IZMO Limited (532341) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the IZMO Limited Q2 and H1 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. The statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to your host, Mr. Sanjay Soni, Managing Director of IZMO Limited. Please go ahead, sir.

Thank you. Good morning, everyone. I would like to wish you all a very warm welcome to IZMO Limited's earnings conference call for the quarter and half year ended 30th September 2024. I would like to begin by expressing my gratitude to you all for taking the time to join us today. We have on call with us today Adfactors, our Investor Relations team. I trust you all would have had the chance to go through our investor presentation and results published on the website and stock exchange. I would like to start with a quick overview of our company and some key recent developments before getting into the business and financial performance. Brief background about the company. As you might be aware, IZMO Limited is among the leading software product companies specializing in the automotive domain. Our operational footprint encompasses offices in San Francisco, Chicago, Paris, Brussels, Los Angeles and multimedia studios in Los Angeles and Brussels. We also have a presence now in the U.K. Over the last 2.5 decades, we have gained prominence as a provider of innovative software solutions for the automotive industry. Today, we have thousands of clients in U.S., Europe and India, and with some of the top automotive manufacturers amongst our clientele. Our business can broadly be categorized into 3 core divisions. One, Izmo Studio which is interactive media solutions; two, izmoauto, digital retail and CRM platform; three, FrogData, AI and data intelligence platform. Izmo Studio with studios in Los Angeles and Brussels reach globally in automotive imagery, licensing the world's largest image library to top clients like Hertz, Avis, Europcar, Arval, Edmunds and MSN Autos. Cutting-edge lasers and CGI technology drive our innovative digital retail solution. Our interactive CGI product izmoEmporio, a 3D virtual showroom for dealerships, portals and retail apps has earned industry-wide recognition. Recent clients included Ford, Peugeot and Renault. Developed in-house, it exemplifies the Make in India initiative. Building on this, we are developing a virtual reality products that merge digital retail with physical experiences, offering immersive customer engagement, with VR gaining traction in the global markets, virtual -- VR software is a highly underdeveloped market with huge scope for expansion. izmoauto is our digital retail and CRM group operating in France, the U.S. and India. It leads in France, serving major retail groups and OEMs with steady growth. A new Spanish language platform for the U.S. caters to the growing Hispanic market. We have a Spanish-only automotive in the U.S. called www.autogozo.com with 2,000-plus dealers signed up on it. The portal targets the $220 billion Hispanic automotive market, positioning it as the base for our U.S. expansion. Our CRM products are now mandated by Stellantis for European aftersales with a multiyear contract and expansion planned across all brands. We also had more consulting in France, certified by the French government for reimbursed training for automotive dealership. Clients include Stellantis, Renault and large dealer groups, and we have a lot of plans for growth of this division. FrogData. FrogData are AI and data intelligence division has led the way in AI-driven decision analytics for the automotive industry. After 7 years of investment, it now delivers millions in additional profits to thousands of dealers, showcasing the power of AI for performance optimization. Current products include FDAP, which is the FrogData Decision Analytics Platform, WarrantyBoost, is a service analytics with warranty uplift, WarrantyMind, which is AI for warranty claims administration. FrogData's products are well received and the division is growing substantially. This market has driven investments in sales, engineering, delivery and marketing. New AI-driven products for vehicle pricing and predictive service upsell are planned to release soon. Coming to some of the key recent developments. We have made remarkable progress in the first half of the year, building on the strong momentum from the previous year. Despite headwinds from global economic fluctuations and geopolitical uncertainties, the company has not only maintained its growth trajectory, but also expanded its market presence. The automotive industry's chip shortage, which caused significant disruptions in 2022 has also eased, further supporting the industry's growth this year. Our client also continues to grow tremendously with significant additions in the U.S. as well as European markets. Adoption of our FrogData AI suite of products is the highest as it gained popularity among several existing as well as new users. A major highlight of the year so far has been the acquisition of Geronimo Web, a U.K.-based leader in digital marketing solutions for auto leaders and OEM. This acquisition has expanded IZMO's client base across Europe and Latin America and positioned the company among the largest automotive digital platform providers globally. The integration of Geronimo Web expertise and client portfolio enhances IZMO's value proposition in the automotive marketing space, and significantly broadens its market reach. The move brings Ford into our client roster, and we aim to cross-sell many of our products through this automotive giant. Another important development was the commencement of operations at the facility under our subsidiary Izmo Microsystems Private Limited. IzmoMicro focuses on EV technologies, reflecting our strategic diversification into the rapidly growing EV sector. The cutting-edge System-in-Package manufacturing facility in Bangalore is designed to produce high-performance SiP solution for an industry such as automotive, consumer electronics and telecommunications. The investment in the SiP facility positions IZMO as a key player in the global semiconductor supply chain, showcasing the company's commitment to technological innovations. We have already started working with an automotive player for this and are in talks with many others. This quarter reflects revenue coming from this new line of business as well. A major prior milestone was the expansion into the U.S. Hispanic market through the launch of the Spanish language portal mentioned earlier. This strategic move enables us to tap into a growing demographic and strengthens our position in North America. Another notable achievement was our partnership with Stellantis, one of the largest global automotive manufacturers. Stellantis chose IZMO's CRM product for its European aftersales operation, and we are seeing good traction from the CRM rollout across Stellantis' entire European network. While we operate in a highly competitive environment, the company is leveraging its deep domain expertise to stay ahead in product development and market positioning. Its integration with major data system in the U.S. automotive ecosystem, including DMS CRM, IMS and digital retail platforms, gives IZMO significant advantage. This integration allows us to offer comprehensive data-driven solutions to automotive clients, helping them optimize their operations and improve business outcomes. Now turning to our financial performance. Second quarter, that is Q2 FY '25. We reported INR 58.55 crores of revenues during Q2 FY '25 or 30.83% year-on-year rise. Revenue growth is driven by expanding clientele across the U.S. and Europe, supported by higher sales prices. We added about 100 new customers in the U.S. and 46 in Europe during this quarter alone. The quarter also saw the commencement of revenue from our subsidiary Izmo Microsystems. Our EBITDA, excluding other income for the quarter stands at INR 9.49 crores. growing 4.85% year-on-year, where EBITDA margin is 16.2%. Continued investments in our talent pool, which is our greatest asset has had a bearing on the margin. Our PAT during this quarter is INR 29.9 crores against INR 5.12 crores in the second quarter FY '24. This includes a onetime gain from exceptional items, which are the proceeds from the sale of a property. PAT margin stood at 51.07% higher by 3,963 bps. EPS during the quarter is INR 21.14. Coming to the half year ended FY '25, we recorded INR 106.13 crores in revenues during H1 FY '25, a 23.06% year-on-year rise. Our EBITDA, excluding other income for the half year grew 8.42% year-on-year to INR 18.79 crores, while EBITDA margin is INR 17.70 crores (sic) [ 17.70% ]. Our PAT during half year is INR 35.93 crores as against INR 10.13 crores of H1 FY '24. PAT margin stood at 33.86%. EPS for this period is INR 25.40. That is all from our side. We can now take questions.

