Cyber Media Ind Management Discussions


OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are among the leading global cloud-communication platform service providers to enterprises, over-the-top ("OTT") players and mobile network operators. We offer omni-channel digital communication solutions, including messaging (A2P SMS, OTT Messaging, and RCS amongst others), enterprise voice and email, to enterprise clients across the globe. We offer a range of cloud-communication services to clients across diverse sectors including banking and financial services, aviation, retail, e-commerce, logistics, healthcare, hospitality, media and entertainment, pharmaceuticals and telecom. Further, we have expanded our enterprise solution suite to include digital fraud prevention and anti-phishing solutions. Our clients include some of the worlds largest and well-known organisations, including a number of Fortune Global 500 companies. Further, we also offer SMS filtering, analytics, SMS Firewall, SMSC, MMSC and SMS monetisation solutions to Mobile Network Operators globally.

Our Managing Director & Group CEO, Mr Rajdipkumar Gupta was Conferred "CEO of the Year" & "Cloud Innovator of the Year 2023" along with two more additional awards for "Best Use of Cloud Services by a Telecom Company" & "Best Enterprise Cloud Offering" (IT Sector) (Source: ET ascent Business Leader of the Year 2023). Weve reached the Tier One position in the CPaaS Market Impact Report 2023 (Source: ROCCO Report).

We have been consistently ranked amongst the tier 1 application-to-peer ("A2P") SMS Messaging service providers, six times over 2016-2022 and scored high rankings across metrics including reliability, customer service, technical expertise, understanding of the industry and quality of service amongst others. (Source: ROCCO Report). We are the only Asian company covered in Gartners Market Guide for SaaS (October 2020). Further, we have been identified as an Established Leader in CPAAS Strategies, Opportunities & Market Forecasts 2023-2027 in study published by Juniper.

Route Mobile Limited (UK), our wholly owned subsidiary in the United Kingdom, received an honourable recognition of being amongst the fastest growing companies in Technology & Telecom sector and overall ranked 3rd in the UKs top fastest growing Indian companies in 2022 (Source: 7th edition of the Grant Thornton India meets Britain Tracker, developed in collaboration with the Confederation of Indian Industry). We were also ranked among the top 5 fastest growing companies in this report consistently, from 2018 - 2020.

We have also been ranked in Listed in Fortune Magazines - The Next 500 Indias Top Midsize Companies - 2020 : 2022 and received an award at the 19th & 22nd ICSI National Award for Corporate Governance as the "Best Governed Company" in the Emerging Category 2020 & 2022. Route Mobile has won 2 Gold at Juniper Researchs Award for CPaaS Provider of the Year and Best SMS Firewall in the year 2021 and a Gold for being the Best RCS Provider at the Future Digital Awards 2022.

Route Mobile was incorporated in 2004 and is headquartered in Mumbai, India. In the fiscal year ended March 31, 2023, we serviced 3,000 customer, including large global enterprises, as well as small and medium businesses. As of March 31, 2023, our global operations included 10 direct and 25 step-down subsidiaries serving our clients through 31 locations across Africa, Asia Pacific, Europe, Middle East and the Americas.

During the fiscal year ended March 31, 2022, we completed 4 acquisitions (i) SendClean (July 2021), (ii) Masivian S.A.S. (November 2021), (iii) M.R Messaging FZE and (iv) Interteleco (Now Known as Route Mobile Communication Services & Co.). Through these acquisitions, we expanded our global footprint, and strengthened our product portfolio. In the fiscal year ended March 31, 2023, our focus was on deeply integrating the processes and operations of the acquired businesses, and driving synergies.

Masivian is the leading CPaaS player in the Colombian market, and also has presence in Peru. We have leveraged their understanding and knowledge of the LATAM market, to expand into Chile and Mexico. We believe this will contribute towards the growth of Masivians business in the LATAM region.

