Ladies and gentlemen, good day and welcome to Vaibhav Global Limited Q3 and nine months FY 2023 earnings conference call. As a reminder, all participants' lines will be in 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, please signal an operator by pressing star then zero on your touchtone phone. Please note this conference is being recorded. I now hand the conference over to Miss Disha Shah from Adfactors PR. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us on Vaibhav Global's earnings conference call for the quarter ended 31st December 2022. Today we have with us Mr. Sunil Agrawal, Managing Director, Mr. Nitin Panwad, Group CFO, and Mr. Prashant Saraswat, Head of Investor Relations. We will begin the call with opening remarks by Mr. Sunil Agrawal on the business operations, key initiatives, and a broad outlook, followed by a discussion on the financial performance by Mr. Nitin Panwad, after which the management will open the forum for Q&A session. Before we get started, we would like to point out that some statements made or discussed on today's call may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties that we face.
A detailed statement and explanation of these risks is included in the earnings presentation, which has been shared with you all already. The company does not undertake to update these forward-looking statements publicly. I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.
Thank you, Disha. I welcome you all to Vaibhav Global's Q3 FY 2023 earnings call. I hope that you have reviewed our results and the accompanying presentation that provides details on the business operations and the current market conditions. I will now take you through the performance for this quarter. Sales for the quarter were INR 724 crore, down by 3.6% from INR 750 crore in the 3rd quarter of last year. The top- line is increasing over pre-COVID period of Q3 FY 2020 with a strong growth of 28.5%. This performance is with the backdrop of current moderating consumer demand amidst inflationary environments. In our U.K. market, many of the major delivery partners are facing strikes which had an industry-wide impact on deliveries.
Further, during the quarter, we faced a cyber attack which resulted in temporary disruptions to our U.S. and U.K. businesses. The company has demonstrated resilience in current economic environment, as our revenue growth would have been flattish year-over-year if we negate the impact of cyber attack and delivery disruptions. Our gross margins continues to remain strong at 60.6%. Our vertically integrated business model allows product differentiation with lower USP and helps us maintain market-leading gross margins. EBITDA for the quarter has been at 10.5% in Q3 versus 8.1% for Q2 and 11.4% in Q3 of last year. Our sustained efforts on cost optimization helped to sequentially improve EBITDA margin, which bottomed out in Q4 FY 2022.
During the quarter, our Germany business continued its growth momentum and is now clocking approximately EUR 1.5 million revenue every month. Other business metrics are also trending positive. Today, we are dispatching more than 3,500 pieces a day. In terms of customer engagement, our CSAT score in Germany is 96%. We are under discussion with other affiliates to gain more households in Germany. At Shop TJC, the Freeview channel upgrade continues to give positive outcomes in terms of new TV customer acquisitions. New TV customer acquisition rate, which was negative prior to upgrade, continues to be positive with year-over-year growth every month. Customer acquisition growth was, however, overshadowed due to historical inflationary levels and weak consumer sentiments. Our D2C brand, Rachel Galley, is performing very well with 200% year-over-year revenue growth on a low base.
In U.S., even though inflation is inching downwards, consumer sentiments remain muted. We are taking positive measures to mitigate the impact of these headwinds on our business, including expanding product portfolio of under $10 and $20 products, content improvement, expand our TV footprint, digital and OTT promotions, etc. We believe that these headwinds are transient. We are well-placed to leverage the true potential of U.S. and U.K. markets. Our vertically integrated supply chain network spanning 30 countries is the backbone of our business and a key differentiator. It is helping us with increased product availability. The low-cost manufacturing with value sourcing enables to serve value-conscious customers in our addressable markets in U.S., U.K., and Germany, thus achieving industry-leading gross margins.
We reach TV homes through cable, satellite, telco networks, and over-the-air antenna, also called the OTA broadcast. Our products are also available on digital channels, including proprietary website, smartphone apps, OTT platforms, and marketplaces. Further, our four Rs framework: widening reach, new customer registrations, customer retention, and repeat purchases remains to be our key levers for growth. The reach of our TV networks by the end of Q3 FY 2023 was approximately 129 million TV homes, which is 2% higher year-over-year. We've been expanding our customer base by leveraging diverse product portfolio and omni-channel presence. Our unique customer base is at half a million. New registrations on TTM basis at INR 3.2 lakhs.
