.
Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Bhanu Chopra for closing comments.
Thank you, everyone, for your time today, and thank you for your support.
On behalf of RateGain Travel Technologies, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.