Affle 3i Limited (AFFLE.BO) Q2 FY2026 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Good day, and welcome to Affle 3i Limited Q2 and H1 FY 2026 Earnings Conference Call hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Mehta from AMBIT Capital. Thank you, and over to you, sir.

Thank you, Danish. Good morning, everyone. On behalf of AMBIT Capital, we welcome you all to Q2 and H1 FY '26 Conference Call of Affle 3i Limited. I take this opportunity to welcome the management of Affle 3i Limited, represented by Mr. Anuj Khanna Sohum, who is the Chairperson, MD and CEO of the company; and Mr. Kapil Bhutani, who is the Chief Financial and Operations Officer of the company. Before we begin with the discussion, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve some risks and uncertainties. Kindly refer to Slide 25 of the company's earnings presentation for a detailed disclaimer. I will hand it over to Mr. Anuj Khanna Sohum for his opening remarks. Thanks, and over to you, Anuj.

Thank you, Ashwin. Good morning, everyone, and thank you for joining the call today. I trust all of you are keeping in good health. H1 FY 2026 was a transformational period for us as we continue to progress on our Affle 3i vision with the goal to deliver 10x decadal growth. We outperformed both H1 as well as H2 of the previous year and are continuing to build on this momentum in FY 2026. In Q2 FY '26, we exceeded all our performance benchmarks to record our highest ever quarterly revenue, EBITDA, profit after tax and conversions. We delivered revenue of INR 6,467 million, a growth of 19.1% year-on-year. Our focused execution on higher productivity and continuous innovations enabled us to achieve EBITDA of INR 1,461 million, a growth of 28.9% year-on-year and 172 basis points EBITDA margin expansion on a year-on-year basis. Notably, it marked our sixth consecutive quarter of sequential margin expansion, and it resulted in 33.5% year-on-year growth in our profit before tax from operations, excluding the other income. We achieved highest ever PAT of INR 1,105 million, a growth of 20.1% year-on-year. In terms of our CPCU business, we continue to operate from a position of strength, both strategically and operationally. Our CPCU business drove 109 million conversions at a CPCU rate of INR 58, and we earned CPCU revenues of INR 6,319 million. Beyond the numbers, we are inspired by the way we are achieving this growth, powered by innovation, intelligence and measurable impact for our advertisers globally. Over the last few quarters, we have deepened the role of AI across our systems and operations. Our investments in intelligent technologies are scaling well with the recent launch and integration of Niko into our unified consumer platform stack. Niko is our specialized AI agentic capability designed to automate and drive ROI-driven growth advertising for marketers across the iOS ecosystem. Together with OpticksAI, our Gen AI-powered creative engine, Niko adds a new dimension to how we advance AI automation and enhance efficiency of the mobile marketing ecosystem. We continue to demonstrate strength across our markets. India and global emerging markets together contributed 73.9% to our revenue and grew by 20% year-on-year. This growth was broad-based across our industry verticals, supported by the strong pickup in digital ad spends due to the early festive season in India. The market tailwinds remain intact, reaffirming our positive outlook for sustained growth momentum. Our developed markets also delivered a resilient performance, growing 16.8% year-on-year and contributing 26.1% to our revenue. The growth was driven by deeper customer engagements and a steady expansion in new account additions, reflecting the effectiveness of our localized sales execution. While the overall trajectory remains positive, we saw a risk-managed rollover of budgets from Q2 to the festive Q3 from a few customers in the United States. We have a robust engagement pipeline for Q3, and we continue to unlock new avenues for expansion to strengthen our position, as the privacy, compliant, trusted and results-driven platform. We were granted 2 new patents in United States, expanding our IP portfolio to 16 granted patents till date. The first patent titled method and system to encode user visibility count, leverages probabilistic encoding and algorithmic functions to estimate ads exposure frequency, thus optimizing computing requirements and improving user engagement rates. The second patent titled method and system for hardware and software-based user identification for ads fraud detection, enhances our fraud detection capabilities by analyzing plurality of hardware and software level data in real time across connected devices. Together, these patents and our tech innovations continue to enhance our competitive moat and our ability to deliver quality user conversions and measurable value for advertisers globally. This quarter, we have featured 3 customer-approved case studies in our earnings presentation. The first case study highlights our full funnel user engagement strategy for high lifetime value new and existing user conversions for fintech in India. The second highlights our capabilities in scaling the impact of CTV ads with mobile engagements and drive ROAS via cross-screen conversions for e-commerce in U.S. The third focuses on our multi-placement strategy with dynamic optimizations that significantly boost purchases for a large omnichannel retail brand in Latin America. Affle continues to be recognized as a technology thought leader in the industry. Our platform was ranked as the fastest-growing and the second highest gainer in overall market share, ahead of several large global tech companies in Singular's Q3 2025 Trend Report. We also received multiple accolades for our advancements in AI-driven marketing, automation and hyperconextual creative intelligence at ET DigiPlus Awards 2025. Additionally, we were honored with the most effective use of AI and ML and Proximity Campaign of the Year Awards at e4m IDMA 2025 along with many other recognitions along leading industry forums. With that, I now hand over our discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you, and over to you, Kapil.

