OnMobile Global Limited (ONMOBILE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of OnMobile Global Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from Christensen Advisory. Thank you, and over to you, ma'am.

Thank you, Steve. Good morning, good evening to all participants on the call, depending on the geography you are in. Welcome to the Q2 FY '22 Earnings Call of OnMobile Global Limited. Representing the management today, we have FC, Executive Chairman; Sanjay Baweja, Managing Director and Global CEO; Krish Seshadri, Chief Executive Officer of ONMO; Biswajit Nandi, Senior VP of Global Sales; and Radhika Venugopal VP [ Finance ]. The call will start with an update on the overall performance during the quarter and financials [ from ] Sanjay; Krish will give you a brief update on ONMO; which will be then followed by FC, speaking on the overall business activity and sharing his thoughts on the future plans. 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 risk and uncertainties [indiscernible]. For a list of such considerations, please refer to the earnings presentation. OnMobile Global undertakes no obligation to publicly revise any forward-looking statements to reflect future or likely events on [indiscernible]. Having said that, I now hand over to [indiscernible]. Over to you, sir.

Yes. Thank you, Asha. Good day to everyone. I'm glad to be with you once again, and hope all of you are doing well, staying safe and healthy. Before I get into the business and financial update, I'd like to thank all of you, our customers and our team members, for their continued trust in us. I hope all of you had already seen the investor deck that has been made available to you as well as hosted on our website and exchanges. If any one of you is not on the mailing list, please feel free to mail us or connect with our Investor Relations team, and we will add you to the distribution list. In line with our long-term growth strategy to become a partner in social Esports, the Board of greatest recently announced a new leadership structure to further strengthen our focus towards 3 business functions: D2C gaming and B2B products and solutions. I have taken over as Managing Director and Global CEO of OnMobile Global, and to ensure focus on strategic growth of our gaming business, Krish Seshadri has been redesignated as Chief Executive Officer of ONMO, with a dedicated emphasis on D2C, mobile gaming and social Esports. The other key changes is that Mr. Biswajit Nandi will oversee all global sales as Senior Vice President of OnMobile Global. I really want to start by talking about our revenue and products, which the 2 has been the bane of our results. From a gaming business perspective, during the quarter, we signed 9 new customers in this quarter for Challenges Arena, taking the cumulative sign-ups to 15 out of the 6 customers that are already live. While we saw doubling of our Challenges Arena revenue quarter-on-quarter, the multiplier effect has started in the ongoing quarter and will exemplify as more and more customers go live. The cumulative gross paying subscribers at the end of quarter stood at 1.2 million. We expect to sign up and be live with many more customers. We are looking forward to see substantially increased revenue from Challenges Arena over the coming quarters as we are witnessing good traction there. We are noticing exponential increase in monthly active users for this segment. Also, I'm really glad to inform you all that we have completed our first co-branded launch of ONMO B2B with a 5G operator outside of India, and a few days ago -- and we also signed 3 additional customers this quarter. We are also excited to announce that we launched real money cash [indiscernible] beta testers for ONMO Games in India, and the commercial launch is planned during this fiscal. We have added 22 new games and more new features in ONMO. Krish, of course, will talk more about it in a little while. From a product perspective, games which contribute about 10% of our revenue grew by 4.1% quarter-on-quarter, aided by new customer additions in Asia region. Tones contributed 39.4% to revenue, and we added 2 new customers here also. Under the Tones segment, we have signed a new deal with one major operator in [ Thailand ]. Videos contributed about 46.4% of our revenue, and I'm happy to inform you all that during the quarter, we launched D2C video deal in France. I want to reiterate that it is our expectation that from Q3, and more prolifically, from Q4 onwards, we should start seeing good growth in revenue due to both the new products, Challenges Arena and ONMO B2B, becoming live and various telco customers. As we had indicated earlier, we expect to sign up to more than 20 customers within this current fiscal for the Challenges Arena, with a lot of them going live within this year itself. We are looking at signing a number of new customers for ONMO within the current fiscal. We intend to start sharing more data with you in the coming quarters on the revenue from new products. One more significant product which I -- that I wish to let you know, as these 2 new products are actually opening up new doors for us, with a high percentage of the customers that we are signing up now on new label. And we believe that we will be able to upsell our existing products to these new relationships, which in turn will help us stabilize and may actually give a tick up -- uptick for these legacy products revenue. In terms of financial update, our Q2 FY '22 revenue was stable on a quarter-on-quarter basis with -- at INR 136.7 crores. As factored in the earlier calls as well, the year-on-year growth reduction came from Europe and EMEA regions. Europe and EMEA region that declined due to some operating policies. We have now sorted the issues, and things are improving further as we go along. In Europe, after 9 months of continuous de-growth in subscriber base, we finally see the stability in Q2, and the players hit 9 months high during Q2. In line with our strategy to shut down any business entity that does not measure up to our stated goals of revenue and profitability, we are continuing to focus on unprofitable Latin American businesses, and we are in the process of exiting from these countries. As mentioned earlier also in the call, I would like to reiterate that we have completed this process substantially last fiscal, and the full closure of entities is expected in the current fiscal of '22. If you see revenue by geography breakup, given in percentage, marginal revenue of 1.3% now comes from Americas, while almost 58% now comes from Europe. On the cost front, as part of our rationalizing effort, we saw a reduction of our manpower cost, which is a reduction of our manpower, which also resulted in a onetime severance cost of INR 3 crores this quarter. This is going to have a lasting effect on our future manpower cost, which is, as a consequence, increased to 8.6% on a quarter-on-quarter basis for this quarter, but has decreased 11.5% year-over-year. If I were to exclude this onetime cost, our manpower cost decreased by 0.4% quarter-on-quarter and 18.9% year-on-year. This is despite the increment that we gave the staff effective 1st of July. Our stated target for manpower cost is 20% of revenue. We are currently at 23%. It will be our endeavor to reach this number in the coming fiscal. We have increased our focus to acquire [indiscernible] talent for our gaming business, along with the rightsizing of our legacy business requirement. Our marketing costs remained stable at around INR 8 crores. Other OpEx increased by 35.2% quarter-on-quarter, mainly due to onetime cost of INR 2.8 crores. EBITDA for the quarter is at INR 9 crores, a decrease of about 38% and the margin at 6.9%. The drop in EBITDA is due to onetime cost, as mentioned above. If we exclude those onetime costs, our EBITDA would be INR 14.8 crores for the quarter and the margin at 11.4%, witnessing a growth of 2.2% on a quarter-on-quarter basis. Operating profit is at INR 6.3 crores with a margin of 4.8% during the quarter. However, excluding onetime costs, operating profit would be INR 12.1 crores and a margin of 9.3%. Our profit after tax at INR 2.7 crores. This includes a nominal loss of INR 0.9 crores. Excluding one-time costs, the PAT would be at INR 8.3 crores. Our DSO in this case has improved to 128 days as compared to 140 days last year. The cash at book stood at INR 172.8 crores for the quarter as compared to INR 2.7 crores at end of Q1 FY '22. The decrease is mainly due to our investment in Chingari of INR 32 crores. And also, during the quarter, we made upfront payment of EUR 4.2 million to one of our leading operators in Europe. Please note that Rob0 is also now our 100% subsidiary. Earlier, it was in [ a percent ], and we had invested only 25% into their equity. But during the quarter, we invested the remaining 75% equity, and now it is a 100% subsidiary. We will continue to invest in our gaming products to strengthen our position in the B2C and gaming market. Also want to inform you all that on 5th of September '21, the Board of Directors declared final dividend of INR 1.5 per equity for the financial year 2021. A lot of the operating metrics and data have already been shared in the presentation deck. I'm sure all of you would have had access to the same. With this now, I will hand over the call to Krish to talk about ONMO. Thank you very much. Over to you, Krish.