New customer acquisition on TTM basis stands at INR 2.4 lakhs, which is lower by 1% year-over-year, but significantly higher by 79% over pre-COVID period of Q3 FY 2020. On a sustainability aspects, we are glad to announce that recently we successfully conducted and passed the SMETA 4-Pillar A udit for two of our units. SMETA audit signifies highest standard of labor, health, and safety at our manufacturing facilities and recognizing our efforts towards sustainability. Another important aspect of sustainability efforts is our midday meal program, Your Purchase Feeds. Recently, we crossed a milestone of 73 million meals with a run rate of approximately 54,000 meals donated every single school day. We are also closely monitoring the economic landscape and are adapting our strategies as necessary to take advantage of any opportunity that may arise.
Overall, while we are aware of the current macro headwinds, we remain optimistic about the future and are confident in our ability to navigate these challenges and achieve our goals. Considering current macro indicators, we expect to achieve flattish to 2% top- line growth in Q4 and end this fiscal year with -3% to -2% top-line growth. For FY 2024, we expect to deliver revenue growth of 8%-10% range with strong operating leverage over current year. Our midterm outlook remains intact, and we expect to deliver mid-teens revenue growth in subsequent periods with decent operating leverage. The Board of Directors of our company have declared an interim dividend of INR 1.5 crore per share for the quarter. We look forward to maintaining a balance between growth, investment, and quarterly payouts to generate sustainable value for our stakeholders.
With this, I now hand over the call to Nitin to discuss financial performance. Over to you, Nitin.
Thank you, Sunil, and good evening, everyone. A warm welcome to Vaibhav Global's Earnings Conference Call. While Sunil gave some details on overall performance and business status in the just concluded quarter, I will now take you through our financial performance for this quarter and nine months ended 31st December 2022 in detail. Broader economic challenges are there since last few quarters, continue to impact our growth plans. Quarterly revenue of INR 724 crores were on the backdrop of muted consumer sentiments, resulting in revenue decline of 3.6% year-over-year. While the quarter 3 financial year 2023 top-line reflects temporary impact on current macro environment. However, growth of 28.5% over pre-COVID period of quarter 3 FY 2020 is encouraging.
In local currency terms, [audio distortion] had a decline of 11.3% in Q3, which is majorly driven by weak consumer sentiment and cyber attacks in last quarter. However, declining interest rates in the U.S., we hope that it might trigger the consumer sentiments positively and may create a new opportunity in U.S. economy continues to evolve. In short periods in the U.K., growth in new TV customer acquisition on Freeview TV platform continued during the quarter, reassuring our investment in upgrading our channel position. However, weak consumer sentiment in the U.K. overweighted the growth perspectives and hence in Q3, revenue has shown a decline of 10.9% year-over-year. Performance in the U.K. were also partly affected by cyber attacks and disruption in delivery market during the quarter.
As Sunil had mentioned already that had this attack and delivery disruption did not happen, our revenue would have been flattish year-over-year in Q3. Shop LC Germany is scaling up well, with revenue and customer numbers increasing every month. At operating level, we are confident to break even in this territory by H2 FY 2024. Our TV revenue was INR 441 crore and digital revenue was INR 269 crore. TV revenue declined by 5.5% year-over-year, and digital revenue grew by 0.4% year-over-year. Our focused investment in omni-channel had been relatively better performance in digital segment for us.
On comparing against pre-COVID period of Q3 FY 2020, the growth is encouraging, with TV growing by 18.7% and digital by 50.2%. The current macro situation is volatile, long-term growth perspectives are promising in our addressable markets. Our sustained investment in growing omnichannel have resulted in 59% of new customers being acquired digital. Omnichannel distribution promotes cross-selling potential, encourage customers to transact on both TV and digital platforms, which gives them a unique shopping experience. Omnichannel customers also have a significantly higher lifetime value than customers who buy only on TV or only on digital. Having a wider product basket across platforms is a great opportunity to increase wallet share of the consumers. Our Budget Pay feature provides consumers with the convenience of buying on EMI.
