OnMobile Global Limited (ONMOBILE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the OnMobile Global Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from Christensen IR. Thank you, and over to you, ma'am.

Thanks, Lizan. Good evening, good morning to all the participants in the call, depending on the geography you are in. Welcome to the Q4 FY '21 earnings call of OnMobile Global Limited. Representing the management today, we have FC, the Executive Chairman; Krish Seshadri, the CEO; and Sanjay Baweja, Chief Financial Officer. The call will start with a brief update about the quarter and gone by and the business update by FC and Krish, which will be followed by financial performance review by Sanjay Baweja. We will then open the floor for Q&A session. I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties that we see. For the list of such considerations, please refer to the earnings presentation. OnMobile Global undertakes no obligation to publicly revise any forward-looking statement to reflect future or likely events or circumstances. Having said that, I now hand over the floor to FC. Over to you, FC. FC?

Thank you. Thank you, everybody, for -- yes, can you hear me?

Yes.

Thank you. Thank you, everybody, for joining this call. Let me start with ONMO. The beta launch was done on May 20 in 3 specific cities. So if you're in India, it's mostly Mumbai. It's really to introduce the product and make sure everything is ready for the subscription and real money gaming coming up in the coming quarter. Many, many items are in development. So if you try the service, it's better. I just want to let you know that the many features are coming during the year. We're also in discussion with a lot of 5G operators for launching the service, which so far has good traction on that front. So quite happy with that first beta launch. The team did a good job. And now many, many items to come on that front. The second item, as you saw, Challenges Arena was launched in Q4, also had some good traction on subscription activation in April and May. We have 2 deployments, 1 with an operator, 1 with an OTT, 1 with subscription, 1 free with advertisements. So it's a good trial also to start, and we have many deployments right now going on and new operators discussion also for launches. So that also is a good start. Quite happy with the product on the site. And the last item I just want to bring up in the quarter, as you saw, there was a dip in our Q4, which was not planned to be fair with everybody. It's a specific issue. And most of it is a specific issue with our main operator in Europe, which had some issues in their call center and had to implement some restrictions on many levels. And the specific issue is being worked with the operator to be able to address and rectify the situation. So it's an unfortunate event, but we are working on it. So thank you. I'll pass it to Krish now. Thank you.

Great. Thank you. Thank you, FC. Good afternoon, everyone. Warm welcome to you all. Thanks for making the time to be on this call. I'd like to share the progress in Q4 and also year ending FY '21. I'll start by touching upon our high-level performance and specific product highlights and get into some of the 3 key priorities, which FC just outlined on ONMO. So for FY '21, as you saw, revenue had a slight 2.1% decline and ended at about INR 576 crores. Our EBITDA, operating profit and profit after tax grew this year more than about 1.5x. On a Q-on-Q basis, revenue witnessed a slight drop of 6.2%, mainly from Europe. As FC said, it wasn't planned. One operator taking very specific measures, and we are discussing with the operator to remedy this situation. EBITDA margin was down a bit, from 12.7% to 11.8%. But as you saw, profit after tax grew nearly 32%. As I mentioned, it's a quarter where we've been digitally transforming several efforts across the company. And the quarter saw further digitization of our core products. So let me get straight into the products. I'll start with our existing core products, which is Tones and Contests. So as you saw, in FY '21, our overall revenue was more or less flat, a slight decrease of about 0.7% and Q-on-Q decreased 4.9%. The decrease is all primarily due to non-digital. While digital has actually been growing, the transition this quarter is in progress and looking very optimistic. So digital Tones revenue for the year grew about 400% with our installed base growing to nearly 20 million. And that shows a growth of about 60% to 62% over the last fiscal in our Tones or digital Tones installed base. And that same story is kind of consistent even with our Contest business. As I mentioned last quarter, even in Contest, our focus is to grow revenues in this business through continued digitization of this product. So if you look at the overall Contest revenue, it decreased by about 3.3% over the fiscal and 8.9% Q-on-Q. Once again, all of this decline was primarily from non-digital. So customers are moving to digital, and we are migrating them out there. So that's the transition that we are seeing. And if you look at our digital mobile contest product, FY '21 versus '20, our revenue grew 186%; and Q-on-Q, we grew about 30%. And the true metric that we also look at is the number of quiz questions that people play, and that grew quarter-on-quarter by 30%. So we are seeing this very healthy migration of our user base from some of our legacy non-digitized products to our mobile products. And in the contest space, with the launch of Challenges Arena, which is our mobile gaming quiz app, we are very confident that revenue is going to grow by leaps and bounds over the next few quarters. As FC mentioned, we launched Challenges Arena with 1 telco and 1 OTT app in April. And in just 2 months, we've had over 350,000 gross additions. That's on the telco. And about 1.1 million users on the OTT in 2 months. We are in conversation with several telcos, about 10 of them across Asia, Europe and Middle East. And we continue to be really excited about Challenge Arena and the mobile gaming quiz space. And you'll see our continued focus and investment in that area. Coming to our third product, which is videos and editorial. Overall, for the fiscal, it was reasonably good with revenue growing by about 5%. But on a quarterly basis, we did have a 5% decline primarily due to that 1 operator in Europe, which was a very unplanned event. Moving to ONMO, which is our cloud gaming product, which went into beta May 20. We are really excited by the progress that we made since last quarter. I think many of you saw the screens in our visual presentation, and we had a video during the last quarterly update. And for those who are not there and are new to ONMO, I'd like to reiterate a few things from that presentation. One is ONMO is built on 3 huge trends that we are seeing in mobile gaming. Mobile gaming is a massive $80 billion market. The 3 key trends that ONMO is built on is, one is social media and networking. And the second is eSports. eSports was a very small industry, and it's grown to about 0.5 billion in audience. And the third big trend in mobile gaming is casual short gaming sessions. So if you notice, on the ONMO platform, we don't host complete games, but we have these short gaming sessions. That's for the casual player. And we are seeing a large number of people adopting that because of shorter attention spans and people like to play these short gaming sessions between activities. So I think that's here to stay. So those 3 disruptive trends are definitely the building blocks of our product. Supporting that is 2 key technologies. One is our cloud streaming product. Some of you asked if this product is out in the web, in the Play Store. It's not in the Play Store. You don't need to download it from there. So it's a cloud streaming product. No need to install and uninstall. I think the biggest problem in mobile gaming has been uninstall rates, which are roughly between 40% to 60% of all mobile games that are installed get uninstalled in the first 30 days. So in our case, we don't need to keep installing and uninstalling because all the updates are happening in real time. And you don't need to get out of ONMO to go and play another game. It's -- you can seamlessly move between games on our app itself. The second big technology that's driving our product is AI, and all these short gaming sessions that I mentioned are fundamentally driven by our AI -- visual AI engine, which helps in the creation of these unique challenges. So that said, since the last time we kind of gave you an update on the product, we've seen huge progress on multiple fronts. The beta, of course, launched on May 20, with about 30 games and 850 unique moments or challenges, and we have over 1,000 unique challenges so far, and we'll continue adding, and we should get to a few thousand unique challenges by end of year. Also, during that time period, we've added very compelling features, like challenges and leader boards and virtual currency battles. We've also improved the accuracy of our artificial intelligence engine. And soon, we'll be launching B2C cash battles and monetization in Q2. And we are also talking to different telcos for B2B partnerships. So those conversations have started with about 20 operators across Europe, Asia and Middle East. So in summary, about ONMO, I think this is perhaps the first Indian company to launch a mobile cloud streamed gaming platform for the global audience with AI-driven technology. And that's a very audacious goal that we had, and we've kind of pretty much on the path to fulfilling that. And I want to say that the quality and level of technology powering ONMO is unparalleled. It took us some time last year to get it right, but we now have a world-class product backed by an engineering team across India, Sweden and Canada, that is definitely an A-list team. We'll continue investing in the product and the teams and hiring people from top Internet companies and very confident that ONMO will be a dominant social Esports cloud gaming platform going into the future. That's pretty much on ONMO. On the organization side, we continue to emphasize on employee safety as most of our employees continue to work from home globally. It's been a challenging few months for us, but I want to thank all of them for their incredible hard work and commitment in the face of this adversity, and we also managed to have a global launch of ONMO during this time period. I'm quite excited, frankly, by the opportunities that we are seeing in mobile gaming that lay ahead for us in India and in Europe and North America. Very encouraged by the technology building that's going on, the product focus, the quality of global engineering talent that we have. And I think we've entered into this fiscal with a much clearer strategy, and we are incredibly focused on day-to-day execution. So with that, I hand it over to Sanjay Baweja, our CFO, for his comments on the financial performance. Sanjay, over to you.