Great. Thank you, Sanjay. Good afternoon, everyone. I'll share the progress on ONMO, our social Esports cloud gaming product. So there's been huge progress on our D2C product over the last few months. The first is monetization. We introduced cash battles and tournaments feature in India on November 3. You remember that in the last earnings call, we were working on this. So cash is now enabled for both tournament and one-on-one battles in states where it's permissible. Others will be able to continue playing the noncash version of ONMO. So for those who played with the product, you'll notice payment integrations for multiple payment mechanisms like UPI, wallets, net banking, et cetera. And we also have contacts where if you want to play more challenges and practice tournaments and batteries, we've enabled that. The second big change on the product is, obviously, we've upgraded our content, as Sanjay had mentioned. We've got more gains onboarded on the product, and there are more unique challenges and short gaming moments in the platform. So roughly, we have about 60 games right now and nearly 4,000 unique AI-driven challenges. Remember, we have said that our goal is to get to about 10,000 unique challenges, and we are the world's first challenges creation engine powered by artificial intelligence. And from the initial player feedback and focus groups that we've conducted, players just love the variety of games on our platform and the unique challenges and short-form moments. And they feel that they can seamlessly move across these games and short challenges without downloading any app. And these short gaming moments allow players to snack on gaming content, and this is a huge trend in the market. There are over 150 million Indians who now play sessions which are really short, 5 to 10 minutes, consuming bite-sized content, and they come back several times a day. The third big development on the product, as you would notice, is a hugely improved and contemporary UI, user interface, and user experience. For those who've played with the product, you'll notice a battles [ carousel ] that ensures closure of open battles in the platform, and this is all targeted towards faster monetization for us as we make revenues when these battles close. You'll also see activities page where you can go and check your ongoing battle, your ongoing tournament. So it kind of gives you a history of what you've played in the past and what you're currently paying, what you've won and what's your status on different challenges were. And if you go into our games page for any specific game, you'll also see a progression logic for challenges introduced that improves your replayability while displaying the number of challenges. For example, if you are in the queue puzzle game, you'll see 150 challenges, and if you are in the 10th of the 12th level of that challenge, it gives you a progression logic for that. So we are very confident that our ONMO direct-to-consumer product will be a dominant social Esports cloud gaming platform. Over the next 6 to 7 weeks, we'll continue optimizing the product, the user journey and engagement. And then starting Q4, we will start with our digital marketing push for -- in India for user growth. That said, we'll also continue upgrading our features and rollouts over the next 3 months, in particular, our first-time user experience. We're going to focus a lot on the first-time deposit experience and features to induce repeat visits during the first 7 days, and many more interesting things that are in our pipeline. On ONMO B2B, there's been terrific progress on the partnership side, as Sanjay mentioned. Very strong interest from telcos globally because they also see the short game moments and the thousands of challenges and cloud streaming as truly different from any other platform. We completed the first co-branded launch with a 5G customer. We've signed up 3 more global customers. There are multiple conversations with different global customers, which are at various stages of partnership discussion. So we are very confident that ONMO B2B will also see a similar growth trajectory and customer adoption like Challenges Arena, which Sanjay talked about. And the great thing about the ONMO product is it cuts across geographies. It cuts across age groups, countries, gender. So it's a very, very universal product offering, very, very futuristic. So that said, gaming is our future growth business, and both our gaming products are mobile-first, mobile in nature. The mobile gaming space is expected to grow over $100 billion over the next 2 years, driven primarily by mobile gamer because of the millennial audience, cloud gaming spend, Esports and social gaming. So as you can see, all these are very, very integral to the ONMO product. And over the course of this transformation to a gaming business, we've also been able to attract and build world-class gaming talent across all our regions, India, Sweden and Canada. So with that, that's a recap on ONMO. I'll hand it over to FC, our Executive Chairman. Thank you.