During the quarter, the product sold via Budget Pay contributes 38% of our total retail revenues. This feature has added a level of affordability, especially during the current inflationary environment, which also helps in further improving customer engagement. Our non-jewelry segment comprises fashion accessories, lifestyle products, beauty products, and apparel. Today, it contributes 28% of total retail revenues. Over the past few years, share of non-jewelry has increased multipoint, indicating our ability to take higher wallet share out of the same customers.
Owing to our mode of being vertically integrated, we were able to maintain gross margin of 60.6%. EBITDA margin for the quarter was 10.5%, which has shown sequential improvement over past few quarters. Our cost re-reduce initiatives, better pricing, and narrowing losses in Germany helped achieving our double-digit EBITDA margin during this period.
Profit after tax for the quarter was INR 39 crore against INR 69 crore as of last year. Our balance sheet continues to remain healthy with robust cash flow generation. Operating cash flow and free cash flow of INR 121 crore and INR 96 crore respectively reflects year-over-year improvement owing our operational efficiency and CapEx reverting to normal levels. ROE and ROCE of 9.5% and 14.5% respectively on TTM basis suggests effect of lower profitability. We perceive current revenue pressure as transient, being linked to recent macro headwinds and near-term challenges in operating environment. We are also committed towards creating sustainable value for stakeholders, are pleased to announce that the board has approved third interim dividend for the year of INR 1.5 crore per equity share.
Considering current macro indicators, we expect that the top-line will be flattish to 2% in quarter four and end this fiscal year with a -3% to -2% top-line growth. For financial year 2024, we expect to deliver revenue growth in 8%-10% range with strong operating leverage over current year. We remain committed and are confident to deliver strong returns for our stakeholders in the mid to long term. We expect to deliver mid-teen revenue growth in subsequent period with decent operating leverage. While our financial performance may not have been as strong as we had hoped, we are taking steps to improve and remain confident in our long-term success. We have a wider product portfolio with omnichannel presence. We believe that continued focus on our core competencies will drive growth in coming years. Thank you.
With that, back to your moderator .
Thank you very much, sir. Ladies and gentlemen, we will now begin the question -and- answer session. Anyone who wishes to ask a question, press star one on their touchtone telephones. If you wish to remove yourself from the question queue, you may press s tar and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question, please press star followed by one on your touchtone phone now. We have our first question from the line of Abhilash Heran, an investor. Please go ahead.
Hello.
Hello, Abhilash.
Okay. Can you explain in detail on the sourcing front for our various products like jewelry, fashion accessories, lifestyle products, how do you decide on in-house manufacturing versus outsourcing? Kunal, can you elaborate on that on detail?
Sure, Abhilash. We decide on what product line are we good in manufacturing and what product line is best to outsource from outside. Most importantly, the product ideas starts with the product idea. Product development is done by our in-house units as well as product samples are submitted to us from the outside. That are then presented to our merchandisers and buyers. Then whatever the product segment which would be successful at the front end at retail units is then bought back from respective units. We respect the ingenuity and the creativity of outside vendors. If somebody has presented a new product, an interesting product from outside that we believe would be good for us, we'll buy it from them.
We don't copy and manufacture it ourselves. Having said that, we have more than 250 people within our product development team that constantly comes up with new ideas, new product, more and more manufacturing is going towards our own units. predominantly, jewelry will be manufactured by us and apparel, the really fashion garments are manufactured by us.
Okay, sir. On the, on the designing part, so that entire designing is done, for a product in-house?
Mostly. Unless some third-party vendor would come up with unique design with their own design team and offer those products to us. In that case, we will negotiate the price with them and buy from them. Within jewelry and fashion apparel, it's very small amount that we buy from outside. We buy like home product or beauty product or accessory handbags, that we buy from outside.
Okay. And then, sir, can you explain like, why is it that these parts are not manufactured inside, in-house? For what reasons are these not manufactured in-house?
Matter of scale. We want to go into the manufacturing of a product line that is already matured or is at a scale, or we can scale very quickly. If in future the product line scales within our business and would sustain our own manufacturing, we will definitely go there.
Okay. Okay. that helps. Sir, how much time does it take to recover the customer acquisition cost to their respective lifetime value on across various platforms?