Thank you. Thank you, Krish, and good evening, and a very warm welcome to all of you on the call. I hope all of you and your families are safe and healthy during these very challenging times. Let me quickly elaborate a little bit more on the financials. Most of you may have already seen the investor deck that has been mailed to you as well as hosted on our website and the exchanges on that side. If any one of you is not on our mailing list, please feel free to mail us or connect with our Investor Relations team, and we will add you for the distribution list. I will start with key financials for the financial year '21, and then I will move on to the Q4 FY '21. So FY '21, as compared to last year, our revenue remained stable. EBITDA grew by a solid 67% and margins stood at 12.4%. Operating profit grew again by whopping 148%, and operating margin was at 10%. PAT also grew considerably by 67%, and PAT margin was at 8%. The key drivers for the profitability growth are a reduction in manpower cost and OpEx cost. Our cash stood at about INR 266 crores despite our investments in Rob0 and also the share buyback. Mainly -- and this has been mainly due to our collection efficiency on a yearly basis. Our DSO is down from 144 to 116 days. Full year growth evidences the decent improvement in profitability, and we are aspiring to maintain in the current years as well. Coming to Q4 FY '21. The revenue was at INR 137 crores, a drop of 6.2% quarter-on-quarter and about 9.7% year-on-year. The reduction, as Krish and FC both mentioned, is coming from Europe and a bit from the EMEA region. Europe and EMEA revenue is down mainly due to operator policies. We are engaged with them. And hopefully, things will go on, move -- improve as we go along. As per our stated strategy to shut down any business, that does not measure up to our stated goals of revenue and profitability. We are continuing to focus on unprofitable Latin America's business and are in the process of exiting from those countries. This is what I've been saying all along, where, of course, we do not have the right pricing power. As mentioned earlier in the calls also, I would like to reiterate that we have completed this process substantially in FY '21 as far as operations are concerned, but closure of the entities is expected in the current year. On the cost front, our manpower cost declined by 4.1% quarter-on-quarter and 6.1% year-on-year basis, primarily due to our cost rationalization efforts. Our marketing costs declined by about 10.9% quarter-on-quarter and 5.8% year-on-year. This is a result of optimum marketing investments. Other OpEx costs also declined by about 6.8% quarter-on-quarter and 48% year-on-year. Costs are lower mainly on account of travel, modification of -- termination of leases of our offices as per the new norms of work from home and other savings in software costs, et cetera. During the quarter, EBITDA witnessed a 28% year-on-year growth to INR 15.4 crores with a double-digit margin of 11.8%, mainly due to the above-mentioned cost saving parameters. Our endeavor is to maintain the current margin levels, along with continuous focus on cost optimization. Operating profits grew by 47.6% year-on-year to INR 12.5 crores and the margin of 9.6% during the quarter. Our profit after tax was INR 14.9 crores, a growth of 31.9% quarter-on-quarter and 11.4% margin during the quarter. And also, our DSO improved from last quarter of 120 to 116, as I said earlier, 144 for last year-end to 116 now. As mentioned by Krish, we will continue to invest in our gaming projects, which is expected to be launched within this fiscal. A lot of operating metrics and data have already been shared in the presentation deck. I'm sure that all of you have had access to the same. With now -- with this now, I will hand over the call to the operator to open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of [ Jay Prakash Maheshwari from LifeGuard Pharmaceuticals ].