We also established, organically, a new subsidiary namely Route Mobile Arabia Telecom in Saudi Arabia. Building on our presence and success in the United Arab Emirates and Kuwait market, we have further expanded our presence in the Middle East Market through this new setup in the Saudi Arabia market. Saudi Arabia is an exciting, large and fast-growing market, and we believe we are well poised to capitalize on this opportunity. Route Mobile has also obtained the "CITC License" from Saudi Arabias Communications and Information Technology Commission (CITC), which is responsible for regulating the information and communication technology sector in Saudi Arabia. This license is mandatory for any company or a technology provider to conduct local SMS business.

The larger technology and product team across Route Mobile, Masivian and M.R Messaging has collectively enhanced the capabilities of our CPaaS platform, and added several new solutions to our portfolio. During the fiscal year ended March 31, 2023, we have emphasised our focus on new product offerings which create significant benefits across the value chain to enterprises, their end customers as well as to M NOs by establishing dedicated Strategic Business Units. Details of the same are captured in the following description of our operations. Our operations are internally aligned into the following business verticals: (i) Enterprise and OTT; (ii) Mobile Operator; (iii) Digital Identity and Security Services and (iv) Business Process Outsourcing ("BPO").

Enterprise and OTT. Our Enterprise and OTT vertical primarily provides cloud-communication platform services to enterprises. Our enterprise cloud- communication platform services and solutions include: A2P messaging that includes SMS, 2-Way messaging, and Acculync; enterprise email; RCS messaging; OTT messaging (also referred to as IP Based Messaging), and voice application services (which enable enterprises to, via the cloud, connect incoming and outgoing voice calls to their applications and systems). Voice services also include interactive voice response, Click2Call, missed call facility, outbound dialler.

Mobile Operator. Through our own communications platform and managed services, we provide software and service solutions to mobile network operators

globally. Our main service offerings in this segment include SMS filtering, analytics, monetisation, and hubbing solutions. We consummated the acquisition of software (IP), customer contracts and technical team, on a slump sale basis from TeleDNA Communications Private Limited, in FY2020-21, to further bolster our Mobile Network Operator focused solutions. With this acquisition we expanded our Mobile Operator focused solutions to include SMSC, MMSC and firewall solutions.

Digital Identity and Security Services: We launched TruSense (https://trusense.id), a digital identity and security suite that secures digital transactions through a reliable ecosystem, enabling businesses to authenticate the end user in a frictionless way. The vision for the solution suite is an ecosystem free of digital fraud where no consumer faces risks related to identity theft, forgery, SIM swap, phishing, SMishing, social engineering, account takeover and online fraud. These solutions are extremely critical, to thwart identity theft in real-time to prevent loss of revenue, in a world with continuously growing digital transaction volumes. These solutions ensure that customers do not fall prey to frauds and are not inconvenienced with another layer of security through their online journey.

TruSense addresses this security concern with an identity and security framework that leverages AI/ML for real-time risk assessment, ensures a safe frictionless authentication without OTP, and facilitates seamless identity verification against authorised third-party data.

Digital identity, authentication and fraud detection as a service is relevant to several industry sectors - such as financial services, e-commerce, retail, and healthcare - that rely on peer-to-peer mobile payments, online banking, digital wallets, and online registrations. Route Mobile envisions a secure ecosystem where the digital economy relies on global risk scoring, authentication, and identity verification for improved customer experiences.

Business Process Outsourcing (BPO). We provide a range of voice, non-voice services as part of our BPO services. Our voice services include client support, technical support, booking and collection services. Our non-voice services include client support through email and chat, IT support, billing and data processing.

We are members of the GSMA, (GSM Association) an industry organisation that represents the interests of mobile network operators worldwide. We are also members of MEF and IAMAI, which provides us with representation at various international and national industry forums.

In FY2023 through our cloud communications platform, we processed more than 106.84 billion transactions (at a consolidated level). We have established direct relationships with MNOs that provide our clients with global connectivity. As of March 31, 2023, we had direct relationships with over 280 MNOs (at a consolidated level) and 6 short messaging service centres (at a consolidated level) hosted in various geographies across the globe. We are able to access more than 900 networks (at a consolidated level) across the world.

