OnMobile Global Limited (ONMOBILE) Earnings Call Transcript

Good morning, and welcome to Q2 FY '26 Earnings Call of OnMobile Global Limited. Representing the management today, we have FC, Executive Chairman and CEO; Radhika Venugopal, Whole-Time Director and CFO; Bikram Sherawat, President and COO. The call will start with a brief update about the overall performance during the quarter by FC and then Radhika will update on financials. And then we'll open the floor for -- sorry, so then Bikram will share his insights on operations, and then we'll open the floor for Q&A session. So I would like to remind you that whatever mentioned and statements made in today's call may be forward-looking in the nature and may involve risks and uncertainties that we see. For such lists and considerations, please refer to the earnings presentation. OnMobile Global undertakes no obligation to publicly revise any forward-looking statement to reflect future or likely events or circumstances. Having said that, I now hand over the floor to FC. Over to you, FC.

Thank you. Thank you all for joining this quarter 2. Let me start by saying what we mentioned at the AGM, it's our 25th anniversary, 25 years of OnMobile. It's a big milestone, honestly. There's not that many companies who made it -- make it 25 years. So on September 27, we celebrated our 25th anniversary, and it's going to go on during the whole year. As I mentioned, we actually are developing a new service for our 25th anniversary. And I think it's important to mention that we've been 25 years serving mobile operators, right? So when we talk about deep understanding of the market and our customers and our partners, after 25 years, I can say that we have a lot of legacy that we can use, and that's what we're using into gaming actually. Let me start with the results. It's a good quarter. Mobile Entertainment is stable. It's not a small task realizing that last quarter there was a big one-time revenue coming from a license that we had from Buzzmo. That was last quarter. So to be stable, having this one-time last quarter is good. We still stand by our projection to be 5% growth Mobile Entertainment year-over-year at the end of this year, FY '26. If you remember right, for the last 5 years, we've been degrowing on Mobile Entertainment. So to at least have a stable view and be able to grow from here on I think is a good achievement. We have, as we mentioned, done some great investments in Buzzmo, putting AI into enterprise communications. So that's -- we're getting good traction. Bikram will talk about that. We're also developing a new service in tones and video that will be launched by year-end. So, so far, on track for a projection of 5% that we mentioned last year. Gaming grew 12% quarter-on-quarter. When we look at gaming, I'd like to say that, again, last year in November, we posted the target to do $2 million a month in 18 months, which is actually in 2 quarters now. And it's March 2026, that's the target so that we do $2 million a month by March. We are on line to do this. So this is -- so far, we still have 2 quarters to go to attain it, but we're on track to do $2 million a month. There's a mix in that 12% of subscription revenues and platform revenues. So Bikram will talk also about that. I'm happy to say also that we -- you saw the new announcement that we did undercover because it's not officially launched, but it is developed and it works with the Virtual Console. So now we have a complete suite of gaming products. I am not -- the team here is not planning to launch an additional service. We have 4 products, Challenges Arena, ONMO, Gaming Platform and Virtual Console, all running on the same core back end, 4 products. So the development of this product and the ongoing maintenance of this product is paid by the operation. As you see, we've reduced capitalization massively from all the development that we've been doing. So it's been 5 years officially in gaming. The actual development into gaming started in January 2020 with our first product launch in '21-'22. So 5 years into gaming. We're not planning to add more. I'm really satisfied with what we have. We really have something very good on mobile gaming and now going into the console gaming with the new service, which will be launched in the coming quarters. So from my point of view, we're in a very good position to continue the growth that we have, 12% growth on quarter-on-quarter. Anything that we can do between 10% and 20% growth quarter-on-quarter, I think we have a very solid gaming business. And this is where we're going with this. And we have enough -- now getting to $2 million a month of revenues, we are -- we will have enough money to invest within our operation to product upgrades. So a very good position to be able to grow gaming and while we generate cash, right? And again, not many companies can have both, right? A lot of companies try to waste a lot of money growing and it takes them a lot of time to make profit. We're in a situation where we're making a bigger of profit, generating cash and having a very interesting growth in gaming. So I like the mix. I'd like to add also that AI -- in the last months, we've implemented AI everywhere. We're really pushing on AI. So efficiencies are coming. One problem I've been discussing with you for the last year, 1.5 years was optimizing the number of accounts that we have on marketing. And just to give you an idea, we have about 500 marketing campaigns running every minute. Every day, we have 500 marketing campaigns in all over the world. And I'd like to highlight this also, OnMobile is a global company. We're really one of India's global media company. And it's very difficult from India, the team is in India, to manage all these campaigns around the world. If you think about this, even if you have a team of hundreds of people, we don't have hundreds of people in marketing, but to run 500 campaigns across the world and optimize them is very, very -- you need a lot of people and even then they would not be performing. So we've added AI tools, which is really interesting, because we're looking at the tool. And the AI tool is analyzing every single customer, every single campaign and telling us, you should do this, you should do that, do this, do this. And it also tells us that if we do all this, it gives us projection on what should be our revenue and what should be our cost. So we started last month in our first month, which the results here that we're showing is Q2 ending September. So just our first month in October, we see right away a boost on our revenues for gaming subscription and a reduction of our marketing costs. So that's the impact of implementing AI across 500 campaigns to be able to really optimize and do a job that, honestly, a team, even if we would double, triple or quadruple our team, we would not be able to do as good as a job as what the AI is telling us to do. So it's really interesting. We're having fun with the AI now really looking at projection and seeing how and when -- how we could really optimize each campaign. And we see the results right away in October. So that's why we're very confident on our $2 million a month target by March. So again, good cash position this quarter, and I repeat myself, but I'm quite happy with what we're going -- where we're going with gaming in our whole suite. So let me pass the ball to Radhika for a deeper financial analysis. Radhika?

