Ladies and gentlemen, good day and welcome to the Q3 and nine months FY 23 earnings conference call of RateGain Travel Technologies Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions 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 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, Chairman and Managing Director. Thank you, and over to you, sir.
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 third quarter and nine months ending December 31, 2022. We're excited to connect with all of you again and share some key highlights from the quarter gone by. Joining me on the call are Mr. Tanmaya Das, our CFO, Mr. Divik Anand, our Head for Investor Relations, and Thomas Joshua, Company Secretary of RateGain. Alongside we have our investor relations partner, Strategic Growth Advisors. We announced our third quarter results for the financial year 2023 earlier today, and although briefly, I hope you've had a chance to go through our financial results, press release and investor presentation that are available on the stock exchanges and on our company website.
We're delighted to share with you another quarter of healthy and resilient performance with broad-based growth across all three business segments, strong margin performance and steady travel demand across key geographies. This was the best ever quarter in the history of RateGain in terms of new contract wins. We continue to deepen our presence across our enterprise clients. RateGain, being a trusted and reliable partner of choice for many large OTAs and hotel chains, has been instrumental in driving new business. We continue to engage with our customers, driving a healthy pipeline of INR 268 crores. We continue to report strong performance on the margin front with an operating margin of 17.6% on the back of operating leverage and favorable business mix contributing to the margin performance.
Our business lines, DAS and distribution, which are also our high margin businesses, continue to witness good traction with good volume growth with existing clients and continued monetization of new logos added in the past quarters. We continue to focus on responsible growth and monetization of new products introduced in the past 12-18 months. We are well on the path to seeing expansion in margins on the back of operating leverage kicking in, which I've highlighted many times recently, is really the beauty of the SaaS business model. On a run rate basis, our annual recurring revenue exceeds our pre-COVID ARR by 27%. RateGain is also performing very well on the Rule of 40 that I often talk about, which is a benchmark for SaaS businesses. We are currently at 57%, which is an aggregate of the 17% EBITDA plus 40% growth.
As you all very well know, we completed the acquisition of Adara in 2nd week of January. We're extremely excited about the opportunity given the inherent strength and value of the technology and platform we've acquired and how this travel intent data can really drive higher returns across digital marketing campaigns for travel and hospitality companies. This fits in perfectly with the vision of RateGain to build an integrated RevMax platform that allows our customers to do guest acquisition, guest engagement and retention, and wallet share expansion. The initial integration plan is well underway, and the focus is to make this business EBITDA positive in the next 2 quarters and map out the GPM roadmap, first capturing the low-hanging fruit, which is to recapture and reactivate the existing and lost relationships. Global travel companies continue to hold steady despite the volatile macro scenario.
With the recent opening up of Asia geography, especially China, we expect to see good growth in the international travel market. A global travel outlook report released by Skift recently refers to travel as a mega trend, with cross-border travel expected to grow at 50% and healthy revenue uptake for our customers, including hotels, airlines and vacation rentals. We continue to focus our sales and marketing efforts. With the combined efforts of our team, we had the best ever quarter in the history of RateGain, with new contract wins recorded at over INR 49.3 crores. A 22% growth over Q3 of last year, which was our biggest quarter then and really ever prior to this. We continue to make calibrated investments in growing in certain geographies and behind our growth products.
As we continue to deliver and execute across key parameters, I would like to applaud the RateGain team on delivering another strong quarter and moving towards our vision of becoming the leading SaaS-based RevMax platform in the travel and hospitality space. With that, I will briefly now touch upon the performance across our three business segments, starting with distribution segment. This division accounted for 38.9% of our total revenue with a recurring revenue of 99%. We witnessed healthy volumes growth in the past quarter with demand across OTA channels and midsize hotel chain segment. We continue to expand our footprint with our connectivity platform and the integration of Content AI with Booking.com is a step forward in seamless and efficient content distribution for hotel chains. RateGain continues to innovate in solving the challenges of our industry to help our customers unlock new revenue every day.
Our MarTech business continues to grow at a healthy pace, contributing to 34.4% of our total revenues with a 99% recurring revenue. We continue to make inroads into the APAC and Middle East region and have onboarded multiple properties with our innovative brand engagement and paid digital media solutions. Post the FIFA World Cup, hotels in the Middle East especially are increasingly focused on social media presence and direct guest acquisition. Our end-to-end digital marketing offering covers all essential customer acquisition channels, including Google, Meta, social media, including Facebook, WhatsApp, TikTok, Snap, et cetera. We're able to deliver higher return on ad spend to our clients with real-time demand and parity insights through our DAS products. With our recent acquisition of Adara, we'd be able to draw on the travel intent audience to drive more targeted marketing campaigns and drive higher returns.
