Good evening, ladies and gentlemen. I am Yusuf, moderator for this conference. Welcome to the conference call of Route Mobile Limited, arranged by Concept Investor Relations, to discuss its Q2 FY24 results. We have with us today Mr. Rajdipk umar Gupta, Managing Director and Group CEO, Mr. Gautam Badalia, Group's Chief Strategy Officer and Chief Investor Relations Officer, and Mr. Suresh Jankar, Chief Financial Officer. At this moment, all participants are in listen-only mode. Later, we will conduct a Q&A session. At that time, if you have a question, you may press star and one on your telephone keypad. Before we begin, I would like to remind you that some of the statements made in today's earnings call may be forward-looking in nature and may involve certain risks and uncertainties. Kindly refer to slide number 2 of the presentation for the detailed disclaimer.
Please note that this conference is being recorded. I now hand the conference over to Mr. Rajdip Gupta, Managing Director and Group CEO, Route Mobile Limited. Thank you, and over to you, sir.
Thank you, Yusuf. Good evening, everyone. I hope this finds all of you in good spirit as we near the festive season. I have some exciting news to share tonight. Even though the month of July and August typically see downturn for us, given the holidays and unusual dip in global volume, Route Mobile has not just preserved the volume, but also soared and registering our highest ever revenue. In fact, even amidst of the global challenges, our year-on-year growth in both revenue and PAT in H1 FY 2024 has exceeded over 25%. This past quarter has been pivotal for us, marked by securing several significant deals that promises to propel our growth trajectory. Here are some of the standout agreements we have clinched. First off, collaboration with Vi India this quarter.
It's a major international A2P termination and firewall management services deal, and one we are particularly proud of. Our history with Idea and now our re-engagement with the merged entity, Vodafone Idea, underscores our platform robustness. This association alone has the potential to bring around $100 million in revenue. We are gearing up and in process of deploying our firewall, which will go live very soon. In Southeast Asia, we clinched another major international A2P termination and firewall management service deal, and it's already live and running. Finally, there's a global e-commerce giant we partnered with. In Q1 FY 2024, they are onboarded and live with us now. In fact, now we are expecting to gain more traffic from international destinations, including India.
This win, this big wins make me confident in saying we are on track for our annual revenue growth of 20%-25%, and frankly, we might just hit that top mark. Additionally, since Q1 FY 2024, we all hit several milestone. We got, s ome of them are: We got a nod as a major provider in Gartner CPaaS Magic Quadrant for 2023, and we're featured in 4 Gartner Hype Cycle reports this year. We have forged a significant partnership in Bangladesh with Robi Axiata Limited, focusing on RCS business messaging. We successfully launched Route Amplify, our flagship event. It was a melting pot of industry leaders, where we shared and gained insight into key areas like customer engagement and digital identity. Our new product revenue has shot up by staggering 64%.
Our collaboration, like the one enabling WhatsApp-based ticketing system for Delhi Metro, only goes on to prove our innovative product development. Now, for our deal with Proximus Group, everything is on track. We are eyeing to wrap up by Q4 of 2024. We have even set up an integration governance committee, pulling in senior leaders from Proximus, Route Mobile, and Telesign, all working together to ensure smooth sailing. Every step we have taken so far, it just reinforces our confidence in this partnership. I'm personally thrilled about what lies ahead, especially leading the CPaaS division post-deal. Last but not the least, based on our sterling performance this quarter, the board has approved an interim dividend of INR 3 per share. Big thank you to all involved. Now I will hand over to Gautam, who will share more about our financial highlights. Over to you, Gautam.
Thank you, Rajdip . Good evening, everyone. Season's greetings to all of you. We have already uploaded our quarterly earnings presentation on our website, as well as the stock exchange website. Hope you had a chance to go through the presentation. I'll quickly summarize our financial and operating performance before opening the floor for Q&A. The quarter gone by has yet again been an outstanding quarter, considering the seasonality of the business. The key highlights for the quarter gone by has been the large deals that we have won, as highlighted by Rajdip earlier. The throughput from some of these large deals should start to reflect from Q4 onwards. Hence, we believe that we will be closer, closer to the upper end of our revenue guidance band of 20%-25%.
More importantly, FY 2025 looks very promising on the back of full year effect of these large deals wins, plus the benefits of synergies that should start to flow to Route Mobile from the Proximus deal. In terms of the update on the Proximus transaction, as Rajdip highlighted, the regulatory filings are well on track, and it seems that the transaction, including the mandatory counteroffer, should close during Q4 FY 2024. In terms of the synergy that was called out at the time of signing, we have been able to further validate the same based upon the interim work done so far. Based on the exhaustive work done over the past six weeks by the integration governance team, we reconfirm that the overall EUR 90 million or $100 million EBITDA synergy stands completely justified.