[Operator Instructions] The first question comes from the line of Sudhir Bheda from Bheda Family Office.

Sudhir Bheda here, and congratulations on a good set of numbers. Am I audible?

Yes, yes, I can hear you. Mr. Sudhir.

Yes. See, my questions are threefold. First, the FrogData growth is, I think, muted in Q2. And I believe that it is seasonality and Q3 and Q4 are much better. But still what kind of growth do you foresee in FrogData in this H2?

In the second part of the year, we are looking at around 25% to 30% growth because normally, the business comes in, in the last 2 quarters.

As far as FrogData is concerned?

Yes, yes.

Okay. And sir, can you throw some light and quantify how the semiconductor business at Bangalore and then any kind of foray which you are following into, that are progressing. And next year, should we see the revenue coming in, in FY '26? And if yes, then what kind of revenue we foresee?

We are already, in fact, having started seeing revenues in this -- in the last quarter from this business. And this year, we hope to see revenues of around INR 5 crores to INR 6 crores before March, if not more. We are trying for more. Next year, we are looking at around INR 30 crores to INR 40 crores at least coming from this division. So we've already signed up 2 large customers, both automotive, and we are talking to several more, including our biggest customers in France. So we do see a lot of potential because hardware with software combination is quite appealing to many clients because, again, it is a single source. And we are getting very good traction in this area. And that is the reason why we decided to sell them.

Great. Great. And this quarter, I think our employee cost -- due to employee cost, our EBITDA is also muted. So...

