ROUTE MOBILE LIMITED (ROUTE) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Root Mobile Ltd. Q1 FY27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Arginhotri, Chief Executive Officer. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining us for Rupert Bind's Learning Call for the first quarter of fiscal year 2027. I am Tushar, and it's my pleasure to welcome you all. Joining me today is Avinay Baniyala. We will take you through the operational and strategic highlights of the quarter, and Raj, who will walk you through the detailed financial performance. Following our prepared remarks, we will open the floor for questions. Before we begin, a quick note that our quarterly earnings presentations was uploaded yesterday, and I hope you've had a chance to preview it. Some of the statements we make today may be forward-looking in nature. These are subject to risk and uncertainties, and I request you to refer to the disclaimers in our presentation. Let me set the context for the quarter before handing over. This was a quarter of important progress on these strategic priorities we laid out earlier this year. We return to year-on-year revenue growth, and just as importantly, the quality and mix of that growth continues. To shift in the direction we have committed to, with a new product portfolio growing, meaningfully faster than the business as a whole. We are clear-eyed about the margin softness this quarter, as Vene will explain, several of the items that we don't, margins are specific in nature and largely transient, and we are actively working through each of them. A conviction in the medium-term trajectory of the business is unchanged. At the same time, we took a decisive strategic step with halter acquisition, a precise expression of the build versus buy philosophy we articulated as a strategy update in May, and one that accelerates our move up the value chain from messaging into full-stack AI native customer engagement. We also saw strong external validation of our execution and of the shared global vision with Proximus Global. Taken together, this was a quarter of steady operational delivery, disciplined strategic action, and continued strengthening of the positioning for the years ahead. We remain focused on execution and on delivering long-term value for our stakeholders. With that, let me hand over to Vinay to take you through the quarter in more detail. Over to you, Vinay.

Thank you, Prashad. Good evening, everyone, and I hope you are all doing well. As Dushar mentioned, we uploaded our quarterly earnings presentation last evening, and I hope you had a chance to go through it. I will structure my comments in four parts. First, the shape of our revenue growth this quarter. Second, a discussion around the margin performance and specific items that affected it. Third, the key business and product developments for the quarter. And finally, a few minutes on the health care acquisition, which we believe is an important strategic milestone for the company. First on revenue, in Q1 FY27, revenue from operations grew approximately 10% year-on-year and 2% quarter-on-quarter. I would highlight the quality of this growth. The drivers are the ones we have been highlighting for the past several quarters. Continued strength in growth in our new products portfolio and customer additions to our AI, ML-driven firewall solutions business portfolio. I want to draw your attention to the new products portfolio. RCS, WhatsApp and other IP-based messaging solutions. New product revenue grew 14% year-on-year and 11% quarter-on-quarter, growing meaningfully faster than the company as a goal. This is the engine of the business mix transformation we have been committed to, and the sequential acceleration demonstrates that we are aggressively driving momentum around the non-SMS solution portfolio. The ILD business, which was the principal source of revenue decline through FY26, continues to be a challenge in terms of growth for the near term. Second, let me address gross margins and provide additional context around the reported numbers. Gross profit margin for the quarter was 20.9%, which is lower than the levels we exited FY26 at. There are two key drivers for this margin deterioration. The primary driver is certain developments in specific customer accounts. We witnessed temporary disruption in traffic from select existing large high-margin customers as we are deploying new solution capabilities to address evolving business requirements of these customers. This is not revenue or gross margin that we have lost, but just a temporary disruption which will be restored in the coming quarter. As we continue to offer the new solution capabilities to these customers. These are account-specific situations rather than broad-based deterioration in pricing or margin, and we are actively working through each of them. The second smaller factor impacting gross profit margins in the past quarter is the security incident at our Colombian subsidiary. The gross margin performance translated into an adjusted EBITDA margin of 9.5% for the quarter. We recognize this is below the trajectory we have guided to. I want to be specific here. We view several of the items that impacted this quarter as largely transient. Third, let me spend a moment on the key business developments of the quarter because they reinforce the strategic direction I have just described. We have seen strong external validation of our execution capabilities and of the global vision we share with Proximus Global. And practically, it strengthens our right to win in large enterprise engagements worldwide. Conera Proximus Global's network API and enterprise connectivity platform won the Best Application Service Provider Award at the Career Community Global Awards in 2026. This is a recognition of the continued innovation coming out of the Proximus Global ecosystem in network APIs, a category we believe will be an important growth factor for the industry over the coming years. On the product and platform side, we continue to strengthen our global RCS footprint, expanding direct operator integrations and advancing towards broader direct coverage access across markets. New partnerships and platform enhancements further reinforce our ability to drive scalable, rich business messaging experiences worldwide. We also further enhanced Ocean, our omnichannel engagement platform, with new campaign management, reporting, audience management, and wide-level capabilities, while expanding deployments across international markets and progressing strategic use cases. Together with Heltar, which I will come to next, Ocean sits at the core of our ambition to move up the value chain from messaging into full-stack customer engagement. Finally, let me spend a few minutes on Heltar because this transaction is a precise expression of the M&A philosophy we have articulated at our strategy update in May. On July 13th, we signed a business transfer agreement to acquire the identified business undertaking of Heltar Technologies Private Limited on a slum sale basis. Heltar is an AI-driven, only-channel customer engagement platform. At its core, it turns communication workflows into fully automated, self-running programs from a single prompt to a live customer journey. Its chatbot and automation capabilities span WhatsApp, RCS, and voice, and the voice capabilities are being extended upon. It carries AI-driven analytics that helps enterprises measure and optimize communication performance. The platform is no-code and prompt-driven, which means enterprises can configure and launch new use cases in days rather than months. Several large enterprise customers already run high-value sales and marketing programs on the Helter platform with measurable improvements in conversion rates and ROI. Why does this matter for root mobile? Three main reasons. First, capability acceleration. We have consistently said that organic development alone will not close the conversational AI capability gap within the timeframe the market demands. Helter compresses what would happen a multi-year internal build into an immediate deployable platform, consistent with our build versus buy framework. Second, distribution leverage. We saw several global enterprise clients, the majority of whom use us for a single channel today. Heltar gives our key account and cross-sell teams an AI-native engagement layer to take into that base. There is limited incremental customer acquisition cost attached to this opportunity. And third, it directly accelerates our non-SMS revenue, which has compounded at over 40% annually over the past four years and is central to our medium-term revenue mix ambitions. In terms of structure, the transaction is a slum sale of the identified business undertaking as a going concern. This includes the Heltar brand, the intellectual property, the technology platform, the team who will transition to RootMobile. Heltar's founding team, alumni of IIT Kharagpur, will continue to lead the platform within RootMobile. The transaction is expected to close in the coming weeks, subject to customary closing conditions. The transaction is being fully funded through our internal accruals and is not material in the context of our balance sheet. To summarize the quarter, we have returned to year-on-year revenue growth, with new product revenues growing 14% year-on-year and 11% sequentially, ahead of the company average. The margin softness this quarter was driven by specific and largely transient items. Our strategic positioning continues to strengthen, as reflected in the industry recognition that we have received, and we have taken a strategic decision with the acquisition of Heltar. With that, I will hand it over to Raj to walk you through the detailed financial performance. Over to you, Raj.