Out of these, some of the synergy buckets where Route Mobile will stand to benefit are as follows: In terms of bucket one, which is the revenue, and cross-selling synergy, Route Mobile will leverage the Digital Identity platform of Telesign in emerging markets. Digital Identity as a product is a very unique SaaS offering, which is used to drive digital trust and entails gross margins which are northwards of 80%. Route Mobile will also be making inroads into untapped large global accounts through Telesign to service their requirements in emerging markets.
In terms of the synergy bucket two, which is OpEx savings and synergy, create a state-of-the-art product innovation lab in India to focus on new product initiatives, automation, and AI/ML capabilities, drive economies of scale by consolidating the cloud infra, software licenses, and vendors across the group, and work towards a low-cost operating model through the shared service center construct and leverage the capabilities of our BPO arm, which is Call 2 Connect . In terms of synergy bucket three, direct cost synergy. Drive better efficiencies owing to higher economies of scale and deepen as well as expand our exclusive MNO connects. These initiatives will definitely accelerate our journey towards a billion-dollar revenue with 15% EBITDA margin target by 2027.
Just to further reinstate, this deal will pave the way for Route Mobile to be a global CPaaS player in true sense, with an unparalleled reach and a very comprehensive product stack of its own products, coupled with licensed products from the group. By virtue of this deal, we should be able to demonstrate, quote, unquote, "cost leadership at scale with industry-leading growth rates." As I said, this is only an interim update and will be fine-tuned further. As and when these are further crystallized into the final operating model, we shall update you on the same. Highlighting some of the key business metrics, for the quarter and the half yearly numbers gone by. In volume terms, we processed over 31 billion transactions in Q2 FY 2024, which is again the highest quarterly volume, billable volumes processed by us to date.
Billable transactions increased from 26.9 billion in Q2 FY 2023 and 29.5 billion in Q1 FY 2024 to 31.3 billion in Q2 FY 2024. Average realization per billable transaction marginally decreased from 32.8% in Q1 FY 2024 to 32.4% in Q2 FY 2024, owing to increase in domestic volumes in India. In terms of geography, India continues to be our largest market by termination, accounting for 47% of our revenue by termination. You may refer to slide 20 of the presentation. Domestic volumes in India witnessed a double-digit growth despite the NLD pricing deals. We continue to witness very strong momentum in our, on our next-generation products. New product revenues grew by 64% on a YoY basis and 53% on a QOQ basis in Q2 FY 2024.
In terms of operating overheads in Q2 FY 2024, employee benefit expenses decreased, primarily due to rollback of performance-based stock options and cancellation of stock owing to resignation by few employees. The increase in other expenses was primarily due to foreign currency translation loss of INR 91 million and increase in travel and business promotion expenses, both totaling to an increase of INR 30 million. The business promotion expenses were largely related to our flagship, Route Amplify event, which was held in Mumbai. In terms of EBITDA, EBITDA grew by 16% YoY from INR 1,094 million in Q2 FY 2023 to INR 1,268 million in Q2 FY 2024. There was a sequential growth of 2.5%. From a balancing standpoint, average receivable days stood at 73 days, and average payable days stood at 64 days.
Normalized cash flow conversion in H1 FY 2024 was very strong at 77%. You may refer to slide 16 for the same. With this, we open the floor for Q&A.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Ronak Chheda from Awriga Capital. Please go ahead.
Hey, hi, Gautam. Congratulations on the results, first of all. I have two questions. First question is, on the e-commerce giant's business, right? We've done a multi-geography deal. So can you just explain on this further, and how much of this business would broadly split into India and the other emerging geographies? How should one think of the deal itself? That's the first question.
Sure.
So yeah, Gautam, let me just answer this question.
Yeah, yeah, sure.
So, Ronak, I think India is going to be at least about 50% of the revenue, and the remaining 50% will come from international. We have signed the contract with this e-com giant for 10 countries and including UK and some of the Asian countries as well. And I think the connectivity and the binding is already done, and the testing is also done, and we already started getting traffic for India. So we believe in by next quarter or maybe by this quarter, we can see more traffic. But in terms of split, I think 50% revenue will be India and remaining 50% will be international.
Understood. That was helpful. My second question is on, you actually touched upon in the opening remarks on the synergies which would flow from the merger process and some business coming from Telesign. I mean, how soon can we start looking at that in the results itself? Will we wait for the deal to complete and then this will flow, or we should start seeing it from this quarter itself?
