AFFLE - Affle (India) Limited Share Price

In the Q4 FY2025 earnings conference call held on May 12, 2025, management provided a positive outlook for Affle 3i Limited. They expressed a vision of achieving over 20% growth for FY2026, driven by robust demand in both developed and emerging markets. The company highlighted a remarkable revenue growth of 23.0% y-o-y and profit after tax (PAT) growth of 28.5% for FY2025, with Q4 revenue reaching Rs. 6,023 million, a 19.0% increase y-o-y.

Key forward-looking points included:

1. Mid-term Growth Target: Management aims for a mid-term growth target of 10x over the coming years, maintaining a commitment to innovative solutions across advertising and technology.

2. Focus on CPCU Growth: The company reported a significant jump in Cost Per Conversion Unit (CPCU) revenue, which increased by 19.2% y-o-y, contributing Rs. 6,007 million in Q4 FY2025.

3. Market Resilience: Despite seasonality typically affecting Q4 revenues, the adjusted figures indicate a strong performance in both India and the Global Emerging Markets, with a combined contribution of 71.1% to the overall revenue.

4. Expansion in Developed Markets: Notably, developed markets showed 27.3% y-o-y growth, possibly reflecting increased traction post-acquisitions and a strategic focus on non-gaming verticals.

5. Investment in Technology: The company plans ongoing investments in AI and automation, exemplified by a new patent grant aimed at enhancing fraud detection capabilities, which underscores their focus on technology-led innovations.

6. Cash Utilization Strategy: Management reported a robust cash generation with over Rs. 1,300 crores on the balance sheet, hinting at potential future acquisitions or buy-back schemes as part of their growth strategy.

Overall, management's outlook is characterized by confidence in continued expansion across diverse markets, underpinned by a solid technological foundation and robust operational execution.

1. Question: "...I wanted to understand what has led to the strong growth in the developed markets during the quarter? Secondly, you said that we can do 20%+ growth in FY2026 as well. Would this be again more accelerated by developed markets or do you think that both India and developed markets will grow in line?"

   Answer: Thank you for your question. Our strong growth in developed markets stemmed from maintaining momentum in sales activities and successfully acquiring new customers alongside existing ones. We believe that both India and developed markets will contribute to growth, targeting around 20%+ in FY2026 across all regions.

2. Question: "...my second question is for Kapil...do you think that we still have the tailwind from employee expenses or can we get some leverage from the data and inventory cost as well?"

   Answer: We anticipate stable employee costs in FY2026 without substantial increases. While we expect to leverage efficiencies from data and inventory costs, the focus will remain on maintaining operations at current expense levels, even as we target growth in revenue.

3. Question: "...if you could just help us explain a bit better [about the patents]...How does it help us?"

   Answer: Our recent patent grants significantly enhance our competitive edge, serving to protect our intellectual property related to fraud detection and advertising effectiveness. The patents validate our technology's originality, reinforcing our position as a trusted partner in digital advertising.

4. Question: "...are we in any discussions with [Netflix]?"

   Answer: It's early to comment on specifics, but we expect to engage with platforms like Netflix naturally as they work on advertising models. As they offer new ad inventory, we foresee potential collaboration opportunities with them as a publisher.

5. Question: "...if you could just talk about what the steady state for business promotion is for you as you look ahead?"

   Answer: We plan for marketing expenses to range between 2% to 3.5% of revenue, acknowledging that promotional spending can fluctuate significantly from quarter to quarter based on seasonality and specific marketing events.

6. Question: "...I wanted to understand that how do we plan to utilize this [cash] in the next year or over the next 1 to 2 years? Do we expect any kind of buy-backs or would it be more linked/consumed during any acquisitive opportunity?"

   Answer: We are committed to maximizing our cash reserves towards achieving sustainable growth. This includes pursuing strategic acquisitions and operational enhancements. Currently, our focus is primarily on growth rather than buy-backs while seeking substantial, long-term profitable opportunities.