ROUTE - Route Mobile Limited Share Price

The management of Route Mobile provided a cautious but optimistic outlook during the Q1 FY26 earnings call held on July 18, 2025. CEO Rajdipkumar Gupta emphasized a strategy focused on profitability and revenue diversification after facing headwinds, especially in the A2P SMS segment. The company aims to enhance its core strengths and expand its non-SMS product portfolio, which includes WhatsApp and RCS solutions and AI-driven firewall solutions for mobile network operators (MNOs).

Key forward-looking points from management include:

1. Growth Areas: The primary focus is on expanding global footprints for non-SMS products and leveraging cross-selling opportunities with Proximus Global. This includes deepening analytics-based firewall solutions and optimizing the customer mix for better margins.

2. Revenue Diversification: Gupta highlighted significant efforts in diversifying revenue streams beyond traditional SMS, leveraging channels such as WhatsApp and RCS, where the company has onboarded several marquee customers.

3. Financial Performance: Route Mobile's Q1 revenue from operations stood at INR 10,508 million, a decline of 4.8% year-on-year. However, the gross profit margin improved sequentially to 21.4%, compared to 19.3% in the previous quarter, signaling a shift towards higher-margin opportunities.

4. Employee Dynamics: There were 26 new hires versus 63 exits in the quarter, attributed to rationalization within acquired companies, focusing on improving operational efficiency without impacting business continuity.

5. Strategic Partnerships: Management is actively engaging with global system integrators to accelerate go-to-market strategies and leverage partnerships for significant deployments, particularly in tailored solutions like firewalls and omni-channel communication systems.

6. Future Expectations: While specific growth targets for FY26 were not disclosed, Gupta expressed confidence in the growth potential, driven by new strategic initiatives, product innovation, and collaborations within the Proximus Global ecosystem.

Overall, Route Mobile aims to emerge as a stronger entity, harnessing new technologies and partnerships to navigate the ongoing market challenges and pursue sustainable, profitable growth.

1. Question: What are the reasons for the higher other expenses and the increase in the tax rate? Also, can you provide insight into Proximus synergy? When can we expect better growth and margin expansion?

Answer: The increase in other expenses was primarily due to significant foreign exchange losses related to our UK entity. Regarding the tax rate, it has risen due to profits generated in certain domestic markets. On Proximus synergy, we are seeing initial traction, especially with sales in Asia. While we've faced revenue declines, the gross profit margin has improved, indicating a shift toward more profitable business. We believe better growth and margin expansion will come as we optimize our customer mix.

2. Question: Can you elaborate on the revenue decline caused by a large digital native enterprise moving to direct sourcing from MNO? Is this a trend we should expect to see more often?

Answer: Yes, one customer has opted to partner directly with MNOs, seeing value in bundling more services. While this reflects a unique shift, it's not indicative of a prevailing trend. Most customers prefer working with aggregators like us. Our diverse service offerings across multiple destinations create complexities for direct partnerships, so we don't anticipate many others following this path.

3. Question: Can you provide guidance on growth prospects for FY26, considering the challenges faced?

Answer: While we aren't providing specific guidance, I am focused on growth, cost optimization, and realizing synergies with Proximus Global. I have a proactive plan in place to bolster new customer acquisition, particularly in telecom products and RCS, which we believe will drive growth, despite challenges.

4. Question: How does the recent customer churn affect new product revenue? What's the outlook regarding RCS and WhatsApp monetization?

Answer: The decline in new product revenue mainly stems from WhatsApp's pricing adjustments that reduced margin despite steady volumes. Although we see future potential revenue growth with RCS and WhatsApp, immediate gains may be tempered due to market pricing recalibrations. The trajectory looks promising as we stabilize pricing structures.

5. Question: With the growing diversification in geographies, how are you ensuring compliance in data-sensitive sectors like BFSI? Is this impacting costs?

Answer: Route Mobile is 100% GDPR compliant, and we've had extensive experience in various high-compliance industries. Our operational history with banks market-wide reflects our capability to navigate these regulations effectively. Consequently, we do not view regulatory compliance as a significant cost driver.

6. Question: What strategies are in place to diversify the industry mix beyond BFSI and CPaaS partners?

Answer: Our product is inherently industry-agnostic, but we strive to create vertical-specific solutions where feasible. While BFSI has showcased significant engagement, we are actively looking to enhance products for other sectors like retail and hospitality, capitalizing on our existing partnerships with leading brands in those areas.