Gautam?
Yeah. So, see, I think, I think we are at this point in time working on wireframe, but even before the deal, Telesign was a partner with Route Mobile, and we used to help them for, for some part of, their termination into emerging markets. That continues, as is. In fact, the throughput on that has increased, to some extent, but, but I think lion's share of synergies will start to flow, post-closing.
Understood. And, just last bookkeeping question on your working capital. I see the receivable days have gone up. Should we read too much into it, or this is just a quarterly phenomenon?
Yeah, it's, I mean, I mean, you shouldn't read too much into it. In fact, a few days post the closure of the quarter, I mean, we received one of the payments from a large OTT player. So, I mean, we also have to advance for, I mean, July, August, and even September to an extent. I mean, these are typically the holiday seasons, I think, in most of these places. So I think that we shouldn't read too much into it. I think from a free cash or operating cash generation standpoint, I think probably you can't tell me that.
Understood. These are my questions. Thank you so much, and best of luck for your future quarters.
Thanks a lot.
Bye.
Thank you. Next question is from the line of Nikhil Choudhary from Nuvama. Please go ahead.
Hey, hi, thanks for the opportunity. First question is regarding Vodafone Idea deal. I hope you understand that, given the contradictory filing by, you know, both the companies and who is also contacting you, we just want to understand, you know, how basically you accounted for $100 million in economic potential. And any rough timeline in terms of when you will be able to materialize it? That's my first question. I have follow-up.
So Nikhil, hi, I think, as I said already, the deployment of our firewall is already in process, and, based on the current timeline which we have given to Vodafone Idea, we are looking out to go live by in December. So that's the current timeline we have. And, what was your other question? How we quantify $100 million.
Yeah, and timeline for fast recognition.
So it's very simple math, right? If you see the number of subscriber, what Vodafone Idea has about $200 million, and you multiply by particular SMS, you know, and then you say five cents per SMS cost. I think that is the kind of math we have done at our end while giving this number to the market, and we believe that, the number may be more than $100 million, but, we are little bit conservative with giving that $100 million, number.
This entire revenue, because of our exclusivity, will flow through Route Mobile.
Yes.
So this revenue, I mean, whosoever gets the pie operator will have to necessarily terminate through Route Mobile. So we get the 100% pie of this revenue to Route Mobile.
Sure. So is it correct to again repeat, Gautam, that this INR 100 million will start flowing from quarter four of 2024, and next twelve months, we can see it top line through our P&L?
You can consider quarter four. Yes, you're right.
Got it. Second question is in terms of ILD revenue. This quarter, while NLD has done quite well, which you have highlighted, ILD, we have seen decline. I think it's maybe due to volume decline. Can you please help us understand what led to that?
I think, as I said, seasonality, right? We always need to understand that H1 is 45% of our revenue and H2 is almost 55%. Now, Diwali and all the other festive season is going to start in the month of this quarter especially. We will see the growth, and I think there's nothing— the dip is basically based on the seasonality and nothing to worry about. We have seen the growth in this particular, in fact, October month, and we see the growth going to come in November and December as well on IDD business.
Sure. So just last question from my side. You know that you have highlighted in your press release statement about INR 297 crore basically deposited for firewall deal. Based on the filing by your competitor, INR 67 crore is the revenue basically just from the firewall deal. And you have highlighted that you usually deposit, you know, 3-6 months of payment to telecom operator. So just want to understand how big is maybe the other con contract or what kind of ROI we are looking if my calculations are right, maybe?
Sorry, can you please repeat your query? I didn't understand what was the query. We have given this 297 to two operators, and for one operator, a partial payment was made last quarter. The final payment will be done once we are close to going live.
So Gautam, what I want to understand is, the quantum of Vodafone firewall deal, based on disclosure by the competitor who lost the contract, was about INR 67 crore for annual, right? So just want to understand, and given it was one of the biggest firewall deal, what basically led to deposit of INR 300 crore, which is, you know, much larger?
Okay, okay. No, let me just correct you. I got your question. So there is two streams of revenue. Okay, first is the firewall revenue, which is firewall deployed by 365squared and Route Mobile. And there's a revenue share between 365squared and Vodafone Idea. Okay? That is a separate revenue. Then when all the traffic which flows through Route Mobile platform to Vodafone Idea, that's additional revenue we generate. So I think you, if you're talking about one firewall revenue, which is separate, I think that number comes to the number which you are talking about. Then there's additional revenue potential and margin, which Route Mobile generates directly with OTT player. So you have to consider it in that way.
