ROUTE - Route Mobile Limited Share Price

During the earnings call for Q4 FY25, Route Mobile's management expressed mixed sentiments regarding the company's outlook amid market challenges. CEO Gautam Badalia reported a 15.5% year-on-year revenue growth for Q4, despite significant headwinds in the CPaaS sector. He emphasized the strategic positioning of Route Mobile within the evolving market, highlighting opportunities arising from structural changes and trust issues in communications.

Management expects key advances in digital identity and telco APIs in the upcoming year. However, they decided against providing specific guidance for FY25-26 due to uncertainties in global traffic regimes which could affect enterprise and OTT communication spending. Instead, they focus on outperforming industry growth rates while implementing cost efficiencies to enhance profitability.

Financial highlights include:

• Q4 revenue from operations: 11,750 million INR, a slight decline of 0.7% sequentially.
• Gross profit margin: 19.3%, down from 21.8% year-on-year.
• EBITDA: 1,219 million INR, a decrease of 2.8% year-on-year.
• Profit after tax: 850 million INR, down 8.9% year-on-year.

For FY25 overall, revenue from operations reached 45,756 million INR, a growth of 13.7%. However, gross profit margin fell to 20.8% from the previous year's 21.4%.

Management highlighted a strong free cash generation, achieving 114% EBITDA to cash conversion, driven by improved working capital management. They also noted a final dividend recommendation of Rs. 2 per share, raising the full-year dividend to Rs. 11 per share, surpassing prior guidance.

Looking ahead, management is optimistic about leveraging cross-sell opportunities through the integration with Proximus Group, aspiring to significantly enhance direct margins moving into FY26. Overall, while the near-term outlook appears cautious, management remains committed to strategic growth and operational optimization.

Question: I just wanted to ask, this year, we are not able to make the guidance. So, what are further stands on that and what the guidance we wanted to give to shareholders and investors? And apart from this volume side, we have seen growth in India in this quarter. But overall, if we see overseas and other regions, still we are in degrowth. So, if you can guide.
Answer: We decided against providing forward guidance due to uncertainty. While domestic volumes in India have ramped up, International Long Distance (ILD) volumes faced challenges, mainly due to a major client phasing out a core platform. The overall performance outside of India has been relatively stable but doesn't show significant growth currently.

Question: Just wanted to understand how the integration is going on with Proximus. And also, you know, channel shift is going on overall industry. So, if you can guide us when we are seeing the better visibility in this sector.
Answer: The integration with Proximus is progressing well. We've tapped into low-hanging cost synergies and are training teams for cross-pollination of products. We're optimistic about seeing improvements in direct margins and embracing technological advancements for better performance in this sector moving forward.

Question: Gautam, I would like to understand what kind of revenue contribution currently we have from Telesign or, broadly speaking, cross-sale revenues from Proximus?
Answer: For the last quarter, revenue from Telesign was around 14%. While we've engaged in promising discussions regarding cross-sales, tangible revenue from these initiatives has yet to materialize, primarily focused on generating cost efficiencies so far.

Question: But as revenue from our related parties increases going forward, how should we think about your gross margins? Is 19% the new norm?
Answer: The margin on messaging from related parties is lower than our overall business. However, we're pursuing high-margin opportunities through platform plays, which we expect to significantly improve our gross margin once these initiatives ramp up.

Question: There is another question with respect to the write-off that you had in one of the MNOs. I just wanted to get a clarification. Is this related to Vodafone first and secondly can you explain why you had to take a write-off on the receivable side?
Answer: Due to confidentiality, I won't name the MNO. We generated over $100 million in annual value but faced a shortfall of Rs.28 crores due to a major technology client changing their communication approach. This shortfall necessitated a write-off which impacted our financial statements.

Question: So, my question is like some birds eye view, if you have seen from last 10 years, the sales in March '16 was Rs. 367 crores and now we have Rs. 4,576 crores, we are talking twelve times you can say but the profit has jumped from Rs. 63 crores to Rs. 334 crores which is not even six times. So can you guide us like what is reducing the profits?
Answer: The base business in 2016 had much higher margins from low competition. As prices and competition increased, our gross margins diluted significantly. Though revenue has soared, control over costs and optimizing margins is crucial for future profitability.

Question: So, what are the company's internal growth targets for EBITDA margin for the coming years?
Answer: Currently, we can't specify an exact EBITDA margin target due to ongoing integration efforts and market uncertainties. However, our goal is to outperform industry peers in both revenue growth and cost efficiencies moving forward.

Question: Sir, as you quoted, there are a few large deals which will contribute to sales of the company in coming future. So what is the margin from there we can expect?
Answer: While we can't specify exact margins at this early stage, we anticipate that these large strategic deals will yield much higher direct margins compared to our current messaging services as we leverage synergies with Proximus.

Question: My question is on the balance sheet. So, we have a few advances and deposits given to suppliers. So by when do we expect these to be adjusted or flowing to the cash flow?
Answer: We expect these deposits to flow into cash flow over the next few months. They are typically short-term and will be unwound soon unless specific legal disputes intervene, which we are currently addressing.