Am I audible?

Yes, please.

Yes. So as I can see that a lot of products are in pipeline and have been launched. So what is the marketing expenditure budgeted for the launch? And what -- or what is the expected revenues and top line growth from these products in this fiscal?

Krish, do you want to take it or shall I?

No. Go ahead. Go ahead, Sanjay.

So as a policy, we do not generally give statements which define our specific strategies for the current year. But let me say that on an overall basis, and I think that's important, we expect that over the next 4, 5 years, we'll probably end up spending more than $100 million for marketing alone as we go along. And obviously, if that is the level of marketing expenditure we are expecting to work on, you can imagine what kind of revenue growth we are expecting. But that's a broad 4-, 5-year thing. We don't want to give specifics for current year and in the next 6 months what are we going to do because I think that's something a lot more tactical and we'll leave it for the moment.

Okay. My another question was that you have recently invested in Chingari app. So how are you looking to integrate your services with Chingari? And what is the revenue share with Chingari app?

Krish?

Sure. I'll take that. So our partnership with Chingari is marketing and distribution partnership. So ONMO will be integrated into Chingari and serve as a destination for games for Chingari users. At the same time, some of the user base will be redirected from Chingari straight onto ONMO. So it's a combination of 2 things. You'll have people playing the ONMO games on Chingari, and then you'll have some of them being diverted straight into ONMO. So I can only say that the numbers at Chingari are very impressive. I think they are close to about 65 million installs to 70 million installs this month. The user base has been growing consistently month-over-month. And those numbers are probably going to get to about 40 million to 50 million monthly users very soon. So that's the base of users that will potentially be exposed to our ONMO product today. And if that growth continues into the next 2, 3 years, you can get a sense for the scale of the exposure that we'll have.

Okay. My final question is, are you guys also looking into gamified learning? Because I can see 1 app called ONMO Kids in the play store.

I mean not specifically, but our Challenges Arena is about quizzes. So there might be elements of our product and content strategy out there, which might kind of also encourage some learning around that quiz team. So we're looking into that space very keenly.

We'll move on to the next question, that is from the line of [ Prakash Ramaseshan from Pragya Consulting FZE ].

I've been a long-standing investor in the company, and it's very pleasing to see the kind of growth you've had over the past couple of years, particularly last year. Just 2 short questions. Firstly, in -- just a statement, and I'm looking to just seek your confirmations on this. The legacy business that you were in, which is Tones and Contests, you're looking to move from non-digital to digital revenues increasingly. As that happens and your unprofitable geographies get closed down, would you see a steady-state business at current levels and an EBITDA of somewhere at 15%, which is what you used to have? Or you're looking at growth in that business?

So while there will be a move and there will be a transition phase, yes, the numbers, which you mentioned, are very, very plausible in terms of the legacy business profitability.

And you'd be looking at growth also there, sir, at about 10%, 15%, something like that?

I would say that while our target would be the numbers, which you mentioned, but I would rather bet for stability and see -- because if you've noticed, over the last couple of years, we had some erosion due to various reasons. We think we'll stem that and we will start the growth path as we start this year, new year. But as of now, stability is the main thing which we want to first achieve and then go for growth and then legacy. Our growth engine is going to be ONMO and Challenges Arena. And Challenges Arena, while Krish has given you a lot of aspect of that, that's really a highly profitable venture, when it stabilizes, and that stabilization will take a couple of quarters. At that time, the profitability of the Challenges Arena as a product will at least be twice as much as our normal products. So let me say that, and that growth is likely to happen. It will stabilize in the first 2 quarters. I think the third and fourth quarter could see significant numbers from Challenges Arena. And the profitability, like I said, is far superior to our current products. So that's all I'd say.

Sir, thank you for those inputs. Just one more question. Are you speaking about the $100 million marketing expenditure? Are you looking to get into elaborative financial structure such as subsidiarization and inviting equity there, et cetera, to ensure that a big burden of that does not come out of the balance sheet of ONMO? Is that the plan?

Yes. That is indeed the plan. As we mentioned last time also, the intention is to get some equity, and that equity will be from people who are focused on the VC kind of players rather than the normal investor so that -- you're right, so that there is no pressure on the current balance sheet. While we have already invested a substantial bid when we acquired Appland, when we've invested in Rob0, when we've invested in the products till today. Going forward, as we move into the marketing aspect, we will go to the market and get funding for it. The intention is it should happen within this year.

The next question is from the line of Mithun Aswath from Kivah Advisors.

Yes. Just on both of your gaming proposition, I just wanted to understand how much of that content is proprietary? Or what you're trying to create is just a platform of -- where other content manufacturers will provide those games on your platform? If you could just throw some light on that?

Yes. So see, if you already go to play.onmo.com, you'll see about 30 games out there. So we are not the builders of those games. We host other people's games. And that's fundamentally the structure and nature of that business. What we do is, on top of the games, we provide features which are social in nature. Our monetization models hinge around Esports and battles and challenges. And at a very high level, that's the platform that ONMO is. And if you look -- in the gaming business, if you go look at valuations, I think there's something that people should realize. Game development companies, their valuation multiples are much lower than usually game platform companies. So a lot of our money isn't going to go into content development and game development. It's more in building the platform which has network effects. So that's fundamentally key to what we do, which is we are not a game development company at this stage. We are a platform. We are a network.

Yes. That would be the same for the challenger as well?