Focus on Next Generation Communication Solutions

Our razor sharp focus on innovating the product offerings and evolving go-to-market approach continues to drive positive results for the Company.

Over the past few years, we have added several alternative communication channels to our robust platform - including Enterprise Voice, OTT /1P Messaging, Email, RCS Business Messaging and Chatbots, to comprehensively address the digital communication requirements of our enterprise customers.

To further focus energies towards new product and higher value add to enterprise customers, we have established dedicated Strategic Business Units to drive business momentum around 3 product areas: (i) Digital Identity and Security solutions; (ii) Email; and (iii) Chatbot solutions.

Customer centric approach

Our hunting and mining strategy continues to deliver strong results. Our sales teams are focused on acquiring large enterprise clients globally, and the customer success team is focused exclusively on capturing a higher share of digital communication spend of these enterprise clients. This reflects in our client concentration analysis provided below.

Opportunities and Threats Opportunities

• Rapid adoption of digital identity and fraud prevention solutions by enterprises will create tremendous opportunity for the solutions brought to market by TruSense.

• Replacement of traditional communication methodologies (for instance customer support through call centres) with new interactive

communication solutions (for instance chatbots running over RCS or IP based messaging channels) in order to provide prompt support and richer experience (using videos / audio and graphic content) to end customers is creating strong momentum around Route Mobiles next gen product offerings.

• RMLs omni-channel platform approach positions it as a partner of choice in an environment where enterprises have multiple options of communication channels to reach their customers.

• Firewall solutions (analytics and monetisation solutions for MNOs) continue to witness growing demand, as more and more MNOs adopt these solutions to enhance their revenue streams.

Threats

• Sudden introduction of disruptive technologies that could lead to enterprises reducing spend on

current form of A2P messaging. This requires A2P messaging solution providers to look beyond the horizon in terms of technologies being adopted by the industry.

• Regulatory requirements across regions could change, affecting business potential in individual markets. It is essential for A2P solution providers to be aware of key regulatory requirements to ensure business compliance in multiple jurisdictions.

• Increasing competition from players seeking to expand presence across their core markets.

Financial performance

Consolidated Income Statement and Key Financial Metrics

C crore

Particulars

FY2023

FY2022

Y-o-Y Growth

Revenue from operations

3,569.23

2,002.03

78. 28%

Other Income

39.40

20.06

96.40%

Total Revenue

3,608.63

2,022.09

78. 46%

Gross Profit

786.67

419.52

87.52%

Gross Profit Margin (%)

22.04%

20.95%

EBITDA (Non-GAAP)

456.56

257.63

77.21%

EBITDA Margin (%)

12.79%

12.87%

PBT

381.50

195.22

95.42%

PBT Margin (%)

10.69%

9. 75%

PAT

333.11

170.08

95.85%

PAT Margin (%)

9.33%

8. 50%

Revenue from operations in FY2023 grew on the back of sustained growth in revenue from existing clients, on- boarding of several large global clients and increasing contribution of businesses acquired in FY2022. Following chart provides an analysis of organic and inorganic revenue for the year.

Revenue Growth Analysis (in E mn)

At a consolidated level, the gross profit margin expanded from 20.95% in FY2022 to 22.04% in FY2023.

Employee Expenses grew from C 126.12 crore in FY2022 to C 196.90 crore in FY2023. Employee expenses include employee stock option (ESOP) expenses (non-cash in nature) of C 15.59 crore in FY2023.

Other Expenses increased from C 74.76 crore in FY2022 to C 145.62 crore in FY2023. Increase in Other Expenses was primarily due to increase in Internet, data

centre and cloud services; and travel and conveyance (primarily due to increased business conferences and client meetings), legal and professional charges and commission expenses (largely related to M.R Messaging compensation structure) amongst other costs.

EBITDA (Non-GAAP) increased from C 257.63 crore in FY2022 to C 456.56 crore in FY2023. Detailed computation of EBITDA (Non-GAAP) is provided in the table below.