The DAS business unit grew at a strong pace on the back of increased volume demand and expansion with our existing enterprise customers. We are seeing increased demand from our OTA and hospitality customers in the Asia Pac geography with a re-revival in travel demand. Our air segment continues to perform well with new logo additions. The recurring revenue for DAS business are 98.1% and contributed to 26.7% of the revenue in the third quarter. Our M&A strategy continues to be one of the key cornerstones of our growth strategy here at RateGain. With the completion of the recent acquisition, the focus would be on the integration from shared services perspective and from sales GPM perspective to leverage the global presence of RateGain. On the people front, RateGain was certified as a Great Place To Work for the fourth year in a row.
We have various programs for upskilling and building talent within the organization, namely RG Polo and RG Chrysalis. All these programs along with within promote people within to approach to encourage the team to perform at an optimal level are the key to the performance that's reflected in our quarterly performance and to retaining talent. In terms of awards and recognition, we were awarded in two categories at the recently concluded 2023 HotelTechAwards organized by Hotel Tech Report. Rate shopping and market intelligence, which is part of our DAS business line, and the channel manager, which is part of our distribution business. RateGain continues to dominate every category. It has products in ranking number one in social media, number one in content management, and number two in rate parity.
I'd like to now ask our CFO, Tanmaya Das, to take you through the performance of Q3.
Thank you, Bhanu, and a very warm welcome to everyone on the call. I'm proud to report that the company has posted another strong quarter with healthy revenue growth, margin expansion, and new contract wins. The healthy pipeline and new contract wins, despite a volatile global environment, highlights the strength of the travel industry and the increasing need of digitization to drive revenue growth in this sector. In terms of headline numbers for Q3, which is historically a strong quarter for us as compared to Q1 and Q2, the company has registered a 40% year-over-year and 11% sequential revenue growth, with Q3 FY23 revenue at INR 138.3 crore. Worthwhile to note that all the growth this quarter are organic growth.
Our EBITDA stood at 16.58%, which saw a growth of 147% year-over-year and 30% sequential. Our adjusted EBITDA stood at 17.6%. Our revenue growth was 40% year-over-year, our operating costs grew by 29%. Sequentially, our revenue growth was 11%, our operating costs grew by 8%, resulting in operating leverage as our EBITDA margins improved from 9.66% to 16.58% year-over-year and from 14.11% to 16.58% sequentially. In terms of PAT, it grew from INR 0.9 crore to INR 13.6 crore year-over-year, which is multi-fold increase. Sequentially, it grew from INR 12.9 crore to INR 13.2 crore.
Our other income reduced by INR 6 crore this quarter, primarily due to unrealized Forex loss of INR 4.5 crore arising due to restatement of our U.K. balance sheet where US dollar cash and receivables were restricted to British pounds and as US dollar depreciated against British pound, resulting in notional accounting loss. Without this notional accounting loss, the PAT would have been INR 17.7 crore for this quarter. In terms of headline numbers for 9-month ended, our revenue grew by 48%, DAS grew by 29%, distribution 35%, and MarTech 82%. EBITDA stood at 13.7% against 8.9% for the corresponding period last year which is a growth of 245%.
PAT stood at 9.06% at INR 34.6 crore, whereas last year same period we had incurred a loss of INR 1.5 crore. At the start of the year, we had given a guidance of 30% growth and 12.5% EBITDA margins, we are well in course to beat the guidances by a good margin. The company continues to have strong customer relationships that are helping in building scalable, predictable and sustainable revenue streams. Recurring revenues for the quarter stood at 98.3%, 77% of revenue was subscription in nature. Gross revenue retention and net revenue retention stood at 90.4% and 105% respectively.
The revenue per employees saw 25% increase over last year at INR 0.86 crore. Our annual recurring revenue stands at INR 553.1 crore, which is 32% more than ARR as of the end of last year. Our pipeline continues strong and stood at INR 268 crore. We continue to have strong balance sheet where our networks saw an increase of 4% as compared to last quarter and stood at INR 678.3 crore. Our cash and cash equivalent balance for at the end of quarter was INR 432.8 crore, but we have deployed around INR 120 crore post the quarter for recent Adara acquisition.
Our cash from operation continues to see marked improvement in 9 months of this year and stood at INR 29 crore, which grew a growth of 68% as against same period last year. I'm also happy to report that Adara integration is progressing well as the initial phase is on track with the integration shared services, namely finance, HR and marketing is underway. We're pretty excited about the growth prospect and synergies that we need to capitalize on in the coming quarters and years. In terms of guidance for Q4, we'll be able to consolidate Adara financials for this quarter for 2 months and 20 days as we completed the transaction around 10th of January. We expect to grow organically 30% year-over-year. Our organic business margins should expand to around 18%-19% in Q4.
For Adara, we expect to register a 5% EBITDA in this quarter. We have spent certain one-time costs to close the transactions in legal and professional expenses, which will take its effect. Considering all the above, we expect to deliver around 15% EBITDA for the quarter at a consolidated basis. We expect our PAT margin to be around 9% for the quarter and for the year without any dilution due to the acquisition. I would like to conclude my update and we are happy to open the floor for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and 1. First question is from the line of Karan Uppal from PhillipCapital. Please go ahead.