Thank you, Krish. Thank you all for joining the call. Let me start by congratulating Sanjay for stepping up as a Global CEO. Sanjay, the Board is really happy with the work you've done in the company, and obviously, it shows. I know I've worked with you, Sanjay, for multiple years. You were on the Board for many times, back then, as CFO, now Global CEO. I'm quite happy that you did step up to this level, and we're in very good hands in you with -- as CEO. We did -- and I'm going to cover the whole Board here because we did for -- during the COVID, it was very tough to do Board meetings over Zoom. It's our first Board meeting that we did in presence here in Dubai. We spent a very good 2-day session on all aspects of the business. And just to reiterate what the Board is feeling right now is we're -- every aspect of the business is solid. And I must say, that's a first in many years that I've been in OnMobile where I feel that every aspect of the business is covered and solid. And you might not see this as investors, obviously, because you don't have all the details of the business. But when I look at our traditional services as Tones, video and the new services, which are really performing now and ready, just on the ONMO side, just to come back since Krish has finished, it took us 2 years to build the service, and it's not an easy service. It's the first social Esport platform in the world. Nobody has that. We're combining 2 technologies, which is cloud streaming and AI visual analytics, to be able to do challenges and see who wins, who lose, without any code integration from the game of upper part. Nobody has been doing this, and it's really, truly a challenge. It seems easy on the vision, to say it on paper. It's another thing to make it work, and make it work to a point where it works every time. Very happy, and I'm going to congratulate the whole ONMO team on this one because we launched live now with cash, as you know, November 3. It's been a huge effort from the team to do it, and now we're live. And now we're in the situation where we can start marketing, which before was always, well, we can't because something is missing. Now nothing is missing in the ONMO side to market. And I talk about ONMO. I just want to take one step. The highlight of the quarter is not that much ONMO, it's Challenges Arena. The engagement metric and the conversion metric on Challenges Arena, and conversion from a user point of view and from an operator point of view, are terrific, honestly. We launched the product in March, April and -- with only one customer. Now we're live with 5. We signed 15. Verbal confirmation is up to the roof, honestly. I've never seen, from a telecom point of view, a product that picks up so much in 6 months. One thing that we've been having as an issue with operators for multiple years now is the traditional VAS services were not engaging. And all you could see, yes, you could stack up customers paying subscribers, but nobody was using the service, and everyone is calling the call center to cancel that service, and that was a very tough business to maintain. Now what I see with Challenges Arena, it's truly the inverse, there's truly engagement on that service. And there's so much engagement that shows that operator says, "You know what, you show me the metrics. I see the engagement, and I'm signing up." And the compounded effect of this -- right now in the quarter, we looked at the results on the -- and this seemed very small. Yes, it's less than 1% of our revenues. Yes. But trust me, this thing is really -- I'm just saying right now the picture which we're looking future results, but we're actually looking Q3 right now, and the results are totally different. And the compounding effect of, I think, multiple launches and operator is really picking up. So I'm really -- and as a Board overall, we're quite happy with the team on this one in the metrics, and there's a lot that can be done on that gaming product on Challenges Arena. So we're very positive on this, very positive on ONMO, so 2 great service. The operators are ONMO also. Clearly, it's a cutting-edge service. So we're mostly addressing 4G, 5G operators that really want to be cutting edge, but a lot of them are quite interested. So ONMO is following about 6 months behind on the sign-up of operators on the B2B side, but it's right there. But what I really like, and I'm coming back on the strategy today, is that we're filling the demand for multiple aspects that the operators need, right? And clearly, Challenges Arena is a totally completing -- complementary product to ONMO, and we're right out there with Challenges Arena and ONMO following on, and I really see the pathway with revenue has really been kicked in. The ONMO service that we sell to operators is a subscription service, it's not real money Esports. It's subscription, which is the same model as Challenges Arena. So whatever you have seen in the next quarters coming out of Challenges Arena, expect the same following on with ONMO. So we have like 2 waves of new products following on. One thing also I want to highlight, which we're very happy is that the 50% to 60% of the customers, when I say mobile operators, are new. We have today 98 customer mobile operators. All the new that we signed, the 15 new that we signed on Challenges Arena, the majority are new customers. They're new operators that we've never dealt with. The same thing with ONMO B2B. So really, really new way also of getting new operators onboard on the B2B side. And so that's what I really want to share with you. I mean I'm quite -- I really look at the future, and I'm really enthusiastic. And just one word additional on ONMO D2C. We're live with D2C on ONMO. Now we can start marketing it. We all know we did the investment in Chingari. Yes, it is a great investment. By the way, you saw we reinvested at twice the value. It's going like crazy, 35 million-plus monthly active users. Well, all of this as an investment, we're benefiting also as the -- as we launch ONMO D2C, and that's the key. So a big focus now that it works is to get this thing integrated right away for Q4 so we can benefit in India from the Chingari momentum. So that's really the team's task to make sure that we deliver in Q4, aside from going with marketing. So I'm going to stop it here. I'm sure you have multiple questions, so we'll go right into the Q&A.