On TV, the store for acquiring and selling is same. It's very difficult for us or is impossible for us to differentiate what is acquisition cost and what is selling cost. We don't look at it that way. How we look television broadcasting is that within 18 months, the TV cost, the broadcasting cost should be 10%-12% of our revenue. We look at it in 18 months basis. On our digital customer acquisition, we try to acquire customer at one-third the lifetime value of that customer. The different channels have different lifetime value. For example, Google, Facebook has about $70-$100 lifetime value. Whereas OTT, like Roku or Fire TV or Apple TV, they have about $2,500 lifetime value.
We try to keep our customer acquisition costs at one-third the lifetime value or below one-third the lifetime value.
This is for that you mentioned, right?
Sorry?
This is for the various platforms like acquisition through Facebook and Google.
Yes. Facebook and Google lifetime value between $70-$100. The lifetime value through connected TV or OTT, as we call, is about $2,500.
Understood. Understood. Sir, can you explain more on the delivery front, across various regions? How do you manage the last mile delivery?
At all three locations, we have contracts with the local shipping company. For example, in U.S. we have contract with DHL and FedEx. Depending on the distance and the weight and the value of the item, our software offers the most optimal service, and our operator automatically prints the respective label. In U.K., we have service through Royal Mail and Evri and DPD and Amazon. Four providers. Within four providers, our automatics software prints the most at optimum label for us. In Germany, It is all DHL and DPD that distribute our products.
Understood. Sir, one last question from my side. Sir, you have mentioned that you generally don't sell products, which have a gross profit margin lower than 60%. Also, have you ever considered or are there products which can generate higher traffic but might generate less gross profit than 60%? Are you open to that or are you going to stick to the gross profit margin above 60%?
Yeah. We've designed our business on Zara, if you know Inditex. Zara model is, all in-house brands and, you know, minimum they make 55% margin, 54%, 55% margin at around EUR 25 billion revenue. Our model is that we would source product or even third-party brands we will source, but only that will afford our gross margin of 60%. If it is lesser than that, we just don't entertain that brand. That in fact would exclude, say, Apple or Samsung or Dell products for us. We are happy to stay in the space where our brands would over the years become more ubiquitous and known and would have developed equity value within the brands.
Okay. Thank you so much.
Thank you, Abhilash.
Thank you. Reminder to participants to ask a question, please press star followed by one on your touchtone phone now. We have our next question from the line of Sachin Kasera with Svan Investment. Please go ahead.
Yes, sir. One or two fast data keeping questions. The higher EBITDA improvement in turn is also because of the higher other income. What exactly is this, an operating part of this higher other income, or is it just a one-off event?
Yeah. Nitin?
Hi, Sachin. Other income includes the foreign exchange gain we, which is around $800,000. It's around INR 8 crore, INR 7 crore.
Apart from that, the other income is mainly what we receive through interest or the cash backs from credit card companies.
Sure. Secondly, you did mention that, with the pre-COVID December quarter, the revenues are much higher. Even when you compare it, the margin level is significantly lower. Is it mainly to do with the investments that you have made in Germany or is it also to do with the fact that the high investments you made in digital marketing in the existing markets, and hence it's a twin impact, and with both of these normalized, the margin should be significantly better?
Yeah, as you mentioned, the majorly it is related to the investment we have done in Germany, and also that we have started investing in our digitally to grow our digital sales and also investment in our broadcasting. Both, compared to financial year 2020, so both areas we have invested, so both is impacting our EBITDA margin. Majorly it is related to Germany.
Sure. Lastly, considering the current subdued sentiments internationally, what gives us the confidence of being able to deliver 8%-10% sort of a revenue growth next year?
Yeah, I'll take that. Sachin, we have our Germany scaling up and our airtime that we acquired in U.S. last year, which had additional investments and the digital investments we made and as well as the D2C brand that we launched, Rachael Ray and Ramsey. We are seeing them tracking back better. We've run the multiple simulations, and based on those simulations, we feel confident to deliver 8%-10% growth in next financial year.
Sure. Sure. Thank you. All the best.
Thanks, Sachin.
Thank you. We have next question from the line of Pritesh Chheda with Lucky Investment Managers. Please go ahead.