Yes, that's because the Geronimo acquisition, the employee cost is still high. We are reducing it. We are rationalizing it, but it will hit us for another 1 quarter before it starts going down, because these were costs in U.K. and other countries, which we are now reducing over a period.

Okay. And -- but the revenue also will -- incremental revenue will also help us in increasing the EBITDA, right, in...

Yes, absolutely. Because the revenue will -- is also kicking in, but since the costs were high -- high cost base, we have to with -- the cost reduction can be done over a period of time. It can't be done overnight. So we have started the process and we are doing it gradually. So by the March quarter, you will see very good results from that division coming in, positive. So that will definitely add to the EBITDA.

The next question comes from the line of Jinesh Shah, an investor.

Sir, in the last conference call, we spoke about divestment of FrogData and tentatively, management has also set up for a time line by December and most likely this divestment of FrogData will happen. Would you please elaborate what is the status as on today?

Yes, we had done a lot of work on that. But what the feedback we got from the market was that FrogData size-wise, was quite small. And that's why the valuation we were getting was not in line with our expectations. We are looking at $60 million to $80 million, whereas they were offering $40 million to $50 million. And the feedback we got was if we are able to take FrogData up to $10 million to $12 million revenue then the multiple can be much better. So they asked us to wait and come back after, say, a year or 15 months, and then get a much, much better multiple on the valuation on the revenue. So that is what we decided that we will wait until we achieve a figure of $10 million, which should be in the next, say, 9 months, and then we'll hit the market. And because that also attracts a much bigger kind of PE players when the turnover is big and they can take us -- they can invest at $25 million for 25%. Then we attract a much better class of investors. So a lot of them suggested that come back to us after a year, and we'll definitely be very keen to invest at a much higher valuation, but we need a bigger chunk in terms of investment. So that's why we have put it off for some time because it made sense to us that we should get better value, why dilute it at this point when we don't really need the money urgently. We have enough liquidity in-house to manage our growth for the time being.

Sir, as you are venturing into the semiconductor business, will you please elaborate what kind of CapEx you are planning to do this year and next year?

This year, we are planning around INR 5 crores and next year's similar amount. So we're not looking at a very large CapEx. It's not required because what we are doing is very specialized System-in-Package technology. It does not require a very, very large investment, but more of it's technology-driven rather than capital intensive. So we are focusing on that business. It's much more IT-related business, and that's what we are focusing on. And also -- all the investments we've done from our own results. So we don't need to borrow or do anything like that.

Understood. Very good. Sir, are you planning to divest any non-core assets the way you have done in Q1 this year -- in Q1, Q2 this year, do we have any further plan to divest the non-core asset?

Not at this moment. We have already done what we needed to do, so.

Okay. So Tesla is...

Maybe a couple of years down the line. Right now, we have nothing in the pipeline.

Okay. Sir, Tesla is launching the driver-free car. I mean, the kind of automation, what they are doing. So are we into any kind of this business? Do we have any product line where we can contribute like...

We are working. We are doing an R&D on that. So it's in the process, but it's too early to talk about it, because it's very complex software. It requires a lot of CGI and other things. So we are doing that, but it takes time. But yes, we are developing something on those lines with -- along with one of the large OEMs, but we can't disclose more at this stage.

Tesla is not our client list, right, sir, as on today?

No.

Okay. Sir, what kind of spend we have done in R&D this year and what is planning for next year?

See, our normal R&D spend is INR 20 crores to INR 25 crores on an average. We always do that. So that is stable. Because we are always looking at new products, new technologies, and that remains. Now as the turnover keeps going up as a percentage, R&D spend will come down. That's the whole idea. So we are trying to increase the top line as much as possible. So the R&D spend as a percentage keeps coming down, and that's what we have been doing. But the R&D spend is very stable.

So the company has a very strong balance sheet and continuously generating positive cash flow. Is the company going to do any kind of buyback in terms of rewarding shareholders in a year or any...

Buyback is not the right utilization of the company's funds. We have done 1 acquisition this year using our own funds. We are looking at other opportunities. We're looking at growth in semiconductor. So there are many other areas to invest the capital rather than do a buyback because we have opportunities.

Okay. Sir, any growth guidance have we set up for the next 2, 3 years?

We are looking at around 25% to 30% growth year-on-year average. So we hope to achieve those numbers.

The next question comes from the line of Rahul [ Dohare], an Investor.