Thank you, Vinay, and good evening, everybody. I'll summarize our financial and operating performance during the quarter ending June 26 before opening the call to Q&A. As described by Tushar and Vinay, the top-line revenue grew sequentially and year-on-year, while EBITDA margins were impacted by in-quarter specific items. Our Q1 revenue from operations was $11,515 million INR, representing an increase of 9.6% year-on-year and 1.8% sequentially. This demonstrates the resilience of our business with strong demand for our solutions, heavy, healthy traffic growth, and continued customer engagement. In Q1, we reported a gross profit of $2,404 million INR. which is higher by 6.8% year-on-year and lower by 8.9% sequentially. Gross profit was affected by a combination of market dynamics and specific account-related factors, which we are actively addressing. Gross profit margin for the quarter stood at 20.9% versus 21.4% in the same quarter last year and 23.3% in the previous quarter. Close profit margin is primarily affected by the specific factors explained earlier. However, we are focused on onboarding higher-margin accounts, pushing our new product portfolio, and optimizing routing, which will support margin expansion over the coming quarters, reinforcing our commitment to profitable growth and long-term value creation. On a reported basis, we constrained OPEX growth to 2.9% year-on-year. Mainly due to salary inflation, higher expenditure on consulting fees, and a provision for an advance. Adjusted EBITDA for Q1 was 1.089 million INR, which is lower by 5.6% year-on-year, and 18.9% as compared to the previous quarter, due to the aforementioned in-quarter margin impacts. This all contributes to an adjusted EBITDA margin of 9.5%. Adjusted profit after tax. We're 686 million, which is up 16.6% year-on-year and lower by 14.1% sequentially, driven by your dark flow-through. I will now hand over to the moderator for the Q&A section.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchdown telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Divyaj Jaju from Srinetra Asset Managers. Please proceed.

Hello, good evening, sir. Thank you for the opportunity. So, could you elaborate more on the customer retention, kind of how the annual revenue retention, like, improve over the last few years, particularly among, like, main enterprise clients?