Yeah, sir. Sir, I was trying to interpret what we have put on slide 31, where we are seeing conscious investment for future potential and scale via accelerated investment broadcasting and digital. When I understand your business is, it's post gross margin, it's a fixed cost business, you know, in terms of largely the broadcasting expense that we incur. When I look at your P&L, these numbers are flat YoY at about INR 730 crores. The question is, have we added any cable, you know, cable, the TV, numbers? You know, some time back, you know, we were like fully there in terms of U.S. and U.K. in terms of the cable TV connection.
Just if you could highlight a little bit more on what you want to mean by this.
Yes, so, Pritesh, in U.S., the cable broadcasting, we still have about 15 million homes that we are not in currently. Those 15 millions are cable and OTA homes. We still are. This is after we have made this investment into additional cable homes. For example, Comcast, Cox, and many national OTAs, we are still not fully distributed. As we get the opportunity, we take them, because we don't get those cable homes every day. We constantly follow up, and sometimes they, if they are fully distributed, they don't have any opening. Whenever the opening comes, we will take them. That is in U.S. In Germany, we still have about 15 million homes that we are not in currently. After entering the country, we are majority distributed, but still there's a lot of potential over there.
This is mainly about broadcasting. The next part of the digital was also digital marketing on our digital properties as well as our OTT, as well as analog. All three places we made investments in last quarter to get our footprint larger and acquire customers.
Some quarters back, or let's say some years back, we were saying that, you know, in U.S., whatever, wherever we want to beam in, we have beamed in, and whatever residual is either expensive or it's not our target market. It's just that it's an opportunistic entry and hence we have taken it? That's how we should perceive it or...
Just for example, the Comcast is about 20 million homes, but we were very small representation in that. A few years ago, they were asking quite high amount. Recently we got a reasonable broadcast opportunity, and we took it. We'll continue to look at those opportunities whenever they can come our way. That 18 million-20 million homes was an opportunity. Of that, we are already in about 10 million. There is still 8 million opportunity within Comcast. Cox is another million and a half. OTA, the full power OTA, there's another 10 million homes opportunity for us.
These are long deals or these are multi-year deals that you have signed, or these are deal windows for like couple of years, three years?
These deals are, we sign for a year, but we have exit on these deals for, within 90 days, notice period, we can exit.
Okay. You might not get a similar pricing maybe next year. You got a bit-
Yes.
Okay. Okay. Okay.
The pricing or even at any price, these may not be available because they are fully distributed from their side.
Okay, understood. On the slide 15, you are mentioning about these households where you're not there. We just want to recap. In U.S., out of 75 million, now in how many households we are there?
As I just mentioned, we are about 8-10 million homes still short from full distribution.
From six- [crosstalk]
Uh-
We are in 65 million out of 75 million.
I don't have exact numbers with me how many we are out of this. But OTA, the 17 million includes full power and low power.
Mm-hmm.
Full power point of view, we are still 10 million homes which have still potential for us to get in on full power. The revenue difference between full power and low power is about 5-7 x.
Okay.
Whenever we get that opportunity, we'll take them in future as well.
In U.K., if you could give a similar, in GBP 27 million, how much more left to reach?
Yeah. In U.K. we are fully distributing in all 27 million homes.
Okay.
There are still opportunity. For example, ITV is the number two, number three broadcaster here in terms of audience. If we get an opportunity to get few hours on ITV broadcast, we will take it. We already are on OTA, full power OTA, that is Freeview in U.S., in U.K. To get into that nationally broadcast channel, to get part-time on that, we'll still take it. That is again very opportunistic. Sometimes those air times are very rare to come by. If they come, that only increases our reach to the audience that would not normally come to shopping genre. Shopping genre is a certain area they may not come.
Understood. In Germany, you said you have 15 more to go. You're in 12 out of 27.
Germany and Austria put together is, I think EUR 43 million.
Okay.
Pritesh, if you can, exit, give them exact number.
We know about Germany, right? As of now, we are in Germany or we have started beaming in Austria also?
We started in Austria from day one.
Okay.
Last year also. They're pretty combined markets, and they all, they ship out to Austria already. Combined market, we still have EUR 15 million opportunity there.
If you want to share our outlook on the carriage costs next year, inclusive of the OTA channel, cable, will there be a rise when there is... You're gonna add something or we saw a step up this year and next year we need not see the rise?