Yeah, hi. Thanks, thanks for the opportunity. Couple of questions from my side. Firstly, on the overall travel outlook, Bhanu, if you can elaborate, you know, amidst the macro challenges, what is the outlook on the overall travel for CY 2023? It would be helpful if you can break it up in terms of our core markets like U.S., Europe and APAC. How big is the opening up of China for the travel industry, if you can elaborate on these two points.
Yeah, so in terms of, you know, the overall outlook, you know, as I mentioned to you, we referred to Skift, which is a very well-known publication and bases the global travel outlook report that was released by them. You know, they're referring to travel as a mega trend and a cross-border travel is continuing to expected to grow at 50%. As we mentioned specifically, what we saw in sort of rest of the world will play out in China as well because they only recently opened up their borders. We do expect a lot of that pent-up demand to flow into the cross-border travel, international travel as well. In terms of the key markets for us, as you note, it's largely US and Europe.
As far as, you know, the numbers that we reported and even in the existing quarters, the number of transactions and the volume and the conversation with customers is not giving us any reason for concern. At the same time, I am cautiously optimistic about what the industry holds for rest of the year. Of course, there is a lot of chatter about in our key markets of U.S. and Europe about potential recession and interest rate rising. Like I said, we see travel as a mega trend and it's defined currently everything and we're hoping for the best and that it will continue to remain so. Like I said, I am cautiously optimistic.
I do believe that we should hold steady from here on.
Okay. So just to take this forward, in terms of your cautiously optimistic commentary, do you still believe that 30% growth rate can be possible, organically in FY 2024?
Yeah. That's what, you know. See, the growth is really a function of really three things, right? It is a function of the retention of the business. As you can see, we continue to retain most of our business. We have healthy GRR rates. Our ability to grow existing customers is the second point. You're seeing, you know, our net retention rates are getting better, although incrementally better. You know, also looking at the conversations we are having with our large customers and the chat about volume expansions that we are seeing with them, that gives me the confidence that we will continue to expand on our NRR rates also.
Thirdly, you know, as we noted, we had the best ever quarter, in this last quarter, Q3, in terms of new customer wins. All the indications that we have in front of us, you know, lead me to be quite confident about, you know, the organic growth story ahead.
Okay. Thanks. Thank you for the detailed answer. The second question was on new contract wins. You mentioned that it is record win for the company. Are these only new orders? What is the split between the segments, SaaS, distribution, and MarTech? Also, if you look at in terms of comparison to your revenue, it looks to be very low. How should we interpret this data point?
Yeah. I'll let Tanmay come in on the split between the different business lines. A couple of sub-questions in your question that I will address. A large part of our contract wins was really, you know, cross-selling new products to some of our existing customers. Something that I've indicated is, you know, if you look, go back 2018, we were a two, three product company, and now we have 12 products. Something that I've been insisting on our growth strategy is our ability to cross-sell and upsell new products and capabilities to the large enterprises. You know, a substantial part of our new wins were with the, you know, with our, some of our existing customers buying some of the new products. It was a cross-sell initiative.
Your question about, you know, this, you know, in terms of the in terms of the new contract wins, it doesn't seem very large compared to, you know, the overall revenue of the company. The way to think about this is, this is incremental revenue. When we report on new contract wins, we do not report on business that is getting renewed. That's, you know, that's the function of a SaaS business model that let's say if I have INR 100 of revenue, and I'm telling you that If our GRR is, let's say INR 90 out of that, INR 90 is getting renewed. Although it could be also qualified as, you know, revenue win, but we don't report it like that.
We report only the net new win, in the new contract win. Going back to that example of 100, you know, let's say we are renewing 90, and then we add another 50 on top, our total revenue for next year will be 90 plus 50. That's, that's how you should look at that data point. I mean, happy to get into a more detailed discussion to help you draw out that bridge.
Thanks. Thanks. It was very helpful. Maybe, Tanmay, if you can, mention the split and-
Yeah. This quarter, it was like, we had couple of marquee deals signed. One was in distribution, where one of the large hotel chains signed up with us for a $multi-million deal. This quarter it was more skewed to our distribution. Like 63% came out of distribution, around 25% from SaaS and 12% from MarTech. That's the split for Q3.
Okay. Thanks. Thanks a lot, and all the best.
Thank you. The next question is from the line of Anmol from Albatross Capital. Please go ahead.
Hello. Good afternoon, sir. Congrats on a great quarter. I have two questions. My first question is on the Adara acquisition. What are the integration costs, if any, can we see in Q4?
Sorry. Integration costs.
Integration costs relating to Adara that we can see in Q4. Are there gonna be a cost like that or if any, we can quantify them?