Reconciliation of Consolidated Profit before tax (PBT) to EBITDA (Non-GAAP)

(in H crore)

Particulars

Year ended

31.03. 2023

31.03.2022

Profit before tax (Ind AS)

381.49

195.22

(-) Other income

39.40

20.06

(+) Finance costs

20.45

5.16

EBIT

362. 55

180.31

(+) Depreciation and amortisation expense

81.60

38.32

(+) Employee stock option expense (non-cash)

15.59

18.87

(+) Net loss on foreign currency transactions and translation

4.99

20.13

(+) MRMs Bad Debt written-off (pertaining to pre-acquisition period)

5.85

-

(-) Capitalised cost

14.01

-

EBITDA (Non-GAAP)

456.56

257.63

Depreciation and amortisation increased from H38.32 crore in FY2022 to H81.60 crore in FY2023. In FY2022, we acquired Sendclean, Masiv, Interteleco and M.R Messaging, and full year amortisation of intangible assets (identified as part of purchase price allocation for acquisitions) increased from H23.31 crore in FY2022 to H60.11 crore in FY2023.

Finance costs stood at H20.45 crore in FY2023, compared to H5.16 crore in FY2022. This increase in the finance cost primarily relates to unwinding cost (interest cost) of H11.71 crore on the future purchase consideration to be paid to the erstwhile shareholders of the acquired entities.

Consolidated Balance Statement Summary and Key Financial Ratios

All figures in I NR crores, unless specified

Particulars

FY2023

FY2022

Trade receivables

701.54

487.05

Days Sales Outstanding (on total revenue) (#)

62

64

Current Ratio (#)

2.28

1.85

Debt : Equity ratio (#)

0.05

0.00

Return on Equity (%)

19%

15%

Interest Coverage Ratio (#)

18

35

The Company has maintained healthy operating parameters from a balance sheet perspective.

Trade Receivables have increased in FY2023 reflecting growth in revenue from operations. Days Sales Outstanding has decreased from 64 days in FY2022 to 62 days in FY2023.

Current Assets increased from H1,668.66 crore in FY2022 to H1,786.69 crore in FY2023, whereas Current Liabilities increased from H661.25 crore to H783.16 crore over the same period.

The Interest Coverage ratio stood at 18 in FY2023, compared to 35 in FY2022.

Human Resources

RML employs 1,112 employees (at a consolidated level) as on March 31, 2023. Of this, Call2Connect has a headcount of 390. RML has deployed 812 resources in India, and 300 resources across multiples global locations. The Technology team comprises 309 resources, focused primarily on developing new capabilities within the messaging platform, and creating next generation messaging solutions which address enterprises communication requirements and solutions to optimize monetisation for Mobile Network Operators. RML closed FY2022 with a headcount of 936 employees (at a consolidated level), of which Call2Connect employed 209 resources as on March 31, 2022.

Standalone Income Statement and Key Financial Metrics

All figures in H crore

Particulars

FY2023

FY2022

Y-o-Y Growth

Revenue from Operations

535.80

333.81

60.51%

Other Income

95.22

40.21

136.81%

Total Revenue

631.02

374.02

68.71%

Gross Profit

124.26

86.00

44.49%

Gross Profit Margin (%)

23.19%

25.76%

EBITDA

49.33

23.99

105.63%

EBITDA Margin (%)

9.21%

7.19%

PBT

109.83

33.42

228.64%

PBT Margin (%)

20.49%

10.01%

PAT

89.83

27.76

223.60%

PAT Margin (%)

16.76%

8.32%

Revenue from operations increased by 60.51% in FY2023 on the back on several large new customers on-board in the domestic market.

Other income includes Dividend declared by subsidiary company of H36.84 crore in FY2023.

Employee Expenses increased from H54.72 crore in FY2022 to H62.89 crore in FY2023. Employee stock option expenses in FY2023 stood at H12.94 crore.