So the customer retention, the net revenue retention stands at 98% for the year. We had side impact in just one of the key customers, which are also working on recovering over the future period. But overall, we are not seeing significant risk on the existing customer portfolio. As I mentioned, there was one high margin customer where we are trying to do a product upgrade, new feature rollout. So that revenue again should come back to us. But rest of the portfolio seems quite stable at this point in time. Okay, and as the huge cash is seen on our balance sheet, so how we are thinking to allocate over the next few years, like any particular investments are there, or like shareholder return would be possible, how the company is seeing. So that's a fair point, Vivian. So we hold around 1,300 plus crore rupees of cash on the balance sheet, cash and cash equivalents. And as we have demonstrated, you know, we have a well laid out. strategy for evaluating potential acquisitions to fill capability gaps. That is one area in which we are looking at utilizing cash. Besides that, there are certain organic initiatives as well, where we plan to, you know, deploy optimization solutions internally, as well as, you know, we might do some headcount increases depending upon the business requirements. So, but, but, you know, that is on the organic side will still be limited by the growth of the business in a way, but inorganically, we are fairly selective. There are two different approaches towards acquisition that we are following. One is the capability acquisition, which is reflected in the Heltar deal as well, which is not very large in terms of deal size, but it fills a significant capability gap for us. On the other side, we are actively looking at potential acquisitions where we can scale up business, but those will be fairly more involved decisions where the decision-making process will be slightly longer given the cash outlay could be larger in terms of value. So those are the ways in which we plan to utilize cash. And again, we have a dividend program in place where a certain portion of the cash is returned to the shareholders as well. So that is the way we are looking at the cash utilization. We have big focus on growth initiatives where we find useful deployment for the capital. Okay. Thank you, sir, for guiding.

Thank you. The next question is from the line of Bharat Gulati from Dalal and Docha. Please proceed.

Hi, thank you for the opportunity. Congrats on a good set of numbers. Just trying to understand on the top line, our volumes have seen a good growth on a YOY basis, but on a quarter-on-quarter basis, they've largely been flattish for the past four quarters, past three quarters on a growth from a growth standpoint. So, how do we see that going forward? Is this largely seasonal? Do we see a pickup in this? And do we expect to maintain similar sort of volume growth that we have done historically?

So, the volume growth we expect, you know, the season setting in, in the next couple of quarters, we see enough coming away. We had some losses, but we could compensate for some good wins in the last few quarters. That helped us meeting the volumes levels, a steady volumes level. But as we see the season setting in, we were expecting the volumes to grow by 10 to 15 percent in the next couple of quarters.

Got it, got it. Fair enough. And on the, just trying to understand on the OPEX front, right, we've taken the wage acts on this quarter. So what would the employee costs look like going forward? How do we see operating leverage playing out? Would it be more broad based than it was in this quarter? Yeah.

Sure. So, Bharat, that's an interesting question. Brad, do you want to take that?

Yeah, yeah, you're perfectly right. The wage hikes are behind us, so now we're at a run rate, and we don't materially expect the salary cost to go up. It's pretty flat in the coming quarters.

So, we shouldn't even see any sort of employee additions? Are we investing into talent, or is that also broadly done with, and we should sort of see inflation-like year-on-year growth on that front?

Yeah, we typically hover around the 800 count mark. It's not going to materially change, but we are backfilling where we need to and recruiting to support our product and sales growth in the coming quarter. So it's not going to be material, but we are looking at that talent pipeline.

Got that, got that. That's helpful. Just trying to just once again to touch upon the top line growth, I understand the ILD business would be a drag on our top line. Considering if we normalize that, let's say for X of ILD, what would our new product portfolio volume growth and our existing domestic SMS volume growth be at? You know, I understand some of the, uh, industry is also seeing strong volume growth in the business from India, India headquartered businesses getting terminated outside India, which is, uh, again, not an, uh, which is a non-ILDO business. So how are we seeing growth from that standpoint?

So perhaps we don't break down the volume into components, but I can give you a high-level flavor. So, you know, on ILD, what we are trying to indicate is that growth on that base is, you know, where it's not matching up the company average, but it's not like we are seeing a degrowth or dilution of business there. I mean, we are still chasing customers and, you know, it's sustaining for us at the levels we are. In terms of domestic, as you rightly mentioned, we have good traction going for the domestic business, which we demonstrated in the previous quarter as well, except for the specific situations which I referenced. So I think volume again for us is a mix of ILD plus domestic, and it might be slightly different from competition as well. And on the new product, as I said, we witnessed significant growth in the last quarter. We had 14% year-on-year growth on that segment of the business, and obviously it was driven by higher volumes.

Got it, got it. And just a couple of more questions on, you know, how are we seeing growth? Because I understand you spoke about a net retention revenue of about 98%. So is this majorly growth driven by new customer additions? And just how do we see wallet share going forward? You spoke about cross-sell of products. So how strong is the cross-sell already in terms of shifting them to the OTT products?

