OnMobile Global Limited (ONMOBILE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the OnMobile Global Limited Q3 FY '22 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.

Thank you, Melissa. Good day, and welcome to the Q3 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 a brief update about the overall performance during the quarter and financials by Mr. Sanjay and Krish will give you a brief update on ONMO, which will be then followed by FC speaking on overall business activity and sharing his thoughts on future plans. We will then open the floor for Q&A session. I would like to remind to mention that -- 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. 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 or circumstances. Having said that, I now hand over the floor to Mr. Sanjay. Over to you, sir.

Thank you, Asha. Good day to everyone and I'm very glad to be with you once again and hope all of you are doing well, staying safe and healthy. Let me take this opportunity to thank all of you and our customers and our team members for their continued trust in us. I hope all of you have already seen the investor deck that has been mailed to you as well as hosted on our website and exchange [indiscernible]. If anyone of you is not on our mailing list, please feel free to email us or connect with our Investor Relations team and we will add you to the distribution list. I will start by sharing a quick update on our products and then the financial performance. At the outset, let me start by talking about Challenges Arena in what I will call out as our best performer for the quarter. 6 new customers agreed on our terms for Challenges Arena, taking the cumulative agreements to 21. Out of those, 8 are already live. Further, additional 5 customers agreed and 3 went live during January '22, taking the total customer agreements with 26 and 11 live customers by the end of January '22. Let me also say that a couple of more customers in fact have gone live up till now in February also. As you are all aware that since last quarter we've started reporting Challenges Arena revenue contribution. So in Q3 FY '22, its contribution almost doubled quarter-on-quarter. The multiply effect will be exemplified as more and more customers go live. We are starting a further doubling of revenue for Challenges Arena from Q3 to Q4. Thanks to Challenges Arena. We are aiming for a decent double-digit growth for OnMobile overall revenue in the next fiscal, which we've not seen over the past few years. The cumulative gross paying subscribers at the end of the quarter stood at INR 2.6 million as compared to INR 1.2 million last quarter, a growth of 117% quarter-on-quarter. We are targeting to touch INR 4.2 million in Q4 FY '22. We are witnessing good pipeline here and expect to be live and sign up with many more customers in the coming quarters. We are confident that going forward we will see significant revenue growth coming from Challenges Arena. We are seeing very good traction here. We are noticing exponential increase in multi-active users for this segment. Now coming to ONMO. I'm glad to inform you all that we have completed INR wallet and payment integration for our ONMO product. We have also completed product integration with Chingari, although still at this stage, we now have complete access to the 100 million customers, which will unfold over time. We have started developing crypto payment option in line to our strategy. We have introduced [ beta ] tournaments and many more features and content in ONMO. We have also introduced bonus cash as part of our first-time experience in ONMO. We have added 71 new games cumulatively as on end of December and signed with new partners. Krish, of course, will talk about it a lot more in a little while. As you are already aware, we've gone live for B2B ONMO with Dialog Sri Lanka, the revenue for which will start flowing through within this quarter. Also we have further agreements with another 3 customers, who will be enabling revenue for us from Q1 of next year. Also, I'm glad to inform you that during the quarter we launched a new B2B mobile quiz gaming program Challenges Arena under the brand name O-Cade with Ooredoo Myanmar. O-Cade is a unique platform for Ooredoo Myanmar to enhance their engagement activities towards subscribers. Going forward O-Cade will emerge as a go-to destination for playing instant battles and open tournaments in the region with its own redemption portal where games can redeem O-Coins and Telco products, data and airtime et cetera. It will also have a few more payment options for O-Coins purchase in the future. From an overall revenue perspective by products, Tones contributed [ 43%] to revenue and grew by 11% quarter-on-quarter and 8.6% year-on-year. Legacy games in this business has dropped 9.3% quarter-on-quarter on account of onetime revenue adjustment due to technical issue in a major operator in Asia. Video, of course declined a bit by 5.3% quarter-on-quarter, partly due to ForEx impacts and partly due to [indiscernible] promotions by one of the major operators in Spain. As indicated earlier, I would reiterate that going forward, we expect to see good growth in revenue led by both new products, Challenges Arena and ONMO B2B coming live with telco customers. As mentioned earlier, we expect to have agreements with more than 30 customers within this current fiscal '21, '22 for Challenges Arena and a lot of them going live within this year itself. We are also looking at signing a number of new customers for ONMO during the next fiscal. We intend to start sharing more data with you in the coming quarters on the revenue from new products. We are seeing significant traction in these 2 new products. A high percentage of customers that we are signing up now are new labels. 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 they actually are likely to give an uptick for our new product revenue. In terms of the financial update. Our Q3 FY '22 revenue grew by 1.9% quarter-on-quarter basis at INR 139.3 crores. The year-on-year decline came from Europe due to reasons mentioned earlier. In line with our strategy to shut down some businesses -- business entities that do 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 this 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 2022. If you see revenue by geography breakup [indiscernible] marginal revenue of 1.6% now comes from America, while almost 55% comes from Europe. ME&A contributed 22.6%, witnessing a growth of 27% quarter-on-quarter mainly from Tones business. On the cost front, we continued our rationalization efforts and yielded savings with a reduction of 7.9% year-on-year in manpower cost, while it remains stable on a quarter-on-quarter basis. Our stated target for manpower cost is 20% of revenue. We are currently below 25%. It will be our endeavor to reach this number of 20% in the coming fiscal. We have increased our focus to acquire skilled talent for our gaming business along with rightsizing our legacy business requirements. Our marketing costs grew by 14.3% quarter-on-quarter and 33.8% year-on-year primarily due to increased investment in digital space. We have yield savings in OpEx cost by about 11.5% quarter-on-quarter mainly due to absence of any onetime cost that we incurred last quarter. EBITDA for the quarter, at INR 13.4 crores, an increase of about 48% quarter-on-quarter with the margin at 10.1%. The growth in EBITDA is driven by our cost optimization efforts. Operating profit is at INR 11 crores, a growth of 74% with a margin of 8.2% during the quarter. Our profit after tax was INR 8.7 crores, which is a growth of almost 3x quarter-on-quarter with a margin of 6.5%. Our DSO remained stable at 128 days. The cash books at INR 144.5 crores for the quarter as compared to INR 177.8 crores at the end of Q2 FY '22. The decrease is mainly due to our investment in Chingari of INR 11 crores and a dividend that we paid for INR 16 crores. We also incurred R&D expenses towards ONMO for INR 14.9 crores during this quarter. We will continue to invest in our gaming products to strengthen our position in the B2C gaming product. We have also mentioned it earlier that for ONMO, we will need to raise some funds. There have been discussions with bankers and some strategic investors over the last few months. It will be our endeavor to close this money [indiscernible] as soon as possible and I see that happening over the next couple of quarters. A lot of operating metrics and data have already been shared in the presentation that 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.

