Affle 3i Limited (AFFLE.BO) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Affle 3i Limited Q3 and 9M FY '26 Earnings Conference Call hosted by Anand Rathi Share and Stock Brokers Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shobit Singhal from Anand Rathi Shares and Stock Brokers Limited. Thank you, and over to you, sir.

Thank you, Shubham. Good morning, everyone. On behalf of Anand Rathi Shares and Brokers, we welcome you all to Q3 and 9 months 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 Chairperson, MD and CEO of the company; and Mr. Kapil Bhutani, who is 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 2 of the company's earnings presentation for a detailed disclaimer. I will now hand over the call to Mr. Anuj Khanna Sohum for his opening remarks. Thank you, and over to you, sir.

Good morning, everyone, and thank you for joining our call today. I trust all of you are keeping in good health. Q3 FY '26 marked an important milestone as we surpassed INR 7 billion mark in quarterly revenue run rate while delivering our highest ever quarterly EBITDA, profit after tax, CPCU conversions and CPCU rate. During the quarter, we delivered revenue of INR 7.18 billion, a growth of 19.2% year-on-year and 10.9% quarter-on-quarter, reflecting the consistent resilience of our business. This performance underscores our ability to execute effectively in a challenging global environment and across market cycles, reinforcing the strength of our AI-powered consumer platform stack. Our sustained focus on higher productivity and innovation enabled us to achieve EBITDA of INR 1.63 billion, a growth of 24.1% year-on-year and 11.6% quarter-on-quarter. Notably, it marked our seventh consecutive quarter of sequential margin expansion, and it resulted in profit before tax growth of 25.1% year-on-year and 13.7% quarter-on-quarter from operations, excluding the other income. We achieved highest ever profit after tax of INR 1.19 billion, a growth of 19.1% 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 119.7 million conversions at a CPCU rate of INR 59.6, and we earned CPCU revenues of INR 7.14 billion, an increase of 19.6% year-on-year and 12.9% quarter-on-quarter. It is also important to mention that our non-CPCU business serves as an important entry point for certain customers and partners for top-of-the-funnel tech enablement on our platform. Thus, the non-CPCU business is aligned to eventually drive our customers towards deeper funnel conversions on the CPCU business model itself. With the global digital advertising spending on the rise, we see significant market-wise performance growth opportunities across all our billing entities. Our India and global emerging markets contributed 73.9% to our revenue and grew by 19.8% year-on-year and 11% quarter-on-quarter. This performance was achieved despite the full quarter impact of Real Money Gaming in India and was supported rather by broad-based demand across industry verticals, reflecting our naturally diversified revenue mix. Our developed markets delivered a robust performance, growing 17.8% year-on-year and 10.9% quarter-on-quarter and contributed 26.1% to our revenue. This growth was also driven by deeper customer engagements, conversions of pipeline activity and steady new account additions in these entities. As anticipated, the normalization of budgets supported this momentum, and we continue to unlock new avenues of expansion, strengthening our position as a privacy compliant, trusted and results-driven platform. In terms of 9 months FY '26, we achieved revenue growth of 19.3% year-on-year, EBITDA growth of 28.5% year-on-year and PAT growth of 20.3% year-on-year. Our year-to-date performance reinforces our confidence in sustaining robust growth through Q4 FY 2026 and FY 2027 to attain our Affle 3i 10x growth vision. Beyond the numbers, what continues to excite us is how our growth is powered by technology-led differentiation and AI-driven innovation. Over the last few quarters, we significantly deepened the role of AI across our unified consumer platform stack. Niko, our most advanced next-generation Agentic AI optimization engine enables fully automated self-service mode with concurrent and real-time decisioning across bidding, targeting and budget allocation. Over the last quarter, Niko automated and accelerated campaign learnings and optimized outcomes for the Newton platform, strengthening our ability to deliver superior ROI and higher lifetime value users for advertisers at scale. In our earnings presentation, we have featured 5 customer-approved case studies for 3 industry verticals. The first 3 case studies focused on our verticalized strategy for AI-led multi-placement dynamic optimizations to drive conversions for Hospitality and Travel vertical across India and emerging markets. The next case study highlights our repeat conversion strategy across Android and iOS to expand user monetization for the Gaming vertical in U.S. The fifth case study highlights our capabilities in scaling premium iOS users conversions globally for the Edtech vertical, leveraging our Agentic AI capabilities. Affle continues to be recognized as a technology thought leader across industry forums. Our platform secured 70 recognitions across various categories in the latest app Supplier Performance Index. We also received several accolades across leading industry forums, notably the Emerging Markets Innovator of the Year and the Best use of MarTech at the MarTech AI Awards 2025 along with the most effective tech platform at the Maddies 2025, the Best Partner Award at the OPPO Ad Awards 2025 and the Global Best Support Partner at the Honor Global Developer and AI Conference 2025. We also won 30-plus customer campaign level awards across industry events, reflecting the strength of our partnerships and the impact of our AI-powered consumer platform stack. With 3 new patents filed in this financial year, our IP portfolio has grown to 39 unique patents filed, including 16 patents granted. Our strong balance sheet and robust operating cash flows continue to support sustained investments in technology, talent and strategic initiatives. We remain disciplined in the capital allocation while ensuring that we continue to invest and innovate proactively to strengthen our long-term moat and to drive sustainable value creation. We have also laid a solid foundation for our Affle 3i 10x growth vision. We have successfully onboarded Sameer Sondhi as our CEO for North America with a dual role as our Chief Strategic Investments Officer. Sameer's 25 years of credible track record of scaling ad tech platforms in North America and beyond will play a key role in accelerating our organic and inorganic growth plans. Earlier in this financial year, we had internally promoted Vipul Kedia as our Chief Operating Officer to anchor our growth in India and emerging markets. These steps have deeply aligned our leadership commitment and conviction towards the next phase of accelerated and compounded growth impact. With that, I now hand over the discussion to our CFO, Kapil Bhutani, to discuss the financials. Thank you, and over to you, Kapil.

