Matrimony.com Limited (MATRIMONY) Earnings Call Transcript & Summary

Good evening, everyone. On behalf of B&K Securities, I would like to welcome you all to the Matrimony.com First Quarter FY '22 Earnings Call. We have with us today Mr. Murugavel Janakiraman, Promoter and Managing Director of Matrimony.com; and Mr. Sushanth Pai, CFO. So without further delay, I would like to hand over the call to Mr. Murugavel to provide a brief overview of the quarter gone by, and then we can move on to the Q&A session. Thank you, and over to you, sir.

Thank you very much, Deep. Good evening, everyone. I hope everyone is able to hear me. I hope all of you are continuing to stay safe and healthy. India witnessed a severe second wave of the pandemic. And many of our associates and their family members were also impacted. We as a company put health and wellbeing of our people at the forefront. Some of the initiatives we rolled out for the people were special leave, financial assistance, reimbursement of test costs and vaccination costs, online free consultation, enhanced insurance cover, help desk related to COVID, webinar by doctor, et cetera. We also accelerated our CSR initiative to help the society by contributing INR 50 lakhs to the Tamil Nadu CM Public Relief Fund and about INR 20 lakhs towards various other COVID-related initiatives. Given this background, I'm happy to state that we overcame many challenges, and we have reported a strong start for FY '22 with a good year-on-year growth on billing and profitability. As indicated earlier, our strategic initiatives continues to yield results and our focus in product enhancement and customer experience will help to enhance this growth momentum. In quarter 1, on a consolidated basis, we achieved INR 105.2 crores of billing, indicating a decline of 1.4 percentage quarter-over-quarter and a growth of 29 percentage year-on-year. There's a slight decline on a quarter-over-quarter basis as the lockdowns did have some impact in April and May, but the momentum enhanced in June. For Matchmaking, the key highlights are as follows. In quarter 1, the billing was INR 104.7 crores, a decline of 1.3 percentage quarter-over-quarter and a growth of 29 percentage year-on-year. Revenue at INR 104.9 crores, a growth of 4.2 percentage quarter-over-quarter and 21.8 percentage year-on-year. We added 2.2 lakhs paid subscription during the quarter, a growth of 31.6 percentage year-on-year. We continued to see good double-digit growth in volume and billings in North and Western market, which are high competitive -- competition intensity. PAT for Matchmaking business increased 1.6 percentage quarter-over-quarter, but declined 1.9 percentage year-on-year. We continue to track the impact we create for our customers. We're happy to state that we have created about 26,485 success stories in quarter 1. Other highlights for the quarter. During the July 2021, the company has signed a definite agreement to acquire 100% stake in Boatman Tech Private Limited, promoters of ShaadiSaga.com as approved by its Board of Directors. The acquisition will be by the way of share purchase from the existing shareholders for an aggregate consideration of INR 11 crore subject to adjustment at the time of closing. The transaction is subject to customary closing conditions and regulatory approvals. We expect to close the transaction this month. Founded in 2015, ShaadiSaga is a leading player in wedding service industry with over 40,000 vendors across multiple services and catering to customers across 15 major cities in the country. Through a robust digital presence, built with strong social media and the content marketing capabilities, ShaadiSaga has garnered a consistent demand of around 1 million monthly active users with its technology-focused approach. ShaadiSaga offers a differentiated product experience. Following this acquisition, ShaadiSaga founders will join Matrimony.com in senior leadership roles. With this strategic acquisition, we'll accelerate our growth through supply enhancement and superior product capabilities. We intend to integrate ShaadiSaga product technology and social media assets with our offering, that is WeddingBazaar.com and Mandap.com. With this approach, we believe that the deal will significantly strengthen our positioning, which includes both WeddingBazaar.com and Mandap.com, and which enabled both the brands become #1 wedding services brands pan-India. Now coming to the Marriage Services business results, revenue was INR 0.6 crore, a growth of 19.1 percentage year-on-year. Losses in the quarter was INR 2.1 crores as compared to INR 1.9 crores in quarter 4. On the billing and revenue outlook for quarter 2. We have now delivered 4 consecutive quarters of year-on-year double-digit billing growth in Matchmaking, and we expect this momentum to continue, along with the growth in profitability. We expect that Q2 Matchmaking billing and revenue to show a double-digit growth on a year-on-year basis and a single-digit growth on a quarter-over-quarter basis. Wedding service is expected to grow from Q1 levels. ShaadiSaga will be consolidated post closing of the transaction, which is expected by this month. So the contribution from ShaadiSaga will be insignificant in this quarter. Let me now pass on to Sushanth to comment on the key profitability metrics. Sushanth, over to you.