Thank you, Sanjay. Good afternoon, everyone. Q3 was a good quarter of progress for ONMO on multiple fronts. We introduced new features and had multiple launches across both B2C and B2B. I'll touch on a few key initiatives and progress that we made. The first one is we launched our cash real money gaming on 2 formats, which is tournaments and battles. We are very excited by this product. In the tournaments product, you can play a tournament which has a start to finish time, multiple people can join that cash tournament and they rank on the leaderboard at the end of the time. So for any of you who haven't checked it out, I'd be happy if you can sign into these tournaments and take a look at them. The second format is the one-to-one battles format. Here, a player can challenge another individual or a friend on a game and the winner takes the entire prize pool. So I want to let you know that these game plays across both battles and tournaments has doubled in the last couple of months and we will continue seeing this good growth month-on-month. The second big launch for us was obviously on Chingari. You must have read about it over the last few days. We plan to leverage Chingari's 100 million and growing installed base to expand our reach and audience in India. As we had mentioned in a few previous calls, ONMO's short format challenges and Chingari's short-form videos complement very well and so do the social aspects of both these products. And this launch inside Chingari also provides that audience with an unparalleled social gaming experience on short moments. And we think that the synergies are tremendous. And as of now you can get ONMO on the Chingari beta version of the app. It's being used by a select audience. And over the next few weeks, we'll ramp this up to the entire Chingari base so that we can provide millions of users with an immersive social gaming experience. The third feature, which we launched, if you'll have played with the product, it's very prominent. It's beated tournaments. We changed the [indiscernible]. It's a little more contemporary. And these are coin tournaments where if you beat the highest score, then your score and profile picture gets published. So it's a very, very vital kind of a product. Players will keep attempting this again and again to appear in the feed on top of the leaderboard. And adding this social competitive layer to the tournament will improve engagement and retention and that's a known fact in the industry. So our product is a very, very innovative take on something that's helped retention and engagement of social gaming products. And even here, we've seen tournaments and game plays in this particular product grow 3x over the last 2 months. Coming to the fourth point on the core content, Sanjay touched on this. We had nearly 70 games on the platform and 4,000 moments. These are very unique vision AI-driven challenges on the ONMO platform. So we continue to add thousands of moments every quarter and we hope to get this to easily 10,000 over the next quarter or 2. So we also have a terrific pipeline of games and partnerships that we worked on, and we'll keep adding more games and more moments over the next quarter or 2. And as our cash product -- our real money cash gaming tournaments and battles are being launched. We also have a very aggressive marketing plan that will start mid-March and continue for a few months. Sanjay also mentioned about ONMO B2B and the Dialog launch. So currently, Dialog users have an opportunity to experience the free trial subscription version of our product, which was launched in December. And very soon, they will also be using the paid version of the product. And that is due to launch in the next few weeks or so. So in summary, for ONMO, it was a great start to the year. Our teams across India, Canada, Sweden are all incredibly focused on execution, continuous product innovation. As you can see, we've been releasing very innovative products every quarter and we are going to start seeing tremendous growth starting next quarter. So we're very optimistic that ONMO will be the dominant social Esports cloud gaming platform, given our thousands of very unique short gaming moments curated from very popular casual mobile games. With that, I hand it over to FC now for his comments.