Congratulations on great set of numbers. You have answered pretty much most of the questions that I had largely on the employee cost increase because of the Geronimo acquisition. Can you also share what was the revenue contribution from Geronimo? And -- on the IzmoMicro side, you have already given the potential revenue contribution next year. Can you also tell us about the gross margins you expect to get from the IzmoMicro?

So Geronimo, the contribution is around a couple of crores for the last quarter because most of their contracts are annual contracts. So there's a lot of annualized revenue, but it's been quarter, I mean, monthly. But by -- I think in a 12-month period, we are looking at around INR 30 crores of revenue to come from them, INR 30 crores to INR 35 crores in the next 12 months. And it's growing because we are looking at getting some very large contracts in Geronimo, which we have been helping them to target. In IzmoMicro, we are looking at gross margins of around 30% to 40% at least. And until now, we feel that's quite doable, because it's -- like I said, this is an IT-based model. It's not just DMS or very low-end electronics manufacturing. So we are in a very specialized area where we have gone into, and we look at least a 40% gross margin.

Just one more question from my side. On the warrant conversion, you earlier said you eventually want to increase your promoter holding to close to 40% by end of this year. Is that still on track?

Yes, we finished. We paid for the warrants, and it was allotted in the last Board meeting. So all warrants have been converted.

As per the last update, I think the promoter holding will go up to about 35%, 36%. Is that the maximum? Or can it continue going up?

We look for opportunities to increase it further, I need to also have capital to buy. So [ a question ] of that as well.

The next question comes from the line of Raghav, an investor.

Am I audible?

Yes, yes, very clear.

I'm sorry if I missed this, but I'm just trying to understand what is the other income reported in the quarter comprised of?

Sorry?

What is the other income reported in this quarter?

We sold one of our land, company's land and building for INR 31.5 crores. So that is the other income, most of the other income. The rest is, we file claims against people who are using our images illegally or without permission or without paying us and that income comes from there as well, some income. But majority of it is the sale of the company's property.

Understood, sir. And my second question is just if you could just shed some light on the kind of products we are building under IzmoMicro? And like are they client-specific products? Are they industry generic products? And what purpose do they address? If you could just shed some light on those products.

We are doing a lot of products like a tire pressure sensor we have designed for our clients. It's, of course, specific to the client, but it can be modified for use with other clients because each company is this single requirement is different depending on their electronic system. But we are designing such kind of products using SiP, because in SiP, you can actually combine the similar technologies like digital and analog onto a simple single platform, which otherwise you can't do an [indiscernible] So with this flexibility, we can actually do a lot of innovation and give them products which are not possible so easily. So we are working on similar areas.

Understood. So essentially, please correct me if I'm wrong, but not just limited to the EV side of...

We are looking at regular ICE automotive as well as EVs. It's basically the entire automotive domain, not only EVs.

The next question is from the line of Prasenjit Paul from Paul Asset.

Congratulations for the good set of numbers. I just wanted to understand the competitive intensity of your products, like what kind of pricing power you enjoy or what kind of pricing hike you conduct like every year, what kind of pricing hike are you out with any kind of customers? If you can help me on that from me.

Sure, Prasenjit. So in each division, we have different competitive dynamics. So like in Izmo Studio, we hardly have any competition. In the U.S., we just have one competitor. In Europe, we have no one. So we have a lot of pricing power in that, and we have been increasing every year, the fees we charge for the images by nearly 15% to 20% on a year-on-year basis, because we have pricing power. On FrogData also, we are hiking prices because again, we are seeing -- the dealers are seeing the returns are very, very significant compared to what they paid. So we have been hiking there also by nearly 25%. On izmoauto, definitely, we have a lot more competition, whether it's in the U.S. or Europe. So there, we have to be very mindful of the pricing, and we normally don't increase more than 5% to 10% year-on-year.

Okay. So Izmo Studio or FrogData, so do you see like competitors are coming in because at some point of time, maybe competitive intensity must increase. And if that happens, sir, do you have any kind of patent or any IP for your products or for your software?