That is the potential we have seen in this overall deal, and we believe that the platform is going to play a very critical role to mitigate or to at least mitigate the risk of, for the gray routes, which was still there on their network. We identified certain gray routes which have been used, and with our firewall, we believe that we will mitigate those risk of gray route. We will definitely deliver the commitment which we are already made to Vodafone Idea.
Sure. Okay. Very helpful. Good luck for coming.
Thank you.
Thank you.
Sir, Gautam, you were saying something.
No, also, Nikhil, I mean, the deal, I mean, from when it was with the prior partner and moved to us, I think the price has also moved quite a bit. So the deal value per se, I think would have more than doubled, right? So, I think we also have to kind of take that into our account.
Understood. Understood, Gautam. Very helpful. Thank you.
Thank you. Next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Good evening, sir. Sir, just on the realization piece, so I think we were expecting some increase in the realization, but because of the mix, it has come down a bit. But, net of the mix impact, is there, what has been the realization increase for this quarter, like to like?
Yeah, if we adjust for the sharp increase in our domestic India volumes, the average realization would have marginally gone up.
Okay. Okay. And we understand the seasonality, but I think the YoY growth has sort of come down a bit in this quarter. So any particular color that you can provide there?
No. So the base has also kind of increased quite a bit. And YoY, I mean, we demonstrated, you're talking about it from a H1 standpoint or quarterly standpoint?
Q2 year-over-year versus Q1 year-over-year, I was alluding to.
Oh, sequentially?
Stronger. No, no, sir. Not Q2 over Q1. I was saying Q2 versus last year Q2, and Q1 versus last year Q1. So this Q2 versus last year Q2, the rate has sort of come down a bit compared to what we saw in Q1.
No, so last year, I think there were a few acquisitions also that were based in, and now everything has been kind of consolidated with a larger base. I think we're talking about subjects who are growing at a 20%-25% year-over-year basis. And within that, I think this is some of these deal wins we are talking about hitting the top end of that band.
Understood. And finally, sir, you have mentioned about some resignation by some employees, etc. So this is like, you know, some hardcore resignations, or these are, you know, some of the efforts towards the rationalization or-
No, no, no, no, it's not towards rationalization. So what had happened there, and this, I think we have called it out multiple times in previous calls also, a lot of the cost, I think, that was there in terms of the employee benefit expense was attributable to the ESOP cost, wherein a lot of that cost was front-loaded, front-loaded rather. And in the past, I think when we had issued this or granted this ESOP under the ESOP 2021 scheme, a lot of these ESOPs were rolled out to employees, and there were performance criteria. So wherever, I mean, employees have not been able to perform, those ESOPs have kind of been relinquished.
On top of that, there are certain cases where employees have resigned, and then some of those have been kind of rolled back. So it's completely and purely on performance and owing to the resignation of few employees.
Understood, sir. Is there a way to quantify the deal with the large e-commerce company, you know, sort of the numbers are we looking at?
We are currently at very early stage of our live traffic. Probably we can quantify this in more detail by next quarter or by this quarter end, and once we have a next quarter earnings call.
Okay, sir. Okay, thank you. All the best, sir.
Thank you.
Thank you. Next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead.
Thanks for the opportunity. Couple of questions. First of all, just want to understand, I think you partly alluded about the guidance kind of thing. Now, even for lower end, I think you indicated about, last time at least 20%, and in the earlier prepared remarks, you said 20%-25%, and, high chances of hitting upper end. So which is roughly, let's say, 25%, which require very significant acceleration in H2. Even to reach 20%, you require 15, 16% growth over H1. Another way to put it, 19% which is there to hit lower end. So can you help us understand? I understand about seasonality in December quarter, but it is materially higher, even including Vodafone bill-
So, Dipesh, Dipesh, I think if you also consider the e-commerce client, which is going, which has gone live now, and that effect is going to be in this quarter and next quarter, plus the Vodafone bill. We are also working on certain more firewall deal, which we will, will announce very soon. So keeping all this in mind, I think we are very much sure that we will achieve our guidance, which we have given to the market.
More like 25%, you are confident?
Yes. Yeah, it will be closer to the 25% than 20%.
Understand, sir.
Yeah.
So second question is about the security deposit. I think we mentioned two MNO for the roughly around INR 300 crore kind of number. Whether any payment is related to Vodafone also covered here?
Yeah, part of it.
Okay. And in H2, you expect any material number, or this number will taper off materially in H2?
No, H2 also, I think there will be some bit of that will come through. Plus, plus one other deal that I think Rajdip talked about. Yeah, that happens.
Okay. In that case, your reported OCF might be still very muted. Right way to understand it?