[Operator Instructions] The first question is from the line of Mithun Aswath from Kivah Advisors.

Hello? Yes, my question is more on -- the cash balance, I think, has come down to about INR 177 crores from INR 266 crores in the beginning of the fiscal. Just wanted to get a sense, how much have you invested in Chingari so far? And what is the current valuation of Chingari? And what stake you have in Chingari at the moment? And what -- how many users are currently are on Chingari?

Okay. As far as the -- our investment is concerned, we initially did INR 32 crores, and then we followed it up recently with another INR 11.06 crores. We are maintaining our 10% share in Chingari. I'm not at liberty to speak about the value per se, but I mean I will leave that up to you to decipher. But I can say that, that from the first investment to the second one, the valuation has doubled. As far as the number of customers [indiscernible], I'll request Krish to talk about it.

Yes. Thanks, Sanjay. So roughly about 35 million monthly active users but that are growing pretty rapidly and should likely closer than 50 million in Q4. So that's order of magnitude of reach that we are likely to have.

Yes. And just wanted to understand the fall in the cash balance by close to INR 90 crores. If you can just give us a breakup of where that money has gone in terms of where you have spent it? Obviously, some amount of it has gone to Chingari, but the remaining fall in the cash balance, if you could just take us through?

Yes. Radhika, do you want to take this?

Yes. So we invested INR 31 crores, INR 31.8 crores in Chingari. There was also an upfront fee payment to one of our major auditors in Europe. That is around EUR 4.9 million. These are the major outflows in cash. Further, we invested another INR 11 crores in the -- recently in Chingari. On top of this, we have also -- we are also investing in the R&D of the gaming product. So these are the bifurcations of the outflow of cash.

Yes. Also to mention that we completed the Rob0 acquisition. So that took another -- some crores.

The next question is from the line of Deepak Poddar from Spark Capital.

Yes.

Mr. Poddar, if you can speak closer to the handset, please.

Yes. Now is it better?

Yes.

Okay. Sir, I just wanted to understand a couple of things. I know in the previous conference call as well, we have been speaking about like in 3 years, our new gaming businesses will be larger than our current business. So, currently, we are -- in our current business, we're at about 50 -- INR 500 crores to INR 520 crores, INR 530 crores kind of a revenue run rate. So at least the INR 550 crores, INR 600 crores revenue target in 3 years from gaming, will that be a feasible kind of -- one can envisage on the gaming business?

Yes. Yes. Let me just -- if you look at the market today, on the B2C side, right, on real money gaming, all our competitor, which I will not give the name, but you know them, I mean in 3 years' time, have grown to major revenues, and we're addressing the same market. We're going globally also. We're addressing the B2B market also, as you know. So we've got 2 fronts. So yes, our expectations for sure is that gaming is going to grow to that front. Sanjay, you want to add anything?

2 Yes. I mean while specific numbers one doesn't want to give, but our sense is, clearly, of the gaming revenue will get larger than our current legacy business.

Larger. And in 3 years' time, that's what. Right?

Yes. 3 to 4 years' time. Yes.

Okay, okay, okay. And I understood that. And then in the Challenges Arena segment, the kind of pickup that we have seen and traction, so that's quite commendable. So maybe next 2 to 3, 4 quarters, so what sort of revenue traction we are looking at, maybe from INR 1 crores right now to maybe what, INR 15 crores, INR 20 crores in [indiscernible]?