Thank you, Anuj. Wishing everyone a good day, and hope all of you are keeping safe and well. We continued our positive growth trajectory of the previous quarters as it marked our 10th consecutive quarter of sequential top line and EBITDA growth and sixth consecutive quarter of EBITDA margin expansion. Beginning with the highlights of our key performance metrics on a consolidated basis, we delivered year-on-year growth of 19.1% in our revenue from operations, 28.9% growth in our EBITDA, 33.5% growth in PBT from operations, excluding other income and a 20.1% growth in PAT. This was driven by broad-based momentum across industry verticals and markets, further supported by earlier onset of the festive season in India. We concluded quarter 2 FY '26 at a consolidated revenue of INR 6,467 million, delivering a sequential growth of 4.2%. In H1 FY '26, we recorded revenue of INR 12,675 million, and it was a balanced performance across the 2 quarters. On a stand-alone basis, India revenue grew by 24.8% year-on-year and 10.5% quarter-on-quarter, while on an adjusted basis, the growth stood at 26.3% year-on-year, marked by allocation of budgets in Q2 for the festive season this year. We continue to enhance our productivity by scaling our platform operations and strengthening Affle's AI capabilities. These initiatives, combined with sustained revenue growth have significantly strengthened our operating fundamentals. As a result, the EBITDA for the quarter stood at INR 1,461 million, an increase of 4.6% sequentially. We achieved an EBITDA of 22.6% -- in FY '26, our EBITDA increased by 31.2% year-on-year as we achieved INR 2,858 million. EBITDA margin stood at 22.6%. On OpEx, our inventory and data cost at 61.2% of the revenue from operations and it was broadly in line with our past quarterly trends. Employee cost increased by 3.7% sequentially, which was lower than our top line growth, and we continue to invest in intelligent automation aimed at enhancing overall productivity. Other expenses stood at 6.4% of our revenues, declining by INR 7.4 million on a sequential basis and most of the same for the year-on-year basis. Even with the increase in additional provisions for trade receivables for real money gaming clients in India, the normalization in other expenses is attributed to other discretionary and miscellaneous expenses categories, including that of marketing and business promotion activities. We achieved profit before tax of INR 1,353 million, reflecting a growth of 19.2% year-on-year and a 4.8% quarter-on-quarter. Our underlying growth for both quarters, quarter 2 and quarter 1, is even stronger if excluded from other income and evaluated our core operating performance. Our profit after tax for the quarter was INR 1,105 million, marking an increase of 21.1% year-on-year and 4.8% quarter-on-quarter. Our PAT margin improved to 16.5% of the total revenue from -- up from 16.1% in quarter 2 last year. The PAT increased by 21% in H1 of FY '26 with a margin expansion of 53 basis points. We continue to prioritize efficient working capital management. And as such, there were no material changes in collection risk for all other verticals, excepting RMG vertical in India. Our disciplined financial management supported by healthy balance sheet and robust operating cash flows provided a strong foundation for capturing emerging opportunities and driving sustainable growth through FY '26 and beyond. With this, I end our presentation. Please open the floor for the questions.

[Operator Instructions].

So, Danish, I will go ahead with the first question. This is Ashwin here. Anuj, congrats on a steady performance. Despite the fact that we had the RMG issues this quarter, we saw almost 25% growth in India. So wanted to get a sense in terms of what were the impacts of the RMG issue? Are there any residual impacts left? And what was the offset in terms of driving such a strong growth? And secondly, given that this time around Diwali was a little earlier, so any early signs in terms of how the festive demand is shaping up?

Thanks, Ashwin, for the question. Yes, the RMG issue did impact in this quarter, but that was offset by better demand and early demand because of Diwali being early today this time. So therefore, in -- we saw a lot of the advertisers increasing their campaign budget spends earlier in the month of September. So we saw a benefit from that. So that neutralized the impact of the RMG issue for the last quarter. Of course, there will be some carryforward effect because the RMG issue continues now into this quarter as well. Having said that, the fact that the festive budgets came in a bit earlier, I think we saw a more resilient growth performance in line with our expectations for the India market. And therefore, overall, we had a very steady outcome. I think the fact that we have already seen some part of the festive budgets in our hands in the previous quarter, in Q2, we already have a good sense of where this quarter is going, and we are fairly confident that we should have a reasonably good quarter in Q3, given the fact that we already have in hand all the pipeline of the budgets for the festive quarter. And we are keeping a clean and very carefully calibrated check on any impact of RMG, which was already known through the last quarter. So we have upped our sales efforts and pipelines in the other verticals. So we should be all right. But yes, there is some impact of the RMG issue, which is known to all of us.

Sure, Anuj. And just one question on the developed market side, you did talk about some rollover of the budgets from Q2 to Q3. So what exactly are we seeing there? Any impact of the tariff or the uncertainty that's been there around the Trump tariffs or their policies or demand in the developed market? How are we seeing that shape up?

So for us, we haven't seen any reduction in budgets due to any tariff issues at the moment. What we have though seen is that some of the advertisers were more careful and they were wanting to increase their budgets into Q3, which is a festive quarter versus spending more during the previous quarter because of the uncertainty around tariffs. So they wanted to -- they didn't reduce the budgets, but they did what we call typical optimization. Instead of spending it in July, August, September, they're looking to spend a bit more in October, November, December. So our pipeline for developed markets is resilient and strong -- and stronger versus the last quarter in Q3. So the festive quarter in developed markets should be stronger than what we have seen in Q2, right? So we are seeing some of the budgets moving there, but that's more what we define as risk-managed calibration of some of the marketing budgets being planned by the advertising teams of our customers.