Sure. So I mean, you know, selectively, whenever we are seeing customers having processes where we can enter with the new or the non-SMS product portfolio, the sales teams are actively pitching to the existing key customers. So the way we look at our portfolios, you know, there's a set of the top 50 customers, which generates significant revenue for us. And the idea is to target those customers and identify opportunities, and obviously, a lot of these customers would have vendors taking care of certain business processes for them. So, you know, it's either replacing an incumbent, which is not a very straightforward sales cycle, but we are also looking at new business processes where we can fit in our non-SMS product portfolio. So that is the way we are attacking the cross-sell approach in the business. With Heltar coming in, I think we have a strong proposition for the customer base where we add a significant layer on top of just the communication channel. And that will be a big push once we close the transaction, hopefully in the coming few weeks. That should really create additional traction around the non-SMS volumes and business for us. And should that have a good

impact on Q2 numbers or will that take some time to ramp up and sort of really come up in the numbers?

This should take some more time to ramp up. You know, most of the companies when they are setting up their comps budget, It doesn't, you know, scale up in the same fiscal year. So, right now, the play is happening between channels. So, you know, a loss of SMS is gain of WhatsApp. A gain of WhatsApp is affecting a loss of RCS, perhaps. So, while we see, you know, we are present and ensuring the wallet share stays with us of any enterprise customer, we see the scaling up happening gradually, in gradual quarter over quarter. We see that setting in by less to last week of last quarter, sorry, this financial year and and and continue growing as we go on to the next fiscal year.

Got it, got it. And just lastly on, you know, we've been seeing some impairment last year. It's good to see there's been none of that in this quarter. So do we largely believe that it's out of the books and no more debtors should, you know, sort of turn into bad debts? Yeah.

Yeah, that's a fair reflection of the position. So we're not expecting any future issues like that. They're all in the past.

Got it. That's really helpful. That's really helpful. That's just amazing. Thank you so much.

Thank you. The next question is from the line of Dipesh Mehta from MK Global. Please proceed.

Yeah, thanks for the opportunity. I have a few questions, so maybe I start one by one. First, I want to get update on FA27 guidance. Last time we indicated revenue margin dividend kind of guidance. Can you provide update to that?

Yes, I'll take that. I guess we're one quarter into our fiscal year, so we will hold that for now, and we will look at how we progress through the quarter. But as you can see in the financials, the revenue is definitely strong. We are on track for the dividend, and at the EBITDA margins, we are working to actually address those in-quarter.

I understand. Broadly, the adjusted EBITDA is there. I wanted your input. Do you think 12% which we broadly indicated, considering the business trajectory you expect in the next three quarters, as well as certain one-off posts which you… We have this quarter, considering both factors, 2L is still possible to achieve kind of thing in the remaining period.

So Dipesh, like we mentioned in the opening comments, you know, there are certain factors which are transient, which we believe will reverse over the coming quarters. Some of them might be slightly stickier. So, you know, by the end of this quarter, we'll have a clear view of where we should be landing the year. But ideally, we should not materially deviate from what we had guided exact indication. Sorry, are you able to hear me? Sorry.

Yeah, I understand. Second question is about the update on the security incident which we face at Massivian. Can you provide update, let's say, where we are in terms of the traffic, in terms of the remedial action which we have taken, and how to expect Massivian growth trajectory in coming quarters?

So, the investigation remains ongoing with the support of our... Cyber Security Specialist, and the platform continues to operate under enhanced controls and monitoring. Massive is keeping the effective customers informed and the regulators informed as the investigation is progressing, and we will continue to provide updates as the first further information is available, but we were hopeful of an attestation to come away very soon, which will actually encourage us to go back and get back the business from the enterprises which are impacted at this point of time. So, yeah, so hopefully, I see, we should be back in track very soon, and, you know, back with our, you know, whatever business was affected temporarily should be back with us very soon.

Do you expect any further costs incurred on the remedial exchange at Massivian, or quarter one is provision is sufficient for us to cover?

While we have made, as you mentioned, we have made provisions already, there can be very minor increase in the cost, very, very minor, but, yeah, nothing major is expected. Whatever we have provisions, we should actually address all the expenses towards the security agencies and apartments, yeah.

Understood. Third question is on the sales and marketing rate count, if I look at it. It has declined double-digit sequentially as well as on a YY basis. Can you help us understand what any, let's say, change in the growth strategy which lead to sales and marketing headcount decline? And can you provide broad thought process around how to look at numbers?

Sir, give us a moment if I'm just trying to look it up. Yeah, I got your questions. You're trying to understand what happened on the sales and marketing headcounts on, right?

No, it's not. Maybe you can revert later. Another question which I have on the case conversion. Can you provide, let's say, some sense about how you expect case conversion in first on quarter one and for the full year? Last year was very strong. Can you give some sense how you expect this year to play out?

