Dreamfolks Services Limited (DREAMFOLKS) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Dreamfolks Services Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Liberatha Kallat. Thank you, and over to you.

Good evening, everyone, and thank you for joining us. We appreciate your continued interest and engagement with the company. Earlier today, we announced our financial results for the quarter ended 30th June 2026. The detailed financials and investor presentation have been made available on the stock exchanges as well as on our website. and we hope you had an opportunity to review them. As we begin FY '27, I would like to reflect briefly on the journey we have undertaken over the past year. FY '26 was a year of significant disruption and structural change, particularly in the domestic airport lounge ecosystem. While this transition had a material impact on our financial performance, it is also stated a transformation that has been preparing for from being predominantly a large advocator to becoming a broader travel and lifestyle benefit platform. The most important change we are seeing today is in the way our banking and enterprise partners are designing their customer value propositions. The focus is increasingly shifting from a single standardized benefit to a more personalized combination of experiences based on customer segments, spending behavior and usage patterns. An example of that is the launch of boring Par-based travel benefit program for 1 of the largest banks premium credit card users. This enables customers to access relevant travel benefits seamlessly through that journey, while allowing our banking partners to deliver a more contextual and personalized customer experience. We believe these propositions are an important indication of how the card benefits ecosystem is evolving and where Dreamfolks can add value. This claims directly to reimprove strength given our ability to aggregate multiple services and contribute them through our technology platform. We are therefore increasingly positioning ourselves not merely as a service provider, but as a benefit technology platform that enables clients to design, distribute and manage differentiated customer propositions across travel and lifestyle categories. This evolution is supported by favorable structure industry trends. India credit card transaction value is expected to grow from approximately 21 trillion in FY '25 to 54 trillion in FY '30, representing a tag of around 21%. While transaction volumes are expected to increase to nearly $13 billion. At the same time, global travel and tourism continues to expand. With the sector contributing approximately USD 11.6 trillion to the global economy in 2025. APAC remains 1 of the key growth engines for global aviation, while Southeast Asia tourism market is expected to grow from proximately USD 35.5 billion in 2025 to $67.4 million by 2031. These trends and both are conviction that the long-term opportunity extends well beyond traditional airport lounge access. Against this background, we continue to broaden our service portfolio across the travel and life side. During the quarter, we went live with several major banking programs covering global lounges, global meter assets, airport transfer and premium members only class. These programs demonstrate how our platform is increasingly being used to create bundles and differentiated propositions rather than simply providing individual services. Our core network also continues to buy them steady. As of the end of the quarter, we had 1,100 plus global airport lounges with more than 70 new outlets added during the quarter. Railway ounces remain an important growth opportunity for us with 100% coverage across the country. The acquisition of 111 Hospitality has strengthened our operational control over the segment and enabled us to participate more directly in the growing premium railway travel ecosystem. With the continued modernization of India's railway infrastructure, we see significant potential for railway lounges to become an increasingly important competence of the broader travel and lifestyle benefit ecosystem. Rolv was another category where we continue to see significant headroom. We now provide access to more than 80 potholes list in India and over 860 cost courses international. -- strengthening our ability to offer premium lifestyle benefits across geographies. Another area we are closely monitoring is our DS Club membership program. The initial response has been encouraging. -- with number of memberships sold is showing steady quarter-on-quarter growth. While the initiative is still at an early stage, and we remain measured in our approach. The traction so far gives us confidence in its potential to evolve into meaningful direct-to-consumer and lifestyle engagement channel over time. Importantly, the contribution from business outside our traditional lounge offering has continued to increase. Our non-airport lawn services contributed approximately 33% of the top line during the quarter. This is a significant milestone for us because it demonstrates that the diversification strategy is no longer simply a strategic intent. It is increasingly reflected in the composition of our business. At the same time, our focus remains on deepening relationships with existing clients. Rather than building a partnership only through the length of traditional down checks, we are working with clients to introduce multiple categories of benefits with the same technology and distribution infrastructure. This enables us to increase wallet share, improve engagement and create stickiness within our client ecosystem. As we look ahead, our brainier remains clear, scale our global launch network and strengthen our position relative to global peers. Expand the railway launch network, a subsidiary 111 hospitality. We defined credit card benefits in India by moving beyond the legacy domestic lounges proposition and offering a broader range of travel and lifestyle experiences. The journey from a travel focused advocator to diversify Travel and Lifestyle benefit management technology platform is well underway. The progress we are seeing across global volumes new client program, network expansion and the increase in contribution from non-plant services gives us confidence that the foundation built during FY '26 are beginning to translate into more diversified and lens business. Turning to our financial performance for the quarter ended 30th June 2026, the company reported revenue of INR 39 crores. Gross profit from the quarter stood at negative INR 0.9 crores, primarily impacted by the upfront minimum guarantee payment made to support the expansion of our global launch business. We expect these investments to be recovered to increase transaction volumes and scale up the global business over the coming quarters. The adjusted EBITDA after adjusting for noncash expense stood at negative INR 16.4 crores. While near-term profitability has been temporarily affected due to the structural research and efforts to expand globally and enter new geographies. We believe the rapid adoption of new a lifestyle services and deeper integration in the global and railway launch business segment, we should be able to grow bigger than ever. Despite these headwinds, our balance sheet remains strong and resilient. We closed the quarter with cash and cash equivalents of INR 193.3 crores providing significant financial flexibility to integrate more strategic initiatives. Our network as on 30th June 2026 stands at a healthy INR 300.4 crores, a position that underscores our ability to invest in growth while maintaining financial discipline through this period of transformation. We remain confident that the investments we have made in platform, people, partnerships and geographies will translate into meaningful value creation as industry conditions normalize and our newer revenue streams. I would now like to hand over to Shekar for a detailed financial update.