You know, Pritesh, this is very opportunistic. We don't know when we will get. I cannot give a guidance on that. But what we are giving guidance is a strong leverage next year. This year's profitability was quite subdued, and how we are seeing, we already bottomed out from the margin point of view. As you saw in current quarter, we are already double digit. Year-over-year, our margins will continue to expand.
Okay. Okay. Thank you very much, sir.
Thank you again, Pritesh.
Thank you. A reminder to participants, if you wish to ask a question, please press star 1 on your touchtone phone now. We have next question from the line of Sumesh Guleria with WealthCulture. Please go ahead.
Hi, sir.
Hello, Sumesh.
Sir, my question is regarding to EBITDA margin. Right now we are at 6.5% EBITDA margin, and you have mentioned that it's kind of bottomed out. Financially at 2024, what kind of number we can expect from the margins?
We don't give guidance on EBITDA for the next year, but what we can say is, with confidence that we would have a strong leverage over current year. Year-over-year, we'll see growth in every quarter.
Okay. Okay, sir. Okay. Thank you. Thanks a lot.
Sure, Sumesh.
Thank you. We have next question from the line of Nilesh Shah from Envision Capital. Please go ahead.
Hi, Sunil. Just wanted your color in terms of you've mentioned about introducing products in the $10, $20 categories. What kind of products these would be? Would these be in our traditional jewelry or our lifestyle segment, or are we looking at some other kind of products? Number one. Number two is what impact will this have on our margins? I mean, would this be margin dilutive, or could our general fundamentals of 60% gross margins minimum even be apply, be applicable for this category? If you can just kind of share your thoughts on this, please.
Sure, Nilesh. I'll answer the second question. For us, 60% margin is a bottom- line. We would not bring any product category or any product segment which would go against this business principle. To answer your second question, no, our margin will stay above 60%. The first part of the question is $10, $20. We already have airtime dedicated to $10 and $20. What I meant to say in my remarks is that we are, in view of the current economic sentiments, we are accelerating that space a little bit more. With that, the customer acquisition is higher, customer engagement is better, and the return rate is low.
Great. Thank you. Thank you so much.
Sure, Nilesh.
Thank you. We have next question from the line of Rohan Mehta, an investor. Please go ahead.
Good evening, sir.
Good evening.
Sir, I had a couple of questions. If you could just shed some more light on the cyber attack that had happened and, you know, the impact on our operations.
Sure. Around 12th of November, we had a cyber attack on U.S. and U.K. servers. For about two days, our business was disrupted almost completely. After that we started. Our, actually, online business came back up within 24 hours, and our TV business came after two days. Our shipment was blocked for about one week, both U.S. and U.K. We could not ship products that customer had ordered. Overall, if we had not had this impact and also postal disruption in U.K., we would have been flat year-over-year this quarter.
Okay. Sir, are we going to be making any investments in cybersecurity going forward?
We already have good cybersecurity, but, you know, with such an attack, we came back up within two days. Normally in such attack, people have about two weeks that they take. We had all the backups on cloud and whatever our on-prem server apps were, we were able to move it on cloud and started from there. Now all our apps are on cloud, and we have beefed up our security through FIFA and Sophos, and we are fairly confident of repairing any such attack in future. Now, you can never guarantee them, but we feel fairly confident that we have now good position, good situation.
Right. Right. Fair enough, sir. You spoke about the German market. Is growth in line with our expectation of forecasts or has there been any impact in terms of the, you know, general global economic scenario and the inflation that we hear about?
If it was not for inflation or current subdued environment, we would have been profitable earlier. We are still feeling fairly comfortable to become breakeven in H2 of next financial year.
Okay. Okay.
For the full year we won't be profitable, but we will be breakeven, breaking even in H2 of next financial year.
Understood, sir. Understood. One last question, sir. In terms of the countries where we source our products, is there any specific region or country wherein, we are able to make better margins if we source from those countries or?
I'll go different way. We go to the country and the product where we can make our 60% margin up. Otherwise, we don't even touch any other places that we can't do those margins.
All right.
As I mentioned earlier in my remark, we buy product from 30 countries, and the merchants scour them from whatever would be the right product from all over the place, and then we put in the best possible product for the very limited airtime we have on TV or limited space that we have online within our criteria of how much forward inventory we can keep, how many SKUs we want to keep, and how many inventory turns we would have.