Thank you, Krish. Thank you, Sanjay. Thank you all for joining this call. I just want to mention to all shareholders. We're really -- we have a gaming-first strategy coming with all the background of our products with Tones and video subscription and support to gaming. And this quarter we really confirmed that gaming-first and gaming is really first and showing real numbers. We have 2 key products on gaming, which is Challenges Arena, quiz and puzzle app and ONMO that Krish just talked about. I am quite satisfied with the fantastic growth of Challenges Arena. We've been discussing it in these quarters for last quarter, but I really want to highlight that we did 3 quarters of double -- doubling every quarter, the fourth quarter, which is -- the third quarter call now, but the fourth quarter we're in right now, we can confirm we're going to double again this quarter. And I'm looking at our global sales right now, really adding on customers, operators at the rate of signing and deploying of at least 5, 6 every month. So the compounding effect -- initially we had only a few customers. Now we're adding 5, 6 a month. So I really see this being a true very strong gaming sector, Challenges Arena. And really proud to say that we're a gaming first company. And our strategy is to really leverage all our other products such as Tones and video subscription to really push our gaming. And there's a lot of integration that's not done yet between the products to really push that gaming strategy first. So that's -- really happy about this. I also want you to realize that this [indiscernible] of signing up a B2B operator and in the case of ONMO, we really focused on B2C first, which is to be very specific, India first. And with our deal with Chingari, with Chingari first, right? So just so you understand the strategy right now is we're deploying on Chingari. We're getting the millions of subscribers then we'll spend the money on the marketing campaign, very strong marketing campaign in March that we're going to deploy to really capture the India market. And then we're going to look globally. But on the global level, I want you to understand the B2B side is going to follow the same pattern as we have with Challenges Arena. Actually, most of the operators that we signed with Challenges Arena are gearing up to launch ONMO also. So this curve is a bit delayed because as you know ONMO is a very cutting-edge product and it takes a bit more for an operator to be able to launch it. But really, the pattern is following along. So really, really good curve on gaming. Really, really strong gaming strategy. And I think the team is doing a fantastic job. And even our investment as you know, we saw the Chingari investment in our result this quarter doubling in value. And we can see -- I think we strike a great partnership with Chingari on that front. So overall, very satisfied. We're really confirming our strategy. And to that point, I'll open it to Q&A.