No. There will be obviously certain travel costs, some overlap of resources and all. As in the guidance that I have given, despite all those costs inbuilt, we are expecting a 5% EBITDA in that business in Q4. Yeah. You know, despite, you know, factoring in all those transition and integration costs, we should be able to deliver a 5% EBITDA in Q4.
Okay. Okay. My next question is on your cash utilization. I can see that you're sitting on around INR 400 or INR 1,000 cash on the books. Just wanted to know your thoughts on what is gonna be the utilization of that money.
The INR 432 crore, out of that, INR 120 crore we have already utilized post Q3. We are currently actually, you know, we have added some cash in, good amount of cash in January, so we're currently sitting around INR 335-340 crore cash at this point of time. Certain amount is, as per the IPO proceeds, around the two objects on tech investments and AWS.
Investments which will roughly take around INR 90 crore out of that. Rest of balance cash is internally accrued cash over the years. Obviously, as Bhanu said, the M&A program is a very much a key strategy for us. Ultimately, what we see is that when we are ready for our next acquisition, when the integrations are done and all, then those will be utilized for inorganic expansion or any organic expansion into new products, et cetera.
Yeah. You know, given the fact... I'll just add to it. Given the fact that, you know, given the fiscal discipline that we have and the margin expansion that you're seeing, you're adding cash now every month. From a free cash flow perspective, you know, in company our size, we're adding good amount of cash. I don't see, you know, this cash being utilized for in the near term for any of our growth initiatives because we are generating enough cash to organically fund that through our accruals. Most of this cash will be, you know, targeted towards M&A and something that we always said that M&A has been a forefront. We saw the Adara deal also that we've done. I do believe, similar opportunities will present itself, and we still have a very, very robust pipeline.
At the same time, as Tanmaya pointed out, I think there is some degree of work that we need to do to digest the Adara acquisition. Post that, you know, we will be getting more aggressive again to see if there are assets available at the right price that are complementary and match our vision.
Okay. Thank you , for commenting.
Thank you. The next question is from the line of Rohan Nagpal from Helios Capital. Please go ahead.
Hi, thank you for letting me pose my questions. My first question is how exactly are you measuring recurring revenue? I think you said 77% of your revenue is subscription-based, and then 99% of it is recurring revenue. How does this work out, especially in the distribution vertical, where you're looking at a certain number of transactions and you're charging customers per transaction for at least some chunk of your revenue. Are you, are you billing on a certain number of transactions upfront or like how does this work?
The recurring revenue means the contracts are recurring in nature. There is no one-time contracts like doing a development or bespoke, et cetera, right? Even if subscription revenue is pretty clear, right?
Yeah.
For the rest of the transaction-based revenue, the contracts are kind of recurring because they're all auto-renewal contracts, evergreen contracts. If, say, IHG or a big hotel chain is doing transactions through our pipes, the contracts are there for, you know, 15, 20 years, you know, getting auto-renewed every year for another year, right? Obviously the volume will vary year-over-year. In terms of, nature of that contract is evergreen or recurring in nature.
Got it. It's not necessary that you will retain 99% of the revenue. It's just that you expect to have that transaction sort of, that flow keep coming.
Yeah.
Got it. My next question was on, was on how you are measuring LTV to CAC because, I mean, frankly, LTV to CAC at 23 is off the charts. I don't know of any SaaS businesses that do it. What we're seeing is a LTV to CAC of 8.9 in Q1, 12.2 for the first 2 quarters, and then 22.8 for the third quarter or for the first 9 months.
Yeah. This quarter has been, as I said, is the biggest quarter in the history of RateGain. LTV to CAC is a functionality of gross margin and retention rates. As I said, the 65% of that INR 49 crore that was closed won this quarter contributed from distribution business, which has got like very less churn rate, even it's like less than 5% churn rate in that business. Gross margins are as high as 90%, right? That's why it looks very high this quarter. You know, it is what it is. Because distribution business contributed that much, which has got like less retention and high gross margin, the LTV to CAC looks high.
I understand that. Are you telling me that the 22.8 LTV to CAC is for Q3 and not for the nine months, so FY 2023?
That's right.
Okay. Your presentation says 9 months, FY 23.
Okay. Let me check on that and I'll get back.
Yeah. I think Q1 was Q1, Q2 was H1, and Q3 was nine months. If you could clarify that. Okay, since that is most likely a misstatement, could I just pose one more question? Hello?
Yep. Yes, please.
Yeah.
Please go ahead.
Yeah. I just, on this, on MarTech, one of the key highlights that you guys have mentioned is a big digital offering that's allowed you to double your ARPU. Increase the net retention. Could you just talk a little bit more about the digital media offering? I think from FY 20 or FY 19, your ARPU for digital marketing for MarTech seemed to be around the $25,000 number. Is it fair to assume that it's now at a closer to $50,000 a year?