Our next question comes from the line of Deep Shah from B&K Securities.

So first question is actually on the revenue split. After, I think, 7 quarters, we've seen non-CPCU revenue again at roughly INR 15 crores. So is this like a onetime project or some client wanted something non-CPCU? Because I think directionally, we have been focusing only on the CPCU side. So some clarity here could be useful.

That's correct. So for us, CPCU is the anchoring segment that we're pushing for. And non-CPCU is anything that is outside conversions-driven campaign. So there could be instances where we would do certain licensing deals with certain customers. There would be cases where we're doing a branding campaign where the customer is not necessarily yet graduated to sharing deeper conversion funnel details. So there could be instances where we onboard a customer or an agency or a partner to come on to our platforms, using licensing or brand campaigns methodologies. Even there, our goal is very clearly to transform them going forward into CPCU business. So you can think of it as a feeding mechanism. Some of the customers would come in, in a certain form, in a non-CPCU format. But very quickly, we are always graduating them upwards, doing deeper tech integrations with them to get them to the CPCU format because even if it is a branding campaign, as you would note in the CTV case studies that we have been sharing with all of you in our earnings presentations, even if it is an ad showing on a larger screen, CTV, we are able to link it back to mobile and drive conversions from it. So we have the capability today to go to our customers and get branding budgets for them, but then transform that into a performance CPCU kind of a metrics. And in certain instances, it would be a scenario that in certain customers, it may take a bit longer, and therefore, it starts as a non-CPCU and then hopefully graduates into a CPCU format as we do deeper integrations and make them more comfortable with that.

Perfect. This is very useful. Second question is for Kapil. So Kapil, we've seen now, I think, again, 6, 7 quarters of margin improvements. And this time, we've seen some improvement despite some provisions that we would have had to take. So 2 subparts here. First, if you could quantify if that's material enough, if you could quantify the provisioning? And second, what part of it do you think is actually due to operating leverage because we also saw some cost rationalization that you spoke about in the opening remarks. So is all of that sustainable? Is it all of rev driven? If you could give some idea around this, it will be helpful.

So the provisioning effect can be quantified as close to about 0.5% of our profits before tax, right, which is an additional provision, which has been reviewed by our statutory auditors. Based on the current assessment, it will be an ongoing assessment in the next quarter also. With regards to the operational efficiencies, quarter 2, we have been spending on marketing efforts for last 4 quarters on a regular basis, and we have taken a certain pause on our marketing and activities for this quarter. So the efficiencies are felt there. With regards to other efficiencies, with regards to our number of employees, I think so we have not increased number of employees. But yes, certain employees this quarter have earned their variables. So you will -- you saw an increase. But otherwise, overall, we are not increasing our OpEx and the margin at these levels should be sustainable for the medium term.

Our next question comes from the line of Arun Prasath from Avendus Spark.

Anuj, my first question is on -- we discussed this quite often in the past. I think we have been now fairly delivering consistent growth of roughly 20%, which is aligned with our long-term projections. Is there any still case for going after some of the other businesses, which is -- may not be as profitable as at the current margins, but maybe diluting some margins, we can deliver better growth. Thereby, obviously, the marginal margins might be lower, but overall, that will deliver better value to the shareholders. Is there any case for that for us to go for this?

Arun, thanks for your question. Yes, it is definitely consistent resilient performance, giving 20% approximate growth on a year-on-year basis consistently. And it is not just a growth in terms of the revenue numbers, and I think we've always mentioned that we are a margin sensible bottom line aggressive company. And therefore, the DNA of the whole organization, let's say, the Kapil talked about some of the people have earned the variables. Now even there, the targets for the sales teams, the business heads across all markets carry 2 functions: revenue growth, which is sales as well as margin expansion, right? So the whole organization is run in a certain fashion. Now to, let's say, deviate from that to incentivize the team to go for slightly lower margin businesses or just get the numbers in, would -- I think, would be an unnecessary step to undertake at this moment. We are seeing sensible amount of growth coming from the, let's say, higher profit pool, right? So positioning ourselves as a premium platform, getting high lifetime value users, both new as well as existing user conversions for our customers. And I think that positioning is a way more premium positioning and being able to say no to certain revenues, which are of a lower margin or a lower profile, I think augurs well with our competitive moat. Now are we leaving something behind on the table for, let's say, other competitors to take up that business and challenge us in future? We don't think so. On the contrary, when these advertisers graduate to say that, okay, we have got a certain base of users, now please help us to get to a more premium or more higher-value users, then they would necessarily come to us. So the positioning of our platform and our company as a premium platform for our advertisers is a very important sort of external message to our customers and profiling of our companies. But also internally, I think it builds organizational pride and alignment that let's not just chase revenue growth, let's go very clear. We have to get revenue growth very aggressively. But as long as we are getting this level of growth, which is about 20% year-on-year growth, and we are able to then expand our margins, that is the right way to grow and the right way to build the company, and we don't want to tamper with the organizational DNA at this moment. So I think for the near term, you would see our focus would continue to be at this level of growth while doing consistent sensible margin expansion.

