ROUTE - Route Mobile Limited Share Price

Management provided an optimistic outlook for Route Mobile, highlighting a strategic commitment to profitable growth rather than mere volume expansion. The company reported a sequential revenue increase of 6.5%, reaching INR 11,194 million, while EBITDA grew 16% to INR 133 crore, demonstrating a robust underlying financial performance. Gross profit margin improved to 22.1%, reflecting a disciplined focus on profitable growth.

Key forward-looking points include:

1. New Product Growth: Revenue from new products surged by 13.1% sequentially, significantly outpacing overall revenue growth. Management emphasized that their omnichannel platform is gaining traction in diverse sectors, including mobility and transportation.

2. Partnerships: The recently established partnership with Tech Mahindra has allowed Route Mobile to penetrate new customer segments. Ongoing collaborations, particularly in the Network API space, are expected to create structural opportunities for growth.

3. Focus on Margins: Management is prioritizing high-margin business segments and is confident in sustaining current EBITDA margins around 12%. The effective tax rate is anticipated to normalize, allowing for potential improvements in net profitability.

4. Market Expansion: The company is strategically entering new verticals and is optimistic about capturing additional market share, especially in the telecom API ecosystem.

5. Future Investments: Route Mobile is considering tuck-in acquisitions, particularly in AI and voice capabilities, as part of their capital allocation strategy to enhance product offerings and foster growth.

6. Customer Mix Optimization: The shift towards prioritizing profitability over volume is expected to enhance long-term stakeholder value while expanding the addressable market.

Overall, management expressed confidence in a sustained recovery, positioning the company for continued growth in the coming quarters.

Major Questions and Answers from the Q&A Session

Question 1: "Out of whatever Rs. 1100 crore revenue, what is the revenue from SMS? If you can give that number and further, if you can split that between promotional SMS and regulatory SMS?"

Answer: "We typically don't provide a detailed split, but about 85% of our traffic is transactional SMS, with only 15% being promotional. We've seen growth in alternative channels like WhatsApp and RCS for promotions. So while SMS may face challenges, our diversified channels are growing."

Question 2: "Can you elaborate on the telecom operator firewall deals and their revenue mechanism?"

Answer: "I suggest an offline discussion with our investor relations team to fully explain this complex topic. Each deal can vary greatly, and a one-on-one would provide the best clarity."

Question 3: "Where do we stand with our WhatsApp capabilities compared to companies like Gupshup and Twilio?"

Answer: "We believe we have strong capabilities and are channel-agnostic. We support advanced features like ticket booking through WhatsApp. Our focus is on continuous improvement to meet customer needs comprehensively."

Question 4: "What kind of revenue and margin do we anticipate from the Proximus deal?"

Answer: "We do not have a traditional revenue-sharing arrangement. Instead, we charge based on our service costs to Telesign, ensuring healthy margins of around 10-11% EBIT from this partnership."

Question 5: "Is the lower revenue per billable transaction an ongoing trend?"

Answer: "The decline in ARPU is due to changes in business mix, specifically growth in lower-yield segments such as domestic SMS. We monitor this closely and aim to shift focus to higher-margin clients moving forward."

Question 6: "How do you assess the risk with advance commitments to operators?"

Answer: "We've minimized new commitments and are confident in the existing ones. We no longer pursue high-risk deals and will consume our commitments in the coming months; our assessment strategy is prudent."

Question 7: "What are your thoughts on sustainability and potential growth rates going forward?"

Answer: "While we aim for consistent growth, specific guidance isn't provided. We are optimistic about H2 based on our pipeline and the upcoming seasonal demand driving revenue."

Question 8: "What percentage of revenue comes from related party transactions?"

Answer: "The largest related party transaction comes from Telesign, contributing about 15% to our total revenue, and this helps us maintain healthy margins."

Question 9: "What expectations do you have for revenue growth in H2 FY26?"

Answer: "While I cannot provide specific forecasts, we aim for continued momentum driven by an extensive pipeline, particularly in high-margin segments. Our strategy is focused on sustainable growth."

Question 10: "Can WhatsApp account for a larger portion of our revenue in the next few years?"

Answer: "Potentially, yes. While I won't commit to a specific percentage, the adoption rate will influence how much revenue WhatsApp can contribute, and we're adapting our services accordingly."