So, Dipesh, Q1, the closing balance is what we had reported. We had some delayed collections with some of the key customers in the first quarter. I mean, it's not a collection issue at first. It's just a timing issue. The reconciliations that the customers need to do took a little longer than ideally we would have expected. And March was a significantly strong collection. So, if you look at it quarter on quarter, the cash flow has been weak in this quarter just because of the delay in collections. I would not say there are any defaulters in that list, but these are large customers who typically reconfile the data in their systems as well. So that collection should flow in during the quarter and the collection, the cash position for the rest of the year should go back to the typical 75 to 100% conversion from EBITDA, which we have. The EBITDA will pass through home operations conversion. Q1, Q1, I would just want to, you know, caveat was slightly challenging because of the delayed collections from some last clients. And these were in specific geographies, largely India and UAE. And it's, it's, it's not, it's not a one-off. I mean, we've had it in the past in instances and those customers have been longstanding customers from us. So, we do not see a risk around it, it is just a timing problem is here and something.

I understand. But for the full year, you are comfortable at around 75% conversion.

Yes, yes. We will revert to that connection, I mean to that cash conversion level for the year. I understand.

And the last question which I have is about the non-SMS business. Now we'll be seeing some, let's say, progress and acceleration in growth. How to understand that business margin profile compared to our traditional SMS business? So has mix changed? Do you expect what kind of implication on margin on blended business?

So the division of the Helter's acquisition, we would try to bring Helter to geographies where the competition is not relatively as intense as you see in India. So we're trying to bring it to Latam, we're trying to bring it to European market and U.S. as well. And we see that we can make decent upfront revenues from revenue with high margin. With acquisition of enterprise customers in those geographies, the initial feedback after we demonstrated the capabilities of the platform were very encouraging, and we're fairly hopeful that when we bring this platform to those geographies, we see upswing in our DM levels.

So broadly, I'm not very clear. So you are indicating a non-SMS margin profile is likely to be better than SMS.

Okay, that's right. I'm saying the improvement of the margins would be better on the new non-SMS products from the geographies, which is, you know, apart from India, using the HealthUp platform, which brings in some interesting capabilities. As I said, the reflection is very good and very positive from the enterprises and from the initial demonstration of capabilities. Does that answer your question?

Yeah, so broadly, just to be very clear, let's say currently it is tiered below double-digit percentage revenue share. As we scale it and it, let's say, approaches 20-30 percentage of revenue, you expect it to be margin-accurative rather than margin-directed. That is the right way to understand.

So, Dipesh, honestly, you know. If you look at different markets, the margin profile varies even for the non-SMS portfolio. And honestly, currently, if you look at our non-SMS mix, it's in certain specific regions at this point in time. So when we bring in the Heltar platform also, it's going to be a bit of experimentation for us. So for this year, we would not want to commit to any margin expansion or dilution because of these product solutions or the non-SMS product solutions. We'll have to play it out. We have different pricing models around those products. And we'll take a little bit of time before we can formally indicate what kind of expansion we can expect from deployment of these solutions. Thank you.

Maybe you can later revert on the sales and marketing headcount question. Thank you. Sure, sure. Thanks.

Thank you. The next question is on the line of Amit Chandra from HDFC Securities, Peaceful Seed.

Yeah, thanks for the opportunity. So, my first question is on the, you know, on the revenue from the new product stream. So, obviously, we are seeing good healthy growth there and, you know, That is around 9% of the revenue. So, but if I see more from an industry perspective, the portfolio seems to be very small. Also, the overall growth in the portfolio is also actually lower versus what the competition or the industry is growing at. And if you can indicate, you know, what is the market share, maybe in WhatsApp, RCS that we are having, and because the growth is lower, so, you know, are we also, you know, Having a lower market share or we are losing market share there in the WhatsApp and the RCS case.

So, hi, Amit. At this point of time, there's no published report to state exactly what is the market share of any participant natural data. We have rough indication, though, of the volumes of WhatsApp and RPS, and that's also not published. I mean, that's what it says, you know, market intelligence, we arrive to certain numbers, but we see we have a decent share, not that we can't improve on that. But having said that, I mean, I am unable to comment at this point in time exactly how is the company displaced vis-a-vis us. Because, it's largely due to non-availability of a consolidated market report on WhatsApp and RCS.

Yeah, I'm just saying that because in terms of what base we have. And the base of what the competition is almost reacts off the base of WhatsApp and RCS that we have, and they're going much faster versus what we are clocking. So that's why there's an indication that are we, like, using market share, or is it that we are trying to do something different here?

So, Amit, our attempts have been to go the market without compromising on the tech margins. There has been some aggression at the marketplace on the pricing of WhatsApp and RCS, and we don't really want to participate around that. We would intend to keep our margins intact and healthy in a manner that we can continue sustaining these offerings over a period. So for those reasons, I just said, you know, it may, one, I just said I can't accurately comment. But having said that, our strategy is very clear to keep our payments intact and strong.