Thank you, Anuj. Good morning, and hope all of you are keeping safe and well. We continued our steady growth momentum in quarter 3 FY '26, marking our 11th consecutive quarter of sequential growth on top line and EBITDA and seventh consecutive quarter of EBITDA margin expansion. This consistent performance reflects our operational rigor and sustained focus on profitable growth. We concluded quarter 3 FY '26 at a consolidated revenue of INR 7.17 billion, delivering a year-on-year growth of 19.2% and sequential growth of 10.9%. In 9 months FY '26, we recorded revenue of INR 19.85 billion, delivering a growth of 19.3% year-on-year, reflecting a balanced performance across all 3 quarters. This quarter, on a stand-alone basis, India revenue grew by 20.6% year-on-year, while on adjusted basis, the growth stood at 23% year-on-year, supported by robust momentum in advertising spend despite full quarter impact of Real Money Gaming in India. We continue to enhance productivity by scaling our platforms operations and strengthening Affle's AI self-service capabilities. These initiatives, combined with steady revenue growth have further strengthened our operating fundamentals. As a result, EBITDA for the quarter stood at INR 1.63 billion, an increase of 24.1% year-on-year and 11.6% sequentially. We achieved an EBITDA margin of 22.7% despite extra cost for change in employee-related provisions due to a change in labor code. In 9 months FY '26, our EBITDA increased by 28.5% year-on-year as we achieved INR 4.49 billion at EBITDA margin of 22.6%. Moving on to OpEx. Inventory and data costs stood at 62.4% as we ramped our investments in EFGH industry verticals across international markets to further strengthen our verticalized offerings and unlock new growth avenues. Our employee benefits expense remains largely flat sequentially, supported by productivity gains and efficiencies from ongoing investment in intelligent automation. Our other expenses were lower at 6% of our revenue versus 6.4% in quarter 2 FY '26. However, in absolute terms, the other expenses increased by INR 19.5 million, primarily driven by higher business promotion activities aligned with seasonal demand and sales initiatives during the quarter. We achieved a PBT of INR 1.46 billion during the quarter, an increase of 18.1% year-on-year and 8% sequentially despite lower other income. If we look at our PBT from operations, excluding other income, we delivered a growth of 25.1% year-on-year and at 13.7% sequentially, outpacing our top line growth. Our profit after tax stood at INR 1.19 billion, marking an increase of 19.1% year-on-year and 8% quarter-on-quarter. Our operating cash flows for the 9 months period was INR 2.54 billion. We continue to prioritize efficient working capital management as there were no material changes in our collection risk for all other verticals, except incremental provision done for RMG business in India during the previous quarter. Our OCF to PAT for 9 months stood at 75.8%. This is because of temporary increase in collection days from agencies due to their periodic client audits in this period. This should normalize in quarter 4. Overall, our prudent financial management and disciplined execution positions us well to capture emerging opportunities and drive sustainable growth to FY '26 and beyond. With this, I end our presentation. Let's please open the floor for questions.

[Operator Instructions] The first question is from the line of Shobit Singhal from Anand Rathi.

So congrats on a good set of numbers. So sir, I have 2 questions. My first question is on your gross margin. So how do you see your gross margin moving in the medium term? Because we have seen a sharp jump of around 230 bps year-on-year and around 130 bps Q-on-Q on your inventory and data cost, which has been around 60%, 60.5% to 61% for a decent period of time, say, around 12 to 14 quarters. So if you can just guide us, it will continue for some time at this elevated level or it should go back to normalized level going forward?

Thank you for that question. First of all, we are absolutely clear that our data and inventory cost is -- has 2 elements to it. One is the element to earn the revenue within a reporting period of a quarter. And second is where we are actually investing. We are expensing it out fully in the reporting periods where the cost is incurred, but we're actually fundamentally and consciously investing in our own expansion across international markets and verticalizing deeper into those international markets so that we can launch all our EFGH category verticals across international markets, right? So we are in that phase of expansion where we are investing into the data and inventory cost to build our intelligence -- verticalized intelligence for international markets. And therefore, what you see here is 2 factors, right? We are fully expensing it out in the reporting period, but a part of that incremental, like what you call the increase in the data and inventory cost has to be seen as an investment being made to verticalize our intelligence for international markets, right? I hope that answers the question.

Yes, sir. So sir, my second question is a follow-up of your last quarter comment on inorganic acquisition, where you said that you are evaluating around 10, 12 companies. So any progress on that front? And how soon we can expect to close?

Thank you for that question. Yes, we have, as a Board and the investment committee been evaluating about 10 to 12 companies, which we think are all honorable targets for us, but we have shortlisted amongst them, we have narrowed that pool down to now 4 companies, and we are doing active due diligence assessments of those 4 companies. And we will make a firm and a sensible decision progressively at the right time at the right price.

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

Congrats on a great set of numbers. Kapil, the first question is for you on the opening commentary that you made about slightly higher agency business. But what I see is the incremental revenues, say, over the last 6 months has been INR 968 million, 3Q minus 1Q incremental revenues, but incremental debtor increase is [ INR 1,590 million ]. So is there something more to it? Or this entirety, we are used to looking at Affle at generating 90% to 100% OCF. That entirety will be taken care of in 4Q? So that is my first question.

Thanks. We have been mentioning that our target of OCF to PAT ratio is greater than 80% year-on-year. We have been achieving 90% to 100% consistently for the last few years. We believe that we'll be achieving in the range of 85% to 95% OCF for this year also. We believe that the payment cycles with the agencies have started to ease off, and we should be able to deliver 85% to 95% range of OCF.