To a large extent. There are some elements of those quiz questions on Challenges Arena with some of them we obviously own that. And in some cases, in some countries, we may have content that is being hosted by others. But the gaming products by themselves don't lend themselves into a lot of expenditure from our side into content development and content expenditure. That's why, as Sanjay said, the margins in this business is significantly higher than existing business.

[Operator Instructions] The next question is from the line of [ Farir Sabia ], an investor.

In gaming platform, there is -- margin is much higher than gaming development platform?

I said the valuation, the way game platform companies are valued is very different from how game development companies are valued globally.

Okay. And how much you cash generate in last year?

I didn't get your question, please. How much...

Cash flow generated last year and using this cash flow in future?

Sanjay, I think that's for you.

So from a gaming perspective, per se, it has not generated cash flow because gaming, we've yet to launch. So from that aspect, cash flow is not generated. But otherwise, we continue to be profitable, and we generate significant cash. For example, for the financial year FY -- this thing, our profit after tax was INR 46 crores. So to that extent, there is considerable amount of cash that we generate. And we are sitting on about INR 250-odd crores of cash.

Where you use this cash flow, INR 250 crores, in future?

So -- yes, yes. So there is a focus on growth. There will be investments a little bit in ONMO, which we've already done. And we will continue to look at inorganic ways of growth. And I think that's something that is very key to our strategy. We will focus on some inorganic growth over time. Our expectation is that the growth being a true target for us, whether it's in the legacy business or otherwise, we will look at some inorganic mechanism to grow. And that could be one big use of our cash.

Okay. This cash flow is a total investment of $100 million?

So the total cash that we have is about INR 246 crores. We can't exactly tell how much we will invest over the next 12 months. But yes, there could be opportunities for us to look at.

Any acquisition plan?

We are always open, like I said, to inorganic growth. There is no specific thing that I can talk about now.

Do you competitor of Nazara Technologies?

Sir, may we request that you return to the question here. There are participants waiting for their turn.

Last one. Last one.

Krish, maybe you want to talk about Nazara a bit?

Yes. Yes. Are you a competitor of Nazara Technology?

Not really. First, Nazara is a game development kind of a holding company. They have acquired 4 or 5 games. They're not a gaming platform like us. So we are not necessarily in the same space.

The next question is from the line of Arun Kumar, an investor.

Can you hear my voice?

Yes, please.

Okay. So Krish, I mean a question which is on to you directly as you are the CEO of the organization. So essentially, this company is from 2000. And last 21 years, the domain and the DNA of this company has been B2B and very less in terms of B2C. While we understand that the transformation is from B2 -- only B2B to now B2C. And the B2C, definitely, if we see the kind of the gaming, entire business and entire industry volume for the entire world and per se for the North America market, MEA market, Europe and obviously in India. So essentially, that -- all the growth parameters in terms of top line and bottom line will somewhere at some part of time almost gaming platform will overtake the traditional business. So that means necessarily we are talking about huge kind of transformation of a company essentially for last 21 years from B2B towards B2C. Now we also understand this B2C is altogether a very different ball game. So I would like to understand that what is the company's going ahead strategy be it tactical or strategic in nature. How you are going to build ONMO on B2C because nobody knows ONMO in B2C? Everybody probably knows on B2B, but nobody knows on B2C. And that is the reason we find that the downloads are significantly low even if we are into beta for the last 6, 7 months.

Over to you, Krish.

Sure. I think there were multiple questions. I'll try and answer most of them. So it's -- as you said, the company is transforming. That's right. But the core of our business is still our B2B business. So those businesses still exist. They are revenue generating. It's not like they are going away. ONMO is a B2C platform, and that's a platform that the company has built over the last 12 to 18 months. And we've just launched it, the beta version, 1 week back, not 7 months back. So the team that has built ONMO predominantly comes from the gaming industry. We've got about 35, 40 people there right now, and we are aggressively hiring from other B2C gaming companies. So it should be looked at as a venture where we've been very focused in developing that capability. So net-net, you mentioned that the revenues from B2C could potentially be -- from ONMO could potentially be much higher than the rest of OnMobile. That could be the case in a few years from now. As Sanjay said, we take a very long-term perspective. We've invested significant amount of money and effort into building ONMO. And it's a very big market that we are going after. And that -- building that core capability took the last 12 months, right? So right now, you have probably a very, very rock-solid team across Canada, Sweden and India working on this product. That doesn't mean our B2B revenues are not our focus. That's also going to be the case. So it's that transition that we are looking at. And over the next few years, you'll see revenues from ONMO really growing because that's our focus. We're going to probably have more than $100 million going into marketing. So you'll see the existence of those capabilities within the company over the next 24 months.

Yes. Krish, that probably, I'm a bit aware about, I mean, following very closely about all your quarter-wise updates from the management. I was asking that what is the initiative in terms of marketing you will -- you are planning or going to take for the current year and in future probably -- most probably for the current year so that your downloads increases and that everybody talks about ONMO games. Currently, people are talking about some of the games of Nazara or somebody else. But what is that we are going to do significantly different that will make everybody in India talk about ONMO game? So anything in that plan on that scale?

Sure. Maybe I'll just touch a little bit. First is we're not on the App Store or Play Store. It's cloud stream onto a progressive web app. So you just need to go to our website, and it's kind of 1 click and you play. From a marketing standpoint, let's look at our time line. We just launched our beta product right now. And then in Q2, we launched with cash battles, monetization, subscription, et cetera. And that's when a lot of the digital marketing and customer acquisition spend will be far more aggressive going into the rest of the fiscal year. And post that, you're going to see a lot of cash infusion into marketing happening. So most of this should kick off starting sometime around Q2 when cash and subscription start. So that's when you'll see some marketing happening.

Okay. And one last small question. Just to reconfirm that quarter 4 does not include any cash flow or revenue of gaming platform?

Yes. No, it does not. It does not.