And secondly, on the sharp impact that we had on the cross margin, you mentioned that there is one specific event where there is a traffic reduction due to some solution deployment. And after we have given the guidance in the last quarter in terms of strategy for the longer term, so is it something that was not planned? What actually caused this to happen? Because I think the gross margins for this would have been much higher. That's why the impact is so sharp. So, if you can throw some more light in what actually happened.

Customer with your settings. And that led for us to, and this was last minute, and that's why we had to go back and then to a drawing pose. We are in the testing state with that bank, and we're very hopeful that this is going to be back. You will see the reflection in this quarter. I'll be hopeful that those revenues and margins will be back with us.

Okay. Now, just what I'm trying to understand is that we had a full quarter impact for this or we had only a partial impact in this quarter?

We will see a partial impact in the quarter. We should be able to recover. We should have, you know, the recovery soon and the balance quarter should be on track.

Okay. And also, if it will be helpful, if you can, if you can quantify or give the bridge in terms of the cross-margin impact, that what has actually caused, you know, in terms of quantification, what was the impact from this incident. And also, in terms of the security incident that happened in, like, Massivian. So, as far as my, you know, reading this happened in the second of the quarter, in the last week of the quarter. And that's why. We have had a very big impact on the margin. So the margin impact is largely. Such a big impact.

As I stated earlier, the investigation remains ongoing with the support of cyber security specialists. The platform continues to operate, and they are continuous monitoring. We are making a good assessment of the impacts, and we should be in position soon to exactly reflect upon the impact. But, yeah, we're making an assessment of the fact, in fact, of the entire round. I mean, keeping the, you know, effective customers and the regulator all informed about the investigation process, and we'll continue to provide a base, you know, as we get more information about this event. But as, you know, as far as the impact is concerned, we are making a good assessment, and we should be in position to give you more information.

Vinay, if you can provide the bridge, please, in terms of the margin, in fact, if you can, it will.

Sure. So Amit, in terms of exact breakdown, I need to just double check internally. But what I can tell you is that at a high level, the key items were the customer specific situation which we've been discussing. We had some impact on aggregators, multiple aggregator accounts where we have a way to recover those margins as well. I mean, we have some routing optimizations and ways to get back that margin. But these are the main issues where we believe these are transient. These have happened in the past and we've come out of these situations. So, it is nothing out of the ordinary in the business, just that, you know, the impact in this quarter has been a significant one, but there are ways to get back from these impacts in the business.

And also in the segmental, you know, breakup that we gave, the India specific month, you know, segment profit has been, like, negative in this, like, in this quarter, and this has not happened in the, like, previous so many quarters. So, any specific read through this?

Yeah, so the large Indian, sorry, the large customer which we were discussing, where we had the impact was an Indian customer. That is where you see the impact on the India entity in the breakup.

Okay, thank you.

Thank you. The next question is from the line of Kevin Gandhi from CapGro Capital. Please proceed.

Hello. Thanks for doing my question, sir. I hope my voice is audible.

Yeah, Kevin, we can hear you. Please go ahead.

Yeah, yeah, yeah. Thank you. Yeah, thanks for the invitation, sir. Sir, my question was on the true caller partnership, which we have chosen, right? So, like, just wanted to know how much of the potential are we actually seeing from that deal? Because we have close to 50, 50 CR users, as you've announced on the BSC notification. How we are, like, how we are pursuing that, because I think that might seem to be a great order for mobile. Just wanted a review on the same. Thank you.

So, Kevin, thank you for the question. We are, you know, testing the Truecaller as a platform with certain customers. I mean, too early for us to identify exactly what kind of margins we can bring in, but, you know, it certainly opens up more markets for us. Truecaller has very decent share of market in multiple continents. And we're really hopeful that, you know, once it's testing, and this testing is of the platform and the integration of this platform with certain enterprise customers, once they go successful and we make an assessment of how much we can monetize that, we perhaps will be able to give you more stronger views here. So, too early to state anything because we just signed up with them and we're taking it to...

Okay, so, like, would that give the access to all the TCR consumers which Truecaller has lately? Would we be able to actually set up the platform for the entire user base of Truecaller across the world? Is that the assessment?

Sure. Okay, so that is a reach which is provided by True Quality to any of the partners, how to monetize this, you know, we can use rich media on the platform, we can do multiple other things, but that's something I just said. This is something, you know, once we actually have a live case, only then we'll be in a strong position to comment on. We are, as I said again, as I mentioned earlier, we are testing this with multiple enterprises and multiple geographies, and we're hopeful that this. Once it works, we can give you more accurate assessment.