Yes. Thank you, FC. Good morning, everyone, and thank you for joining us. I'll cover the quarter 2 performance now. In quarter 2, our revenue was INR 131 crores, which was up by 2.7% on a quarterly basis. EBITDA improved to INR 8.6 crores with a margin of 6.7%. Profit after tax was at INR 6 crores. Gross margin expanded 55% in Q2 versus 51% in the last year same time, reflecting both mix and cost discipline. Gaming continues to be a growth engine with our gaming subscribers reaching 13.7 million, growing around 61.8% Y-o-Y and 14% quarter-on-quarter. Gaming subscription revenue was INR 34.4 crores, which was up 31.8% on a yearly basis. In September, gaming subscription monthly run rate touched USD 1.4 million. And we are on track to achieve the $2 million mark by end of this year. Within Mobile Entertainment, revenue was at INR 95.5 crores. It was flat. We closed the quarter with a gross cash of INR 129.5 crores and this reflects our positive operating cash flows. Operating discipline remains a focus. People cost was at INR 27.8 crores, which was 8.6% reduction on a yearly basis and marketing was at INR 23.2 crores, which was again a reduction from the previous year. Other OpEx closed at INR 11.1 crores and our DSOs stood at 111 days. Our priorities remain profitable growth, operating cash flows and disciplined capital allocation, and we are focused on scaling our gaming subscription and monetizing our Gaming Platform. On profitability, there is a step-up in gross margin and reduction in marketing, which ultimately will result in bottom line growth. Thank you. That's all from the financials. Over to you, Bikram.