Okay. So quarter 4 is all about legacy business. And the drop in quarter 4 is because of some issue with one of the operator, which happened in Europe. Am I right?

That's correct.

The next question is from the line of [ Yash Chowdhary ] from Param Capital.

Hi, Krish. Hi, management team.

Sorry to interrupt, Mr. Chowdhary. We are not able to hear you.

Am I audible now?

Yes, sir. Much better.

Yes. Many, many congratulations to the whole management team and Krish, especially. And it was nice looking at the launch of the Challenges Arena and the beta launch of ONMO platform. Sir, in your presentation, you have mentioned the target ARPU for Challenges Arena. So can you just give us the -- some brief idea about what exactly it is? How -- what are the economics behind it?

Yes. I mean at a very high level, we gave you a target range. So roughly, it's about $0.20 in this region in India. And when you look at Europe, the monthly subscription model would be at around $6, right? So that's how we are going with many of the telcos. And from there, you will -- I mean this is after revenue share that happens, it will probably be in that range.

So like will this be starting from the -- this particular quarter or how exactly? Because we have already launched this Challenges Arena with 1 telco and 1 OTT. Telco is mostly Vodafone Idea?

I can't tell you exactly who at this stage. But we've launched with 1 telco and 1 OTT right now. And then there are conversations with several more, 10-plus operators across Asia, Europe and Middle East. And those deployments and subscriber base will kick off likely starting Q2 in addition to the 1 that we already have.

So this 110,000 paying subscribers that we have mentioned in our presentation, so will we be able to see the revenues in this Q1 FY '22?

Yes. So there will be some amount of revenue for Q1. So -- since it's just come on board, you will see a small amount of revenue. But like Krish is mentioning, Q2 and Q3 will be far bigger in that sense. But yes, we will see a shade of revenue because we just -- April and May, there are just 2 months, and it has now come to a level of, as Krish was mentioning, the 110,000-odd paying subscribers. So it will take some time for it to build up, and we'll see revenue in a big way over time.

Okay. Great. And our ONMO platform is -- will be based -- like the revenue generation model will be based on the subscribers only, right?

It's both. On ONMO, it's subscription and predominantly Esports or battles and challenges, usual money gaming.

Okay. Money gaming.

Yes, because that's completely a B2C product. And on Challenges Arena, if you look at the scale at which it could potentially grow to, we've got 1 customer. You've seen the paying subscribers, and we are in conversation with 10-plus operators out there. So if you do the math, you can actually kind of get a sense for how this could potentially scale over the next 18 months.

Yes. Got your point. And hopefully, the investment in Chingari will also benefit us like the ONMO platform going ahead?

No, absolutely. As I said, Chingari is close to hitting 70 million users, and they're only growing on a monthly basis. They're adding several million a month. So all that means free distribution for us. So our exposure -- someone was asking about marketing in India. You'll see that we don't need to spend that much. I'm not saying we will not spend. We'll spend. But we'll get a lot of exposure in the country.

Understood. Understood. Only from an accounting point of view, Sanjay sir, the exceptional gain of INR 4.66 crores our books in this quarter 4, can you just throw some light on it?

No, that was a write-back that we did for one of the -- for the Appland, which we had some payment which was due to them, which we believe we don't have to pay them. So we've written that back.

The next question is from the line of [ Ghanshyam Rathi from SAP ].

Hello?

Yes, please.

I am audible, right?

Yes.

Yes. It's regarding the dividend. Why have you announced dividends as aspiration with gaming would require significant investments? [ Isn't cash ] would require due to product launch and fuel future growth of teams instead of you could have gone for the investments?

Well, I like FC to talk about it. But let me just add. We just mentioned that for the new product, ONMO, we are going to raise money separately. And there have been people who've been invested in our company for the last 20 years, and there is a certain amount of expectation that they have from a dividend perspective. And Board in their mind thought that it is best to keep going as the dividend since our profitability was, in fact, better than -- much better than last year. So they in their mind thought that it's best that they recommend that dividend. But I like FC to, if he wants to say something on the dividend part, so that's a Board decision that...

Yes. Let me -- we've been paying dividends for many, many years. Actually, we believe in both growing company and a profitable company. So profit comes with dividend and growth. Now it's a bit special, and I'm going to address also the fact of going B2C versus B2B. When we did our research on all the 5G operators, the main service that in mobile entertainment that most 5G operator wants is the 5G cloud gaming. So we will go with the B2C with ONMO. But keep in mind, we are going with ONMO on B2B 5G cloud gaming also, which we're addressing. And my expectations, although we're going with spending an interesting amount of money to grow this brand globally because this is truly a global play, my expectation is to still continue as a profitable company and continue to pay dividend. And to that end, we have a good cash position right now, as you know. My view is not to use all the cash for the B2C. And the view is really to be able to both raise money for ONMO separately, get an interesting valuation, but most importantly, get some investors and venture that could invest with us to grow the ONMO side, while we use the rest of the money to consolidate our position in some markets and on the B2B side and make sure that we continue on making money. So it's a balance between two. We're right into the equilibrium right now because we're launching ONMO. We will use a bit of our cash to spend on marketing. We've already used a bit of our cash to do the investments in Chingari and the other acquisitions that we've done that are for ONMO, but give us some value also on the side. That's the beauty of this investment, right, because we have the value of the investment, but we get the value of the marketing also, which serves the ONMO need for marketing. So -- but to answer your question on cash and dividend, from my view, I obviously want to maintain and hopefully increase the dividend in the coming years, while the profitability increased throughout the company.

The next question is from the line of [ JNM Shah ] from India Advantage Securities.

Am I audible?

Yes, please.

Yes, sir.

Yes. So my first question is regarding our core B2B products business. So as we know that from last 2, 3 years, we have witnessed very flat to declining trends here in terms of top line around 3% to 4% average decline. And I understand this is due to winding of business in certain geographies. Going ahead, I wanted to understand what should be the expectation of investors from this legacy business. I understand Krish mentioned previously in the call that we are first aiming stability here to maintain the current run rate of revenue. But I would just like to have more light here given that teams focus will also shift towards the new products as they launch.

