AFFLE - AFFLE 3I LIMITED Share Price

Question 1: "Anuj congrats on a steady performance. Despite the RMG issues, we saw almost 25% growth in India. What was the impact of the RMG issue?"

Answer: The RMG issue did impact this quarter, but it was offset by increased campaign budgets due to early Diwali. Advertisers ramped up spending in September, neutralizing the RMG issue's effects. Some residual impact remains, but we're confident about a robust Q3 since we have the festive budget pipeline intact. We've monitored the RMG situation closely, ramping sales efforts in other verticals to mitigate impacts. Overall, we had a solid performance in line with expectations.

Question 2: "On developed markets, you mentioned some rollover of budgets from Q2 to Q3. What are you seeing there?"

Answer: We haven't seen budget cuts due to tariff issues, but advertisers are cautious, opting to allocate more budgets to Q3, the festive quarter, rather than spending heavily in Q2. This is a typical optimization. Our pipeline for developed markets appears stronger than last quarter, suggesting that Q3 would outperform Q2. The budget realignment signifies thoughtful planning on the advertisers' end rather than a reduction in overall spend.

Question 3: "Could you provide clarity on the recent non-CPCU revenue, which has been around INR 15 crores?"

Answer: Non-CPCU revenue indicates moments where we engage clients on licensing deals or branding campaigns. While our focus is on CPCU, instances arise where advertisers are not sharing deeper conversion funnel details yet. We view non-CPCU as a transitional stage"”gradually integrating clients into our CPCU model. Recent branding campaigns can drive conversions, allowing us to eventually shift clients toward the CPCU format.

Question 4: "Kapil, you've seen margin improvements for several quarters. Could you quantify the additional provisioning impact this quarter?"

Answer: The additional provisioning impact for the RMG collections is approximately 0.5% of our revenue from operations. This provisioning has been assessed by our auditors and may carry forward into the next quarter. Regarding operational efficiencies, we've held our Opex steady without increasing employee headcount significantly, which supports sustainable margins moving forward. Thus, our margin profile should maintain this level in the medium term.

Question 5: "With a consistent 20% growth, is there a case for capturing less profitable businesses to enhance overall growth?"

Answer: While our performance has been solid at around 20% growth, we are focused on maintaining our margin integrity. Encouraging lower-margin pursuits could disrupt our organizational DNA. We're strategically positioned as a premium platform, and we emphasize attracting high-value customers. Our aim is to continue our trajectory without compromising on margins or diluting our brand value, leveraging our growth from the profitable segments we operate in.

Question 6: "What is your approach regarding using cash for acquisitions? Are you planning for inorganic growth soon?"

Answer: We have a pipeline of about 10 companies that we are evaluating for potential acquisitions, focusing on opportunities aligning with our consumer platform. Our acquisition strategy aims for vertical and horizontal integration to bolster our existing strengths rather than spreading thin. While we will engage deeply with potential targets, we're committed to finding the right valuation and ensuring a suitable cultural fit. We plan a structured approach to any future M&A activity.

Question 7: "Could you explain the sharp increase in depreciation and amortization this quarter?"

Answer: The Q2 increase in D&A aligns with our historical trend: we capitalize specific tech developments, shifting work-in-progress activities into active assets during this quarter. This means higher depreciation levels this time of year. We adhere to a 4-year amortization policy for capitalized tech costs, ensuring our accounting practices remain consistent and transparent with applicable standards.

Question 8: "What are your revenue growth expectations for FY2026 given recent challenges?"

Answer: This fiscal year has seen challenges like the RMG ban and US tariff uncertainties. Despite these, our performance remains close to our expected growth strategies. Although recent quarters suggest slight growth moderation, we remain confident in achieving our 20% growth guidance moving forward, barring unforeseen challenges. The Indian market's festive spending, combined with strong ties to our client base, reinforces our medium-term outlook.

Question 9: "Anuj, what are your thoughts on the changes in CPM rates within large DSPs affecting your business?"

Answer: Our CPCU model differs from DSPs focused on CPM sales. While higher supply can drive down base costs, we focus on converting users, allowing us to sustainably maintain higher CPCU pricing. We consistently demonstrate value to advertisers, and our unit economics reflect that. Increased efficiency in driving conversions legitimizes higher costs while maintaining sustainable margin profiles that align with our premium strategy.

Question 10: "What share of your campaigns currently utilize Niko and OpticksAI?"

Answer: Currently, over 80% of our operations incorporate AI-driven solutions like Niko and OpticksAI. These tools enhance campaign effectiveness and overall operational efficiencies significantly. As we process larger pools of traffic through our tech stack, these capabilities help maintain our competitive edge, leading to higher ROI for advertisers and improvement in our operational productivity.