Yes. Good morning, everybody. Thank you, FC and Radhika. I'm pleased with the quarter 2 numbers, a strong quarter for us. We have had a steady growth across our line of business. It highlights the strength and the diversity of the portfolio which we carry. Despite a few market-specific challenges, which is part and parcel of the business, we have seen steady growth in Europe and Middle East, which stood out in the last quarter for us. Markets -- both these markets have performed exceptionally well. And it's clear that our continued focus and discipline which we are putting in our regional structure and expanding our footprint is going to yield positive results as we go forward. Both FC and Radhika have spoken about the gaming subscription. I'll just talk a little bit more. The gaming subscription business grew by around 8% and the remaining growth we got was because of our Gaming Platform. It's a new product which was developed over the last 3 quarters and our first customer is actually going to go live in the month of November. We are really looking forward to it. The Gaming Platform business and the proposition is evolving along with the streaming ads and premium content into a very compelling gaming and entertainment destination, which is a completely digital ecosystem for our telcos. The first reference customer for us in this quarter is going to only add to the momentum, which we are in discussions with multiple other customers for this product. In markets like Bangladesh, Myanmar, Ivory Coast, we have seen significant amount of interest on the gaming subscription business and our promotions with AI now and sharper content engagements, we are able to see much better conversions and retention on the gaming subscription business. On the Mobile Entertainment, we had a significant one-time in the last quarter. But if you see, we are steady. So that means that we've been able to grow our run rate business on Mobile Entertainment if we take the one-off from the one-time. We have an active base across the lines of product of around 56 million users. In tones alone, we deliver around 330 million daily tone plays across our customers. In the last quarter, in one large Latin America customer, we did a migration for a tones service. We migrated around 96,000 subscribers. It is adding to around 50% increase in our market share in that country. That's significant because if you see 2 quarters back was the first large migration in Latin America, this adds to that, and we have a couple of other more we are looking forward to in the coming quarters. FC spoke about Buzzmo. Buzzmo is very interesting product which we are in discussion with multiple prospects. With this, our enterprise engagement with telcos is becoming very strong. We are in advanced and steady discussions with multiple partners in Middle East and Africa to expand our opportunity and horizon for this partnership. In fact, beyond telcos, we are also in discussion with a few financial services sector companies and banks about this. And with AI, the insights and the customer engagement capability we are able to offer, we are very hopeful that this is going to really add to our product's growth and as a pillar for our growth going forward. Looking ahead, our focus is clear. We continue to scale our gaming business. We continue to grow -- both Radhika and FC have spoken about the $2 million monthly run rate, which we want to achieve by the end of this financial year. We are fairly confident of meeting those. We are in discussion to expand our Gaming Platform business. FC has spoken about the new proposition. We take that to the customers and see how do we able to engage at a much strategic level with our customer partners for that. And we really, really double down and focus on the Mobile Entertainment business, very profitable for us to be able to continue growing and deliver 5% growth as FC has mentioned by the end of this financial year. Thank you.

[Operator Instructions] So we have one question in the chat from the Umesh Matkar. Any plans on utilization of cash?

Well, first of all, guys, as we know, the cash position came down at the beginning of the year because of all the investments we did, right? Our focus is really to have a good cash position. I don't want to be in a situation where we miss opportunities because we don't have a good cash position. When I say opportunities, it can be an investment to a customer. With the new service on gaming that we have, we might have to do some investments, additional -- right now, we're in a good position where most of the CapEx, there's a lot of CapEx in deploying the virtual console. But most of the CapEx is leasable. So the leasing companies are willing to lease it. I just don't want to be in a situation where we have a big customer, we need cash and we don't have it in hand. So for me, it's important that we build a cash position. So from this point, as you can see, our cash is increasing. It will increase every single quarter. And as I mentioned last time, my view is to revisit the dividend policy in the next -- for FY '27. But for now, any additional cash required will come from leasing for other means than using the cash. I think it's important that we do have a good cash position so that we're flexible M&A-wise also. If there's any good M&A, you need to be -- the best one, you have to be able to move quickly. So you need to have a good cash position for that, too. So for now, that's our position.

So he has another question. How do you see the margins going forward as gaming grows faster?