So -- okay, let me take that a bit and then maybe Krish you can add. So the idea is that we want stability in the current business, and we are looking at growth. And as of now, we can say that, that could happen inorganically. But clearly, as of now, like you rightly mentioned, over the last 2, 3 years, there has been certain changes in the environment from the operator side, and therefore, it has led to a small erosion. Our first aim is to make it stable and continue to be more and more profitable. Our idea is that profitability, if you saw last year, probably not the year just ended but the year before that, our EBITDA margins were in the range of about 6% to 7%. We brought it up to 12% to 13%. And that's our aim. We will -- our aim is to continue to be in double digit and good double digit going forward. And like we mentioned, Challenges Arena, which is a B2B product and part of our digitalization of this entire gaming and contest, in that sense, is much more profitable. And therefore, towards the end of Q4, the next -- this year, Q4, we could see significantly higher profitability as we go along depending on how much growth we are able to establish with this. And I think that will be the key from our perspective. The aim is to continue to grow and yet maintain considerable profitability. For that, we will continue to work on however its cost and also from the revenue side on sales growth. Krish, do you want to add anything?

No, I think, Sanjay, you pretty much spoke about everything.

Okay. Okay. My second question is at a very broad level, given that both Challenges Arena and ONMO will be monetized if you look at the full FY '22, so at a broad level, what is the revenue proportion we are aiming to get from these new businesses of Challenges Arena and ONMO? As a percentage comes -- I'm not really looking for the hard core numbers here. But at a broad level, in percentage terms, if you could give investors some idea? What this -- your -- or let's say FY '23 or '24, where you think like it will...

Yes. I think -- let me say a couple of years from now, our target is that ONMO will dwarf our existing business. That's all I'll say. I'll not go specific in numbers. But I think it's -- I can say that the existing revenue would look small in front of ONMO revenues if we were to look at 3 years down the road.

Understood. Understood. That's very helpful. And just 2 more very quick questions. First is very technical in -- on the earnings presentation, we have mentioned ARPU numbers. At present, we are operating on the subscription basis with both telcos and OTT. So is it on a monthly basis, the $0.20 and the $1?

Yes, that's on Challenges Arena, that's right. It's on a monthly basis with operators.

Okay. Okay. And secondly, Krish, as you mentioned ahead in this call that we are sort of a lot of game development company, but a gaming platform company. So any other comparable global names you could give on the gaming platform company?

Absolutely. I think I'll name maybe 3 of them, and you should look up their valuation multiples. The first is Skillz, S-K-I-L-L-Z. Second one would be DraftKings. Third one would be Roblox, which just went IPO some time back. So these are all what people call as platform companies. They don't build the games themselves. And that's what ONMO is. ONMO is a platform company. And platform companies traditionally get valued several times more than game development companies. And that's why someone asked a question on Nazara. And my sense is valuation on ONMO will be multiples times that, given that it's a platform company.

The next question is from the line of V.P. Rajesh from Banyan Capital.

You mentioned the Q4 revenues were low because of specific issue with the operator in Europe...

Sorry to interrupt, Mr. Rajesh. We are not able to hear you?

Is it better now?

No, sir. Can you use the handset mode while speaking and not the speaker phone?

How is it now?

Sir, a little better. Please proceed.

Okay. So my question is that you mentioned there was some specific issue with one of the operators in Europe in Q4. So is that situation rectified? Or when do you expect it to be corrected by?

So we are working with them, and we expect resolution pretty soon. Krish, do you want to add anything? I think that's where we are right now.

Yes. I mean a specific operator post-COVID changed certain policies. And we're discussing with them and the operator to remedy the situation, and I think that should happen pretty soon.

Great. And the ARPUs that you mentioned, $0.20 in India and $6 in Europe, those are net to us or that is we charge to the customer? I'm not sure if I got that right?

This is the net revenues, yes.

This is net revenues. Okay. Okay. And in terms of the fundraising for ONMO platform, any update on the time lines? You had said in the last call that you are approaching VCs in the U.S. and other places. So any update on that will be helpful in terms of where we are and by when do you think it will get done?

I think it will happen within this year is what I'll say, within this financial year which has just begin.

We'll move on to the next question, that is from the line of Maheshwer Peri from Pathfinder.

Congratulations, I think you got a fantastic team. Krish, this is for you. Someone asked from -- moving from B2B to B2C, right? Do you think that you need lot more investments and in a sense because you're launching the product without the money coming from the VCs, as you said, it might be a problem in terms of the launch itself?

See, launches happen over time. So as I said, we are launching our B2C cash battles and monetization in Q2. And we will invest that quarter and the quarter after that. And as Sanjay said, we are planning on raising funds this year. So that's our time line. And we're looking at raising significant capital.

I get that, Krish. All I'm worried about is that because -- see, as a listed company you're always just quarter-on-quarter, whereas here, it is a game where you need to be investing for the future. And that -- striking that balance might just pull you down is what my worry is. I'll be more than happy to spend more money. That's a different matter, but yes.

Yes. So I think -- and you're right. As a listed company, we will be judged quarter-after-quarter. But I think what I'm sure the investors would also be interested in how is our new products progressing. And if we are able to establish that connect with the investors that this is a separate stream, which will, in future, over the next 2, 3 years, going to give us substantial profitability and I'm sure they will like it. And like we mentioned, we're going to have different set of investors who will invest in this, and we are working on a structure to make that happen. The aim is to segregate the 2 businesses in that sense, although we will all work together in it. But it is to segregate the B2C part and the ONMO gaming really from the other legacy, which will continue to be our cash flow or the cash generator. The aim is to continuously have stability and little growth in the B2B and make it heavily profitable and to invest into the ONMO through the VC funding and otherwise, and make sure it's growth. We've already invested quite a bit in -- if you were to look at all our investments in the -- in Appland, in Chingari and otherwise in development of the product, we've invested quite a bit out of our current resources. But going forward, very soon, we will look at VC funding happening within this year, like we said, and that should help us generate a separate business in that sense.

