Frog Cellsat Limited (FROG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Frog Cellsat Limited Q3 and 9 Months FY '25 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. I would now like to hand over the floor to Tushar from Ventura Securities. Thank you, and over to you, Tushar.

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to Frog Cellsat's Q3 and 9 months FY '25 Earnings Conference Call. The company is today represented by Mr. Konark Trivedi, Managing Director; Mr. Umesh Singh, Chief Executive Officer; and Mr. Charan Jeet Kalra, Chief Financial Officer of the company. I would now like to hand over the call to Mr. Trivedi for his opening remarks. Thank you, and over to you, sir.

Thank you, and good morning, everyone. A warm welcome to all of you. I'm delighted to have you join us today as we review the performance of Frog Cellsat for Q3 financial year '25. As many of you know, the industry is undergoing rapid growth, driven by technological advancements and the increasing demand from seamless connectivity. At Frog Cellsat, we are proud to be at the forefront of this transformation, contributing to the evolution of mobile network and ensuring reliable high-quality service for millions of users worldwide. I am pleased to announce that our performance this quarter has been outstanding. We are focused on developing cutting-edge solutions, expanding our product portfolio and successfully fulfilling the growing demand for RF equipment and telecom infrastructure. These efforts have translated into strong financial results, reflecting the strength and effectiveness of our strategy. I am excited to share that our total revenue for Q3 financial year '25 reached an impressive INR 911.5 million, representing a remarkable 104% year-on-year growth compared to the same quarter last year. Our EBITDA for the quarter surged by 375.7% to INR 220.2 million, while our PAT grew significantly by 484.9% to INR 152.5 million. This exceptional performance was driven by the successful delivery of our OneDAS solution for major projects at Noida International Airports, Chhatrapati Shivaji Maharaj Mumbai International Airport and Navi Mumbai International Airport. The completion of these high-value deployments underscores our capability to efficiently and precisely execute complex projects, further solidifying our leadership in the industry. I'm also excited to share several key developments that are propelling our growth. We are successfully completely -- we have successfully completed the delivery of OneDAS system for major airports, including Noida International Airports and Chhatrapati Shivaji Maharaj International Airport. We are also preparing to deliver OneDAS system for Guwahati Airport and upgrade the Active DAS system at Lucknow Airport to support 5G coverage. Our order book remains strong at INR 1,050 million as on December 31, 2024, indicating sustained demand for our telecom solutions. In addition to this, we are further expanding our capabilities with the launch of a new SMT line set to go live by March 2025, allowing us to manufacture products like SFPs, IP cameras and WiFi routers under our own brand. We are also preparing to enter the global Active DAS market valued at over USD 1 billion, which represents a major growth opportunity for us. Looking ahead, we remain confident in our ability to capitalize on new opportunities as the telecommunication industry continues to evolve. Our focus on innovation, scalability and operational excellence will remain at the core of our strategy, ensuring that we continue to deliver sustainable value to our stakeholders. We are deeply grateful for the trust and support of our dedicated team, customers, shareholders and partners. Thank you for joining us today, and I look forward to addressing any questions you may have.

[Operator Instructions] First question comes from Rohit Singh from Nvest Analytics Advisory.

Am I audible, sir?

Yes, Rohit. Yes.

Congrats for a decent execution this quarter. I want to understand the near-term to medium-term visibility, like our order book is INR 105 Cr, which is slightly higher than our -- this quarter revenue. So can you help me to understand like INR 90 Cr, we did it this quarter. So 2 questions. One is how much was from the execution of the order book that we had at the beginning of the quarter? Secondly, what is driving our non-order book revenue? Like how sustainable is it in the upcoming quarters, sir?

So look, firstly, thanks for the appreciation. Yes, the quarter was really good for us, Q3. And the order book is healthy. But I would like to again say that while the order book stands at INR 105 crores, in all likelihood, will be -- we should be only possibly doing somewhere in the range of INR 50 crores to INR 60 crores in this quarter. And we are still maintaining the same guidelines, which we have given at the start of the year that we'll be overall doing our revenues for the year at 30% plus growth of the revenues, maintaining EBITDA of 15% plus. So that's our outlook for the year-end which is -- what we started with, yes.