The gaming market is growing. It's a huge market, right? And the markets we're addressing are not that much exploited by gaming. I'd like to say it. We're a true Indian company that's really global. But we're also global in markets where the gaming industry is not that present. When you look at Africa, across Asia, a lot of markets, even in LatAm, a lot of markets are not that much served by the big gaming companies. And yes, we have an exposure in some markets, exchange rates, political situations. But over the 25 years' history, there's only very few markets where we lost money even in exchange rate or money blocked in countries. We always end up making our money and taking out the cash from the country. So the strategic investment that we have today in gaming in all these markets, they are all markets who will grow massively in gaming. And we're almost like the first mover with volume. When I say everything we do, we try to do with volume. So I see that in the next 2 years, we should really benefit from that growth in gaming in all these markets. So that's the strategy that we have. Yes, we are in Europe also. And the core gaming markets today is U.S. and Europe. So that also -- one thing that we're really not pushing is the U.S. market. That's something that in the next 12 to 18 months, we'll have to start considering. But first, I really want to make sure that we're really dominant in all these -- the other emerging markets where gaming is not that present today, but will be present.

So we have the next question from Jitendra Bhutoria. He's asking on, any update on DeOSphere engagement? We did not consider revenues in the first quarter. So any update?

We didn't consider revenue. To be honest with you, we're still in discussion with DeOSphere. We're not on the same page. So I mean now we're not booking revenues. It's not our focus for now. The service is still there. They still have access to our network, but we're not done. So that's something by next quarter we'll have to see how we move on. But for now, our focus is really on our product line and what we do and not that much on DeOSphere.

Okay. So we have the next question from the line of Saurabh Upadhyay. Are you pivoting away from legacy, that is tones and videos? Or are you trying to recover them?

You want to comment, Bikram?

So let's be absolutely clear that our focus on Mobile Entertainment legacy business is in no way at all defocused in terms of growth. We have -- FC have clearly explained, we've had headwinds in this line of business over the last 4, 5 quarters where we have seen very minimal to negative growth. We've been able to grow this line of business in the last quarter and -- last quarter to last quarter and in the last quarter, we've been able to hold on to those numbers. There are lot of active discussions when it comes to platforms like Buzzmo. We are in discussions with multiple telcos when it comes to tones business. We have done one brownfield migration in the last quarter. There are a couple of them which are expected in the next few quarters as well on the tones line of business. So we hold on to our commitment that we want to grow in this financial year by 5% for this line of business, maintaining the profitability for the organization.

The next question is from the line of Prashant. So he's asking on, we had some fundraising plans 3, 4 quarters back. Any progress or update on the same?

Yes. We had some fundraising plan. If you remember right, the market and -- actually our share value was really down. So it was really costly to raise capital. I must say also with our plans; we needed a lot of CapEx deployment that could not be leased. Now we have leasing companies willing to support our plans. That being said, with the launch of the new virtual console, we might have to raise money. That's something that we're going to do in the next quarter to really discuss with our bankers, how is the market seeing this? How can we actually have a true value that makes sense? I mean I don't want to discuss too much our value, but if you look at our multiples on revenues versus other in the industry, we're really, really below the mark. And I don't think that a gaming business growing at 12% a quarter should be valued at the value we have there. So for now, I mean, we have, as I was saying, a cash position that's building up. And we're trying to do all the developments that we're doing with leasing so that we don't have to raise equity for it. But yes, if the stock market can correct a bit and obviously everything should go hand in hand, we should be in a position to raise money at a good value, let's put it this way.

So we have the next question from the line of [ Neeraj Asi.] So he's congratulating on the 25th anniversary. And any aspirational 5-year target for the company's growth in terms of revenue and profits?

Every call, people ask me where I see the company? And I keep saying it. Gaming industry is so big. We're in so many accounts. There's not that many companies in gaming that are in so many markets that we are. We're dealing with mobile operators who are in most of these countries the biggest enterprise touching the most number of customers. And the strategy is to enable them with us to capture the gaming market. There's no reason these numbers should be small. They should be big in every single country. And we're booking these revenues on gaming, both on subscription, but now on actual game sales. So my view is that the company should be at least 2, 3x the size in the next 3, 5 years, as I said before.

I hope that answers, Neeraj. So the next question from the Manish Kela. From a layman person perspective, can you explain how one would access the videos option, which is a part of your Mobile Entertainment business? What is the content under the video business? Is this something like YouTube, TikTok, et cetera? Pardon me for my ignorance, but again, why should this be only subscription-led?