Congratulations, team. I think after a long time, I see a fantastic direction for the company.

The next question is from the line of [ Chintan Sidani from VOIS ].

Yes. Are you able to hear me? Hello?

Yes, sir.

So actually, one of my question was partially answered, just that I'll phrase it once again. So by when do you think the ONMO and the Challenges Arena will start contributing towards the balance sheet as in like in the top line and the bottom line?

So Challenges Arena has started, although in a small way in this quarter, which is Q1, and it will grow because this is a cumulative growth as we continue to talk to other operators, and it will expand. The ONMO, we expect the launch next quarter. And from there on, let's say, Q3, Q4, we should see some revenue in that.

Okay. Fine. Just a couple of quick questions. So with the cash surplus what the company has got, is -- are there any plans for further buybacks or any bonuses?

So I mean this is for the Board to decide. But as of now, we just finished the buybacks just last year. There is no such intention immediately. But yes, we will look at using this cash -- and bonus has nothing do with cash. So that is one aspect. But we will look at cash to look at some inorganic growth. And our focus is on that to grow and -- whether that's part of the legacy or some other way. But we will continuously look at that. We actively engage ourselves in that activity. And hopefully, within this year, we should see some usage of these funds.

Okay. Okay. And just to the last question. Which is your competitor in cloud gaming in India and in global?

Krish?

I'll answer it and then also hand it over to FC. I mean, I haven't seen any cloud gaming platforms in India that have really taken off in a big way. Although there are a few which are from the global big players, but they're all cloud streamed onto either your consoles or your PCs and then you use a controller or some wireless adapter to move it on to mobile. So in our case, we are directly cloud streaming it onto your mobile with our proprietary technology. So in a sense, from that perspective, I don't see anyone directly competing. Also, the business models are all very different. Most of the cloud streaming platforms, you see are primarily just subscription based. We've got a different monetization model in addition to subscription. So 2 big differences out there. FC, do you have anything to add?

Yes. Let me just -- when we started this venture here in cloud gaming, there was a company called Hatch that was from Rovio, right? They were pushing to operator. They have signed up Sprint. They have signed up some operators everywhere. And their subscription model didn't quite work. They were doing the full game. They added different technologies. They have to adapt every game. Every game developer has to do some modifications to their game to be honest. So that's where the importance of really being strategic here and exactly what kind of service we want. And we decided to combine multiple technologies, right? We went with cloud gaming, but we also went with moments and how do we create moments and challenges without any integration on the game, right, and that's the Rob0 acquisition. And if you combine both, the way we're doing it, very short moments, there's actually no competitors have been doing this. Nobody has combined these 2 technologies together to be able to produce very small moments that are the best moments of a game and being able to compete on them. So on a worldwide level, that's quite unique. When you look at the other platform for cloud gaming, obviously, there's Google Stadia, which is actually really for hard-core gamers streaming the full game. Same thing with Facebook, right? Facebook launched cloud gaming. Again, they're very different. They're not doing Esport. They're not doing the best moments of the game. So everybody out there has got something really more towards the full game streaming. Nobody has done what we've been doing. And actually, that's a big feedback we have from operators because a lot of the operators we approach for 5G cloud gaming today, first of all, they've never seen moments. Now once they get the moment, they say, wow, you know what, nobody is there. So it's an easy place for us to be able to sign a deal. Now to activate subscription, that's where we'll have to really push and be dependent between subscription and real money gaming because that's exactly where we are, right, in between the two. But honestly, no real competition for now.

Okay. And any plans to go towards the app in Android or Apple from cloud to the apps in the future?

So just so you understand also why we took this decision to go with no app is that today, if you see a banner ad in the acquisition, you click and you play in 1 click. It's not like a playable ad, which -- no, if you look at the acquisition funnel, you market, you do a banner ad, you click, you get to the App store. You click, you download the app. You wait until the app is downloaded. You click, you go and subscribe to the app. And once you subscribe to the app, you click in the game menu. Once you click in the game menu, you start the game. So you have a 10-step process to play a game, whereby we have a 1-step, you click and you play, right? So that's a very key advantage here. Now it's a different funnel, right, as you know, because now you need to subscribe, you need all the operator billing or you still need to put your credit card in, right, whereby you have the App Store billing, which we don't have today. So to answer your question, yes, in Android, we could probably do it. There's a lot of restrictions on iOS, which stops us from being able to do it. But yes, we could do an app also, which is in the future developments eventually to do an app. But the funnel we've taken, right, for cloud gaming is to really leverage that 1-click play. And that's a big advantage for activating new subscribers.

Okay. Great. So future is really exciting, and it's -- you guys are doing wonderful job.

The next question is from the line of Nitin Agarwal from [ Shriya Investments ].

I would like to first congratulate the management on good set of numbers. Krish, I would just like to know your...

Sorry to interrupt, Mr. Agarwal. Sir, your voice is sounding very soft.

The question is to Krish. This is for the ONMO gaming platform that you've been speaking around. So what is your aspirational number for number of users, say, 5 years from today and the average revenue per user from this?

See, we've done some analysis, and we've got some internal goals, which I can't completely share. But we are looking at revenues, which are, as Sanjay said, multiples of what our current revenue base is, right, just coming in from ONMO. And from a user base standpoint, it depends. In some geographies, like North America and Europe, it will be different. In India, it will be different. But we plan to take significant market share in the space that we operate. And when you asked about ARPU, most of our monetization is likely going to be Esports, battles and challenges. So from that standpoint, it's not necessarily on an ARPU basis. The amount that players spend in India versus Europe versus U.S. changes significantly. So it's going to be a combination of all those 3 things. But we are looking at a very large user base.