Thank you, Liberatha. Good evening, everyone. I will now take you through our financial performance for the quarter ended 30th June 23. We reported revenue of INR 39 crores compared to INR 526 crores in the last quarter and INR INR 34.9 crores in Q1 FY '26. While the adjusted EBITDA came in at a negative INR 16.4 crores compared to a negative INR INR 14.4 crores in the last quarter and INR 30.5 crores in Q1 2026. Profit after tax stood at negative INR INR 13.8 crores against negative INR 13 crores last quarter and INR 31.3 crores in Q1 2026. The recent impact on the profitability is primarily a result of lower revenue against our existing operating cost base. Once the high revenue contributing businesses in which we are currently investing, begin to scale and unlock their full potential, we expect the incremental contribution to help us absorb our fixed overhead and improve the operating leverage. As of 30 June 2026, our network stood at INR 300.4 crores, while cash and cash equivalents increased to INR INR 193.3 crores from INR 149 crores in the previous quarter, reflecting our continued focus on efficient working capital management. Our strong balance sheet and healthy liquidity position provides us with the financial flexibility to pursue our growth opportunities while maintaining prudent capital allocation and financial disciplines. With that, I open the floor for questions. Thank you.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Sparsh Betta with Professional Capital Advisors.

So my first question is regarding the unit economics on our launch I wanted to ask how much does it cost for us to open 1 and how long before it earns that back?

So in terms of the CapEx, if you are asking that it depends from launch to launch because every city has a different costs. Secondly, it also depends on the size of the lounges because not every rail station, we actually get our same cost in the same site. But however, on average, I would say that right now, starting from a 2,000 square feet lounge what we have, where we also have 14,000 square feet lougnes. So it depends on going up to maybe 5 to 6 is the CapEx investment right now. It is just the CapEx investment that I'm talking about. But apart from that, there are other investments, which is the security deposit and the initial advances, which are also been given to the railways.

Okay. Got it. And also, you mentioned that railway on this could be a INR 500 crore opportunity over files. Could you like walk me through what needs to happen for that number to be here? Like how many patients and how many customers per station are we expecting?

So if you were to look at our prime minister speech, the kind of investment that they have envisage, if that is happening over the period of next 3 to 4 years, I think we are confident and that is a number that we have actually calculated. And this INR 500 crores in the next 5 years is very much possible considering that kind of investment.

Okay. Got it. And 1 last question. How does the margin economics of ETP compared to what you historically earned in the India lounge business? Are they like structurally better.