Perfect. That's very clear. That's very reassuring also. Secondly, on this increase in CPCU rate that we've delivered 3.1% Y-o-Y. So is this largely on account of, say, better quality of campaigns which we've undertaken. The reason I'm asking this is the share of developing or EM rather has increased, which would typically naturally put strain on the CPCU rate. And yet we've delivered 3.1%. So is this a shift of the nature of campaigns that we've undertaken? Is this the dollar appreciation, which has helped us? If you could give some color on that, that would be very useful.

I'll take that question, Mr. Shah. Thank you for that observation. First of all, it is exceptional that we have achieved consistent growth in our revenue -- total revenue increase. And at the same time, of course, it's guided by driving higher volumes of conversions. But in terms of bottom line sensibility of ensuring margin sort of defensibility, we have been able to [ inconsistently ] increase our charging rate, the CPCU rate, and we have achieved the highest CPCU rate till date. Now there are 2 main factors which actually help us to enhance the CPCU rate or to, let's say, it's a reflection of how much value we are adding to our advertisers, right, to our customers. Therefore, they have a willingness to pay a higher unit price. Now there are 2 key strategies that are differentiated for our company, and the differentiation is not only in how we sell it or what we deliver in the end, but it goes into the technology moat and several other data intelligence moat capabilities of the platform. The first one is verticalization. When we go and deeply work as a tech platform, for example, if we are working with a health care customer, we are able to give them not just a consumer conversion, but a conversion of what they see as their patients, right, revenue-generating users. The persona of those people that they are targeting is like a patient. If we are talking about Entertainment category, we are giving them users who are viewers, right, who are subscribers, who will pay to subscribe or gamers or shoppers or when we talk about education tech, one of the case studies which we have shared in our earnings presentation, we are talking about targeting parents, parents of students who would then convert for education tech. So the deeper verticalization strategy. And therefore, the second factor there related to that is giving them premium users, right? So premium placements driving premium users who will have a higher lifetime value for the advertiser. So consequently, because of this verticalization strategy as well as with the ability to target premium consumers in a very deeply intelligent way, with personalization of those personas, which are relevant to that industry vertical. These 2 factors are allowing us to charge a higher price and the advertisers are seeing the value that is coming through the Affle platform.

The next question comes from the line of Anmol Garg from DAM Capital.

Congratulations on good set of numbers. A couple of questions. Firstly, we have seen good growth in India despite the residual impact from RMG and some early festive demand in the last quarter. So what is leading to this? And secondly, now that we are already at 19% kind of growth levels on the overall company side, do we kind of maintain our 20% growth guidance going ahead?

Thanks for that question. That's a great observation. India is our anchor market. India is where we have the highest number of employees. We are listed here. We know our customer base is robust. And we are clearly a thought leader like none other in the ad tech ecosystem in India. Our growth in India is very resilient, and I'm very happy with the way it is diversified across industry verticals. And that is super important because there will always be some issue or the other because of either regulatory reasons or otherwise in some vertical, and that's natural course of business, and we understand that. And we have modeled for it, right? Therefore, we have ensured that we are diversified across verticals. And India is one market where we are covering all our verticals rather comprehensively. Also, if we go further into that, we would find that our growth in India is also coming not only earlier, it was very much anchored on Android. Now we are doing really well on iOS. And I think that segment is a premium segment within India, and we are able to help advertisers to grow in that segment, and that is giving us a lot of differentiation because not every competitor is strong in that capability. And so giving premium iOS-based conversions across the channels that are available across our platforms to those advertisers who are willing to pay more for that category of users is really helping us. And the third pillar would be CTV, right? We are doing exceptionally well on CTV and are consistently winning industry awards, several industry awards that I also talked about earlier. I think this is -- these are the anchors for our India growth.

Right. And from the company overall perspective, do we maintain a guidance of 20% plus growth?

Look, I'll tell you -- I'll give you an insight into how I drive the variable incentives of our sales and management and leadership internally. So that will give you a sneak preview into how the organization thinks and behaves. And at what point in time does the internal organization celebrate that, okay, we have achieved in our growth. So there are 2 key metrics that we want in terms of growth. One, revenue growth, right, in terms of percentage revenue growth across geographies, across markets. The second metric that we want is EBITDA growth, right, percentage EBITDA growth across all markets. And our internal KPI to the team is that both of these areas have to grow on an average of about over 20% to 25%, which means that typically, if you look at it like what Kapil was reporting earlier, right, this quarter, we have grown 19.2% on revenue and EBITDA 24.1%. So if you combine these 2 numbers, you get a 45% number, right? So the internal team has to say you have to get revenue growth, you have to get EBITDA growth. And the bottom line is that it has to be with margin expansion, right? So these are the 3, let's say, parameters. The margin expansion is like an underlying qualifying criteria. But on top of that, we have to deliver stellar revenue growth and we have to deliver also EBITDA growth. So these are the metrics. So when I say when you model our company at a 20% or a 19% to 20% growth rate, that is a sensible way to model us because internally, I'm pushing for 20% to 25% across these metrics and which our team has been consistently achieving and still keeping hungry to push for more.

Right. And just one last thing on margins. So did we have wage hike during the quarter? And if yes, our employee expense was more or less flat during the quarter. So just wanted to understand that.

So I do not know what you mean by rate hikes, okay?

I mean wage hike...

Wage hike. Okay. Yes. What we are seeing is clearly that in terms of the total growth and efficiency of our platform, the adoption of AI and some of the functions getting more centralized into the India market or, let's say, the Southeast Asian markets, which are relatively lower cost compared to, say, markets like U.S., Israel or Europe, we are able to use AI automation effectively, and we are able to upgrade the 24/7 support services to our teams internationally as well as to our customers using tremendous amount of AI automation while centralizing some of the functions of our workforce in lower-cost markets. So overall, what we are seeing is that we have given a handsome wage hike to the people who deserve and the talent who deserves to have it. But overall, even with all of that, we are able to keep our operating expenses in check and control.

Right. So going ahead, we should further expect some rationalization in the employee expense to continue?