Sorry, Rohan, can you repeat the second part of the question? I got the first part.
Okay. I think if we look at FY19 and FY20, MarTech numbers, those imputed ARPU is on the order of $25,000-$28,000 a year. Is it fair to assume that this number is now trending more to $50,000 a year?
Yeah. No, that is not the case. Okay. Let me just take a step back and give you a sense on what are the MarTech offerings, right? Instead of taking product names, I'll just at a high level tell you what are the key capabilities that we sell. We sell the capability of brand management, which is basically, you know, engaging with the demographic that the hotelier is interested in and mostly doing this for luxury hotels. It's basically doing creatives and doing posts on Insta and Twitter and Facebook and engaging with the affluent traveler so that they can build a captive audience. The second thing we do is brand management.
You know, it's very important for especially the luxury hotels that they maintain brand reputation by monitoring what people are posting on Facebook and Insta and also responding to it, especially in a crisis situation, so that they don't let it go out of hand, and they can do damage control on the brand. The third thing that we do is PDM. Basically, it's brand management, brand monitoring, and engagement, and PDM. Paid digital media is all about, you know, it's more sort of top of the funnel, middle of the funnel, and bottom of the funnel to get customers to come to your website and actually make the booking. The KPI is largely around driving direct bookings on your website. Where we have seen the ARPU double is in the PDM offering.
The reason that has happened is, in case of our PDM offering, we have different commercial models that we go to the hotel with. You know, these are popular ad tech models like CPM, CPC, and CPA. What we were effectively able to do is sign up a few customers on the CPA model, which is you actually get paid as you do, it's sort of pay for performance type model. As you increase the number of bookings. Also, if you're getting customers that have higher ADR values, your, basically your pay grade goes up because you're being paid based on performance. You know, there was a movement to taking on some of those kinds of customers, and it yielded great returns for us.
Also we were coming out of, you know, COVID, so as hoteliers began to spend more, even on the other commercial models like CPM and CPC, the marketing budgets just went up. As a result of which, our fees went up as well. That's why you see the increase in the ARPU on the PDM.
PDM is kind of like performance marketing that you were running for the hotels?
Right.
For the.
That is correct. That is correct.
Metasearch is specifically KAYAK, Google Flights, et cetera, et cetera, and PDM is more Google SEO plus any other search engine SEO plus Instagram, Facebook, et cetera. If I got it right.
Yeah. So actually, yeah. In our PDM, you're absolutely right. It's basically it's search, social, and even meta. We include meta in the PDM as well. Because from a hotel's perspective, you know, you could, it could be any channel. What they really care about is how many customers are they able to drive and get bookings on. We basically include meta in it also. Why Adara acquisition is extremely value creative to us is now we'll be able to do display as well. Display as a channel-
Okay.
was not something that we had. Display is largely, you know, when you go on different websites and you get, you know, travel ads.
The banner ads basically.
That is correct. A, we are now with the Adara acquisition able to do display as a channel as well. More importantly, This is the most important secret sauce of why our PDM will become much more powerful than anybody else is the travel intent data that they have. When you're doing performance marketing, it's all about figuring out what audiences to sell to. What Adara data does is it has the travel intent. Basically what we will be able to do is apply that layer of intelligence to all performance marketing campaigns.
We know, you know, for instance, Rohan, you're about to come to Delhi, and we will on a behalf of our customers, be able to send those targeted ads to you on display, or if you're searching on Meta, we'll be able to target you and, you know, lead to that conversion. You're now targeting people more in the lower part of the funnel, thus leading to higher conversions, thus leading to a much better return on ad spend.
Do you have a sense of the incremental ROAS that you can drive through the targeted, through the better, through the improved targeting?
Sorry, I think yes. That's exactly the point. Are you making a comment or is there?
No, no. I was saying, do you have a number on how much the ROAS could increase in terms of percentage points as a result of this better targeting?
Actually, there is a number, but I don't wanna, you know, I don't have it on top of the head, but I will. You know, we can come back to you.
Okay.
We do have that number. Actually, that's a number that we share in a lot of our marketing collateral for Adara as well when we try, you know, to go pitch to customers.
All right. Thanks a lot. That's the end of my questioning. Thank you.
Thank you. The next question is from the line of Shobit Singhal from Anand Rathi. Please go ahead.
Yeah. Hello sir. Congrats on a good set of numbers. My first question is on the market, MarTech business. If I see, we have grown only 3% kind of, sequentially. Are we seeing some budget cut, in this segment, similar to what other global peers are seeing?
No, it's actually, as I mentioned to you, I'll step back and, you know, reiterate that our MarTech business is basically three capabilities. Brand management, brand monitoring and the PDM. As you can probably tell, the PDM is, you know, extremely automated. It is more of a platform and, you know, non-linear to people really. Whereas our solutions around brand engagement, brand monitoring are more, it's more service orientation. While we have a platform, it's a managed service platform. At the time of recovery of COVID, you know, we did sign up a bunch of customers because there is a dire need for people to, especially for luxury hotels, to build this, to have the solution in terms of brand management, engagement and monitoring.