Right. Very clear. Secondly, on the available cash, we spoke about inorganic or strategic acquisition, and you also indicated that as and when the time is right and the price is right, you will go for it. Do you feel that we still have a lot of opportunity on the table to utilize this cash and deploy and take our business to the next level? Or do you feel that currently, you still want to wait and watch and the valuation is a bigger concern and hence, you will wait for a opportune time. How should we look at your inorganic growth ambitions?

Thanks for that question. Yes, we have maintained all along that we are a single cash-generating business unit really focused on the consumer platform business. And even our acquisition approach has been largely expanding that particular business case rather than hedging or shifting into any other adjacencies. So we have looked at both horizontal as well as vertical integration within the consumer platform ecosystem. And we have a pipeline or, let's say, evaluation list of around 10 companies that we are actively evaluating at the investment committee level. And we would necessarily look at the right timing, yes, in the sense of valuation, but also, I think, in terms of where those target companies are in their journey. There are times when they are in the right mindset to become part of another company, and there are times when they are not, right? So I think we are assessing all of that for those 10 companies that are in our active evaluation list. And I think that should tell you that there are sufficient M&A opportunities on an immediate basis into the midterm future. So we will be very selective. We'll be very careful and one could reasonably expect like -- so we did our last M&A about 2 years ago. So I think it's about time that we would be considering actively what we can pursue with the right valuation and the right kind of DNA match with our company in the next coming quarters. And we will also be evaluating these opportunities on a midterm basis because we see ourselves doing an acquisition maybe 1 a year or 1 every 2 years over a period of time, right? So I think that's the kind of modus operandi for our company. And I think you can see the track record of how we have done M&As very responsibly with a very clear transformational thesis that we are -- if we are acquiring something, how will we transform it to a higher calibration of growth or higher margin profile. And I think those are the kind of elements that we are building our own conviction around. Once we are convinced that, okay, we have the right valuation for a target company and that we can take over their operations sensibly, then we have a very clear time-bound thesis on how we will transform that company into a more profitable or more valuable company than what we will acquire it for. So we are building that conviction around a few, and we are actively assessing these opportunities. If anything matures and a deal were to happen, of course, we will do the appropriate disclosures.

Just to be clear, all these 10 names, I mean, you have in the pipeline, which matches our DNA, which we like, probably valuation is what we are trying to fine-tune. Is it the right understanding?

I think the right way to say it is these are all 10 where we think that on the surface, prima facie, early evaluation before going into further details of who are the people and what's happening internally and what's the strength of their tech and so on. Just at a very early level of diligence, we are seeing that, yes, these target companies should be -- how do we say -- we call it the courtship period, okay? The courtship period is where you're engaging actively with these candidates and evaluating them for a long period of time. It's not going to be the case where we met a company and we'll do a transaction very quickly, right? So it's a very prolonged process. If you look at our past disclosures, any acquisition that we have done, we have always highlighted that we were engaging with all those companies for many, many years before reaching the term sheet or the conclusion of a transaction. So this is a long-drawn process. It is not a speed dating process that, okay, you met someone and you quickly thought let's just do a deal. We try to get to know the companies rather deeply over a long, prolonged period of time. And if we find the right valuation and timing, we will do the transaction. So this is how I would answer it. I wouldn't just say that it's pegged on valuation negotiation. It's many different aspects of evaluation.

Our next question comes from the line of Swapnil Potdukhe from JM Financial Services Limited.

I have a couple of questions. The first one is on your depreciation and amortization. It seems that there was a sharp quarterly increase in your D&A. And can you help us understand why such a big increase was there this quarter? And possibly, a related question to that, your accounting policy when it comes to capitalization of certain costs related to R&D. So that's the first one.

I'll take this question. If you see our quarter 2 results every year, you would see this trend coming in. It's not without a trend. It's just that certain portions of the newer techs get capitalized during and put to use during this period. And there is an incremental shift of work in progress to the actual capitalization. And thus, this quarter has a higher depreciation every year, right? It is in line with the trend. With regards to our amortization policy, we have a 4-year amortization policy of whatever the tech which has been capitalized -- whichever is capitalized, and we follow the same. It is consistent. And it is -- the capitalization is done by separate teams and identified in accordance with the accounting standards.

Okay. And the second question is with respect to...

So basically, the development efforts for developing the newer modules is capitalized. The research phase is not capitalized or any technical feasibility efforts are not capitalized.

Got it. Good. The second question is with respect to your growth guidance. Historically, we have been talking about 20% plus revenue growth. Now we have been slightly off for the last 3 quarters on that side. I understand that there are going to be some one-offs here and there and so slight bit of your number is okay. But what I'm trying to understand here is right, during the last 3, 4 quarters, our growth was primarily led by developed markets, which not -- which in this case, this quarter, it was by India markets, possibly because of the festives -- early festives this time around. How confident are we of delivering 20% growth this year and possibly next year as well, given that the mix suggests that we are slightly moving towards high teens kind of a growth rate gradually.