Okay, sir, I got it. Sir, my second question was on the Claro deal. So, I just wanted to know where are we actually in the process of getting the platform established with Claro? And also, I just wanted to know how much potential are you seeing for Claro as well? Because as far as I understand, in FY23, we had signed a deal with Sri Lankan M&O. And Claro seems to be almost 20x, like the subscriber count of Claro seems to be 20x, the deal which we have done in the past. So that was, I guess, a 200-star deal for two years. So as far as Claro goes, I know it's in a partnership with, I guess, Proximus. So just wanted to know, like, what's the share of Ruto Mobile in the Claro deal? And how are we pursuing this deal? What's the potential? So yeah, that's the second question.

Cairo is a multi-country firewall deal for us, which means that we have to deploy a certain platform with all of these telecom operators. Now, we understand we are behind time. We were supposed to be done with the deployment and should have gone by by now. But there are certain reasons which are beyond our control. There have been delay in the deployment, but we are very hopeful that this quarter we should be up and running with them. And we will have some tangible revenues coming away. Very soon. But the deal stands. The deal is on. It's only that deployment has taken a bit more time. And for those reasons, we have not seen trickling. There have been a trickling in it yet.

And Kevin, just to add to what Tushar said, in terms of Claro, I think we have, as Tushar was saying, multiple geographies, and we don't have a blanket contract where we can define all Claro networks. So there are select networks which they have signed up with us, and some big ones like Colombia are not part of the contract. So in terms of the population that you were referring to, it is a fraction of what Claro services globally, and we have those select networks where we are working with them. Just to put things in perspective.

Okay, so in terms of Claro, like, what might be the share of Google model versus 365, like, the share of, like, revenue agreement?

The Claro deal is more of, you know, a five-word deal, you know, which, you know, which is fixed plus variable. So, I mean, there's no share as such, you know. It's basically the more the platform is able to identify gate traffic going in, more we are able to monetize. There's some fixed components and there's some variables. So, there's nothing, I mean, there's nothing like a share-share kind of thing because the exclusively intact network belongs to us for terminating any international traffic in that geography.

My last question was, just wanted to understand the revenue composition of IID versus NAD. I know the interest is worth 8-9% now. So what's the broad state of the revenue as far as the IID and the NAD goes?

So, given we don't break it up as public information, but ILD still continues to be significant for us because, you know, we still service very large global customers. Unfortunately, we don't disclose the exact percentage breakup. So, I will not be able to spell out the exact proportions here, but what I can tell you is that it is still a very relevant part of our business with very good customers in the portfolio. I'm sorry, I'm not able to spell out exact details here.

Okay. Okay. But as far as my understanding goes, the margins are quite lower for the IID, right? Versus the NLD.

Sorry, say it again, please. Very, very.

Okay. Okay. So, as far as my understanding goes, I believe that the margins of ILD are much lower than the NLD, if I'm not wrong.

In absolute value, no. In percentage value, maybe, yes.

Okay. Okay. Okay. Those are the only questions. Thank you. Thanks, Kevin.

Thank you. A reminder to all participants, anyone who wishes to ask a question, leave a star and one on the restaurant's telephone. The next question is from the line of Bharat Gulati from Dalal and Brocha. Please proceed.

Yeah, hi. Thank you for the follow-up. Just wanted to understand on the gross margin front, when we talk about its transitionary in nature, I completely get that. But do we expect these margins to revert back to the levels of Q3, Q4 of F526? Or do we expect them to revert to what we used to historically do at the 22, 22, and a half percent levels? Just trying to understand that, have these structurally changed our business margins towards that higher 24 to 25% mark, or do we eventually believe that in the medium to long term, we'll revert back to the 22% area?

So as we pointed out, you know, there are multiple moving parts to that. And as I said, you know, some of them are reversing automatically once we deploy the product and the customer comes back. Some of them will take a little bit of more effort from, you know, the business point of view in terms of identifying better routes, identifying better margins, which is feasible. But, you know, the timeline to that could be slightly different from what we can do on the known cases of specific customers. So, that is where, you know, at this point in time, if you ask me at the end of July, whether I can, you know, accurately guide whether we'll be at a 22% or a 21.5% for this quarter or whether we'll revert all the way back to 23%, it's a little difficult. estimate to make right now because lot of these pieces are moving as we speak, but as you mentioned earlier, depending upon how much of this correction we are able to do, we can land up in that range of 21.5 to 23%, which we've been operating over the last five or six quarters.

Fair enough, fair enough. That's really helpful. So, just trying to, so maybe directionally, if you can help me, you know, I see that we're planning to enter the new, planning to enter new markets for RCS. And I typically understand RCS is slightly better margin than WhatsApp and SMS business as well, given the, given that, you know, Google wants to take up the market share from Meta. So, do we expect that to sort of drive gross margin? Again, I understand that you can't put a number to it, but directionally, if that business grows and it's growing for us at 14% this quarter, do we directionally see those margins going up structurally?

RCS definitely provides a better margin option for aggregators. So our focus and our efforts will be more to take and promote that as a channel. The search and geographies, you know, where we have deployed a platform and we have some exclusive arrangements also. Given that, you know, our focus definitely will be towards RCS and I'm fairly confident that that can certainly, you know, blend and improve our margins ever better.