All right. Understood. Fair enough, sir. All right. Thank you, sir, and all the best.
Sure, Rohan. Thank you.
Thank you. We have next question from the line of Aniketh Rekhar. Investor, please go ahead.
Hello, sir.
Hello, Aniketh.
Yeah. I have few questions. Sir, as we know this, that COVID situation which has been there in China, how does this impacting us in terms of sourcing?
Yeah. Since we source from 30 countries and our majority of sourcing is from India, and we are pretty agile, so we did not have any issues in getting our product or our requirement fulfilled.
Okay. Okay. Sir, do you plan to expand this business model in India as well?
Perhaps down the road, Aniket, not at this time, because long-distance shopping in India is still not profitable and still is in discovery phase. Once Germany is successful and profitable and scaling well, we may look at Japan next before coming to India.
Okay. Okay. Sir, one last question. How many new products do we target to add every year?
On an average, we launch about 100 new products every day.
100 new products every day?
Yes.
Okay.
Yes, a little more, but that is about the velocity that we have.
Okay. Okay. Okay, sir. Thank you, sir. This is from my side.
Thanks, Aniketh.
Yeah. Welcome.
Thank you. We have next question from the line of Sachin Kasera with Svan Investment. Please go ahead.
Sir, just one follow-up question on Germany. You mentioned about breakeven next year. One, are you referring to the EBITDA or the net breakeven? Secondly, currently I believe we're at a EUR 1.5 million monthly run rate. At any point of time or at what type of revenue run rate will the German operations become at the par with the company average?
The current run rate was EUR 1.4 million, about $1.5 million. The profitability comes at EUR 2.5 million.
Okay.
That is the current state. Now, for next year we may get more airtime or we may have additional expenses. We believe that we need to be around EUR 3 million for it to break even at that level of expense. This is what we are expecting by in H2 of next year. We're expecting about EUR 3 million per month net revenue.
At EUR 3 million expecting a net breakeven, sir?
Yes. We don't have any taxation because we have accumulated losses, only depreciation. The base of gross block is not large, so it is on PBT level. Pretty much that is the net level.
Do you expect in financial year 2025, 2026 EUR, Germany should come to the company level? What is your any broad sense on that?
At financial year 2024/2025, we'll be profitable for the full year. Next year, H2, we will be breakeven. For the full financial year, we won't be breaking even. Even after considering the losses in Germany, we'll have strong leverage year-over-year next year.
Okay. My question was that in which financial year will the operations of Germany, the EBITDA margins be at par with the company average level that we are having? Next year we break even, but when do we reach the company level of margins? Is it 2025, 2026? Which year you think?
We created the model, but that model is not in front of me, and that I would not even give the guidance such far out.
Sure.
Very good question, Sachin, but I can't give guidance on that.
Okay. The other question is related to Japan. You said that some product insights in Japan. Is it that once at least Germany reaches almost closer to the company averages, then we look at a new venture? As you mentioned that any new venture has some sort of investment impact in margins. Internally, what is the type of numbers we are looking? Are we looking at least Germany reaching the company level before we take up any other larger like Japan?
Yeah. We look at Japan approximately three years time from now.
Okay. Thank you.
Thank you, Sachin.
Thank you. To ask question, please press star one. We have next question from line of Abhilash Heran, an investor. Please go ahead.
Hello.
Hello, Abhilash.
Sir, can you explain why the full power OTA are 10 x more expensive than the low power OTA? You had also mentioned that they are productive around 6 -8x the normal cable. Can you explain that in detail?
The full power OTA are affiliated with the CBS, ABC, NBC or Fox. They have a lot of audience available to them because they're linked to the national programmers. Therefore, they have large distribution. They're large companies as well, and there are customers who would want position on their platforms. They're on low power. They have no national affiliations, and they are very small players, so no large customers are looking to distribute on them. Full power OTA has more leverage into getting the better price for themselves. Still at our spend to sales ratio, they're very profitable for us.
Sir, out of the 75 million households in the US, can you give the breakup on full power, full power OTA, low power and normal cable? What will be the general breakup?
Yeah. Let me look at it. Nitin, do you have the data of how many you have 70 million OTA homes. How many are full power and how many are low power?
Okay. Out of which 25, sir.
How many homes, we have 17 million homes in OTA. Of that, how many are full power and how many are low power?