In Izmo Studio, all our products are copyrighted. So that's why a lot of people are paying us penalties for not using them legally. So we are going after very big companies. We have collected a lot of money in the past. We continue to do so. So it's not easy. And if you have to create the library what we have, every year, it has to be upgraded. We're able to bring in the cars into a studio, photograph then do the post-production and then image is ready for studio quality. I mean, as what the OEMs or dealers require. It's not easy. You can't just take a camera and do it in a parking lot. So there's a huge entry barrier there, which is the reason why a lot of our customers say, we will do it ourselves and then they give it up. That is not -- it's too expensive. It's not worth it, It's better to just license images from IZMO. So nearly every car rental companies, these are big companies, are billion-dollar companies. They prefer to buy it from us rather than try and do it themselves. FrogData, we currently don't have a serious competition. It will come but we have enough of a head start. We have enough of our database. We are already innovating. We are adding more products to our product lineup. So as long as I continue to provide value to the dealers and show him that the ROI on our -- on the investment in our products is much higher than what he is investing, I don't think we have an issue with the competition. Because we are not resting on our laurels. We are not complacent. We are continuously doing R&D to think of what next can we bring to the leadership. That's one of the main reasons why we have survived for more than 25 years in this business.

Okay. That's right. So which division has least amount of entry barriers in your current business?

Sorry, just repeat it, there was a plane flying overhead, I lost you in between. Just repeat your question?

Yes. Yes. So out of all the business divisions, which division you think has least amount of competitive advantage or least amount of entry barriers are there?

As of now FrogData, we don't have real competition and Izmo Studio, both of these.

Okay. I was asking for the least entry barrier, I mean for any competition...

That is izmoauto, which is the CRM and the online retail.

The next question is from the line of Akash Sharma, an Investor.

I have a few questions. I guess you are looking to acquire Geronimo. Sir, I wanted to understand what are the synergies that we are expecting from this acquisition? And how will that impact our revenue and profitability?

We completed the acquisition in June, actually. So they have a similar platform like ours for automotive retail, but they have a good OEM client base, which -- especially Ford. And they are present in the countries we are not there. So they are in U.K., they are in Brazil, they are in Argentina. They are in a couple of other countries where we are not there. So it brings us, first of all, Ford as a client. And second, we get these geographies into our geographical spread. Plus, it gives us a lot of opportunity to sell our other products into these clients. We are looking at around INR 30 crores to INR 35 crore turnover coming from Geronimo this year, not this -- in the 12-month period. Since the acquisition was done June end, we'd only get 9 months of that. So we'll lose 1 quarter. And then we hope to achieve profitability by next quarter in Geronimo because there were a lot of costs which we are cutting down, and it will turn profitable by next quarter.

Okay, sir. And in addition to geographies, will there be any new market segments or industries that we'll cater to?

Same, automotive. It's again automotive focused. So the market segment is the same. It's mainly geography.

Okay, sir. And sir, what was the cost of acquisition?

We haven't disclosed that yet officially, but it's a few million dollars, so...

Okay. Okay. And sir, coming on to our IzmoMicro, what is our investment in IzmoMicro as of now? And any kind of ROI that we are expecting?

We have invested till now around INR 5 crores. And ROI will start from next year because this year is mainly set up and getting the clients in. So from next year onwards, we expect good ROI to come in from that business. It takes years for the business to mature minimum. But we are moving very quickly, and we hope to be seeing a positive ROI by next year, next financial year.

Okay. And sir, lastly, as we'll make profit from the next year, what is the revenue contribution that we are expecting from IzmoMicro?

I've answered this earlier. So this year, we are looking at between INR 5 crores to INR 10 crores and next year between INR 30 crores to INR 50 crores.

[Operator Instructions] The next question comes from the line of Anil Nahata, an Investor.

My question is, in this particular quarter, Q2, how much of Geronimo's revenue were consolidated?

It is around INR 2.69 crores.

INR 2.69 crores?

Correct.

So this is the run rate we can take for the Geronimo revenue for Q3, approximately give or take something more?

No, it will be much higher because what happens is they have accrued revenue, which is recognized only month by month, so there will be bigger numbers coming next quarter and then further in the March quarter, so.

Fair enough. So basically, what I understand from the last question is you expect the run rate to go to INR 10 crores in quarter between INR 25 crores to INR 30 crores for 3 quarters. Is that right?

Yes, that's correct.

Okay. Second question is for this IzmoMicro again, a follow-up question. While you have invested INR 5 crores so far, what is the total amount of investment you are looking at within a year period?

Within this year, financial year, it's around INR 10 crores totally. And next year is another INR 5 crores.

So that INR 15 crore of CapEx will yield a top line of INR 40 crores to INR 50 crores is what you are saying?