The next question is from the line of Alok Churiwala from Churiwala Securities.

My question is around the App Store. That was basically just answered some time back, but I have a follow-up question on that. From what I understand is that you gentlemen aren't -- you still aren't on the App Store and the Play Store. And we heard 5 minutes back saying the fact that it's a multi-step process, et cetera, et cetera. So my question basically is that, a, are there any thoughts to get on to the App Store and the Play Store, point number one? B, do you believe the fact that you're worse off of not being on the App Store because that discovery is going to be taking a little longer? And three, interrelated to the same question, we heard about Skillz and DraftKings and so on and so forth. I'm familiar of those platforms. From what I know is that all of those are already on the App Store. So I'm a little intrigued to know the fact that you're not on the App Store. And from what I also know from Apple, and this is publicly disclosed data by Apple, saying the fact that they actually do not charge these gaming companies the 30%. So I'm a little intrigued as to why you gentlemen still aren't on these platforms.

Sure. I'll take that. Maybe FC, you can start.

Go ahead, Krish.

No, just a couple of things. One is there are several large companies that have been built outside the App Store. NPL is not necessarily on the App Store. And a lot of other gaming companies in India have been building side-loaded ATKs. So the first thing I want to say is you can build large enterprises, large gaming companies outside the App Store. And we are also seeing that trend across the globe where there are alternate distribution channels. So this notion that you have to be on the Play Store or the App Store to get discovered and be a large company, I think that myth is slowly going away. The second point was about Apple. It's not that Apple reduced it. They reduced it for certain companies making less than 1 million. So they've reduced the percentage payout only if you're a very, very small company. And the third point is there are certain things that we can do and we are not in the App Store. There are certain Google's policies, which kind of don't lend itself well towards Esports. So those are 2 or 3 things. I'll probably hand it over to FC, who has -- who will give us a much better context over -- the decisions over the last 1 year.

Yes. I don't want to get too technical here. But initially, when we build the service, we really looked at all the App Store policies, what we can do, what we cannot do, right? And I just want to highlight on Apple. Skillz is all -- mostly on Apple. Skillz signs up game developers. Each game developer has to redo a game, republish a game separately in the App Store because one of the iOS policy is to actually publish 1 game per game. You can't recreate sort of an App Store within an App Store. So the way we present it, right, when you jump from 1 game to the other, this is impossible to do within 1 app. So we would need to point out back to our cloud gaming platform, which is not permitted from Apple, just to be clear. So that was one constraint from Apple. On the other side, Apple permits Esport and Google was not permitting Esport. They just changed the policy. But when we were developing, they were not. So that's why companies like NPL, for example, they have very bothersome issues about having their Android app downloaded because they have to put the warning sign it's not supported by Google, as you know. So that's why we went with a clean way of really focusing on having a PWA, which is only an app that's downloaded from the web, which never goes on an App Store. So when you click on onmo.com, the first thing you do is you can add the icon on your phone as an app, but it's not an app that comes from the iPhone. And that's -- from that point, you can actually play. But it's really 1-click play, which we saw really the advantage of having this versus the whole steps that takes you to the App Store and all the warning signs and all the other restrictions that we had to live with. So I hope that answers your question.

Ladies and gentlemen, due to time constraint, we'll be taking the last question that is from the line of Mr. Irfan Karimi, an investor.

I have a couple of questions. Am I audible?

Yes, please.

Yes. I see your downloads for Challenges Arena on Play Store is just around 10,000. So what are you going to do to increase those downloads? Second question is, how much cash do you have on the balance sheet right now? And how much have you utilized it for the stakes in Chingari? And third one is you have around -- you said in the presentation that you have around 1.1 lakh paid subscribers. So can you give you a number as to how much top line can we expect in the Q1 from those subscribers? And I'm sure that you are a little [indiscernible] recently in the coming months. So what kind of number -- maybe small, but what kind of number can we expect in Q1 from Challenges Arena?

I'll answer the first question and then have Sanjay jump in. So the Challenges Arena on the App Store, you should ignore that. That's more Challenges Arena, B2C they were experimenting something. Challenges Arena is distributed through the telcos and the OTT players. So all the data and subscription and the downloads are happening on that side. You're not going to see that data out on the Play Store. So the -- okay. The 350 number...

We can give the number. We've got 110,000 paying and 350,000 gross...

So that's all on the B2B side.

Yes. But what kind of cash do you have right now on the balance sheet? And how much did you utilize for Chingari, for acquiring 10% stake?

So we have, as of now, INR 266 crores cash on our books.

And how much did you utilize this...

Yes. Chingari -- no, Chingari investment is already done, although not reflected here. But we -- I don't think we've made that public. That's not public. Is It? Or is it public? I'm not sure it's public. So not...

It's not public. But as a shareholder, I would be interested to know as to how much you have spent for the stake in Chingari, if you can share.

If it's not public, then I'm sorry, but we'll not be able to share that.

Okay. And what kind of revenue can we expect in Q1 from the Challenges Arena?

We don't give any guidance like this. Like I said, and in fact, Krish also said and FC also mentioned, our attempt is to be stable the current quarter and then consolidate over Q1, Q2. The Challenges Arena rarely comes into its own over Q3, Q4. And that time also, ONMO starts to progress well. So that's the time we should look growth from Q3, Q4. Q1, Q2 is more going to be stability as we are looking at it.

Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

I just want to thank everybody for joining this call. Lots happening. As you can see, we're going in the right direction. Really happy with the team. I think they're doing a good job. So let's look back next quarter, looking forward to give you some great news coming up. Thank you. Pleasure.

Thank you. Ladies and gentlemen, on behalf of OnMobile Global Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.