I would say we will see consistent and high-margin growth in terms of revenue. And the efficiencies will be realized even more on the EBITDA level because of the fact that our OpEx is not going to grow at pace with that. Of course, we'll keep investing in the right areas and taking care of our talent in the most honorable and competitive way. But it's not going to keep pace with the revenue growth because we're enhancing the productivity of Afflers across the board. If you tuned into our Affle 3i launch in April in this financial year, we talked about super Afflers, giving all of them the power of AI tools and Agentic AI capabilities to expand the productivity of each Affler by almost 50% and more. So given that context, we just have to hire lesser people for the incremental growth. So therefore, the efficiency you will see in the EBITDA expansion will be faster or rather the EBITDA growth would be faster than the revenue growth in most cases.

The next question comes from the line of Rohan Nagpal from Helios Capital Management.

So I just wanted to follow up on the gross margin remark that you made. So you said there is some portion that is for revenue generated in this quarter, and there's some portion that is investments that you're making for future revenue growth that you're expecting. Could you please provide some color on the split between the 2, so we can get a sense of what the underlying gross margin is for the business?

Right. Thank you. So this question has been asked of me a few times, and I think I've always given the same consistent answer that to earn the revenue that we make, right? One could say that, hey, only target those users or only target those devices where you are expecting an immediate conversion. But we also need to consistently invest into looking at those expanded pool. We to cast our net wider to build our intelligence about the various verticals that the end users are engaging with, right, to profile or to make sure we have a deeper persona of these users. Consequently, in any given reporting period, I would say at least or around 10% of our data and inventory cost is investing into the future or it is looking at a broader view of what we can do with our verticalization and profiling. And a lot of times, it's focused on geographies where we are looking to go deeper, let's say, we are, let's say, under calibrated in health care as a vertical in certain markets. So we may invest in that to build that deeper intelligence and verticalization for health care because then we are expecting to utilize that for future revenues, right? So similarly, across all the top EFGH category verticals, we would look at different geographies and different markets and prioritize where do we invest more and when. And that's more of a tactical, let's say, execution decision. But on a general basis, you can say that around 10% of the data and inventory cost is actually investment in nature.

Okay. So I was just trying to get a sense of the increase. So is it fair to assume that because there has been an increase this quarter, that 10% is higher this time around? Or is it still 10%?

I would say it would be in a certain range. It will -- I mean, in certain quarters, you may see that this is going a bit higher in certain markets depending upon where we see the immediate growth opportunities or how aggressively are we pushing? Are we pushing for all verticals to have deeper insights across international markets as is the case right now because we are absolutely wanting to go and realize the full ambition and potential of our growth in international developed markets. So therefore, at this point in time, you're seeing that incremental push. And -- but I was giving a more long-term answer that for many years, I've already qualified that this is investment, there is a percentage that's investment in nature. And I will not be able to give any short-term breakups for that. So in the short term, it would suffice to say that why you are seeing an increase right now is because the investment component has grown for verticalization of all our verticals in international markets. But will I be able to give you a specific breakdown for this quarter? I would prefer not to.

The next question comes from the line of Anand Trivedi from Nepean Capital.

Congrats on a good set of numbers. My question is related to Real Money Gaming. I'm assuming with the ban on Real Money Gaming, you must have had a loss of revenue on the back of that. Could you quantify what that reduction is and what areas outside of Gaming have made up for that loss?

Kapil, I pass this question to you, please.

Yes. So you can assume about INR 10 crores to INR 12 crores of revenue on the base effect for the quarter 3 of the last year, which has not recurred in this quarter, yes. But it is a broad-based recovery from our growth of revenue from all the verticals in India. It is not concentrated on any particular vertical, which has given us a growth back despite the RMG setback.

Okay. So is it fair to say that the net impact of...

If you take the base effect out, our growth in India would be higher.

Got it. So the RMG ban has only resulted in a INR 10 crores to INR 12 crores loss or loss of revenue for you, that's it.

Yes. That was in the base effect and yes, that was the base...

What is the base effect?

That was in quarter 3 FY '25, the revenue of RMG in quarter 3 FY '25. Because we can't predict how much revenue would have come into quarter 3 of this year.

The next question comes from the line of Abhisek Banerjee from ICICI Securities.

Just a couple of questions. So first, adding on to the question asked by Anuj. So last time around, you had actually talked about segments like quick commerce, et cetera, which were kind of driving the growth. So can you just tell us overall, right, in India, now which are the segments which would have become the largest for you?

All right. Thank you. Well, in the EFGH categories, we are doing very well in categories E and category F in India, which is, of course, driven by E-commerce and Education -- sorry, E-commerce, Entertainment in category E and in category F by Fintech and Foodtech, right, as well as FMCG. So overall, let's say, in category E and F, we are doing exceptionally well across the verticals. And in Gaming, we already mentioned that there's impact of Real Money Gaming, but we have also shown case studies of other kinds of gaming categories, which are non-real money gaming, where we continue to be very strong and resilient. And category H, which is Hospitality and Travel, again, in this earnings presentation, we have given a very clear case study of 3 of our case studies for this for India and emerging markets. So these are the broad set of verticals where I would say E&F are continuing to be very strong and resilient. In category G, we saw some pullback. In H, Hospitality and Travel is doing well. In health care, we need to double up and we need to do more. So we're investing towards those efforts. I hope that answers your question, Abhisek.

Yes. That answers the question in India. And one more question on the global markets. So what do you think -- when do you think we can go back to the kind of growth rates that we see a couple of quarters back?

Well, first of all, I have to say that given the overall macroeconomic factors and the fact that there are cycles in the market, the overall growth that we have achieved, I would say, is a very, very resilient and very robust and defensible, sustainable type of growth. So this is, let's say, the baseline of growth that we can anchor ourselves on. And in order to accelerate that further, we are looking at both organic and inorganic investments, right? So organic investments, I mentioned, deeper verticalization for international markets. We are already investing in that. We are also investing in our sales force, right, growing that presence. We talked about our management and leadership expansion and reorientation where we have Vipul, who is leading India and emerging markets growth initiatives, and we have Sameer, who has joined on board to lead the North America and developed markets focus for us. So I think we are investing in all areas, both organic and inorganic opportunities are being actively evaluated, and we will absolutely go for capturing the full growth potential of international markets as we go along.