Yes. So I think -- now with last quarter to this quarter, we just had a single operator live. We doubled the revenue with only one operator. We have signed -- we have got 5 other people live now, but they were towards the end of Q2. We believe that this revenue will more than double in this current quarter that we are. So -- and maybe go up as much as 2.5x. Our belief is that once we have at least 15 of them live over the next 2, 3 quarters, the projection -- I don't want to put numbers, but I think the multiplier effect will be huge. And I leave it to you guys to -- while it is it not fair to say that every operator will have similar numbers. In some places, the ARPU is higher, some places, the number of customers are different. But having said that, the current -- I don't think we will exhaust it or we got only -- we probably got only a fraction of what our one operator was doing. I think that operator himself will give us a much larger revenue from where we are today. And the multiplier debt will be there for all to see.

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

Yes. My first question is, given that Facebook has become Meta now, and metaverses are been talked about, I would think it will start to get into the gaming systems as well. So I'm just curious what you guys think about this development for ONMO.

I think you -- yes, could you just repeat that again?

So my question is that with the Facebook becoming Meta, and they are pushing on the metaverses side, I would suspect that the metaverses will start becoming the environment also for the gaming systems. So I'm just curious what you guys think. Is that a reasonable hypothesis? Or those 2 sort of trends will not [ multiply ] in the near term?

Yes, so I'll just touch on it. See, there are several trends happening in the mobile gaming space, right? And the top 3 or 4 that we've pointed out to include social Esports, the use of AI, cloud streaming and short gaming moments. Yes, there are companies focused on the metaverse, too. At this stage, our focus is very, very clear and focused on these trends, which are obviously driving our product development efforts. We look into it maybe in a few quarters and see what our play in the metaverse may be. I don't think we are there right now because the trends that are driving ONMO itself are very huge, right, and you can't keep chasing every trend out there. So the market that we are playing itself is growing rapidly, and I think our focus is very, very clear at this stage.

And let me add. Just let me add. We're the only one in the world today doing social Esports, like truly taking any game that we can put on our platform and actually compete like without any integrations. So it's truly a social Esport platform. Focus is key also, right? So I mean let's hit the mark. We're already going on 2 Esport on to mobile phone, which is different than -- a lot of Esport today is done on console and with special gamers. We're taking this to anybody. As we say, social Esport, anybody on any mobile game, and we made a small -- very small like we compare it to TikTok, right? TikTok gaming competition, right, 15-second, 30-second, 1-minute, 2 minutes competition on mobile games. That's the segment we want to hit hard on ONMO, and that's what we want to deploy. And then we know I think both a subscription model and a real money model both combined or side by side in both cases is truly, on the global level, a great market. I mean the metaverses, to answer your question, I invested 10 years back into a mobile world, and invested in their -- it's another game. And I appreciate that Facebook decides to move to that side, that's their case. I don't know how much money they're going to waste before they can show any results on this. But we're not going to waste any money on the virtual worlds and metaverse and virtual gaming for now. So that's -- for us, the focus is really social Esport, and I really want us to be the leader in there.

That's very helpful. My second question is you had talked about the fundraising for ONMO. So if you can update us within that product.

So I mean we are actually evaluating as to when we got to the market. We've been talking to a few strategic investors and some bankers. Clearly, the traction is there. We want to be ripe from a value perspective when to hit the market. Our sense is we will be raising the money in the next fiscal. We have had discussions with the bankers, et cetera. Our target is to raise the money next fiscal -- early next fiscal.

Okay. And from the P&L, I would think that a lot of [ players ] is also going to ONMO. Would it be possible for you to at least segregate investment that was going in ONMO versus the regular business that is supporting Challenges Arena and [indiscernible]?

Actually, Rajesh, it's difficult to understand. Your voice is getting muffled What is the question? I'm not able to understand. Sorry.

Okay. Sorry, Sanjay. I'll repeat. What I'm saying is that given the expenses that are up, is it possible for you to share the investments that are going in ONMO from the P&L side so that one has a better understanding of your sort of mainstream business and the investment that is going in ONMO?

So as far as ONMO is concerned, as of now, there's nothing hitting the P&L per se except that the overall cost of our leaders. I mean they -- because those costs are into everything else that we do, people like us and the others. Other than that, most of the direct costs are still getting capitalized because of the R&D because the product is not yet -- the D2C product is not yet launched, in that sense, commercially launched. So unless we commercially launch that, that will get capitalized, and that's still as part of our investment that we just talked -- Radhika also mentioned. So from a P&L perspective, those things have not yet come about. As far as the Challenges Arena and other things are concerned, those will hard hitting the P&L. But there, we are commercially launched. There we are growing revenue.

[Operator Instructions] The next question is from the line of Prakash Ramaseshan from Pragya Consulting.

The first part is a small suggestion for us to better understand what's happening in the gaming business and the investment vis-a-vis the returns, and the second part is a question. The suggestion is if you could give us, perhaps, going forward, by quarter, the investments being made in ONMO either on the capital side or the revenue side, and some kind of a reconciliation of the cash balances because that's a question coming up from many investors. Just for information. Maybe it can be one slide in the presentation which can help us better understand the mathematics of the business. The question I have is, as is happened in Chingari, where they have issued cryptocurrencies to incentivize people to come on to their website and play, are there any such thoughts on ONMO and your gaming platforms? That's the question.