So this year has been marked by 2 bigger events, one in India, RMG. And the second is the U.S. tariff uncertainty, right? So despite that, we have navigated very well. Our 19% growth is close to what our estimate is, right? And we are confident that barring 1 or 2 quarters, we will be able to deliver the stated growth potential, which we have been consistently maintaining. With regards to the moves on the spending side, the inflation risk in the developed markets, right, the budget allocation comes a little tighter based on uncertainties. However, there was a direct impact of RMG being spot on a certain basis and that would take about a quarter or 2 to recover that loss of 2.5% of our top line.

Sir, Kapil, does that mean that we will -- we are still maintaining that 20% guidance for FY '26? We are confident of delivering on it?

Our guidance has not been year-to-year. Our guidance has always been medium term.

Our next question comes from the line of Rahul Jain from Dolat Capital.

I have 2 questions. Firstly, Anuj, we have seen some large DSP reporting lower CPMs. So are we seeing such trend in [ ad sector ] ? And also what are the potential leverage we might see in our inventory and data cost in short to medium term?

Thanks for that question. So the way we look at our business is that we are the CPCU performance-driven value-based pricing business model versus, let's say, the larger DSP that you're talking about is largely perhaps in the business of selling CPMs and taking some take rate on top of that. So their business is to sell impressions and our business is to sell conversions. Our business, on the other hand, is to buy impressions in the market. I've maintained all along that there are -- there's significantly larger number of consumers on connected devices and the amount of time people are spending on connected devices leads to a huge volume of supply of impressions. Consequently, it is not a surprise that supply is increasing on digital, people's time on the devices are increasing so much that it is outpacing the growth in the advertising spend, right? So one could therefore see that the commodity or the raw material of our industry, if you call it like that, the impressions will become cheaper. But then within those impressions, there will be more premium users. There will be more premium devices, more premium placements. So if you focus a lot more on iOS, if you focus a lot more on higher-end touch points or higher-value consumers, then one would still be willing to pay a more premium CPM to go to that. What we are seeing is a consistent improvement in our ability to charge advertisers. If you see our trend of CPCU pricing has been increasing consistently ever since we've been reporting it as a public company. I don't remember any quarter where our CPCU pricing would have seen any kind of a dip. So it's a consistent movement upwards. So our volume of business is increasing with the advertisers. Our unit economics or what we are charging per CPCU is also increasing consistently because we are able to demonstrate to our advertisers that in this ecosystem, we are delivering higher value users to them, higher value conversions to them and that we are a more premium platform. In terms of our own margin profile and margin expansion, of course, there are certain factors to it. One is, of course, in data and inventory cost, what efficiencies we can drive with our algorithms. Second is, of course, in terms of the overall scale-up opportunities where we are seeing that margin expansion would necessarily happen, right, because we are a tech platform company and our OpEx doesn't increase as much as, of course, we grow in the revenues. We don't necessarily have to add more people to support a greater volume of revenue. So we're focused on enhanced AI-based productivity, a lot more automation. Our goal is to continue to improve our pricing to our customers and give them higher value. In the process, if we pass some of that back on to the supply side by going more premium, I think that is helping us increase our competitive moat. I hope I've answered that question to you.

Sure, sure. That's pretty helpful. And just one bit for Kapil. I think you mentioned that there was some moderation in business promotion expense. So what was the quantum, if you could share? And what's your annual plan on the same?

So you can say about $1 million plus has been the quantum on the spending this quarter on the lower side on the -- I'm not saying the exact number, but approximately $1 million where we have been discretionary on our spendings.

And anything on your annual thought process where this number should...

Can you repeat what you said?

So I was asking that for the full year, what is the budget that we have for this segment?

So on a full year basis, the budget remains intact. This is the time period where you decide whether which events you are going there, which events you are sponsoring. At the moment, we believe that we had to take a pause for this quarter and putting the best foot forward for the next quarter, which is the festive season in the international market.

Our next question comes from the line of [ Nishita Shanklesha from Safire Capital ].

So I'm new to this company, and I'm analyzing the company for the first time. I just wanted to have a better understanding about the CPCU business model that you have, if you can explain it to me.