The next question comes from the line of Mayank Babla from Enam AMC.

Congratulations on a great set of numbers and the sustainable performance that you displayed. My question pertains to the other expenses part of it. While I acknowledge that earlier in the call, Kapil sir gave some commentary on it, it has consistently trended down from 8.3% of revenue to now 6.4% of revenue. So how should we look at this over the next 2 to 3 years? And is this because of -- as a function of operating leverage playing out or there is some other element to it because the lowest it has been reported was at 4.5% of revenue in June of 2022? So how should we look at this component?

So our marketing spends are driven by events and sponsorships of various agencies in various events, largely buckled in quarter 3 and quarter 4 also internationally, right? So there is a seasonality to these spends. However, the operational efficiencies, as you mentioned, will play because our revenues will grow at a certain level and our expenses will not grow in tune with our revenue growth. So there will be operational leverages being played in the entire other expenses bucket, including the marketing spend.

Sure, sure. And Anuj, could you also -- my second question would be about the connected TV space. Could you give us a little more color or shed some more light on the progress of that and the overall scheme of this?

Thanks for that question. Well, when we look at this -- the consumer platform stack of Affle, our business model is very consumer-centric. And when we talk about consumer centricity, we look at how do we reach this consumer across connected devices. So where all can this consumer be? The consumer is spending disproportionate amount of time on their mobile screen and increasingly, the screen that is becoming very, very important in the lives of consumers and the households is CTV. So therefore, our focus on mobile in-app experiences as well as CTV on device and in-app CTV experiences are actually leading to great engagements in terms of this consumer-centric approach across connected devices. When we go to the advertisers now, we are able to convince them that our platform should even attract budgets, even more budgets on CPCU business model. Earlier, we were going to them and saying, give us your digital budgets and let's take them on CPCU model, right? Because we are deeper funnel conversion, verticalized conversion orientation platform. Now we are able to go to the advertisers and say, move your linear TV or traditional TV advertising budgets to digital CPCU business model because we can now place ads inside and connect those ads to the mobile phones, connect those ads on CTV screens and mobile phones within a household context of devices across connected devices to drive conversions for the advertisers. So therefore, the CTV business is contributing meaningfully to this expansion of growth of the advertisers' budget towards the CPCU business model. So overall, the business model is consumer-centric CPCU business model on one integrated consumer platform stack because the consumer is the same. Now whether you show the ad on the mobile phone to this user or you show the ad on CTV and mobile phone, we will only earn the conversion on the same user, right? We are not going to be earning it differently. But now we are able to triangulate better between these connected experiences and drive more efficient conversions and able to tell the advertisers, hey, shift some of your budgets to this because you're even getting the upper funnel benefit of branding when you do CTV ad, even if you don't drive a conversion, your branding, your upper funnel, mid-funnel impact is much better. So I think this is becoming more compelling. And CTV is a very strong growth sort of factor in terms of how we are shifting advertisers' budgets to CPCU business model.

The next question comes from the line of Siddharth Misra from Fidelity International.

My question is around the growth for developed markets and also emerging markets outside of India. So I wanted to understand like you've done some investments, as you mentioned, to elevate Vipul Kedia and also you've made Sameer Sondhi CEO of North America. And then you've also talked about investments in different verticals to get the full potential of growth. So just wanted to understand when you talk about full potential of growth, is that growth the organic growth materially higher, which is possible in developed markets and emerging markets outside of India. I just wanted to understand what is that potential? Can it accelerate materially? Or this is the investments you've done to maintain the growth at these levels?

See, I'll give you a very grounded answer to this question. We have one of the, let's say, best technology platform capabilities, which are also -- I mean, not just in my words saying it, I'm saying it anchored on the kind of number of awards that we have won for our tech stack and tech platform in competitive independent jury environments, 5 of those awards I named earlier. I also mentioned about our patent portfolio expanding. I think all of these are grounding our claim that we have one of the strongest tech capabilities in this area. So there, I'm very confident of our propositions, what we are taking to market in developed markets. However, or even other, let's say, emerging markets, right, international markets beyond India. Now to get meaningful coverage across all of our 10, 12 verticals with all the advertisers in those markets, it is going to take time, right, because you need to invest in sales, invest in marketing, build those case studies, build that -- build their confidence and say, hey, there's this company from India, which has come to this market. So you have to go a step at a time, and that is what you're seeing in terms of organic growth right now. Now let's look at how can we accelerate that further. If we were to, let's say, do an inorganic transaction focused on, let's say, developed markets or international markets, and we gain access to a steady or a more, let's say, operational sales team on the ground, which already has relationships with some of those customers and opens the ability or the highway for us to now upsell and cross-sell our product propositions at the back of that sales team to those customers. Now I would think that, that is both organic and inorganic growth, right? Because the inorganic part is that when we acquire a business, they are already selling their products to those customers. Once we acquire, we create a rider or we create a short circuit where we can now go and approach those customers and sales team with our upselling, cross-selling synergies to drive organic growth to shift the gear of organic growth from, let's say, third gear to fifth gear. And I think that is the whole thesis of doing the inorganic investment. So therefore, we are looking at not only our own internal leadership expansion, clear leadership orientation and conviction to fuel our growth going forward. We are investing in data and inventory cost to build verticalized intelligence for international markets. And we are obviously looking at doing inorganic transactions where I mentioned we have shortlisted from 12 to 4 and hopefully from 4 to 1 in the near term because we want to make sure that if we are going to do that one transaction, may that be the best inorganic expansion move of our company compared to whatever else in the industry was available that money could buy. So we are casting our net wide. We are evaluating every single target that we think we can afford to transact with, and we will make the most sensible and carefully calibrated decision, hopefully, in the near term.