Yes. So almost we are in similar range

Okay. So presently, actually, if you look at it, it is at a similar rate. But however, as we mentioned to you that there are investments in terms of advances or we are also trying to ensure that because of the pricing price benefit. We are also giving them in advance amount to the launch operators. So I would say that all that cost right now is considered. And I would say presently, you would not see a better margin compared to what it was earlier. But eventually, I would say that, yes, the margins would get better for Global.

[Operator Instructions] The next question comes from the line of Maruthi Nandan Sarda, Individual Investor.

My question is regarding how many quarters we are looking at to be neutral as far as the bottom line is concerned. That means that breakeven level when are you expecting, how many quarters it is going to take. And if you can just explain in detail how we are going to reach over there?

So I would say that by next year, we will actually come to the breakeven time okay. you actually that what the model would be. But the model is that we are focusing more on the global launches right now. Okay. The focus is on global ages, the focus is on call and also the other services which we have introduced. Now as we all know that any new services, which actually get introduced in the market, it takes time for the awareness to build up. So I would say -- now if you see the 1 of the largest banks, which has actually introduced the other services. Now these services were introduced in the month, mid of May. So initially, when it was launched, I would say that there was communication from the bank. But I think the communications of the bank is not on the regular front, but it is only a word of mouth, which actually spread and it takes time. So I would say that this particular service it terms will take at least a year to pick up and we start seeing numbers coming from there. Similarly, it would be called the other services as well. Now coming to global lounges. Now the impact of the VAR has actually impacted our business, and that's the reason the global launch -- the numbers have dropped drastically compared to what we see in the last quarter. Otherwise, I think we could have actually made I would say that in terms of the transactions and the top line would have been much better if there was no word. So I would say that these are the impacts which have happened. But yes, global lounge on other services would be the 1 will grow eventually in a couple of quarters. And by next year, I would say that, yes, we would be in a breakeven.

Okay. Okay. My second question is in respect of the employee costs, I believe that in the current quarter, we had sopexpenses. So can you just give me the breakdown? And will it continue in the senate as.

So like when we talk about the cost, frankly, its impact is very minimal. So if you talk about full year, wishes the impact of those future issued is only 14 lakhs. So that is not at all impacting. So if you see the -- basically, the variance that is appearing, if you are comparing the current quarter number, so these will be more or less equivalent to what we are doing in the previous quarter. So payroll costs, it almost stands there. In the last quarter, it would have seen our commentary, then there was the reversal of the variable pay. So as a result, the number for March quarter was looking quite lower.

Okay. So we can -- we'll be continuing to the current quarter's number in the in the forthcoming quarters as well, right?

Right, yes. Almost in the similar manner.

Okay, okay. Okay. And can I just throw some light on the data like we had quite a big chunk outstanding at the end of previous quarter. So right now, what is the situation? And do we have anything which is more than 90 days old.

So yes, there has been a lot of effort in terms of collecting dues from the receivables. So that's why you see the cash position of the company has quite improved. -- that's what I said nearly 90 crores is there as compared to the previous numbers of nearly INR 148 crores. So there has been a lot of work which is being done in that aspect, yes.

So what is the current data number at the end of June quarter?

So is the benefit number, so we have just published only P&L numbers. Not to forget that we are dealing with all the banks. So frankly speaking, over a period of time, whatever you see the collection -- that is absolutely from these institutions and we don't see any risk here. Just to -- I mean to answer your question, if there is in your mind.

[Operator Instructions] We have a follow-up question from the line of as Sparsh, Professional Capital Advisers.

So I had 1 more question regarding the Club 2.0. Like what the paid member should count or average revenue per user? And how is the retention so far.

So yes, it's relatively new. I tell you why relatively new because why we launched it a few months back, the real effort in terms of broadcasting data and using social media as we have started, point number one. In terms of average cost, I think if you were to look at it, we have 3, which is white, orange and brand. So we are selling more of black, which is the high-end model, where the cost is 50,000 to the consumer. To answer your question, what would be the average, the average among all the 3 would be bought past 30,000. And we have just started. In fact, you will soon see the numbers getting published we are significantly improving the numbers. So what we were doing versus what we have done even in the month of July or for that matter, June, are significantly up. But yes, it's very minuscule as compared to the total revenue. But we will start publishing as and when we feel that it is significantly impacting on the revenues.

The next question comes from the line of Maruti Nandan Sarda, Individual Investor.