However, we did take on a lot of customers in our quest to add a number of hotels at that point. What we're doing now is sort of, you know, cleaning up some of the things that we did as part of our COVID recovery and letting go of some of those low margin accounts, given the overall focus on margins at a group level. There was some pruning of some of the back contracts that we had. I think there will be, there'll continue to be some pruning, so it will, you know, offset some of the growth that we are seeing on the PDM side.
At the same time, as I mentioned earlier in my opening comments as well, it's not gonna be meaningful that it will impact any of the robust demand and numbers that we are projecting for this Q4 as well as the year ahead in FY 2024.
Understood, sir. Also sir, can you share, the EBITDA margins of the BCV Social? Because earlier I think, in Q2 it was actually breakeven and MHS was around 10%-12% margins. Can you share for this quarter as well?
Yeah, it is in a similar range. it both the businesses in similar range as Q2.
Okay. Okay. Also sorry sir, I have missed your guidance for Q4 on revenue and EBITDA, organically and inorganically, if you can share? Thank you.
Hello. Sorry, I was on mute. I'll reiterate my guidance in Q4. We expect to grow 30% year-over-year in Q4. The organic business EBITDA margins should grow to between 18%-19% in Q4. For Adara, we expect to register a 5% EBITDA to this quarter. We have some one-time costs to close the transactions, which will come into effect in Q4. Considering all of this above, we expect to deliver a 15% EBITDA for the quarter.
Okay. Understood, sir. Thank you.
Thank you. The next question is from the line of Ranodeep Sen from MAS Capital. Please go ahead.
Yeah, thank you for the opportunity and a great set of numbers. Congratulations on that. First of, I mean, it's just amazing to snap up almost a $100 million revenue company for just $16 million. Bravo on that. You did mention that, you know, you were in talks with Adara for a long time. My question is, are you presently in talks with any more future companies, like that you want to acquire? Obviously, it needs to be margin equity, we understand. Are you in talks with any companies where we can expect some more acquisition being announced?
Yes, absolutely. You know, as I had mentioned earlier as well, so we run a very, very robust M&A program. There are a couple of dedicated folks whose responsibility is to actually, you know, continue to talk to founders. It's all very, very similar to what, you know, VC funds or private equity guys do, is continue to engage with founders in the industry. We continue to do that. We do have a few opportunities where we've been in conversations for some time. Look, you know, given the fact that we've done this now, this was our fourth acquisition. I think what, you know, what people see is the deals that we did and you know, are wowed by it.
I think what people don't realize is the amount of effort that goes into brewing each of these deals. It's a lot of hard work and, you know, continued engagement, and we are doing that. There's no... It's very hard to... We're very clear on what we are willing to pay for an asset, and sometimes it takes longer for the other side to come around. You know, and sometimes it doesn't even happen. But what we are very clear on is we will continue to do the kind of deals that we've been doing. If you look at our past history also, you know, we usually only pay one and a half to two times revenue. And we continue to be in that, in sort of that range.
Because I feel that's how we are able to create huge alpha, and that's how we were able to create a huge alpha in the previous acquisitions. I'm very confident that Adara is going to be a huge alpha creation and value for us as well, you know, given the fact that the company was about $100 million only 2 years ago, and now we are sort of 6 months into the acquisition and all the features that we had. Because you only learn more after you get married. I'm happy to report it's all great learnings. As Sunny also pointed out, in terms of internal projections for this Q4 quarter for Adara that we had, it seems like we will beat that by a margin.
Great, great to hear that. My second question was, I understand that US and Europe continue to dominate the revenue for RateGain. Have you seen any trends when it comes to India as a market, and how is it evolving? If you can share some insights or trends, especially in the backdrop that the ICC World Cup 2023 is being in India. We did see a notification about the Air India deal. Any other trends or insight about how big is the market opportunity of India?
Look, something that I've stated before also is our focus is on the mid-market and the enterprise market. We focus on, you know, largely chains of hotels that have at least, you know, 10 hotels or more. If you look at the number of chains in India, you know, that have significant amount of hotels under management, there are not that many. Whoever they are, we work with them already. The other part of our growth in India is really, you know, with the international chains. Not just India, but Asia is a great, you know, opportunity for us in terms of growth. And I also like to clarify the way we recognize our revenue.
We probably need to get to the maturity where we can qualify the revenue basis where the hotel is. Because for instance, currently even though we are recognizing the revenue in U.S., it could be related to the hotels in Asia. The reason we do that is because we deal with the corporate, and the corporate is in the U.S., right? Let's say we deal with a Marriott, InterContinental, or a Hyatt, they're all based in the U.S. From a, you know, revenue recognition perspective, it'll get recognized in the U.S., although those hotel chains are seeing much larger growth in the Asia Pac region. We will, you know, continue to see that play out.