Got it. That's very clear. I just had one more question on the inventory costs and the gross margin. So the inventory costs have gone up this quarter as a percentage of revenues. So is it something which will kind of come down from these levels or will be structurally higher going forward? I just wanted to understand whether this quarter was just an aberration in terms of higher investments or you should expect this to continue?

I think this is an investment. I have already mentioned earlier that we have invested more towards prepare ourselves for greater growth in developed markets going forward across verticals in international markets. And therefore, this is something that we will continue to do for at least a few more quarters till we can unlock the full potential of all the industry verticals that our platforms can serve in international markets, right? So we are actively pushing that agenda at this moment. And I think you would still see that we are calibrating that sensibly to have EBITDA margin expansion overall, right? So our -- like I mentioned, the internal organization's goals are revenue growth, EBITDA growth to be accelerated with margin expansion and overall delivering in that range in terms of 20% to 25% for bottom line EBITDA margin growth and around 19% to 20% on revenue growth.

Okay. Sorry, just one more question, if I can. Is it on the inorganic acquisitions. So we will follow a similar playbook like which you've done in the past? Or it could be something completely different, like I'm just trying to understand.

So I think if you look at our track record and credibility of inorganic transactions since we went public in 2019, we did a few acquisitions in 2020 to 2023. Last 3 years, we have not done any inorganic transaction. Why? Because this was part of a considered plan. I want to prove our playbook to all our investors and show that we are a team that understands how to do acquisitions and how to integrate them sensibly into a single cash-generating business unit of a CPCU performance business. And I think with that track record and confidence, as we go further now into the rest of this decade, we are seeing we will do one meaningfully sized transaction in 2026. We will do one more, hopefully, in 2028 and one more in 2030. Our view is very clear that we will, with a spacing of 1 to 2 years, do -- we may have some smaller transaction happening, but I'm saying meaningfully sized transactions given where we are today in the journey and given our management bandwidth and capabilities today, we believe that we can undertake a meaningfully sized transaction. But the playbook overall will largely remain the same. We'll be looking at similar sort of valuation multiples like what we have paid in the past, whether in terms of revenues or -- and in terms of expansion, again, our goal would be how do we unlock greater synergies after the acquisition to transform that acquired unit towards greater growth, greater profitability and cash flows. So our playbook will be the same, but I think the size and the scale would be the only differentiating factor versus what we did at the start of this decade. So between 2020 to '23, how we were playing versus how we play from 2026 to 2030, the difference would be in size and scale, not in the other areas of the playbook.

The next question comes from the line of Vivek Doshi from Nippon India.

Sir, I hope I'm audible. Sir, just wanted to ask one question on the DPDP Act. Sir, are there any additional compliance or consent requirement that Affle and its app partners need to implement? And will this lead to any incremental cost? And also, is there any possibility of reduced data signal for Affle for targeting or this is already consent and largely -- consent based and largely unaffected?

Thank you for that question. Well, first and foremost, Affle has -- we'll complete 21 years in April this year as a company. And with this track record, we have been across all the important jurisdictions where Data Protection Acts have been around for more than a decade, right, starting from Singapore to Europe to U.S. And we've been playing across these jurisdictions. And we have proactively gone and certified our platforms and processes for -- whether it is ISO certifications or Singapore government's data-related certifications, data privacy and security certifications. And we have done these audits consistently for many, many years. So we are not waiting for, let's say, the Data Protection Act of India to become operational before we, let's say, start adhering to those standards that we hold ourselves up for in other markets. Because once we uphold those standards in any jurisdiction, it applies across the board to the whole organization's process because we are effectively one unified consumer platform stack. And we're not running 2 different processes that, okay, in this market, there is Data Protection Act, so let's run it this way and another market doesn't have it, so run it another way. Having said that, if there are certain, let's say, nuances which are specific to the Indian Data Protection Act, then those have already been taken care of by our platform because we know this act has been in the making for a long time. In fact, we have been playing an industry body role to participate as an industry voice in giving inputs of what should be there for best practices in this case. So my short answer is that we are fully ready, and we welcome data protection because it, in fact, increases the confidence of the consumer that, hey, if I'm giving consent, my data will be safe. And if there are any industry players who are not doing anything sensible, then the regulators will go and take them to accountability. So regulation and data protection regulation across jurisdictions, if you go and check the data, the consumer confidence in the industry has gone up. They are more willing to give consent, even in jurisdictions where people are much more uptight about the consumer privacy, for example, Europe and U.S. India has been generally very generous and trusting. I mean, Indian consumer, if you ask [Foreign Language], where do you [indiscernible] willing to share readily. They're not as alert on consumer privacy as the developed markets. Having said that, even in India, with the regulation in place, the confidence of even, let's say, high net worth or iOS premium users who are more, let's say, aware or educated or are behaving like developed markets conscious users about their privacy and concern, even they have greater confidence to give consent. So I don't see any issues with respect to this. On the contrary, given our credibility the international advertisers or the agency groups or international publishers who are operating in India will actually say, now India is Data Protection Act, we would rather work with the top players like Affle, who they can trust, which will uphold these standards as a sensible corporate citizen versus working with, let's say, smaller players who may or may not have these credible credentials to inspire trust. So we think that a lot of partners around the world will trust Affle as a credible player in India to give us any first-party data or collaborate on data privacy initiatives with us.

[Operator Instructions] The next question comes from the line of Swapnil Potdukhe from JMFL.

My first question is with respect to the INR depreciation, which is happening currently. And to that extent, I would like to understand what is the benefit that we are getting in your revenues, especially when it comes to international revenues?

Kapil, are you taking that question? Could you unmute yourself?

Can you repeat your question because the line was not very clear.