No, no, that's correct. But, I think from a, from a, I think we've always been kind of, very, very, particular that, some of these are properly kind of, created kind of for our investments, where you're investing this for two years to two years payback, where, the ROC tends to be north of 25%. So, I think, once we are done with, this additional, this new deal as well, I think, our plates will be completely full. And for the next two years, I think we'll be able to, see a meaningful improvement and win OCF, not only normalized, OCF, but even the reported OCF.
Understood. So 25 will be much better, yeah, from reported OCF also?
That's correct.
Last question from my side is about new product, I think very strong growth. So just want to understand what explains and how we expect that trend to continue? Thanks.
So Dipesh, I think we are investing heavily, and I think our focus is always on new products along with messages. And the kind of pipeline we have as of now, and we believe that growth is going to be significant in coming quarters.
Is it single product driving it in terms of what set or you-
No, no, it is. No, it's a mix of products which we have as an omni-channel stack, which we have. So, it's a mix of all products.
Understood. Thank you.
Thank you. Next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.
Yes, sir. Thanks for the opportunity. So my first question is on volume growth. So obviously, we have seen both NLD and ILD price hikes, and we have seen some volume drops because of the increase in price. So how do we see the volumes from here on, you know, in terms of the NLD volumes can also come down, because there has been a price hike and if are not wrong, the volumes are down in this quarter. So you think you have an aberration or is it going through a, you know, something that they are finding some other alternatives?
Amit, Rajdip here. Our volume on NLD has grown. It has not gone down.
Yeah, double-digit growth.
Yeah.
Okay. And, you know, but, overall, at industry level, you know, I'm just talking about-
Okay, I cannot comment on industry level. Based on the customer base we have, based on the customer we onboarded in last few quarters, we see a significant growth in those customer and due to which our volume has increased. The price increase is NLD level.
Okay. And, you know, sir, in terms of the, you know, the firewall deals that we are taking up, obviously these deals are kind of based on upfront commitments in terms of volumes.
To the operator. So, you know, what confidence level we have or what kind of growth we are assuming, in terms of, kind of, the existing volumes that we have, are having, you know, committing these, higher numbers because, you, you're saying that-
Yes, in this case.
Yeah. So it's INR 100 crore for 800, 800 crores kind of annual revenue. And, you know, if I'm not wrong, this number was much lower in the earlier version. Okay? And, as the-
No, no, no. I think, I think you need to also-
Yeah.
Amit, I've got a question. The earlier version was the price was half the current price. Okay? It was about $0.02 or $0.03, now price is $0.05. Okay, so you need to consider that. Apart from your how confident we are, our firewall is deployed in 16 countries. Okay? We are doing this job in multiple countries, and we have the insight, and we have so much confident about our product, that deploying this product in, with VI, will definitely generate more revenue for VI and for Route Mobile. And based on the insight we have got from our platform for various other countries, I think that is the confidence it gives us, to make sure that we can achieve our numbers.
It is all about our, you know, product. We always believe that is one of the best in the market now.
Okay.
And just adding, just adding to what Rajdip said, it is, I mean, because of the robustness of the product, I mean, we have been, we have been servicing Idea for some time there. I mean, I think for the long-longest period of time on the firewall, I mean, we were the first ones to kind of get this product to kind of initiated and approved by an operator in India, right? So, it was only after the merger that it switched to another partner, but within a year's time, we realized the robustness of our platform and switched it back to us. So it's not just merely on, on the commitment. I think commitment was not the, the factor, I mean, which kind of got things strong in our favor.
It was the robustness of the platform, the capabilities that we have and the reach that we have with the global audience that helps us garner this kind of revenues for an operator.
So another thing, Amit, just to give more clarity out here. We work almost with all the OTT players globally now, okay? Including, you name it, everyone. And India as a market, we always, I think we have our firewall deployed with BSNL. Based on the data points which we have received from BSNL firewall, and we are 100% confident that what kind of volume Vodafone Idea should have on their network. And based on that calculation, what we have got from BSNL, we give this kind of commitment, and we are very much sure that we will achieve that. So as an India market understanding, we have very clear understanding with our current firewall with BSNL right now.
Okay.
And so these, you know, like, these commitments, is like, for every year? So every year we'll have to put in this kind of money or?
Not exactly. It is just one security deposit we have to take, and based on a month-on-month basis, we have committed the volume, which we are sure that we will achieve that.
Okay. Okay, so thank you, and all the best.
Amit, just to kind of revalidate that INR 297 crore is not purely for Vodafone, it's for two mobile network operators. Just to kind of lay the back side and correct them, right?
Yeah, I'm aware of that. Thank you.