Yes, yes. In fact, the top line capable -- after capability after will be up to around INR 200 crores with this CapEx. So we can go up to that. So again, like I said, this is a high gross margin and a very specialized business. We are not doing the generic EMS, electronic manufacturing, very specialized. So here, the IP is very high. So like IZMO itself, we focus on high IP, high gross margin business. We don't like to do very, very low-level business. So that's why we have chosen a very niche area in semiconductor.

So naturally, Sanjay one more thing will be that the EBITDA of this business is likely to be very high, much higher than the kind of EBITDA level that we are seeing in our current business once the business stabilizes?

It's difficult to say at this time, but there is good potential. So yes, it can be higher if everything falls in the right thing. And this time, it's too early to say that. I would like to be a bit cautious -- overcommit at this point.

No, no, fair enough. And the last question is on FrogData. So I mean, we were sort of -- from the earlier calls, you got an idea that FrogData can grow between like 70% to 100% year-on-year, but we have really not seen that kind of growth rates. Is it due to the lack of investment in the sales team or what is holding back that growth?

We actually moved from a onetime billing to SaaS billing last year. So even though the numbers -- we are adding a lot more dealerships, the numbers got hit. So actual growth has been quite significant, but because we moved from a lot of onetime customers to SaaS that has taken a dip in the short term. But we will see the effect coming up in next quarter and the following quarter. You'll see the growth happening again, very rapidly. So it is just a temporary dip because of the way of accounting, which was changed.

Okay. And Sanjay, a couple of quarters back, you had said that you will be happy to disclose the SaaS metrics as we go forward. Do you think this is the right time to do that disclosure?

We'll do it in the annual call. By then we'll have a good listing of the SaaS numbers and a few months would have after moving to the SaaS this thing and FrogData. So when we'll do the annual numbers and annual call, we'll disclose all the SaaS metrics. That will be the good time.

The next question is from the line of Mangal Jain from [ Sumitra Investment ].

Can you hear me?

Yes, yes, Mangal, we can hear you.

Regarding your semiconductor business, what I understand from the discussion, you are in system packaging not the chip packaging. So my next question is for SiP, right now, you are focused on tire pressure sensors. So new news in automotive...

That's an example I gave. That is one product we have done, but we are working on several other products which are going in different areas. System-in-Package is actually not system packaging. It is a System-in-Package. When I say System-in-Package, we are talking of packaging actually with a lens, with the sensor all in one package. So chips are part of it-high level rather than the silicon level.

I'm from semiconductor -- I'm supplier to semiconductor industry, so I understand everything.

Sure. I'm sure you do.

So for connected cars, apart from tier pressure, there are so many other sensors connected car is your future for the collisions revenue. So are you...

Yes, we are looking at that. That's why we are working with a couple of large OEMs on these areas, but it's too early to disclose any more information. But that definitely is a big area for us we can -- software and hardware.

Yes, yes. Interest in [indiscernible] So there is a lot of IT for connected cars and autonomous driving.

Right.

So autonomous driving may not be allowed immediately, but connected cars and collision provision or collision prevention so many other things are coming into the picture.

You have ADAS 1, you have ADAS 2 now. So there is a lot of development happening on there. See, I don't think anyone is looking at autonomous driving for India. It's not practical.

I know. It is worth for sure for coming in our lifetime at least.

Correct. But internationally, there's a lot of scope for autonomous driving in many countries where the population is not so high and it can really work. So we are not really looking at India as a market when we talk of these technologies.

Okay. Okay. But prior to that, there are lot many sensors and electronics, which are being used by advanced car for accident prevention in many ways, advanced safety and all that. So are these things in the pipeline?

Yes.

Okay. I'm in Bangalore during 26, 27, 28, maybe I'll try to meet somebody from your company.

Sure, sure.

The next question comes from the line of [ Brijesh Parikh ] an Investor.

Congratulations on a good set of numbers. I have a few questions. One is that we have been expanding in various geographies and various regions and in various other industries as well. Can you just throw some light in terms of how you're developing the overall organization to meet the growing demand and to meet the growing revenue, which is going to come through all these verticals?