Like, sir, I also want to understand how much this quarter revenue belongs to the order book that we were having at the beginning of the quarter? And how much was from the non-order book revenue?

What do you mean by non-order book revenue?

Is it something like any recurring revenue that we get from any stream, which is not reflected in our order book or 100% of the revenue is coming from the order book that we have in the beginning of the quarter. That's what I want to understand, sir.

Okay. So look, so everything comes from the order book only. But this is -- the way it works is we have like in December and we have an order book of INR 105 crores. But then order also keeps coming during the quarter. So what we declare to you is what is our order book position at the end of the quarter. But then orders still keeps coming during the quarter. Some of them get served during the quarter itself and some of them gets carried over, right? So that's how it works. So to answer your question, in the INR 91 crores, which we did in Q3, see, in the start of Q3, our order book was, I think, INR 115 crores. So it will...

[indiscernible]

Yes. So then to that INR 115 crores, some orders further came during the quarter, which would have increased that order book. And out of that total INR 115 crores plus whatever new additions would have come, we have built INR 91 crores.

Understood. So what is the visibility for the order inflow for this particular quarter? Like how do you see orders coming and adding up to our order book and then execution like you mentioned, INR 50 Cr to INR 60 Cr in this quarter. So what kind of order book do you see at the end of this ongoing quarter?

Rohit, see, we are -- if you're asking about the projections, so look, we -- I've told this earlier also that in our industry, we should not be actually looking into quarter-on-quarter, though we are giving the results, declaring the results on a quarterly basis.

I'm asking for the order inflow.

Yes. So I'm telling you. So as far as market projection guideline is concerned, we should be looking at not quarterly guidelines, but at the annual guidelines, right? So it's like some quarter might be not so good, some quarter will be good. But overall, we should be achieving the annual targets and annual guidelines. This is how it works. So if you want to know more about the next financial year, although it is pretty early for us to project, but we are still aiming for the next year also to achieve 30% growth on the closing value of this year.

Got it, sir. And one last question is on the industry dynamics, sir.

Can you join back the queue, please? [Operator Instructions] Next question comes from [ Garvit Goyal ] from Nvest Analytics Advisory.

Am I audible, sir?

Yes, Mr. Goyal. You are audible.

Sir, my question is with Starlink gaining popularity in India, maybe, say, in medium term, what impact do you see on mobile operators like Jio, Airtel along with the demand for our products like RF repeaters, Optical DAS, interference mitigation systems, like do you think if Starlink provides me Internet directly, that led to user inter-terminals. Why would I need this traditional RF repeaters for Optical DAS. So please provide -- help us to understand this.

Okay. So Mr. Goyal, Starlink or a similar service, satellite service is primarily designed for serving the areas which are remote. That's the basic business model. Even in the developed countries where Starlink is available today, not everyone in the city has started to use that. It's primarily being used in the remote areas. So Starlink might be new for India market, but it's an established service in U.S. and Europe market. It's available and it's being used. Now if you look at in these geographies, the mobile operators and mobile networks are still working the same way as it was working. While Starlink can -- let's say, the use case. So if there is a residence or an office, you put a Starlink, so you can use that Starlink to access Internet at a fixed location. It's not meant like a mobile, you can carry it on anywhere. It's not a satellite phone. It's still a satellite terminal. So it cannot replace your mobile phones. So let's imagine you are going for -- to an airport or traveling. At airport, you still need to use your mobile phone, right? Or if you're traveling in metro, you still need to use your mobile phone. So these 2 are addressing different market segments and not essentially competing with each other.

Next question comes from Tej from Niveshaay.

Am I audible?

Yes, you are audible. I didn't catch your name, sorry.

Tej.

Tej, okay.

Yes. Once again, congratulations for a good set of numbers. So my first question is, sir, I just wanted to get an understanding from you even a broad sense of the opportunity, the TAM that which we have, for example, what would be the opportunity for you? What amount of equipment probably would go in, let's say, a tower -- telecom tower and let's say, one airport would require probably about what value of DAS would go probably into one airport. I know the size would vary accordingly, the value will also vary. But if you just can give a broad range of value of OneDAS going into an airport and what kind of opportunity in terms of how much equipment goes into one telecom tower?