Thank you. Next question is from the line of Swapnil Potdukhe from JM Financial Limited. Please go ahead.
Hey, thanks for the opportunity. I have a couple of questions. First one is on your deal with Telesign, and last quarter I remember you had mentioned that there was some monthly revenues that you were supposed to get from Telesign, and over a period of time, that revenue was supposed to increase. I just want to understand, like, what's the update on that, where were we at the end of last quarter and the current quarter? And how long will it take for the entire potential revenues from Telesign to flow in through Route Mobile? That's one question about.
Okay. Sure. So, Swapnil, I think, even prior to the deal, I think, Telesign and Route Mobile were partners who were working together. But as I said, I mean, since the deal, I mean, we've been working closely on various, integration framework. So the throughput has increased. Definitely, it has increased, and we've been adding more value on to Telesign, I mean, because of our strong entrenchment into the emerging markets. So that continues as is, and we're still working as partners. But the day we are able to close this deal, I think, we believe we'll be able to get, significantly more, traffic, I mean, from Telesign to Route Mobile.
I think that is because today, I mean, because of certain competition sensitivity and certain legal barriers, we are not able to kind of completely be as transparent as what we can be subsequent to the deal. And once the deal closes, I definitely, I think we believe there will be a significant increase in the throughput.
Any numbers you can share?
I mean, it's too early for us to say. As I said, I mean, we've done some interim work on this. Let us come to the final leg of that work, the wireframe. At that point in time, we'll definitely come and give you more crystallized framework of how things will pan out.
Okay. The other way to look at this is, like, I was looking at your Tier One, CPaaS revenue share. Now, that has been declining, you know, quite a bit. So I just wanted to understand, is this the impact of ValueFirst acquisition, you know, by one of the competition or-
Partly, yes. Partly, yes. Partly, yes.
Okay. And then when Telesign revenues are ramped up, we will see some increase in the revenue share from this particular metric?
Possibly, yes. Yeah.
Okay. Right. And just on the balance sheet side, so I think that your borrowings seem to have increased. I mean, if I were to add up your long-term and short-term borrowings, that adds up to around INR 150 crore. Now, we do have a decent amount of cash as well. My question is as to what is the reason that we are seeing this increase in our borrowing number on a Q-on-Q basis?
Yes, some part of that certainly is also some bit of it is treasury management, where we kind of, since we have to pay that in dollars, we don't convert into the INR amounts, we keep that as deposit and kind of create a kind of treasury structure. So, some of these borrowings that we have is again backed by fixed deposits as a security. I mean, partly, I mean, that's what security is given. So, it, it's also summed up with this treasury management.
Okay. And just a last bit on working capital. I know someone asked in the beginning also this question, but an increase of DSOs from roughly around 60 odd days to 73 is decently high number.
Uh,
If you can give some explanation?
Yeah. So there was one particular large OTT payment event which we received just after the quarter had closed. So that led to that bit of a blip.
From a normalized basis, what should be the number that we should be expecting?
It should be around that 60-65 days.
Oh, got it. Yeah, those were the questions. Thanks a lot for taking me.
Thank you.
Bye-bye.
Next question is from the line of Kaustav Bubna from BMSPL Capital. Please go ahead.
Yeah. So I basically have two questions. The first one is, could you just give me a sense on, Route Mobile's presence in this fraud prevention space? How big is this fraud prevention space to Route Mobile right now, and how do you see this Route Mobile's presence growing in this space and the offerings in this space that Route Mobile has? That's the first question. And the second question is, you know, I don't quite understand this deal. I'm sure you've got this question before, because Proximus was trying to list Telesign before, which is public knowledge, and that stack failed. And now they've done this deal through Route, where the promoters are infusing money into Proximus, into Telesign.
I'm just trying to understand, could you give us, I don't know if you'll be able to answer this, but could you give us some sort of indication as to a few years down the line, do you see Telesign and Route operating under one entity?
Too early to comment. So honestly, Gautam, you want to add something to this?
Yeah, I think, I think the major focus right now is to kind of get the deal consummated. Once the deal is consummated, some of these strategic thought processes, I think, will be discussed. At this point in time, as Rajdip said, I mean, none of these things are kind of, they're under adapt.
But why? No, but why was the deal structured this way then?
Because cross-border mergers are not possible in India, and hence the deal had to be structured in this way. But, if you look at, I-
I think, Kaustubh, I think I have already explained so many times about the whole deal rationale. I think you can refer to multiple inquiries of mine and in media also. I think I have explained very clearly why I chose Route Mobile and why I wanted to read, sorry, Telesign, and why I want to read message back to Telesign. So probably if you want to know more about it, you can just give a separate call to us, and I am happy to answer all your questions.