Sure. So the CPCU business model is anchored on -- if you look at the earnings presentation, you will find certain information points that will help you in grasping with that. And you would see that the math of our revenue is basically number of conversions in millions times the average cost per converted user. So CPCU is cost per converted user. And you would find that the CPCU revenue is that math. So the 2 drivers are number of conversions and what is the average CPCU rate you can -- we can charge to an advertiser. And in terms of number of conversions, we, as a consumer platform company, are looking at how many users are actually transacting users through their connected devices with the advertisers. And in that universe of conversions, there will be new user conversions, existing user conversions, conversions where you show an ad to a user either on a CTV and drive a conversion on mobile or you show an ad on a mobile but drive a conversion event even in a physical offline location based on proximity campaigns. There could be 3 types of conversions. And those use cases are also defined in one of the earnings presentation slides. If you were to refer to that, it talks about new user conversions, repeat user conversions as well as online to offline conversions. So what is happening from a broad-based trend line, Nishita, for you to model this, is that the number of people who are now online is increasing. The number of connected devices is increasing. The average time spent on digital and online is increasing. The volume of transactions that the consumers are doing online is increasing. The average price of those transactions is also increasing. Consequently, when we go to an advertiser and let's say, deliver 109 million conversions in a reporting period like -- let's say, in Q2 this last quarter, we delivered 109 million conversions. Affle is able to command an average CPCU rate of about INR 58 per conversion across the board. And our goal is to then tell the advertisers that, hey, these conversions are actually worth that much, in fact, worth a lot more for the advertiser. So they make a value from that conversion over the lifetime of this user and therefore, their willingness to pay us this amount and seeing a good value creation for them. So the CPCU business model is basically the highest level in terms of where you go to an advertiser and say that, hey, Mr. Advertiser, you don't have to pay for doing your -- showing your ads or the clicks on those ads, but you only pay us once you drive a deeper funnel conversion from this consumer on your own apps or your own stores, right? So I think we are helping the advertiser to see a lot more clarity in terms of return on investment. So they're investing an x amount with us. We're saying, "Hey, pay us only when you see a clear conversion that's happening for you and therefore, that's when you pay us." So in a way, Affle is stepping into a business model where instead of cost plus pricing where -- let's say, the question from Rahul was about a larger DSP selling at lower CPMs because their business is, hey, please come on to our platform and buy impressions and pay for that, right? Our approach is different. We're going to the advertiser and saying, tell us what is your KPI for conversions. We will work on the campaign on that basis. If we hit your KPI, you pay us. If we don't hit your KPI, you don't pay us. So Affle is taking the risk of buying the impressions, running the campaigns, processing all the algorithms and data. If we don't deliver on the KPI, we don't get paid. But if we deliver on the KPI, we get paid on CPCU basis, which a value-based pricing versus a cost plus pricing. So Nishita, in a very short way, I've tried to explain to you, and I've given you some references to our earnings presentation, if you can see those, and that will help you to tie this up.

Yes. Yes...

Also you can get in touch with the IR team for a short session.

Right. So I just had a follow-up question. In the existing user repeat conversion in the slide that's like the second way that you can generate the revenue. Every time a user transacts, every time you get the CPM or like every time that conversion rate is counted?

So how it works is that a campaign can be run for getting new users, which is market share expansion for an advertiser. And there could also be scenarios where the advertiser has already converted the user through our platform for them, but the user may not be transacting enough with that advertiser. So let's take an example, let's say, you've downloaded an app and you have registered and you've done your first purchase on that app. But then somewhere along the way, you're doing many other things and you don't go back to that app as much. So the advertiser knows you as an existing user, but is not yet satisfied with the frequency or the average value of transaction that you're doing with them. So they may come back with a campaign to our platform saying that, hey, could you get some repeat conversions from these existing users that you have already got for us? And then our company would run the campaign and make sure that we drive some incremental conversions, repeat conversions. And as we drive those conversions, we can earn revenue against that. So that's how this approach works. So it goes through the full funnel, right, from a new user coming into the advertisers ecosystem to driving repeat conversions from those users to then going, saying that, okay, let's not drive just conversions online, but let's see how we can get a user to also engage with the off-line storefronts of these advertisers because in marketing, the most valuable user for an advertiser is one that buys from them not just once, but many times, but also through many touch points. The user who buys from an advertiser's own app is a valuable user. The same user, if they also buy the same advertiser's product from a marketplace like an e-commerce marketplace and that same user also goes into a physical mall and walks into the store of that advertiser and buys in the physical engagement. This kind of a user is seen as the most loyal user for the advertiser to maximize the lifetime value. So if we get this kind of users for the advertisers, we can command a much higher pricing.

Our next question comes from the line of Lokesh Manik from Vallum Capital.

Anuj, my question was on Niko acquisition and integration. You spoke about it very briefly in your remarks. If you can please share the -- a little more details from perspective of whether it helps us in the back end in terms of optimization of cost and placements, on the front end on the conversion side or from a perspective of geography, whether it helps us better in developed markets versus emerging markets. Also its capability to transition from iOS to Android? Is it possible that we do something on Android [indiscernible], a little more details on that since it was a very brief.

Sure. That was great. So Niko is not an acquisition. It's an organically developed capability, which is our AI agentic capability. Now you would note that our company has, for many years, been filing and being awarded patents in the areas of AI as well as filing patents in the areas of agentic AI capabilities in the context of ad tech for many years, okay? So we are forward ready. We are forward-looking. And in terms of our IP strategy, product strategy, I think we are clearly covering the ground very well and executing and demonstrating not just intellectual property, but also demonstrating impact of that in the form of products consistently being rolled out, whether it was OpticksAI earlier this year or now it is Niko being rolled out on a fully integrated as part of a unified consumer platform stack. Now we have started rolling it out as an ROI-driven growth engine for iOS ecosystem. Together with OpticksAI, it makes perfect sense to do that, and it's being rolled out not only in developed markets, but also in emerging markets. And in terms of capability, we're talking about how Niko engages with our customers as an agentic AI capability and also runs internal campaign automation, optimization in tandem with how our teams would be doing it and in fact, working together, enhancing the human intelligence of our teams to deliver an overall much greater impact than what would have happened in a shorter time, okay? So if we take on a campaign and we optimize for greater ROI or lifetime value users, the algorithms are moving faster and are delivering much greater ROI impact for the advertisers in a shorter time with the productivity of our own workforce getting significantly enhanced. So we can handle, let's say, hundreds of more customers and campaigns and deliver ROI in a much shorter time because of these capabilities being added and these automation layers being added into our platform. So that's one. And in terms of expanding that to beyond iOS to Android and other devices, it's certainly work in progress, and we are actively pursuing that agenda. And we may not necessarily call it Niko, but there are other several agentic AI capabilities that are already transforming the initiatives. We just decided to unveil and talk about Niko and OpticksAI is one example of it, right? So we have already mentioned that we are powering a lot of efforts across the board in our organization to enhance the productivity of what we are doing as well as the higher ROI for the advertisers based on what we are doing using intelligent technologies across the board. So the one example of that is Niko and of course, OpticksAI.