Yes. So I think good suggestion as far as the numbers part is concerned. We will make sure next quarter onwards. In fact, I already mentioned that we'll give you more details. We will -- we do want to share. We want to be completely transparent. We will share from an investment perspective also and P&L perspective also, all the data about the new products, clearly. As far as cryptocurrency is concerned, yes, Chingari has launched it. Hopefully, when somebody gets into cryptocurrency, the value base goes up huge. One, that's going to benefit us in a big way, I hope. As far as we are concerned, doing crypto, I would not want to comment at that. But yes, all options are open for us. And we could -- you could hear some good news from us as of now. We don't know yet. Nothing.

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

My question is on the Challenges Arena. Why did we pull back our app from Play Store? And is there any plan to integrate with Chingari app?

Okay. So yes -- yes. I think the Play Store Challenges Arena that you might have seen, that was more the B2C, and we didn't want to confuse that with Challenges Arena, which is our B2B, which is essentially our product strategy. So the few thousand users that you may have seen in the Play Store, we just removed it because that's not really our B2C play. So that's where it is. We don't, at this point and stage, have a Challenges Arena B2C strategy or plan. If we do, we'll come back to you on that. But right now, it's -- as Sanjay talked about, it's a B2B play for us with the telcos and other OTT platforms.

Okay. Okay.

Sir, you have any further questions?

No. No, that's all.

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

Yes. I just like -- which kind of expenditure was incurred in research and development? Can you kindly throw some light on that?

[indiscernible].

[indiscernible].

So I think the entire development of ONMO product is research and development from our perspective. That's what we're calling the [indiscernible]. Like FC mentioned, it takes 2 years to develop. We've acquired 2 companies, like that, obviously, is shown separately. But innately, the development of the product that we've launched from a B2B perspective and recently on a D2C mode, that's all research and development. That's really the 12 [indiscernible] funding cost. That's what the research and development is. Radhika, if you want to add anything, please go ahead.

So these are basically the acquisitions of Rob0 and also the additional expense feature, which we incur on a monthly basis on the development of the product, which is the -- essentially the people working on the product and the other expenses like -- there are certain contracts related to the development and research. These are the expenses, which are getting capitalized and pertaining to the research and development of the gaming product.

And just to clarify, ONMO, right now, we launched November 3. It's in beta mode, right? I mean it's -- you can use it today. You can use cash and it works. At commercial launch, before we put the full gas on marketing, it's in beta until the end of December. So the capitalization on this front will stop probably January 1. And from on and on, it's going to be a P&L hit. So just so you [ can plan ] accordingly.

The next question is from the line of Manan Thakkar from ICICI Securities.

Hello? Am I audible?

Yes, sir, you are.

Yes. My question is on the customer acquisition cost and the B2C strategy. Is that a dampener that because we need to burn some money, that we are not pushing B2C right now?

Krish?

Is this specific to B2C customer acquisition that you're asking?

Yes. For a gaming business, say, to get into an App Store on iOS and do that, would that need a lot of cash burn, so we are not pursuing it right now?

No. Let me clarify 2 things. One is the ONMO is on the Play Store or the App Store, it's on the web browser at play.onmo.com. It's a progressive web app. But that said, yes, that also needs a little marketing. But typically, the first couple of months of any product launch, you kind of optimize the product and the engagement. And as FC mentioned, we're giving November and December time, and then starting Jan, we'll start the marketing the push for ONMO.

So we would get eventually on the App Store? Do we intend to do that by what -- by which quarter we intend to do that, to get on the App Store?

Look, the product is not on the App Store. It's on the web browser. So if you open your mobile phone and go to, let's say, your Chrome browser, you can just type in play.onmo.com, and you'll find our product there. It's directly cloud streamed onto your browser. So it's not on the Play Store. It's not on the App Store.

All right. So we won't get there eventually, is it?

No. I mean -- and we don't need to pay the big money to kind of come on to the top of the App Store either. So there are lots of products now, especially in gaming, which find alternate distribution channels outside of the Play Store and the App Store, and that's where we are.

Let me just add here, just for our investors to understand the business decision that we took on this front. Since it's cloud-based, we don't need to download an app. It's a big advantage. You'll see in the investor deck, we have shown our first publicities advertising that you can see on Facebook, that you can see on the web. It's a one-click play. When you see the ad, you click. You can play right away, subscribe and you're there. Other apps, you do a one-click App Store. You're in the App Store. You click. You download the app. You wait for the download of the app. You trigger the app. You go log in, in the app. I mean you get the process. I mean this process is like a 10-click versus a one-, two-click play, right? Same thing when I say social gaming. I have a friend. I can do 1 SMS. I send a challenge. And one click, we can play and we can battle. No other platform can do one-click play because they've not been built that way. We've built our system this way. So huge advantage to have the services directly in the cloud, directly on the web without having to do any downloads. Now marketing-wise, doesn't change the fact that we still need to invest in marketing. And I just want to say that on the Indian market side, we're really lucky to have done this investment with Chingari because we'll benefit from all their momentum here in India as soon as we integrate. So I'm repeating myself, but the priority right now in the team is to integrate the service within Chingari so that by Q4 or early next week -- sorry, next year, we'll be ready to push with a lower marketing spend that would normally be required to really hit the market here.