Got it, got it. And just lastly, I'm trying to understand that the level at which we are growing at, even if, you know, I understand that we're seeing good growth in the non-ILD business, basically our domestic business and our new product business, as long as that continues to grow at this pace, when can we, you know, like what share of the business would ILD be, let's say, two years down the line, and then where do we see the new product business as a share of the overall business? Right now as of this quarter, it's at 8%. So just if you can give some sense of what would the business mix looks like, look like a year or two years from now, given the same thought of growth continues.

So, Bharat, we continue to focus on all the businesses, you know, there's our attention towards all the three units, which is IMD, domestic, and new product is seen, and we, our efforts are. To ensure that all the three segments continue growing at the same pace. So it's very difficult for us to say which will have what share of the old revenues. But we just hope that the one which is giving its highest margin has the highest share, and the energies will be towards that.

So just to add to what Tushar is saying, you know, even though we are saying that ILD is facing challenges in terms of growth, it is not that we stop pursuing opportunities there. You know, there are some large opportunities that we are looking at. Just the conversion and timelines are a little bit out of our control. So the idea is, you know, and the reason why ILD continues to be important is it is large scale from each single customer, the ticket sizes are large. Although the percentage margin is low, it gives very good ROI to the business. So, that is where Dushar is trying to indicate that we are not leaving out any of the levers in the business. If it is a large enough opportunity, we will pursue it and try to close it.

Fair enough, fair enough. That's helpful. And just so if you give some sense of what could cause growth to come back in ILD, I understand spends are sort of compressed right now from the customer standpoint, because there are other means to, you know, other cheaper means to execute the same thing. So what could bring back the growth in that segment? And then how would that impact the remaining WhatsApp and sort of the OTT vertical?

So, this will largely, it can come back definitely and it can get back to the growth path. It will remain to be seen that how telecom operators are looking at and what is their strategy in the times to come. When I say strategy, I largely mean pricing strategy. They've been fairly ambitious on the pricing side over the last few years. And if they finally decide to rationalize the pricing, I'm quite hopeful that we can bring back the same growth which we have observed over the last few years in Ireland. So it remains to be seen how telecom operators see this business and how do they intend to grow this in.

And also we are seeing a slight bifurcation of business as well. You know, certain use cases are still relying heavily on the telecom-oriented messaging solutions like SMS, RCS, and certain interactive use cases are now preferentially moving to WhatsApp and RCS. So we are seeing that transition happen. And that is where, you know, some of the solutions which we are bringing in should ideally drive the non-SMS portfolio and our core platform, the SMS and RCS platform, still focuses on onboarding customers who need the telecom infrastructure. So, so from our point of view, we are more driven by what the enterprise needs as a solution point and we offer all of those channels to the solution or to the enterprise. Sorry.

Got it, got it. And so lastly, on, I understand that from October 1st, Meta has certain new rules regarding using its own models to deliver the app with the conversational AI or chatbots onto Meta, onto WhatsApp. So that gives certain benefits to customers for such as free messaging and so on. So is the recent acquisition largely to leverage that opportunity and to sort of get that application capability to leverage Meta's LLMs?

So we've made those observations, but I mean, we're trying to interpret it accurately, exactly what it reflects, and how it adds, you know, to the acquisition we've made. How does it bring more benefits to us? We're still evaluating it. It's, you know, better for good reasons, have been fairly... And they've been shifting their policies, pricing policies, fairly frequently. So, you know, what one is, of course, it's important to interpret it well and also see exactly what is their long-term game like. How would they want the entire board framework which they are now exposing to enterprises will pan out? And how do we fit in and how do we make most of it? So, but it's very early for us to comment. As I said, you know, we made a good observation of that. And we're making interpretations and, and how, and of course, are drawing a plan how to be, grow and benefit the most from it.

From today's standpoint, do we, do we have the capabilities to explore that opportunity that Meta has brought to the customers? Are we already capable to integrate with our Meta LLMs?

Yeah, so the platform which we have in Helter, that is extremely flexible. They offer different LLMs to the enterprise. They have, you know, if it is Anthropoic or Meta or whichever AI the enterprise wants to use, including voice AI. So it's fairly flexible. It's a choice of the enterprise on how they want to run their solutions. So it opens it up for the enterprise. And it can also leverage the entire meta infrastructure that you're referring to. So it's fairly open the way the enterprise wants to use it.

Got it. That's really helpful. Thank you so much.

Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Rajkill for closing comments. Over to you, sir.

Good. So thank you all for your very engaging questions. So with that, we will close the call. So we appreciate your continued support, and we look forward to engaging with you again. Have a great weekend. Thank you. Thank you.

Thank you. On behalf of Root Mobile Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.