Yes. Thanks, Muruga. Our EBITDA margin for the Matchmaking business in Q1 has improved strongly to 27.7% as compared to 23.4% in quarter 4 and 25.1% a year ago. We are progressing well in our journey to achieve 30% EBITDA margins in due course. Marketing expenses are at INR 37.3 crores as compared to INR 38.6 crores in quarter 4. The EBITDA margins have improved strongly despite salary increments given in quarter 1, mainly due to reduced infra expenses due to lockdown and also revenue increase. Excluding marketing expenses, our margins in Matchmaking are at 63% in quarter 1 as compared to 62% in quarter 4 and 56% a year ago. On a consolidated basis, our EBITDA margins in Q1 are at 21.6% compared to 17.7% in quarter 4 and 18.6% a year ago. We have now crossed 20% mark even on a consolidated basis, and we expect this momentum to continue. On an absolute basis, EBITDA has grown by 27.9% quarter-on-quarter and 40.9% year-on-year. Tax rate is at 25.3% for the quarter. PAT excluding Astro, which are our associate company, is at INR 14.1 crore, a growth of 39.2% quarter-on-quarter and 46.9% year-on-year, which is again a strong growth in profitability. Share of loss from Astro is INR 27 lakhs. Our free cash generation for the quarter has been robust at INR 16 crores, indicating 0.84x to EBITDA, and our cash balance is at INR 302 crores. Return on equity is at 21%. On the outlook for Q2 margins, we expect EBITDA and PAT to show a good double-digit growth, both on a quarter-on-quarter and a Y-on-Y basis, and we expect this trend to continue for the remainder of the year as well. I would like to end with a customary safe harbor statement. Certain statements during this call could be forward-looking statements on our business. These involve a number of risks and uncertainties that could cause our actual results to differ materially from such forward-looking statements. We do not undertake to update any such forward-looking statements that may be made from time to time by or on behalf of the company, unless it is required by law. Over to you, Deep, for Q&A.

[Operator Instructions] So as we wait for the question queue to build up, sir, I have a couple of questions from my end. Firstly, could you please elaborate more on ShaadiSaga acquisition? And you have explained that you have changed your strategy now in the Marriage Services business, but how would you like to look at this acquisition, especially that it is largely for the northern market?

Thank you, Deep. See, ShaadiSaga acquisition, in a way, it's significant for multiple reasons. One is that we have moved to a subscription-based business model on wedding services in the beginning of the last financial year. And also for the wedding services marketplace model, there are a couple of things that are important. One is that the good number of listing on the supply side. And while we were strong in certain parts of India, South and to certain parts of India, because these wedding services primarily started in the South. And ShaadiSaga has a good presence in the North and Western market. So in a way, this helps us to become a strong leader in terms of listing across India because also ShaadiSaga has built a good social media presence. They have close to 1 million visitors on a monthly basis. So we'll be able to enhance our offerings in terms of product side, listing side. So these are the benefits. Plus also in terms of product, they definitely built a differentiated and -- product experience. So we see the benefit in terms of product. And also the founders have certain credibility and they invested years in this venture. So the founders joining at a senior position in wedding services, the listing and the social media presence and the product, and all this will help wedding services business to scale up. Wedding is a large business. Somehow so far no one made it big in this category. I hope that with the acquisition of ShaadiSaga, we expect the wedding services business to grow on a strong basis. I mean, however, our base is very small, but we expect post this integration, from Q3 onwards, we expect wedding services to a strong uptake on the growth side. So to sum it up, the benefits on the product, social media presence and also listings side, plus the founder has years of experience in this wedding services operation. These all will be beneficial, plus we're adding leadership capabilities in this space.

The next question is from the line of [ Archit Singhal ].

Can you hear me?

Yes, yes. Yes, Archit, I can hear you.

Congrats team on good set of numbers. I mean it's good to see the margin improvement. So a couple of questions. Firstly, I mean, Sushanth, if you can answer this one. So marketing spends have come down sequentially, and I think that is one of the reasons why the margins have gone up. So are you seeing a reduction in competitive intensity because of which the marketing spends have come down?