No. The question was because of the INR depreciation, what is the benefit that we are getting in the revenues today? And given that the rupee continues to depreciate, I mean, do we expect more benefit to come?

The answer to this question is that it's not only the revenue. It is the cost line items. It's also ceded mostly outside India. Even the India revenue, the exchanges or the SSP players are located outside India. So the exchange movement up is not a very positive scenario for us. It is -- we manage our exchanges to have no effect on the P&L. So it is not only on the revenue, it is across. So there is no impact on the bottom line due to the exchange movements.

Okay. Okay. And the second question is with respect to the several geopolitical issues, which are ongoing across geographies. So to that extent, if I were to just ask you which countries do you think have the highest risk in case any adverse activity happens in some of these geographies because you are exposed to a wide range of geographies beyond India as well. So that's where this question is coming from.

So at the moment, with regards to -- either if you're talking with regards to the tariffs or with regards to the aggression on the political side or the military side, we believe that there is no impact on us because our entities operating out of U.S. are independent entities, which have their own cost structures and revenue structure. So we are not dependent of supply of information from India. So there is no impact of tariffs on us. With regards to other geopolitical activities which are going on, we are a cloud-based company, and we can operate from any corner of the world. We have the Disaster Management Plan enabled. And we have been seeing this through COVID. We have seen through Israeli war. We have seen through Ukraine war. So we believe that we are resilient to that effect.

I would like to add to that. I think we are -- sorry, I would just like to add to that. So on, let's say, geopolitical economic financial side, I think we operate as a very localized sort of compliant business. And advertising is a local business. I mean even if you are working with global players, if their team is advertising in India or in United States, the thought process of that team is very local. There is looking consumer centricity in a very local way. They are responding to local festivals, local holidays and so on and so forth, right? So it's a very localized business. And therefore -- and even if it was more internationalized, I don't think that advertising or software or digital is currently under the purview of any tariffs and so on. Now regarding the bigger issues, let's say, in terms of peace and stability, I think we have a very, very diversified and risk-managed presence across the world, including our tech team's presence across continents, right? So we have a tech team that is based out of India that is anchored here. We have also got a tech team in Israel, in Spain, in Argentina. So overall, when we look at the tech talent of the organization, I mean, right from Australia to Argentina, we have got this collaboration metrics that is going and the company is working 24/7. And during COVID and especially with the Israeli war situation, we tested ourselves that, okay, what if everybody has to work from home. I mean -- and not only home. I mean, in the case of the Israeli team, they're working from very, very difficult situations. And we have seen a lot of resilience in our team to operate in any situation. So when we look at risk management, we go to all levels of worst-case imagination, and we see how can we manage redundancy, how can our workforce be productive, including there are plans like some key people who are super important should have power backups, should have different forms of alternative Internet connectivity so that they can keep our systems up and running in the most dire and difficult circumstances.

We request you to return to the question queue for the follow-up question. The next question comes from the line of Rahul Jain from Dolat Capital.

Most of my question has been answered. Just one thing. Purely from an AI point of view, you obviously highlighted about that extra bit of investment that you've been doing already on the inventory cost. But have you seen a meaningful jump in the traffic on the scraping for inferencing or various other AI activity, which is leading into some dynamic change in terms of the data, which could be fraud data, which could be not so relevant, not intent-based or anything like that? So is there a meaningful change in behavior the way people are consuming AI versus a pre-AI kind of a [ peripheral ]?

Thanks for that question, Rahul. Look, in terms of traffic dynamics, there are enough sort of industry reports which are out there, which are saying that the web browsing on the browser, people doing web browsing, those patterns are clearly shifting. And instead of going and doing search on Google or Bing and these kind of search -- the traditional search engines platforms, the traffic is clearly shifting that people are going to AI and asking AI for answers, right? And I think there is some change in the web browsing behavior. So -- and also similarly on web content consumption, we think that there are certain changes that are happening. Having said that, I think all industry leaders have confirmed that there is no change or in fact, there is an increasing adoption of what's called in-app mobile consumption. So the in-app mobile consumption for people who are using apps on the phone and shifting away from the browser. So AI is absolutely helping the consumers to go more focused on the in-app traffic. So our business is non-browser-focused mobile in-app or on device or CTV. This kind of category of traffic is not seeing any significant sort of change or disruption due to AI. On the contrary, it is, in fact, seen as a great opportunity because the AI apps, for example, the Agentic AI or assistant chatbot kind of AI tools, which are out there, they are essentially apps. And they are -- not all of them have the power to sell subscription-based revenue as a business model. In fact, even the largest of them have started to adopt advertising as a business model. And we are going to be benefiting from that because that will create a new type of ad inventory of users who are on AI tools and apps, which again is an area of focus for us in terms of both helping those apps to get new users as well as to help them to monetize on advertising. So that's a growth opportunity for us on AI. One of the patents that we have also filed recently, as I mentioned, that our patent count and portfolio is constantly increasing, is to look at how to do this better filtering of AI-oriented, let's say, nonhuman traffic, right? So we would like to make sure that we understand which traffic is generally coming from the human versus from an Agentic AI tool acting on behalf of that human, right? So we are doing much deeper filtration for that in our technology use cases. And this is called prebid filtering. Even before we make a bid for that traffic, we should be able to classify it as is this a human engagement that we can show an ad for? Is it a human delegated to an AI Agentic engagement, which is still authentic. It is acting as an authenticated AI? Or is it a fraudulent machine-based simulation to try and earn money for some publisher unfairly? So we are doing very clear and proactive technology innovations in these areas and also protecting that by filing the appropriate patents for what we are doing here.

The next question comes from the line of Ashwin Mehta from AMBIT Capital.

Congrats on good numbers. Anuj, one question in terms of acquisition strategy. So historically, when we earlier did the acquisitions, these were to add services, which could expand our offerings, then we move to adding verticals and geography presence. In terms of the next set of acquisitions that we are looking at, are we looking at newer models of monetization like, say, PaaS, for example, or the supply chain side of things? How are we looking at in terms of this round of acquisitions?