Right. FC, but my only point was getting into the App Store and having the app downloaded the one time for -- will it not lead to more engagement from the users? Because the app ecosystem is fairly penetrated in a 4G, 5G user base for the B2C strategy.

Yes. So to answer your question, on Google Android, we can do it. Actually, we have internal developments looking at it so that we can address this side, too. On the iOS side, there's restrictions from Apple to be able to have what -- the kind of service we have with multiple games within one service. Now with all the different games we're doing and changing the law, the rules to be able to have multiple billing system within an app. Also there might be other ways we could use iOS also to -- I mean the key here is to be able to monetize, right? So if we can get other users through App Store and they do one-click billing, also without having to enter a credit card, we're doing one-click billing with operators, as you know. But in other markets like the U.S. market, European market, it's very strong on the app side billing. So that's the advantage of doing this. So it's going to come along. But for now, really, our focus is the web.

Also, with some of the other bigger competitors in the Esports space, whether it's MPL or [ Avenzo ], they're not on the App Store. They've got an APK, but it's side loaded on their own website. And one has to also follow a certain app store in place of policies in different geographies.

All right. And lastly, on our Tones business, any further updates that you want to share, except for what we have shared on the deck?

The Tones business is stable. Nandi is on the call here.

Nandi, you want to talk about the Tones part, the stability and the future a little bit?

Yes. The Tones business is stable. We are adding customers -- new customers to the Tones business. Their revenues will start getting reflected in the next fiscal. This fiscal, we are deploying the platform inside the telecom operator's premise. And that's how we are looking at the Tones business right now.

All right. So which regions are these new operators?

So we are -- we have signed a few customers in the H1, primarily in Southeast Asia and Africa.

The next question is from the line of [ Rama Krishna Vi ] from Equity Intelligence.

My question is on the front-end payment, what we made to one of the operators for around $4 million. So could you elaborate on that? And when is the payback period? Is there a payback period for this?

Radhika, do you want to talk about it?

Yes.

Let me start, and maybe Radhika can add. We -- this is something that we've been doing this since 2017. The payback is -- will -- is in the next couple of years. But Radhika, why don't we give them more details?

Yes. So this is the upfront fee, what we pay to one of our operators in Europe. And this is -- this has been there. This is not a new payment which we have made. This has been there since 2017. And this tranche of payment has -- we paid this particular tranche in the month of July. So this is basically the expenses, marketing and acquisition expenses, which we share with the operator. It is just a prepayment, and it's not an expense on the P&L. It will get charged off on a monthly basis. It will get charged off over the period -- over a period of the contract. And this is -- this started in 2017. So this is not a new payment which we have done now.

And the payback?

Payback is coming in the coming quarters. So it will come in the coming years and coming quarters.

Yes. 2 years plus, payback is 2 years plus, for the next 2 years plus.

Mr. [ Krishna ], do you have any more questions?

No, no.

The next question is from the line of [ Vikola Rora ], an individual investor.

So my question is on the acquisition that the ONMO deal recently done with the Rob0. So are both the management of Rob0 are continuing with OnMobile? If yes, then the synergies are still there? Or could we see anything else?

Krish, you want to speak about this? Krish?

Yes. Can you just repeat the question? I heard about Rob0 acquisition and the employees.

The question was, is the management team with us. So let me just jump on it. So yes, we have a very good team. I mean Rob0 is based in Montreal, and I'm based in Montreal, too, just so -- and we have an excellent team, very experienced. The Rob0 team in the past have managed key games like [ World Star Poker ], Tetris. So they really, really know. They've developed games on skills in the U.S. They've developed games on multiple platform. And they are the one -- just to remind everybody that they're the one that had developed this algorithm and AI to be able to actually run on top of games and do visual analytics of games. That's the same AI that we're using right now to be able to actually identify the games' stats, the number of coins collected, the number of moves, the number of -- the score, reading the score, and being able to stop the challenge right on time to be able to capture and decide who win. So they're really key to this whole social Esports platform, and yes, to answer your question, we acquired 100% of Rob0 for exactly that reason, is that we wanted them to focus solely on ONMO and not try to do 2 business in the same time, as we know that doing 2 business is very tough. We need to focus, and we needed this thing to focus. So now they're 100% focused in ONMO, and we completed the acquisition to that front.

Yes. Just to add to this. The way we are paying for it incentivizes them to stay on with us for the next 3 years.

Okay. So this is basically same implemented for the Appland as well that we acquired a few years back.

Yes, yes. Absolutely.