Great. My second question, Anuj, is just to understand the penetration of these capabilities, Opticks and Niko. Today, from a rough ballpark percentage perspective, out of, let's say, 100 campaigns, for example, how many would have these -- and how many campaigns these would be penetrated? That is one. And second is, you mentioned that the ad budgets of advertisers are not growing as fast as the supply side is growing. So from that perspective, is there a ceiling with these new capabilities, at least with the existing customers? I'm sure you can use this to acquire new campaigns and new customers, but with the -- in terms of increasing wallet share with the existing customers because the ad budgets are increasing significantly. Is there some headwind you see on that side?

I'll take the second question first. So this is not a case of headwind. This is a simple economic problem, okay? So if the supply is increasing and we're selling raw material of that supply, I mean, the price would go down. But if the supply is increasing, that makes the job of finding conversions within those increased base of users even harder, right? So for example, if in India, you have, let's say, 1 billion connected devices now. And out of those 1 billion connected devices, the high value, high lifetime value transacting consumers is only 100 million versus those 100 million were already online earlier when there were 600 million devices as well. So now the number of devices has increased. So you have to -- it is going to take you harder to go and filter out through that larger ocean of traffic to go and deep down and find those conversions. So essentially, what we are saying is that for premium conversions, the CPCU or conversion-led business model, we have the ability to charge higher because of the simple economics of it, whereas at the same time, we have the ability to run our algorithms more efficiently and take supply for the same amount of money that we spend on data and inventory costs, we can consume a lot more supply and process that efficiently and deepen our intelligence about the overall market base of consumers. So what I was explaining to you was actually better tailwinds for our business because supply is getting cheaper, is getting a lot. And therefore, there is a case for an internal bigger tech stack platform like Affle, which is processing this larger supply more efficiently to find the conversions, which has now become a harder problem because you have to find those conversions with a larger pool of devices with a lot more supply to be processed and dealt with. So if our tech stack is done efficiently and sensibly, we should be able to consume for the same amount of data and inventory costs, a lot more supply process, a lot more device intelligence and be able to charge the advertisers per conversion a slightly higher price for CPCU. So it's not a case of a headwind. It's a clear case of tailwinds and support, and it's a simple case of an economic problem where the demand is getting harder to execute on and the supply is increasing, and therefore, you have supply available at a price. But to find those conversions, you have to do a lot more efficient work with the technology because you're processing a lot more data, a lot more impressions to deal with that, right? So I think that's how I would like to answer it. And in terms of penetration, I can say that AI automation, not limited to the examples of Niko or OpticksAI today has penetrated 80% plus of our activity across the company and I'm not just talking about campaigns. I'm talking about 80% of all activity across the board in the organization is being powered, enhanced and augmented by intelligent AI agents being deployed across the board, across all functions in the organization and certainly with respect to the advertiser campaigns.

Our next question comes from the line of Samarth Patel from Equirus Securities.

I have a couple of questions. First question is, like what is the current margin mix between India and emerging markets and developed markets? And where do you see more room for structural improvement? Any flavor on that would be really helpful.

Right. The way we look at India and we report it on a stand-alone basis as well, so you can derive it from there. But what's very important is to see that India is our most significant largest important market. It is home ground. This is where we are listed. This is where we have the highest number of employees, and this is absolutely the anchor market for us. And doing well in India, therefore, is a strategic #1 priority. In terms of other emerging markets around the world, they behave in a very similar fashion like how India is in terms of demographic profile of consumers. Lots of consumers in Indonesia or Southeast Asian emerging markets or Latin American markets or even Middle East and Africa markets, you see huge number of users and devices, but you see a very small percentage of them being high value -- high lifetime value users for the advertisers. And therefore, the need for a strong tech platform that can efficiently deal with this humongous number of users, over 3.8 billion connected devices is what we reach out to as reported in our earnings presentation. And then going through that on a recurrent basis, very efficiently processing all of that data with tens and thousands of servers in the cloud and yet delivering the kind of conversion volumes that we are delivering, charging appropriately for it with the advertisers and extracting the 22.6% EBITDA that you saw in the last quarter. This is a phenomenal, let's say, execution efficiency that is being demonstrated with over 73% being anchored on India and emerging markets. Now most of us would understand that emerging markets compared to developed markets have a very different unit economics. And the amount of data processing that we are doing to process, I think we're doing a lot of heavy lifting in emerging markets and getting paid at a very tough unit economic sort of calibration of the advertisers. And therefore, the 73% business being in emerging markets is a competitive moat, which I think very few companies in the world in ad tech can match against. If you look at any other ad tech company in the world, which has either got public listed anywhere in the world or has access to significant private capital in their journey, all of them would be over 80% calibrated on developed markets. And even within those developed markets, 90% odd business that they get is from the gaming vertical. Whereas when you look at Affle, Affle is anchored in India on very broad-based of verticals of categories, EFGH. Then we have taken our moat that we have learned with our technology efficiencies in India to expand into all other global emerging markets, contributing 73% of our revenue. And then we have taken that moat to developed markets, and that's contributing about 26%, 27% of our revenue on an average on the trend lines that you see in the recent quarters. But essentially, we have owned our tech competencies and competitive moat out of India and other emerging markets, and now we are demonstrating that execution in developed markets as well.