Other Expenses increased from H16.37 crore in FY2022 to H24.63 crore in FY2023 primarily due to increase in costs associated with internet, data centre and cloud services, travel and conveyance and legal and professional fees.

EBITDA increased from H23.99 crore in FY2022 to H49.33 crore in FY2023. EBITDA calculation are provided in the table below.

H crore

Particulars

Year ended

31.03.2023

31.03.2022

Profit before tax (Ind AS)

109.48

33.42

(-) Other income

95.22

40.20

(+) Finance costs

2.15

1.92

(+) Exceptional item- Impairment

5.00

5.00

EBIT

21.41

0.14

(+) Depreciation and amortisation expense

14.98

14.78

(+) Employee stock option expense (non-cash)

12.94

9.08

(+) Net loss on foreign currency transactions and translation

-

0.00

EBITDA (Non-GAAP)

49.33

23.99

EBITDA margin % on a Non-GAAP basis

9.21%

7.19%

Depreciation and amortisation increased from H14.78 crore in FY2022 to H14.98 crore in FY2023.

Finance costs increased from H1.92 crore in FY2022 to H2.15 crore in FY2023.

PAT increased from H27.76 crore in FY2022 to H89.57 crore in FY2023.

During the year ended March 31, 2023, the company has made a provision of H5 crore towards impairment in the value of its investment in Call2Connect India Private Limited, due to business losses incurred by this subsidiary.

Standalone Balance Statement Summary and Key Financial Ratios

All figures in I NR crores, unless specified

Particulars

FY2023

FY2022

Trade receivables

160.68

1 11. 68

Days Sales Outstanding (on revenue from operations) (#)

76

171

Current Ratio (#)

8.81

13.64

Debt: Equity ratio (#)

-

0.00

Return on Equity (%)

8%

4%

Interest covergae for FY2023

0

0

Human Resources

Route Mobile Limited employs 404 employees (on a standalone basis) as on March 31, 2023.

Risks and concerns: Principal risks and uncertainties:

There are a number of potential risks and uncertainties, which could have a material impact on the companys long-term performance and could cause actual results to differ materially from expected results.

Liquidity risk

The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. External funding facilities are managed to ensure that both short-term and longer-term funding is available to provide short-term flexibility whilst providing sufficient funding to the companys forecast working capital requirements.

Credit risk

The Company extends credit to customers of various durations depending on customer creditworthiness and industry custom and practice for the product or service. In the event that a customer proves unable to meet payments when they fall due, the company will suffer adverse consequences. To manage this, the company continually monitors credit terms to ensure that no single customer is granted credit inappropriate to its credit risk.

Competitor risk

The Company operates in a highly competitive market with rapidly changing product and pricing innovations. We are subject to the threat of our competitors launching new products in our markets (including updating product lines) before we make corresponding updates and development to our own product range. This could render our products and services out-ofdate and could result in loss of market share. To reduce this risk, we undertake new product development and maintain strong supplier relationships to ensure that we have products at various stages of the life cycle.

Competitor risk also manifests itself in price pressures which are usually experienced in more mature markets. This results not only in downward pressure on our gross margins but also in the risk that our products are not considered to represent value for money. The company therefore monitors market prices on an ongoing basis.

Internal Financial Controls, their adequacy and Internal Auditors

The Company has established a robust framework for internal financial controls. The Company has in place adequate controls, procedures and policies, ensuring orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. During the year, such controls were assessed and no reportable material weaknesses in the design or operation were observed. Accordingly, the Board is of the opinion that the Companys internal financial controls were adequate and effective during the FY 2022-23.

The Board has appointed M/s Pipalia Singhal & Associates, Chartered Accountants, Mumbai as the Internal Auditor of the Company to conduct the internal audit basis a detailed internal audit plan which is reviewed each year in consultation with the Audit Committee.

Disclaimer - Management uses the non-GAAP financial information, collectively, to evaluate its ongoing operations and for internal planning and forecasting purposes. Non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with Indian Accounting Standard (Ind AS), and may be different from similarly- titled non-GAAP measures used by other companies.