I'm also very, very kicked about, you know, the recent policy that the government came out in the budget on focusing on inbound tourism and developing top 50 destinations. My gut instinct tells me that there is more that we can do, especially with the government and the Ministry of Tourism, with their focus. It's a, you know, it's a seed implanted in my head now, and I'm hoping that in the next quarter or 2 we'll be able to come back to you if, you know, there are opportunities that, you know, we begin to explore. Thank you. Thank you for sharing that at length. Wishing you all the best for the upcoming quarters. Thank you.
Thank you. The next question is from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead.
Hello. Congratulations on a good set of numbers. Sir, I have one question on the growth side. In this growth, is there any element of inorganic, I mean, the acquisition which you have did, a year back or so?
In Q3 more. Go ahead, Ram. Go ahead, Camille. Go ahead. Q3, the 40% growth that we have reported is pure organic because in the same quarter last year, myhotelshop was already acquired. myhotelshop was acquired in the month of September. The 40% growth is purely organic.
Okay, sir. Just one more question on acquisition side. Going forward, is there any tech enabled related acquisitions we will going to do? The business in which we are, we require continuous upgradation of platforms. Is there anything under pipeline for that?
I'm not sure I followed the question. You're saying?
Yeah.
Tech upgradation?
Yes.
No, I. Yeah. I don't see us, you know, because this is a core area of expertise for us. In terms of, you know, if you think about the SaaS delivery model, there's multi-tenancy, meaning you build it once and you keep upgrading, and it automatically applies and gets delivered over the cloud to everyone. That's what our teams are doing constantly. I think I should mention this. We are planning a demo day so that, you know, our investors and you guys can get a better and better understanding of the kind of products that we have, and you can sort of, you know, touch and feel that. I'd love to invite you all to our demo day.
We will release the details about when we are conducting it, and it'll be a virtual one. As you would see, and if you consistently see our products, they're constantly being innovated. You know, we follow in product SaaS what's, you know, a strategy of building product roadmaps and continuously evolving the product. A lot of those innovations I talk about in our detailed presentations also. Yeah, I do not see the need given this is what we do.
Okay. Because our service are more intangible in nature, so for a better understanding and the potential roadmap, if you organize anything virtually, then it will be really helpful. That's it. Yeah. Thank you.
Sir, we are not able to hear you.
I think we need to go for the next question.
Thank you. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity.
Sorry to interrupt you, Mr. Jain. Sir, the audio is unclear from your line. Please use the handset mode.
Yeah. Is it any better?
Yes, sir. Thank you.
Yeah. My question is basically related to the cross-sell, up-sell that effort and initiative that we've been doing right now, and how we are progressing on that. There was this also initiative related to creating a platform which would help scale up that effort in a big way. Any timeline that we have in mind when we could see that going to the market to our clients too?
Rahul, if you look at our, you know, if you look at our QC numbers on new sales, actually as I indicated, one of the larger deals that we did was a result of this cross-sell initiative. It is beginning to yield results already and basis that we had like a record quarter. We continue to see lots of excitement in the industry because people, you know, especially the mid-market segment, they don't have the wherewithal to deal with multiple vendors, multiple point solutions. We are seeing commercially, not just commercially the excitement of customers to deal with one company. Also, you know, the fact that we can provide this one holistic platform, which I call the front office, looking at the customer acquisition, customer engagement and with retention and volume share expansion.
You know, we're already seeing a lot of traction. Now to your point about the platform building of getting everything into one platform. Our first release is already out. We have actually begun to also use the platform to do this natural cross-selling and upselling. What we are doing is we are bringing on some of our existing customers that used one of our products to say, "Look, here's the platform. You can use this product in that platform also. Let the product sell itself because we can then see the power of, you know, having it all under one roof." That, that activity is already started. You know, we have some very nice conversations with some large chains who have expressed a lot of interest in moving to this platform.
The, you know, early signs are very, very good, but we do have, I mean, even though the first release has happened, there are a bunch of additional components that we need to build and release. I think from a product roadmap and building out the platform, I wanna say it will take us, you know, really rest of the year to get to where we wanna get to. At the same time, given that we've done the first release and we will be incrementally releasing other components on this, one holistic platform, you know, the commercial activity is already begun.
Sure, sure. Next year is the year when we would see monetization happening on this.
That is correct. I think some monetization will begin to occur this year. Again, you know, now everything that we do, you know, in terms of moving the needle has to be substantial because we are now almost hitting $100 million ARR. Even at, you know, let's say when we talk about a 30% growth, that's $30 million, right? We would, you know, for me to be able to comment on and give you the excitement, I want it to be substantial and large. You're right. While we will see some activity this year, but, you know, It'll be really FY, you know, 2025, then we will see it moving the needle given the larger base that we have.