Okay, that's fine. Could you answer the second part, which is about fraud, the fraud prevention segment and Route Mobile's presence there?
Since the partnership with Telesign, Telesign is one of the leader in digital fraud and digital identity products. They got the most evolved stack as compared to anybody in this current ecosystem. We believe that partnering, bringing their entire stack to all the emerging countries where we have our presence. Right now, our stack is not evolved as what Telesign is, and we are definitely going to work with Telesign to use their stack in all the emerging countries where we operate from. And potential-wise, I think digital identity has a huge potential in next two to three years down the line, you will see that impact on our revenues as well.
So currently, it's, you would say it's meaningless, the Route Mobile's exposure to this segment? Is that the right assessment? And it will grow as, Telesign-
Just to understand, there are multiple APIs need to be opened by operator. Okay. For SIM swap APIs, operator, we are dependent on all. In India, only Vodafone and Jio has opened their API for SIM swap. Airtel still thinking about it. The market itself is not ready in India, but in other market, if you go to Europe or U.S., it is already available, and that's why Telesign has a decent amount of revenue coming from DI business. Now, we have made inroads to Jio and Vodafone Idea and got the API access, where we are going to use Telesign stack to sell this product in Indian market or in the Indian country market, the emerging market.
Understood. Understood. Great. And I'll get back to you guys on this because I read, I read everything about the deal, but I still have questions as to, you know, because-
I'm happy to answer all your questions and, because it is directly to me, you can call me also to understand more than why I have invested. I'm happy to answer this.
That'll be great. That'll be great. Thank you so much.
Thank you. Next question is from the line of Sarang Sunil from RW Investment Advisors. Please go ahead. We lost the connection of the last. We will move to our next question from the line of Harsh Chaurasia from Vallum Capital. Please go ahead.
Congratulations, sir, on a good set of numbers. So just there was a one doubt. Like recently, there was a event from WhatsApp India, where there was a lot of aggression on the business messaging part. So I just want to know how Route Mobile, WhatsApp business messaging offerings are unique from the business messaging of part of WhatsApp India, and how are we still relevant in this market? Like, when time we are seeing WhatsApp India part. So-
So I think, if you attended that event, you are also part of that event. And we also been invited by WhatsApp to be part of that event. And just to share about our relevance in this market, that recent deployment with Delhi Metro, we were the first company to have this ticketing system built for Delhi Metro, which has the conversation chat along with the conversation commerce integrated within the same app, and including our own bot, which is a Roubot. So I think we as a company have built our stack, which is now capable enough of handling payments along with the conversation chat as well, along with the bot.
We are very much bullish, and we have seen the growth in our revenue in last quarter, and we have seen the same growth in this quarter also coming from WhatsApp. WhatsApp business messaging as well.
Okay. Okay. Understood, sir. Thank you. And, all the best for the milestones. Okay. Thank you.
Thank you. Next question is from the line of Parth Patel, a retail investor. Please go ahead.
Yeah. Thank you, sir, and congratulations on the good set of numbers. I just wanted to follow up on the question, which was just asked around WhatsApp. As you see, even Amazon today sends WhatsApp instead of SMS. So just wanted to understand how—what kind of impact will it have on your margins, as well as, you know, if and when globally the OTPs also shift to WhatsApp business messaging instead of SMS? And what kind of efforts are we putting in to grow this side of business as well?
So Parth, our new product growth is 64% last quarter, right? And, as far as Route Mobile is concerned, we are a platform company. Any customer coming to Route Mobile platform, they have an option to select the channel they want to communicate with, whether it's WhatsApp, RCS, email, voice, or SMS, right? So end of the day, we as a platform company is going to provide them all the bouquet of services which let the customer select. We spend enough money to build the stack in-house, and now as a one single company which has every single channel of communication available in one platform, for me, we are the only in India who has the entire stack within one platform.
Got it, sir. Thank you. And the last one, my second question is fairly simple. So in terms of the EBITDA margin for the firewall deals, you know, with VI or even with other, smaller MNOs, so what kind of EBITDA margin can we expect, on the VI side, because it's a larger deal, and also on with the smaller MNOs?
Well, as the deal starts, right? It's too early to comment. All our firewall deals are always over 25%, 20%-25% range, and so some of them are even 30%-40% also.
Got it. Thank you, Rajdip.
Thank you.
Thank you. Next question is from the line of Suresh Kumar, an individual investor. Please go ahead.