Right. So look, firstly, the growth that we are seeing in our business and where our major focus is into digital repeaters and Active DAS systems. So those are the active equipment and has less competition, gives better margins. So that's our key area. Now your question about the DAS. So at airport, if you talk about airport, then airport projects, depending on the size of the airport, it can be done maybe in, let's say, INR 6 crores, INR 7 crores and can go up to INR 30 crores or more. That's the basic bracket which airport projects work in, in the Indian scenario. But could tell you, -- so far, we were addressing primarily Indian market with our DAS product. Globally, this market stands at $1 billion plus annual revenues. And now our next step after creating these many reference in India for ourselves because the technology works the same way. It's no different. What works in India works outside. So now our next step is to take our products global markets and tap into this $1 billion size market.

Got it. And really, sorry, what 2 products did you say the most selling on the repeaters and what, sorry?

Active DAS.

Okay. Got it. And the repeaters are mostly for the telecom DAS, right?

No, no. So repeaters and Active DAS both works almost the same way. The only difference is the digital repeaters work for a smaller venue. It can be like a small corporate office or maybe hospital, whereas DAS system works at large venues like airports or stadiums or metros tunnels.

Got it. So in terms of telecom towers, how much of our equipment goes into telecom towers because we are serving that market as well, right?

Yes, we are serving that as well. So again, depending on what all operator wants to buy for that tower, we can supply from -- let's say, for a tower, we are supplying only jumpers, that jumper makes something like maybe INR 10,000 cost for the jumper. But if we're adding to that jumper, let's say, diplexers or SFPs or CPRI cable or feeder cable or lightning arresters and the RACs, so then it can go even up to INR 5 lakh, INR 6 lakh for a tower.

Right. So currently -- I mean, currently, the major portion is jumper, right? The additional part is still less for us, right? Correct me if I'm wrong.

No, no. So look, things keep changing. What you are saying, I think the jumper is more -- is a picture which was like 2 years, 3 years back. Now other parts are also growing and the portion of...

So is it right to say that probably your order value probably would from a telecom operator or from another entity would probably INR 2 lakh, INR 3 lakh. The number would be around INR 2 lakh, INR 3 lakh per tower right now for you?

No, not. That's too much of value because we have not done that much.

Is it -- I mean, if you could just throw...

It can be -- you can take it like INR 25,000 to INR 50,000.

Got it. And who is the major client in this telecom operator or any single client which were contributing in a major way?

Look, Airtel has been our key customer so far. So -- but at a point, they were contributing almost 70% plus revenues, which is coming down because other revenues resources or other customers are increasing. So Airtel and the overall revenue perspective should be still more than 50%. But then yes, other customer additions have happened, which are bringing in larger revenues as well.

Got it. And for the current order book, that is about INR 110 crores outstanding, how much would be DAS and how much would be RF -- I mean, telecom equipments?

In current order book, I think the DAS is going to be about maybe I think around INR 20 crores.

INR 20 crores.

Maybe INR 20 crores to INR 30 crores, yes.

Got it. And what's our scope of work in DAS? Do we do the installation also? Or are we just providing the equipment to the operator or maybe say this system integrator?

It depends on how the deal is designed. So we work in all the models where we -- in some cases, we supply just the equipment. In some cases, we supply the equipment and do the installation as well. So it depends on how the deal is.

So what's the margin profile for the DAS projects? Because I believe it's quite higher than the telecom equipment, which you are doing, right?

Yes. So it's good. It's a very decent, which is getting reflected in our numbers of Q3.

Any number to it, I mean, about range or something like that?

Look, I don't want my customers to get offended with this.

Okay. No problem. And since you are saying you are probably also trying to go global, right? And so are we in talks with any say, let's say, airport operator or something any pipeline in terms of DAS? Or are we probably building team on that side? What's the focus? Are we probably going to push DAS more or still the focus would be telecom and the split would be around same, let's say, higher would be telecom only always. So I just wanted to get your idea and your view of what you're thinking on DAS side?

No. So our key focus is on the DAS and digital repeaters. When we speak about taking global, so these are the products which we are taking global. Yes.