Sure. We have -- like IzmoMicro, we have a complete management team, which has been hired, including product development, marketing, production. So it's a brand-new team of people, of course, with lot of experience -- more than 20, 25 years' experience in similar technology. In the various geographies like we have said, we are using -- we are piggybacking on Geronimo's existing manpower and giving them more products to offer to their customers, so that the cost of sales is very, very minimal. And we are not -- we don't have to invest in new infrastructure as we already have the infrastructure in place in many of these countries. So we are trying to leverage whatever investment is already done, and try and get better ROI. And like I said, again, Geronimo also comes with a very good set of people who have been there with the company for more than 10 years. And we are using that talent and trying to leverage that to get a better return on the investment we have done. So we are definitely looking at human capital, and that's one of the reasons why our employee cost went up because when we deploy human capital, it takes time for the ROI to show, but it's a very important investment, which will bring rewards in the long run.

Okay. Makes sense. I have a second question. In the past, you have said that we have revenues coming in from SONY, the gaming side of it. Are we still trying to focus our attention on that gaming industry and the gaming vertical because that's also a very fast-growing industry. Can you throw some light out there?

Yes, we're still engaged with SONY. It's quite an intensive engagement and we are building up the team bigger and bigger for their requirement. And until we are not able to meet SONY's requirement, we can't even go to anyone else. And like I said earlier, it takes a lot of time for us to train a person to come up to SONY's standard of CGI. So it's not an easy task. It's not something which we can do overnight. And we are trying to scale up to their expectation. But gaming is important in this thing, and we are focusing on that.

Okay. So can we expect a few more customers around it in terms of the industry...

Not this financial year, maybe next financial because we still -- like I said, we still have to meet SONY's expectations itself, still not enough.

And the last question, this is quite a general question. Currently, we are more focused on the auto industries with the kind of the product which we have. Do you think the same can be applied to any other parallel industry? Or are we thinking in that direction as well?

We have tried that in the past several times to move into consumer products here and there, but you see automotive is one of the largest industries on the planet. And the cars are the same. What do you buy in U.S. similar -- it's very similar to what you buy here or somewhere else. So as a product, it doesn't change much, whereas if you look at any other industry, it changes very rapidly compared to the geography, compared to the demographics. So we have stuck to automotive because even in the automotive domain, our penetration is still very low globally. We still have a lot of room to grow. So it does not make economic sense for us to diversify into a different industry, which we know very little of because here, we have very extensive domain knowledge, which we bring to the client. So until we don't achieve a significant penetration or saturation level, we are not looking at any other industry for the time being.

[Operator Instructions] The next question comes from the line of Akash, an Investor.

Actually, just one question from my side. So the EBITDA margins this quarter have taken a hit, I just wanted to understand how your EBITDA margins will look like over the next -- over the second half of this year and then the margins in next year. How are we looking at the movement on these?

Like I said, EBITDA margins took hit because Geronimo costs coming in. As we are rationalizing the costs, those margins will improve and their revenue also will kick in. So we are definitely looking at going back to our last quarter or even last year's margins and improving on that in the next financial year as all the businesses, we invested and start generating profit. It will definitely improve margins going forward. I don't want to give a number at this point, but definitely you'll see an improvement.

The next question comes from the line of [ Mehwan Kotwa ] an investor.

Congratulations on the good set of numbers. My question was just related to the kind of growth both in terms of revenues and profitability that we could expect from FrogData. And even assuming the situation that we further delay our fund raise, what could be fair assumptions for probably next year and the year after that?

We are still targeting 50% to 75% year-on-year for FrogData for next year and the year after that. The pipeline is very strong. We are getting very good traction with the clients. We are adding customers. So I think we should be able to achieve these kind of numbers.

What would the profit numbers look like? Because I think earlier in the call, you mentioned that you probably are looking at 20%, 25% kind of pricing increments as well as the customers are finding value in the product? So could you throw some light on the profitability?

We don't do profit by division. We don't track it by division because a lot of costs are common. But definitely, as we increase pricing, we should see -- like I said, our EBITDA margin should go up for the company because each division, we are trying to increase pricing and improve the margins.

Right. So this growth that we are forecasting is without the fund raise, correct?

Yes, yes. This is organic.

Ladies and gentlemen, as there are no further questions, I now hand the conference over to Mr. Sanjay Soni for his closing comments.

I thank the entire team of IZMO for their untiring efforts, hard work and dedication, which drives the company forward. I appreciate all of you for participating in our conference call. And I also would like to thank our shareholders for the unstinted support of the company since we have been listed. Please do get in touch with our Investor Relations team for any further questions. Thank you very much. Have a good day.

Thank you, sir. On behalf of IZMO Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.