Right. Out of total 22 million homes in U.S., low power is 17 million and high power is 4 million. Sir, how many high power units are still left to be penetrated? Like, what will be number of households, total households in the overall 75 million U.S. household?
22 million, Abhilash Heran, so total 22 million OTA homes. There are all of those homes have full power as well as low power. There, for example, when you look at the channel, like antenna, where no cable is needed. You get about 30, 40 channels there. Of the 30, 40 channels, the top five are full power, and the rest of them are low power.
Okay. Okay. Sir, can you give the same numbers for U.K. And Germany?
Yeah. In U.K., how many are full use?
INR 20 million crore-INR 25 million crore.
No. Out of 25 million, how many are full use? 25 million.
INR 17 million.
Free-to-air is only total INR 17 million crore, and INR 11 million crore is just free-to-air only. INR 6 crore-INR 7 million crore is overlapping with other, satellite or, cable providers.
Okay. Okay, sir. Okay. Sir, in this non-jewelry segment, you had mentioned that non-jewelry segment has higher customer acquisition costs. Why is that so?
High customer acquisition number, not the cost.
Yeah. Okay. sir, more from non-jewelry than jewelry.
Okay. We acquire more from non-jewelry.
Okay. Okay, sir. Thank you, sir. That's all my side. All the best.
Sure, Abhilash. Thank you.
Thank you. We have next question from the line of Heena Parekh, an investor. Please go ahead.
Hello, Heena.
Hi. Actually I just had a few questions. I want to know the split between jewelry and non-jewelry products in terms of revenue.
Split between jewelry and non-jewelry in what?
In terms of revenue.
Okay. Heena, let me take this question. As stated in the remarks, currently it is 28% revenue comes from non-jewelry products and remaining are our jewelry products.
Okay. What is the EBITDA margin for jewelry and lifestyle products?
Heena, we don't monitor separately. We have interval, we don't monitor separately the EBITDA margin for jewelry and non-jewelry. We consider as our overall performance of the product based on their productivity, how the product productivity is coming for each item code.
Okay. I mean, any estimate for the EBITDA for the next 3 to 5 years collectively?
Heena, as Sunil also mentioned that we don't give the guidance on EBITDA, but definitely that in coming years we will see a operating leverage as revenue grows in coming years.
Okay. Okay. Thank you.
Thanks, Heena.
Thank you. We have next question from the line of Aditya Mehta from G.K. Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Apologies, my question might sound little bit repetitive. As for next year we are giving a guidance of 8%-10% growth. Any just broad range of guidance, where we'll be at our EBITDA level? Just a broad range.
We have strong leverage over current year, Aditya. We don't give a guidance on EBITDA level. Having been at 15% kind of EBITDA in the past, our aim is to get to that number as soon as possible. Will it be next year? I don't think it'll be 15% next year, but we will get there pretty soon.
Next year, most probably we will be in the double-digit range. Is it possible?
We don't give guidance specifically, Aditya, but we'll have definitely leverage over current year and a strong leverage over current year.
Okay. Secondly, on the market share gains, so how are our peers performing in the respective markets?
We've gained market share consistently over last 10, 12 years that we've been on air. We are seeing the same in current financial year as well. We recently tried to look at it. Some of our competitors have not published their numbers yet. Whoever has published even the September numbers, we have seen for the nine months rolling, we have gained market share against all of them. I can't say all of them. One company called ASOS, so they have shown a flat year-over-year growth. They had also acquired some companies locally in U.K. last year. We couldn't really split out their acquisition versus their own like for like. Otherwise, when we look at other competitor, we gain market share against them.
Okay. Currently we might be around 2%-3% market share?
Yes, between that.
Okay. That's it from my side. Thank you.
Thanks, Aditya.
Thank you. As there are no further questions from the participants, I'd now like to hand the conference back over to Mr. Sunil Agrawal for closing comments. Over to you, sir.
Thank you, Vikram. I want to thank all the participants for your time and great questions. I also thank you for your support to VGL during last past years. If you have any further question, please feel free to reach Prashant Saraswat at VGL or Amit Sharma at Adfactors PR India, and we'll be happy to answer your questions. Thank you once again.
Thank you very much, sir. Ladies and gentlemen, on behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.