AFFLE - AFFLE 3I LIMITED Share Price

In the earnings conference call for Q3 FY2026, management provided a positive outlook highlighting several key achievements and growth strategies for Affle 3i Limited. They reported a significant quarterly revenue of INR 7.17 billion, marking a growth of 19.2% year-over-year (y-o-y) and 10.9% quarter-over-quarter (q-o-q). The company also achieved its highest-ever quarterly EBITDA of INR 1.63 billion, reflecting a 24.1% y-o-y growth, and a profit after tax (PAT) of INR 1.19 billion, up 19.1% y-o-y.

Management emphasized the performance of its Cost Per Converted User (CPCU) business, driving 119.7 million conversions at a CPCU rate of INR 59.6, which resulted in CPCU revenue of INR 7.14 billion, a 19.6% y-o-y increase. Affle's strategy of leveraging its AI-powered Consumer Platform Stack is central to sustaining growth amid market challenges. The non-CPCU business is viewed as a crucial entry point for customer conversions, aligning with the company's long-term growth strategy.

For the fiscal year 2026, management expects to sustain robust growth, projecting continued revenue and EBITDA advancements. They are targeting a growth vision of 10x, backed by technology differentiation and strengthening partnerships. The company aims for consistent performance across its diversified revenue mix, with particular focus on emerging markets contributing 73.9% to total revenue.

Key forward-looking points include:

• Continued investment in technology and talent to enhance operational capabilities.
• Efforts to deepen market penetration, especially in developed markets.
• Active evaluation of 10-12 potential acquisition targets, narrowed down to four for due diligence.

Management's confidence is underpinned by a strong balance sheet and operational cash flows, positioning Affle for sustainable growth amid evolving market dynamics.

1. Question: How do you see your gross margin moving in the medium term? Will it continue at this elevated level or return to normalized levels?

   Answer: Our data and inventory cost is influenced by revenue generation and strategic investments. Currently, we are fully expensing out investments aimed at expanding our verticalization into international markets. Thus, while we do see some elevated costs, part of this is essential investment to drive future growth.

2. Question: Any progress on the inorganic acquisition front regarding the 10-12 companies you've been evaluating?

   Answer: We've narrowed our pool to four companies and are actively conducting due diligence. We're committed to making a sound decision at the right time and price, ensuring it aligns with our strategy for growth.

3. Question: Can you explain the increase in CPCU rate despite a growing share of Emerging Markets?

   Answer: The CPCU rate growth reflects the enhanced value we're providing advertisers, driven by our verticalization strategy and premium placements. This strategic focus allows us to justify higher pricing through superior targeting and delivering high-value user conversions.

4. Question: What factors contributed to revenue growth in India despite RMG impact? Can we maintain a 20% growth guidance?

   Answer: Our growth in India stems from diversified verticals, strong Android and iOS capabilities, and success in CTV. I believe we can maintain a guidance of 20% plus growth given our business's robustness and management's commitment to pushing for higher targets.

5. Question: Did we have a wage hike during the quarter? Why was our employee expense flat?

   Answer: Yes, we provided a wage hike but maintained flat employee expenses due to efficiencies from AI adoption and centralizing some functions in lower-cost markets, allowing us to invest in talent while keeping overall costs in check.

6. Question: Can you quantify the revenue loss from the RMG ban?

   Answer: The RMG ban led to an estimated revenue loss of INR 10-12 crores in Q3 compared to the previous year. However, broad-based recovery from other verticals compensated for this decline.

7. Question: Can you provide insights into the other expenses trend, and how do you see it evolving?

   Answer: While marketing expenses are seasonal and usually peak in Q3 and Q4, operational efficiencies will help reduce the other expenses percentage in the long term. We expect these efficiencies to enhance profitability without proportionate growth in expenses.

8. Question: What progress have you made in the connected TV (CTV) space?

   Answer: Our focus on CTV is growing as it aligns well with consumer behavior shifts. We're successfully encouraging advertisers to move budgets from traditional TV to digital CPCU models, leveraging both CTV and mobile platforms for effective consumer reach.

9. Question: What is the outlook for growth in developed and emerging markets?

   Answer: While our growth in these markets is currently stable, we believe that with further investment in sales and targeted acquisitions, we can accelerate growth significantly. The potential for organic growth remains high as we expand our vertical offerings in these regions.

10. Question: How do you manage the risk of geopolitical issues across multiple geographies?

    Answer: Our resilience stems from operating localized businesses. We maintain independent entities across regions and have disaster management plans. This approach ensures we can adapt quickly to geopolitical changes, preserving our operational continuity.