Well, that's -- do you want to answer that, Bikram? I can do that.

So from a layman's -- so the question is very valid. The way we work with our telco partners, we use telco channels for distribution and discovery for any content which is available on our mobile platform, right? So it depends on which strategic partnership with telcos where they are interested in taking curated video, which is customized and hyper personalized based on each subscriber's personal preference. So the way it works is we work with various content providers and across categories, whether it's sports, wellness, health, entertainment. All of the content which is created by the content providers is used via influencer marketing to create a proposition for our customers. So it's available on a subscription because the effort on creation, merchandising is where we are able to add value for the consumer. So the customer does not need to go to a channel like YouTube and find their like content through a plethora of all the content available. We provide the video services across Europe and Africa through our telco partners. And that's something a person needs to go to a telco app and go to the video section to discover the content.

But if I can add also, everything we do is subscription-based, a bit like gaming. And the reason we do it is the cost of marketing is way lower because we already have the profile of the individual. We have their phone number in one click, they can subscribe and start paying. So when you look at a Google campaign, because I was talking about gaming, which is very similar to video and you put a banner ad and the individual sees the ONMO ad or the video ad for a video service and they click on it, in 1 or 2 clicks, they become paying subscribers. Normally in the funnel, everybody else, if you don't do it through an operator, in 1 or 2 clicks, you become a free subscribers. So with a free subscriber, you have the option of trying to put an ad and monetize the ad, but then you need a lot of volume or engage them so much that they end up paying. And the funnel is very long and the number of actual paying subscribers become very low, but the actual cost of the ad is the exact same. So when you look at our model, and that's why we looked at D2C and how we would do D2C many years back in gaming. And every time we look at it, the cost of acquisition for paying subscribers is way cheaper the way we do it than trying to do the traditional way of marketing through an app store, Google, Apple or marketing and doing ads. So the whole industry of gaming is big, but they're all going through the app store and they're all monetizing with ads or most of them. That's why we're in a niche situation where we deal with the operator and we actually have a cost of acquisition that's way lower with paying subscribers. Now you were asking what kind of content we do, right? We have general content categories. On news is a big category. Sports is a big category. Kids now, many operators are taking the kids service. Magazines is a new category also. So they are all kind of categories, but all of them are subscription-based. And in some cases, the operator actually bundles it in the service. So the operator pays us and gives it as a pack to their end user. So that's -- I hope that answers your question, but that's the way we do it.

So a follow-up on that. As an investor, is there a way we can be given a walk-through on your video business as investors through a screen sharing session or any other medium on later date?

Well, certainly, we can do that a bit like we did with the gaming during the AGM. After the AGM, we did a small gaming session. I think we should do a session. Actually, we're launching a new service also on video. So once we launch the service in 1 quarter or 2, we're going to also show you the service because it's not possible to send the link between -- it's all operator-based. So it's -- if we launch in Spain, it's only in Spain that's available. If it's in Africa, like the kids service in Kenya, it's only in Kenya that's available. So yes, we will be able to -- we will plan a session so that investors understand what we're doing on Mobile Entertainment. We can even add Buzzmo to it also so that people can see what the Buzzmo service is.

So the next question is from the line of Saurabh Upadhyay. Top 5 customers and their revenue contribution percentage of total. Do you have a geographical breakdown? And how many customers represent greater than 5% of revenue?

We can't give out the information of customers. We are not allowed to share the customer-wise details to investors or to the market.

Like how many customers are...

Can you give geographical breakdown at least?

[Indiscernible] would be 2 customers.

So only 2 customers more than 5%. So we're really, really diversified.

That's great. Is there a geographical breakdown that you could share?

That's a part of the investor deck. If not, I will send it across. You can find it in the investor deck.

We can just show that in the pie chart so at least it's going to be in. Is the pie chart done?

So this is for products.

Did we put it by geography?