So in terms of EBITDA margins, not only the marketing spends -- obviously, marketing spends have come down by INR 1 crore. That is also the reason why EBITDA margins have improved. But having said that, the competition intensity has not relented in the sense, there is still high competition intensity. But like we told you earlier, we see how much we want to spend for the quarter, depending on our trajectory of the business as well as competition intensity. And we do a balance of both. Given that we had a little slower April month than what we had expected because of the intense lockdown and severe second wave that happened, that's why we sort of tweaked our marketing expenses a bit. Having said this, I think in next quarter, the marketing expenses will increase slightly from the current levels because we did tweak it in quarter 1, we may bring it slightly on the upper side in quarter 2. But that is not going to affect our trajectory on profitability. Like we said in the call, that the profitability will continue to increase in spite of the marketing expenses increase. The other reason why the EBITDA margin increased is also, obviously, revenue increased, right? From a quarter-on-quarter basis also, the revenue increased. And the second thing that also happened was we also got some benefit because of the lockdown, in terms of the offices were not running, in terms of power, in terms of rental, certain things we got some leeway and that sort of also contributed to the EBITDA margin.

Archit, just to add to what Sushanth said. It's mainly on account of the revenue. The benefits all, it's a small benefit. As Sushanth said, in spite of increased marketing spend in quarter 2, we expect a double-digit growth on the revenue side and the profit continued to grow very strongly.

Understood. And on the growth, I mean, if you can -- so growth has come back. And I mean, if you can highlight what are the key reasons which is driving this growth? Is it the product innovation and the new categories where you are entering, which is driving this growth?

It's basically our leadership team has been able to execute very well because we are continually looking at ways to increase the conversions. So we see that year-on-year, the conversion has been growing very well. So that we expect that momentum continue, mainly on account of our ability to convert free members into paid members on account of multiple things. The continuous product improvements and our execution capabilities, all these factors have been contributing to the increase in growth. Plus also investing in the -- some of the product areas, some of the newer businesses. So a combination of multiple factors have been driving our growth.

Understood. Two more things from my side. Firstly, I mean, if you can highlight on the pricing per se. And in the annual report, you have mentioned about NRI markets and all. So do you see going forward pricing also to improve? I mean we are seeing the improvement in paid subscribers, but anything on pricing, if you can comment?

Yes. Archit, we see that our ARPU has increased by sort of close to INR 100 compared to Q4. So we continue to tweak in and continue to drive wherever possible, try to get a better pricing possible. And wherever required, we also discount so that the customer can convert better. So basically, we look at both the things so that on one hand, we try to drive the ARPU and one hand, we also look at increase the number of paid subscriptions. So we drive on both the fronts.

Understood. And last thing from my side, like Murugavel, you mentioned growth should be double-digit going forward also. And earlier, there were comments that marketing spends would be calibrated in the same range. So fair to assume that with growth coming back in double digits because of operating leverage, your margin should increase from these levels and -- I mean, should continue to increase?

Yes. As Sushanth mentioned, we expect the margin to -- because if you look at Matchmaking, the margin at now almost like 27-plus percentage. We expect in due course touching 30 percentage, okay, on the Matchmaking side. And enterprise EBITDA margin will cross 20 percentage, we expect that to further to move up. So while the marketing spend continued to increase to drive the growth and also to take out that increased competition activities. However, we expect the revenue growth and billing growth to continue and our margin also to continue. So yes, Archit, to conclude, yes, we expect the margin to further move up from here on both on a Matchmaking level as well as on the enterprise level.

[Operator Instructions] We have a next question in the chat from the line of Mr. [ Kush Dusrani ]. Sir, he wants to ask whether the ShaadiSaga is more of an pinterest model where you can see the listings and contact the vendors directly? What is the model? He wants to understand it better.

Yes. The business model is a subscription business model. Basically, our revenue coming from vendors, paying money to get better visibility and increased leads from us. And as far as the customers who are looking for these wedding services, they come to the portals and they reach out to the vendors who are on the wedding services platform. However, the paid vendors will get a better visibility and better leads. So business model is subscription, which is coming from the vendors in the wedding services space.

Right. We have another question in the chat box. Sir, that question is more -- they want to understand more about your marketing spends. The question is that, how long do you think this will continue and whether these are the peak marketing levels?

It's difficult to comment because one hand, because there's -- definitely, the competition and intensity is continuing. And so we need to invest. In some of the areas, obviously, we are not investing it appropriately, we need to reinvest. And also, as a company, we are looking at expanding to newer geographies. We're also looking at launching a new product offering. So it's a combination of all these things, our geography expansion, new product offering and the competitive intensity. So with all these factors pushing us to invest on the marketing side, we expect that the marketing spend to continue. However, as Sushanth said, which definitely is going to help us in the double-digit growth, even with the increased marketing spend, we expect the margin to improve on both at the enterprise level, the Matchmaking level. So that's the outlook currently.