That was really helpful. My second question is like with 25% of our revenue coming via agencies and the broader AI-led disruption of the agency model, how should we think about our direct client and agency mix and ultimately, the wallet share outlook there?

See, for us, working with the advertiser or an agency appointed by an advertiser, we see it as an advertiser's decision. As far as we are concerned, we are seeing the agencies as much as our customers as we see the direct advertisers. So for us, they are being served with the highest level of regard and loyalty. And so we are not influencing anything with respect to whether we go through an agency or direct, okay? What we see today is that the advertisers who have their in-house teams are very happy to work with our platform directly. And then there are certain advertisers who have in-house teams, but due to global mandates or otherwise, have decided that they must work through an agency. We respect that decision, and we work through those agencies with them. But at all points in time, our systems are deeply integrated to do the data exchange directly with the advertisers and systems, right? Because when we drive a conversion for an advertiser, we must get the appropriate data confirmations and integrations with them directly. So even in the scenario where we are working with the agencies for about 25% of our revenues, we are very much in a technology integration contact with the end advertiser as well. So I think we are ready to deal with all scenarios of how the world will evolve. But I think the agencies will still continue to command at least 25% of the spend. I'm not talking about 25% of our revenue. I'm saying generally, if there's a total ad spend in the market, you would see that the agencies will still play a meaningful role for many years to come. Their role is becoming less important. Their role is becoming questioned, but I think they have a role to play for many years to come.

Our next question comes from Mr. Sanjay Ladha from Bastion Research.

Congratulations for the consistent performance quarter-on-quarter. Sir, I wanted to know what is our repeat customer rate. As for the advertisers, we are the converted users. So my sense is every year or from their advertisement budget, we should gain the wallet share. If you can highlight or talk about with some example. And I know it's happening over time. Therefore, we see 20% plus kind of growth. But if you can quantify in the numbers as well.

Well, thanks for your question, Sanjay. Our growth comes from, let's say, 3 broad dimensions, and that is existing customers spending more, new customers coming in and spending with us as well as new customers -- I mean, I'm talking about existing and new customers in our current markets. And then there is also a dimension of us going into new markets because we are a global platform and a global company. And to do business in a new country, we don't need to necessarily go and register an entity or hire a team and then get revenues from there. We can -- we have the capability today to remotely serve countries where we have even not present, and our platform would work wonderfully. So there are 3 dimensions of growth: existing customers spending more; new customers coming in, in existing markets; new customers coming in, in new markets. And I think this provides a very broad basis of growth across verticals. And therefore, you would find that in all our disclosures, we take a lot of pride in saying that we are a very broad-based growth company and broad-based across verticals, across geographies. And I think that gives us a very rich mix as well as a very, very naturally hedged organization. So if suddenly fintech has an issue in some market or education tech has some issue in some market or gaming has some issue in some market, there are natural balances to this kind of a particular vertical or a particular market-related turbulence in our business. And therefore, we see ourselves as a very broad-based growth engine, which is naturally hedged on turbulence of this nature. And I think that is the best way that I can answer this question. Would I be able to slice and dice for you more and saying how much of the growth is coming from existing customers, in which markets versus new customers, in which markets or new markets? I think for competitive reasons, our Board would want to remain a bit more broad-based in our discourse. But you should be looking at it in a way that the -- our company has shown a lot of strength in terms of negotiating power with our customers, okay? As the volume of business is growing, we are not letting that impact our price. Now in most business models, if a customer is spending a lot more with you, they would say, hey, I'm spending double with you this year. Can you please give me a discount, right? Or can you reduce the pricing? We have the leverage because we're saying, hey, look, we are not going to compromise on pricing. If you don't want to spend double, spend less, I have many, many more customers that are willing to put in the budgets to take conversions in your vertical. So we have the ability to ensure that we are growing without taking any subsidy effect on our pricing or taking any impact on our margins. So we are expanding margins and growing, and I think that's showing a very strong competitive advantage as well as negotiating power in the ecosystem. Do we have the next question coming?

That was the last question. Over to you for your closing remarks.

Okay. I didn't realize, there was a silence for a while, so I thought maybe there was a connectivity issue. Well, then thank you very much for all your questions. They were very insightful questions, and I hope that the responses were satisfactory. We continue to be aggressive about our growth and about our margin expansion, independent of any quarter-on-quarter fluctuations with respect to an early festive season or the RMG issue in India or any budgets moving from Q2 to Q3 in developed markets. I mean, these are market realities, and we will navigate them as we go along, but very broad-based growth, very naturally hedged and long-term growth minded. So with that, thank you for being here today, and we will look forward to our next interaction. Thank you.

Thank you, sir. On behalf of Affle 3i Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.