Got it. That's it from my side, and best of luck for the time.
Thank you, Rahul.
Thank you. The next question is from the line of Mayur Patwa, an individual investor. Please go ahead.
Yeah. Hi. Am I audible?
Yes. Yes, sir.
Yeah. Congratulations on the excellent set of numbers. I have two questions. One is on this amortization of acquisition costs. Can you just elaborate on how much is the acquisition cost left in the books, and for how many quarters it will continue? Second question is on the EBITDA margins of Adara. As you said, you know, they are at the moment around 5% range. Once everything is stabilizes, what margins we can expect from Adara?
On amortization costs, look, these are long-term costs, because we, for our past acquisitions, we created these intangible assets, and they're getting amortized over a period of 10, 12 years. I expect the similar amortization costs next year as well. There is some reduction next year, but there will be addition due to Adara. It's going to be static for at least two, three years. Then there is a downward trend that will happen with the useful life getting coming to a close. Next, I think two to three years, we can expect that it will be in the similar levels.
On Adara acquisition, you know, during our call, investor call after the acquisition, we did mention that we expect to get around a 15% EBITDA margin for 2023 and 2024, next fiscal year. Again, we are in the process of creating a new budgeting cycle and new plans for the year. I think I'll be able to give you much better guidance in our next call. Whatever the initial plan that we had prepared, we're targeting a 15% EBITDA, you know, in 2023 and 2024. This asset is similar to DHISCO as a platform, we'll get a lot of operating leverage going forward as well.
Okay, great. Thanks. That's it from my side.
Thank you. The next question is from the line of Siddharth from Creatios. Please go ahead.
Hi, am I audible?
Yes.
Yes.
Thank you. Thank you for taking my call. Hope you guys are feeling insanely awesome after this great set of results. My question is on MarTech revenue growth. This quarter it's about 3% quarter-over-quarter and 30% year-over-year, which is lower than what I think management guided, you know, during the IPO and very recently as well, which is about 50% growth. My question is, when can we return to that 50% growth? Is the pruning of loss-making accounts, is that going to continue in full year and next year as well? That's the first question.
Yeah. Let me take that one, yeah. Yeah. In terms of something that I indicated earlier on the call also, the pruning, I think, will continue. We do have a few more customers that we will do. You know, given the fact that we do subscriptions, we have to wait till the cycle of renewal comes about. A large part was happened in this, you know, in Q3 and there is also similarly in Q4 some pruning that we are doing. In terms of going forward, you know, given the fact that we are now really focused on maintaining EBITDA levels and margins. We wanna do the same, especially when it comes to our brand monitoring and brand engagement offerings.
What we've done is we've actually elevated the price levels, and as a result of that, we don't expect similar kinds of growth levels. I do think that it will become difficult to sustain our 50% growth level. Also the fact that, you know, now Adara forms that, you know, part of that mix as well because it's, you know, part of the Adara business is part of MarTech as I was explaining earlier. It really becomes a part of the PDM offering that we have. If I had to break it down and sum it up, this is the three components that we have, the brand monitoring, the brand engagement and PDM.
I see the PDM business to continue to grow quite aggressively, especially with the Adara offering making it even more compelling. There is some amount of platform work that we need to do. Before it really kicks off, I think it's another couple of quarters before we can begin to really realize the value of Adara integrating in it. On the brand monitoring and brand engagement piece, which is any which way now a smaller part of the overall MarTech revenue, any which way, I think, you know, recovering that and going back to the aspirations that we have, I think there's a bunch of work. Can I guide you on what that will be? No, not today, but hopefully maybe in the next quarter or so we'll be in a better position to do that.
Understood. Very, very helpful. Second question is on new customer or new order wins and, you know, which are great and which led to, I guess, a decline quarter-over-quarter in the total pipeline. What I just want to understand, what are the plans to replenish this pipeline, you know, for the...
Yeah. The, you know, the decline in pipeline... Go ahead, Sunil.
Yeah, I mean, I was going to say the declining of the pipeline is primarily because we closed a lot of deals this quarter, right? Basically they moved from pipeline to new contract wins. That's number one. We also did some kind of pruning exercise in the pipeline, like changing exercise that, you know, the old pipelines and all, et cetera, because we have to keep that hygiene level well. That's why it is done. I think generally Q3 and Q4 are strong quarters, both in terms of pipeline generation as well as new contract wins. We expect to grow that back to the previous levels. I think.
Got it. That's it from me. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you everyone for giving us the opportunity today and participating in the earnings call. I would like to invite any of you that has further questions, to reach out to our strategic partner, or Vivek Anand, who is the investor relations head, for more detailed conversations and having a one-on-one with us. Thank you again.
Thank you.
Thank you. Ladies and gentlemen, on behalf of RateGain Travel Technologies Limited, that concludes this conference. Thank you for joining us.