Right. Sir, another question was on your international expansion. So there was a time when we had planned to go outside India. Now how is that plan? Do we still see a lot of scope there? Or we will first focus only on the northern markets before going out of India.

No, definitely as far as international expansion, pretty much on the cards. We expect Bangladeshi operations to commence from before the end of this quarter. And we're also working towards the launch of Sri Lankan matrimony or the operations in Sri Lanka, hopefully, before the end of quarter 3. We also have a muslimmatch.com. That's a global matchmaking services -- sorry, the matchmaking service for global Muslim, and it's completely currently online. As far as the physical operation is concerned, it's going to be in Bangladesh for BangladeshiMatrimony; and for Sri Lanka, it's for SrilankanMatrimony. While we continue look at growing the Matchmaking business in India, wedding services business in India, we're also looking at global opportunities also as a part of our growth strategies.

[Operator Instructions] The next questions are from Mr. Devang Bhatt.

Your paid subscriber has declined by 2.9%. Your ATV is up by 1.6%, but the Matchmaking revenue is up by 4.3%. So can you explain us the difference? I also have following -- follow-up questions, but first if you could...

Yes. Sure. So when you look at the paid subscription 2.9% and ATV 1.6%, right, you need to look at actually the billing, not the revenue because the paid subscription is based on the billing number. So that's how it matches. So if you look at 2.9% and 1.6%, the net impact will be about 1.3%, and which is what is shown in the quarter-on-quarter basis.

So what is -- I mean what would be the breakup of Matchmaking Services in this quarter?

So that is given, right? You are talking about billing?

The paid subscriber and ATV growth, if you could give us the growth?

Yes, so that's given. So 2.9% is the decline in paid subscription . ATV increased by 1.6%. So therefore the net...

This is for billing, right?

That's on billing.

I'm talking about the revenue.

No, revenue that is -- we don't track it like that because the ATV is based on the subscription amount that is received. And then it goes on a -- we amortize it over the period of the package. So you have to see it from the billing wise only.

Okay. So your billing is down Q-o-Q, but what gives you the confidence of getting a higher revenue growth on a Q-o-Q basis?

Yes. So what happens is that the billing was down on a Q-o-Q basis because quarter 4, there was an impact in terms of how the revenue is shaping up in quarter 1 because of quarter 4 and quarter 1. Now because in quarter 2, we are again seeing a particular billing and particular trajectory, that's how the revenue comes. So it depends on -- it's like this. Revenue accounting is based on how the billing shapes up from month to month. So for example, if in a particular month, it is lower in the beginning of the month, then it affects more in the same quarter of -- rather in the same quarter itself. Suppose the billing is high towards the third month of the quarter, then it impacts or rather you get higher revenue in the next quarter. So it's like that. Because predominantly, our packages are in the 3-month category. So therefore, that's how the revenue shapes up.

Just to add to what Sushanth said. So far as the Q1, the billing was impacted in April and May, and it's a bounce in the month of June. So whatever increased billing in June, we target the bearing on the Q2. So because the April, May, it was impacted and it also had an impact in the billing in the quarter 1. So Q2, we expect that the revenue to continue because of the increased billing we saw in June and 2/3 of the benefits coming in this quarter, plus also the equity has been -- we expect year-on-year the double-digit growth to continue.

The growth will be in the high single digit or a low single digit?

Hello, we are not able to hear you.

So this growth will be high single-digit Q-o-Q or low single digit Q-o-Q? And will it continue for next quarters?

So what -- so basically, what we have said is that Q2 matchmaking and billing will grow double digit on a Y-on-Y basis and a single digit on a quarter-to-quarter basis. We are not saying whether it is high or low because we need to see how, for example, August shapes up, September shapes up and all of that. So right now, we are just leaving it at a single-digit basis. So if we do very well in August, then that can improve a little more, right? So we'll have to see that.

At this point of time, we're just kind saying -- at this point of time, we are saying that there's a year-on-year double-digit growth and profit trajectory will continue. We are close to 15 percentage. It can even get better on the profit side. So we expect the profit to improve better and the billing and revenue to have a double-digit growth.

So your profit trajectory will be similar to this Q1 quarter? Is it?

We may expect better profit also year-on-year basis.

Okay. Year-over-year basis?

Yes.

Okay. And then has your pricing stabilized, the mix that you were changing in terms of subscribers, has it stabilized now?