So I just wanted to get an idea, so what could be the opportunity for you? A lot of, let's say, airports in different cities are probably coming up, right? So do you see -- I mean, what number -- if you can just -- what market size do you envisage, let's say, in the next 2, 3 years in the DAS? And who are the major competitors in this space? And probably what's our right to win? How do you get the customer? I just wanted to get an idea on more on DAS about how you win the order and what is the potential pipeline in the next 2, 3 years?

Look, the major competition, global competition, there are total 4 companies, 4 -- which are dominant in the global market. So one is CommScope. Second one is JMA Wireless. So these 2 are American companies. Then third one is SOLiD, which is a Korean company. And then there is a Chinese company called Comba. So these 4 are primarily leading the market or has the largest market share. So I think out of the total current market share, they are holding almost 90% between them.

Okay. Okay. So what's our entry point? I mean, are we providing those services at, let's say, a lower cost? Or is it technology? I'm just trying to understand because from a point of view of what's an entry point for us, right?

Yes. So look, for a small -- considerably small player like us, there are 2 entry points for us. One is lower cost. and still delivering the good service with pretty large references in place like Mumbai Airport or Noida Airport.

Got it. And are we manufacturing all components, even the baseband units or let's say, the net band units? Are we all probably making it in-house or we are assembling it or like probably we are importing and just installing?

No, we are making everything locally. Our product is security approved as well. We are part of a government PLI scheme for Make in India.

Any replacement demand from this kind of products, whether it is telecom or DAS, what's the replacement demand for, let's say, antenna -- I mean is there any servicing component which requires replacement every few years or probably months?

Look, the technology keeps changing from -- initially, it was 2G, then 3G, then 4G, 5G. You see every 3 years, there is a new tech which is coming in on an average, 3 years is the time. So once the new tech comes, you need to upgrade the system.

Got it. And sir, when you say that government is -- just a second. Sir, when you say government is preferring the local players for the telecom equipment for the safety of the country. But if I look at the -- I'm just trying to understand, is there any probably a list or something? Or is there a government specific scheme which are supporting the local manufacturers because the names you said, which is holding 90% of the market share are all international players, right? So I'm just trying to get an idea.

So this 90% market share, I said global market share, right? No, India market share.

Okay. So what would be the India split? I mean, how much would be, let's say, our market share or the other Indian players? And who are the major Indian players? And what would be the market share of these big players -- international players, sorry?

So if you see the recent deals in the last 9 months, all the deals that have been closed for Active DAS has been won by us.

Okay. Okay. Great. Great. So on the visibility, I mean, although you said -- I mean, it's not possible probably you to give numbers. But still on the DAS side, I mean, what's the team building, what we are looking at? And does SMT line helps us to manufacture more of DAS component in-house, probably we are backward integrated or the SMT line products are all separate new products or a new entry segment. So if you could just throw some light on that also, please?

Right. So look, SMT line per se is not going to help us with the Active DAS solution because that anyway is already developed product for us. SMT line is meant for a new segment of market, new products, which we are bringing in, like SFPs, IP cameras, WiFi routers. So these are totally new products, new segment of business which we are getting into.

Got it. And what could be the scale we can achieve with the CapEx which we are doing? And what's the amount of CapEx probably we are putting up? And what's the revenue which we can do?

Look, it's pretty early days for us. In terms of CapEx value, we are implementing almost about INR 10 crores CapEx for now in the SMT line. But -- so yes, we'll have more idea on the market size and everything in the coming months.

Got it. And sir, last question from my side is, are we doing subcontracting for any major Indian players, maybe let's say Tejas or an HFCL or something other players or any international players?

No, we are not. We are not -- we are avoiding doing the contracting jobs because they are very low-margin jobs. You are seeing the big players who are doing contracting jobs, they are making only 2% to 4% margins.

Got it. And I mean, at the current -- so what is the utilization are we operating currently? I mean what shifts are we operating in? And...

Yes. So look, we have a pretty flexible system. So as and when we need, we operate in shifts. Otherwise, we just operate in 1 shift. So like in the last quarter, most of the time, we have been working in 2 shifts of 12 hours each. And now we are working in the normal shifts.

The next question comes from Gunjan from Niveshaay.

Follow-up questions on the previous questions. So like in the airport, when we deploy that, so what's the timeline on which we get the order? I mean at what point on the airport construction do we get the orders? And how is it built because the major portion of your revenue got build in Q3. So how does the order execution cycle work in that?