Hi, thanks for the opportunity. Quick question on the overall guidance, medium-term guidance. I've seen various interviews from Rajdip, and you spoke about $1 billion revenues in two to three years. And in some interviews, we're talking about a combined revenue of $2 billion between Telesign and us. So just want to get an, an update from you on what is the guidance that we can expect on the medium term, two to three years?
So very much, whatever guidance I have given during all my interviews, I'm stick with that guidance. We as a individual, company level, we are definitely looking out to hit about $1 billion revenue in 2-3 year down the line. So there's no change in terms of those guidance.
Awesome. That's great news. And one last, again, on the industry-specific question. I mean, you're doing great and great momentum across various deals. What are the biggest risks for you as a company as well as as an industry? Are there any risks that you foresee, and how will you prepare for it?
I don't see the risk, honestly, because as a platform company, we have to innovate every single quarter and month. And as far as our product stack, if you see, we are ready with almost all the changes required, market required in coming years down the line. And if the particular channel is getting shifted from say SMS to WhatsApp or WhatsApp to RCS, probably we have all the channels. So our job is the risk is only that if you don't stop innovating, then there's a risk. We as a company, we are keep on innovation, and I think we will keep on doing this on other channels also. For me, I think right now I don't see any immediate risk on overall business.
Amazing. Thanks. Thanks for answering the questions, and good luck to all of you. Thanks. Thank you.
Thank you. Next question is from the line of Ronak Chheda, Awriga Capital. Please go ahead.
Hey, thanks for giving me an opportunity again. Rajdip, just one strategy question for you. When we listen to the commentary of your global CPaaS competition, right, most of these players have been calling out slowdown in the messaging side of the business or the communication marketing side of the business. Post-merger, when you control the entire CPaaS business of the group, and the targets which we have, just wanted to hear your thoughts on how are we thinking to, you know, direct the business because developed markets seems to be maturing. Just your thoughts, just on a strategy point of view.
Sir, Ronak, it's a-
Yes.
Ronak, it's a very good question, but if you see the most of the developed market, tech giants, based out of U.S., their market is going to be the emerging markets, whether it's a Facebook or a Google, right?
Right.
The potential growth for all these large tech giants are in emerging markets, and we as a company are already a champion of this market. We want to make sure that we empower Telesign to go and win more account or more destinations with the relationship with those tech giants in that market, and we as a company will support them for delivery and termination in this market. So that is a synergy we see, and that is where we believe that both the company has their own strength in different markets. So one is champion of developed market and another one is champion of emerging market. Combined, both the company can create a great value for the as a one group.
Understood. So you don't see that as a challenge, because we are where the entire business is going to be focused for the next 3-5 years from globally, global CPaaS business point of view. That is what you're saying?
Yes.
Okay. Understood. Thank you so much for this.
Thanks, Ronak.
Thank you. Next question is from the line of Sangram Kanade, an individual investor. Please go ahead.
Hello. Am I audible?
Yes, you are. Please go ahead.
Firstly, congratulations on the higher revenue. Thank you for giving me the opportunity. My first question is: how did the Proximus deal affect the upcoming revenues in positive or negative way? And the second question is: will the shares be delisted after the Proximus deal, and will the key managerial personnel be changed after the signing of the deal?
There is no plan for delisting Route Mobile, and as I said, my responsibility for the overall group is going to more, and I'm going to lead the entire CPaaS business of both the companies.
Okay. Thank you. Thank you, sir, for answering my questions. Hope you achieve new heights in every quarter. Thank you.
Thank you.
Thank you. Next question is from the line of Nikhil Choudhary from Nuvama. Please go ahead.
Yeah. Thanks for giving the opportunity again. Just, one question on, gross margin. Gross margin has declined on Q2 basis, and, you know what, basically, make it more questionable is, that is, that happened despite of such a big increase in new product revenue, which increased by 53% Q on Q, and we generally have much higher gross margin. So if you can, you know, tell us what happened there?
Sorry, what was it?
Sorry, sorry, Nikhil, can you please repeat it once again?
Yeah. So our gross margin decreased by 20 basis points on Q-on-Q basis, and that happened despite of new product revenue increasing by 53% Q-on-Q, which has much more higher gross margin typically.
That's a very small amount, as compared to the INR 1,000 crore revenue, right?
So, uh,
Yeah, so it is a function of various country mix, product mix, and I think, I think the delta is so minuscule that it, I think the new products, their contribution is so small that it doesn't move the needle by much.
Okay, got it. Yeah, understood. Thank you.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to Mr. Rajdip Gupta for the closing comments.
Thank you, Yusuf. Thank you, everyone, and have a nice evening. Thanks a lot. Take care.
Thank you. On behalf of Route Mobile Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.