Well, our focus in terms of acquisitions is always having a multipronged approach. It's not just anchored on one dimension of just a particular type of service, but there are several factors that contribute to it. At this moment, I would say that the single word that would define the strategy for inorganic is verticalization, okay? So verticalization, I'll give you 3 dimensions of verticalization that we are evaluating. First, in terms of ad industry verticals, right? The customer base, the sales organization or even the data capabilities of that particular target company, is it going to give us a greater ability to verticalize into these EFGH category verticals that we want to go into. So if they have run a lot of advertiser campaigns for a while, in that market. Is it that intelligence? Can we train our AI models on that and therefore, verticalize our platforms much faster? So that is one dimension of verticalization. The second area of verticalization that we are talking about is from an ad tech perspective, right? Ad tech is, let's say, right from demand side where these advertisers all the way to the tech stack to the supply side to the ad server to on-device operating system level deeper insight, right? So we are saying that right from device all the way to demand. So from demand to device verticalization, is it going to help us with that, right? Is it going to add complementing tech capabilities within our consumer platform stack to become more deeply ad tech verticalized? So that's another dimension that we are looking at. And then, of course, the third area of dimension is on the consumer data and part of the verticalization approach where we can go deeper on the consumer personas, right? So again, these are the 3 dimensions. So from a consumer standpoint, how can we go deeper right from the top of the funnel to the lower funnel conversions with the consumers. On the advertiser side, we are looking at how can we go deeper and verticalize for EFGH categories. And the third is on the ad tech stack, how can we go deeper all the way from demand side down to the device.

The next question comes from the line of Deepak from Sundaram Mutual Fund.

First of all, congratulations on a good set of numbers. So my first question, let's say, is to understand the split of growth. What I mean by that is, let's say, assuming that we do a 20% growth in the next 2 to 3 years on the top line, would it be fair to assume that 17% to 18% of that growth will be driven by converted user and let's say, 2% to 3% would be driven by the average CPC rate going higher? Or is it that average CPC rate would have a higher incremental share in this growth since in the past couple of calls, we have been calling out that we are targeting premium users, CTV channel, more iOS-led conversion? So just wanted to understand the split of growth going forward from that angle.

Yes, I have already given a very clear breakdown in the -- in how we internally look at growth and what are the formulas and the KPIs for the internal organization, the management team, the leadership team, the sales organizations. And we are absolutely looking at a formula where the revenue growth on a year-on-year basis, plus the EBITDA growth in terms of percentage EBITDA growth on a year-on-year basis combined has to be around 45%. So it can be 19% revenue growth and 25%, 26% EBITDA growth, and that leads to 45% or it can be 22% revenue growth and 23% EBITDA growth, and that's 45%. But in both scenarios, we are saying EBITDA growth has to be faster than revenue growth, which means margin expansion has to be part of the equation. Now I would like to retain some execution tactical flexibility to ensure that in certain cases, we may push for higher margin expansion and let's say, the revenue growth is this thing or in case for slightly lower margin expansion, but let's push for the revenue growth as what you're seeing right now, right? What you're seeing is we push for revenue growth, but we invested more for verticalization in international markets and data and inventory costs and so on and so forth. So the EBITDA margin expansion was happening, but not as much as it could have happened had we not pushed for that element. So these are tactical things. Any further distilling it would be perhaps too restrictive. What I would say is that if you are modeling our company for growth, modeling it for around 18% to 20% revenue growth and around, let's say, close to 23% to 25% EBITDA percentage growth would be a sensible way to model our growth.

Okay. Very helpful. Now my second question is relatively short-term nature since now past couple of quarters, our base is largely normalized and Q3 is the strongest quarter for us. Would it be fair to assume that in this Q4 quarter, we should see some cyclicality and some decline in the revenue front on a Q-o-Q basis? Or do we think that we still have that revenue visibility for us to be at a similar run rate of Q3 or even better in Q4?

Let me put it this way. If -- depending upon what all happens in the geopolitical world, what side of the bed the world leaders wake up from every other day, if things are stable, I think we will do better in Q4 versus Q3 or at least like flattish, we'll beat that trend again. But if there's still 2 months to go, okay, February and March. And every day, the situation is dramatically different, yes. So given that context, it could range to slightly below Q3 to slightly above Q3, but we should be very resilient in Q4. One month has already gone. January has been positive. I have reasons to be optimistic. But I would say that, look, I mean, in order to beat the Q3 seasonality lift trend, okay? So in a normal scenario, let's say, everything being sensible in this world, Q3 should be our highest quarter, and we should see -- we should all expect to see a slight dip in -- from Q3 to Q4. That's a normal expected scenario. But we are such a fast-growing company across verticals, across markets that we have been beating this trend over the last few years. And I think we can -- we have a good chance to beat it provided the geopolitical situations allow the advertisers to continue to put their budgets the way we are expecting it.

Okay. I believe that then because we have been doing very well even in Q3 despite all the RMG impact and also there was some uncertainty regarding U.S. because of tariff, we have done relatively well. So hopefully, it should be a good number in Q4.

Yes, I would say if you're modeling it, be prudent and model it like slightly lower than Q3, but let us surprise you.

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

Well, thank you very much for the highly engaging earnings call today and for your wonderful questions. I look forward to meeting you again soon with our Q4 results and the full financial year results. This is our first year of Affle 3i, first year of our third decade. And I'm looking forward to our company turning 21 years old on 5th of April 2026, and there will be exciting news to follow. I think we've laid a great foundation for Affle 3i in its first year already, 10 months gone, and I think we have already done fantastically well. And I'm very, very convinced that we have a great growth ahead for Affle 3i 10x growth vision. Thank you. All the best.

Thank you. On behalf of Anand Rathi Share and Stock Brokers Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.