Yes. So again, [ it's recently ] -- exactly. And Appland, just so -- Appland is focused on the cloud streaming and edge computing. Everything we do is very cutting edge on the edge computing, sorry for the [ word game ] here. but the team in Appland is really, really focused on edge computing, on streaming the moments and doing the snapshots of the moment. And that's something unique also. We have a patent on this on how to do snapshots, but we're the only one in the world today doing snapshots on game on cloud business. Most -- all other cloud providers don't have the snapshot capability. So Appland is focused on this, and the Rob0 team is focused on reading the stream live, analyzing the game play, doing the CMS to be able to create the challenges, make the matrix on the challenge based on what score, coins, number of moves, time-based and stopping the screen as soon as these conditions are met but only on the AI visual analytics front. So yes, it's -- again, I'm back on what I was saying. It's very cutting edge but they're very complex to be able to do. So that's why it's been a big 2 years. Really happy that the team all come together, right? They're working hand in hand. At Montreal, Sweden and India, everybody is working hand in hand to deliver this platform, and it all comes together and now it's working perfectly. So yes. But yes, Rob0 and Appland are very similar type of acquisitions here to be able to deliver this ONMO service.

Okay. So my second question is on ONMO games. So as a user perspective, when I will play the games, some of the things that we are [ lagging ] and at the different devices as well. So do you want to talk about a little bit on the gaming platform, that there's any enhancements or user experience like we are doing something?

Krish?

Yes. Sure. See, as you can see, the platform has about 60 games. The games are all very different, different by different genre. So we've done a lot of optimization over the last 3 or 4 months on the user experience, on some of the lag that you may experience. We are also evaluating the network quality and the good games based on playability, right? So those are all focus areas for us from a product road map standpoint, and it's just going to get better and better. We're going to have a much better first-time experience, first-deposit experience. And today, sitting in Bangalore or Mumbai, which is reasonably close to our servers, we don't see that much lag in many of these games as we used to see about a year ago. So that's also a testimony to the streaming technology acquisition of Appland and how that's integrated within our platform. FC, do you have anything to add?

No. Just -- and just to share a personal experience. I'm here in Dubai, right, and the server is in Mumbai, and I'm playing. And it's working exactly like Montreal, except when there's a peak on the WiFi, and everybody is -- at 2:00 p.m. on the WiFi, but that's something we can't control. The only thing we can do is -- it's really going to edge computing. And just for investors to understand this, and that's why it's so important to sign 5G operators, is when we deploy our own servers into the operator's premise, we control the -- from the handset to the server, there's nothing in between. So we control latency, and we ensure that we have a full quality of service. Right now, we're running on Amazon, and we don't control the Internet, obviously. So it's very, very important in our strategy, and we just talked about India, to really deploy servers within operators across India. And every geographies we go, we have to be right on the edge, right? So to do that, we need to deploy our own servers. So that's going to be a big push in the coming quarter.

Okay. Got it. So just one clarity. If you're talking about ONMO games, then it is just a platform that we recently built out in a few months back, right?

Yes. I mean we launched the noncash version with virtual currency towards the end of May, and it's the same product. It's just that the November version has cash and monetization on it. It's the same product, yes.

The next question is from the line of Deepak Poddar from Spark Capital.

Yes. Yes. Sure. Yes. Sir, I just wanted to understand this ONMO D2C. The beta launch was done on 3rd November, right?

That's right.

Yes.

Yes. Yes. So on the -- from the ONMO platform, so what is the time line that you are seeing a meaningful kind of a revenue start accruing from this platform? What's the time line from the launch that we have done in November?

So the next few weeks until end of December, we're just, as we said, optimizing the platform. The marketing push will start in Q4, both our own digital marketing and also integration with Chingari. And post that, we should start seeing the -- some revenue traction.

Revenue traction, maybe from what, January '22?

Let's look at first quarter next fiscal. That would be meaningful.

First quarter next fiscal. That is 1Q of FY '23, right?

Yes.

That's right.

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

Yes. Just a quick question, Sanjay, on how much have we spent on acquiring Rob0 and how many employees are there?

Rob0, the values has not been given, but it's a very small value. Nothing -- I mean you probably know the Appland numbers. Appland was bigger in that sense. Rob0 is a small investment. I don't think we'd like to give those numbers. But yes, it's not very large, large number in terms of dollars.

And more than 50% of the balance is paid in earn-out over the next 3 years. So we're really engaged on this one to make sure that the value of OnMobile is hand in hand with their benefits there. So yes -- so we have a team of about -- right now, Rob0 team, we started with about 10 person. Now in Montreal, they're about 20, 25 person working on ONMO.

Right. So for their operational expenses, I'm assuming that is being funded from our balance sheet, and that is being capitalized as R&D. Is that the right way to think about it?

Correct.

You're right.

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

All right. Thank you so much all for joining. Again, I'm just going to say how solid we are in all the product fronts, and it was really a -- for us, a very productive quarter. I'm already in Q3 and Q4, not that [ much in ] Q2 here that we have, but I'm quite positive. Next call that we'll do together is in February. We'll have already very good insights on ONMO. We'll have further developments on the growth of Challenges Arena with the metric that I can't wait to share with you and more operators to launch with ONMO B2B also. So I thank you very much, and I look forward to speaking to you in February. Thank you.

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