Right. So look, again, there is no hard and fast rule in this when the ordering will happen. Like -- okay, let's take example. So Lucknow Airport project, we have -- when we have received the Lucknow Airport project, it was during the construction phase of the airport. So the airport is getting constructed and it is still -- for the launch is still almost 2.5 years away when we got there. So the revenue realization happened quite late from the order receiving aspect. Whereas these projects, which are like Noida Airport or Navi Mumbai Airport, they are also under construction currently. But when we received their order, they were at pretty advanced stage of construction, whereas the launch is visible in the coming months. So both these Noida and Navi Mumbai are ready for launch from 1st April. And so there was quite rush, rush for them to get the equipment in time and we delivered it within December for both these projects. Mumbai Airport is a live airport. So they again need a system for operating 5G there and upgrading their current. So that's -- so it again depends. There is no hard and fast rule.

Okay. So the Lucknow Airport actually you took 2.5 years. So right now, the order book that we have from that, that is executable in how much time then?

Okay. So see, this order book, what we have, it's, again, very difficult to predict for us. Out of this order book, how much will get built at this quarter because a lot of subjectivity remains. And especially in this quarter, our order book execution depends on operator rollout. So if operator is doing a fast rollout in this quarter, then they will build up the equipment pretty fast. But if for some reasons, the rollout is slow and they have their own reasons, they have their own planning, then they pick up the material slowly. So you can see the trend from the last few quarters because every quarter, we do give projection of how much is the order book. And then you'll see the next quarter how much we are billing it. So I think you can get a fairly good idea from that aspect.

Got it. So in the other part of the order book, like we have around INR 105 crores. So part of the order book is tied by other telecommunication equipment, then how much -- what is generally the order execution for that one, a year or how much is it? Generally in terms of telecommunications, so a large part of our orders is repeaters or jumpers apart from that because that is a very small component as of now. So the other products would be repeaters and jumpers or accessories, what is it?

Yes. So look, our -- we have 5 product verticals. The first one is digital repeaters. Second one is Active DAS. Third one is IBS accessories, which includes MIMO panel antennas, omni antennas, splitters, couplers like that. Then we have network accessories, which includes jumpers, CPRI cable, SFPs, et cetera. And the fifth one is small antennas. So these are the 5 broad verticals that we have. And yes, in this INR 105 crores, each one is contributing to it. As I mentioned, in this INR 105 crores, almost like INR 25 crores, INR 30 crores must be from the DAS. And yes, everything must be contributing something to that.

The [indiscernible] approximately what normally for your products, how much -- can I just ask one more question, please, then I think I will be done.

Join the queue ma'am.

Sorry?

Can you join back the queue ma'am?

Okay.

[Operator Instructions] Next question comes from [ Ankit Shah ] an individual investor.

Congratulations for fantastic results. Yes. So I have a question regarding the sudden increase of EBITDA margin. So what led to such a high EBITDA margin? And second question would be if you have any -- if you can give some segregation of the current existing orders. So which are the areas and what are the big parties? I mean, what are the big clients are contributing to those orders?

Right. So, Ankit, for the jump in the EBITDA margin. There is a simple thing. We have done almost double the revenues, keeping our fixed cost same, right? So that is one thing which has impacted the margins. So we have not added any resources or anything more to achieve these extraordinary revenues. Second is most of this revenue has come from our Active DAS solution. And Active DAS solution is relatively high profit margins business being active product being -- having low competition in that space. So these are the 2 reasons for increased EBITDA.

Okay, sir. And any -- regarding the order book, do we have any split, if you can share?

Look, we don't usually give that share. So it's a mix of operators and the mix of DAS customers for us. So DAS customers, as we keep announcing anyway for the DAS projects are wins. So there are orders from Metrotel, there are orders from ACES. There are orders from L&T. And so there is a mix of these customers. But then we have orders from Transmedia. We have orders from Adani. We have -- and for the operator business, we have orders from Airtel and Vodafone. So it's a mix of all these.

Okay. Okay. So any highest dependency on any of the client? I mean, out of this INR 105 Cr?

I think almost 50% of it must be from Airtel.

Next question comes from Dhwanil Desai from Turtle Capital.