[Operator Instructions] We have the first question from the line of Prakash Ramaseshan from Pragya Consulting.

Congratulations on the good performance last quarter. I just had 2 questions. One is regarding the crypto strategy. If you could explain a little bit more in detail as to how that's going to get stickiness of customers to Challenges Arena and ONMO. And the second piece is that you're -- when you're having large marketing spend, you tend to take them all to P&L and you don't capitalize them. So basically, if I look at the financials of the company when do you see the revenues outpace the increased spend? Do you think that's 1, that's 3 quarters away, 2 quarters away? I know it's a forward-looking statement, but just to have an understanding.

FC, you want to take the crypto one?

Yes. Just on crypto. I mean, we -- I really believe that can bring value and new users. A lot of people worldwide are using crypto as you know. I think it's very complementary to our products. So we expect in the coming months some news on that front. I don't want to go too much in detail, but just to share with you, we have specialized people on crypto on the team and we're looking at it. So that's the first point. On marketing, I just want you -- and I'll let Sanjay and Krish comment, but I want the investors to understand that in March when we start spending important dollars for D2C strategy on ONMO, obviously we'll see the marketing spend increasing significantly here. The Chingari deal was a great deal because it's an investment deal and we got the marketing as bonus. But we still have to -- as a D2C product, we have to spend real amount of money in marketing and that will show. Sanjay, do you want to add anything on this?

Yes. So actually, we need to differentiate the ONMO profitability, which obviously will go through its time of being a start-up in nature and take it done. And we don't how to comment on the profitability part of this. But having said that, what is important for you to note is that the profitability of our B2B side is going to get much stronger and stronger as we go along into the new year. And I think that's the key, that we will continue to generate more money from the B2B side of the business significantly more. And like we said earlier, I mentioned in my first few words that we will have to raise more funding for ONMO. And most of that money is going to go towards the marketing side. So I would not like to say which -- how many quarters it will take for us to -- from ONMO, per se, to get into a mode where revenue, et cetera, and profitability will go beyond the marketing side. But what I will try to say again is the profitability of the B2B business, the Challenges Arena and other product -- and ONMO also and the legacy part is going to grow from here to a much more different level over the next few quarters.

Just some thoughts on the fact that perhaps you can present it in a manner where you could give us more clarity on the marketing spend of each of those divisions on the B2C side, so we can understand how much is the incremental marketing and what numbers is going to result in, in future quarters. Just an understanding.

Yes. So we intend to -- starting from Q1 next year, we intend to segregate the ONMO reporting separately. As of now, we have just 1 segment. But going forward from 1st of April onwards, we will do segment reporting and we will segregate and give you both the numbers separately.

[Operator Instructions] We have the next question from the line of Aditya Sen from Robo Capital. .

Am I audible?

Yes.

Okay. So you were talking about double-digit growth in revenue. So what would be the base figure, the base figure of FY '21 revenue figure or from here on?

So we've been -- for Challenges Arena, we've been saying that we will double -- we've been doubling the Challenges Arena part every quarter for the last 3 quarters. And we expect that we will double again. So we -- as of now, we don't segregate. We give a percentage contribution. If you've gone through our numbers, you will notice that the percentage of Challenges Arena as part of our overall revenue has doubled every quarter. We expect that to continue at least for Q4. And then overall the revenue growth will continue. The doubling -- the percentages will differ, but the onslaught of revenue growth for Challenges Arena has continued.

Okay. And I see that a video section also contributes to a significant part of our revenue. So do we have any focus on the same video part?

Yes. Video is a very important part of our products and we continue to focus on that. This last quarter, you might have noticed there's a slight dip because it's Europe-based. Most of our video is Europe. So Europe, we saw the euro actually declining vis-a-vis the dollar and therefore, we had some impact. And also there was some inability from a marketing side. But that's behind us. And we expect the video product to be consistent in terms of revenue. We are working on a few things which we are not at liberty to say as of now, but which could take it to a new level for video. But as of now, let's maintain that it will be stable going forward. And the growth as I said will come from new products and the ONMO.

Okay. So the majority of the growth that -- what I can understand is that it's coming only from the Challenges Arena and we cannot have any certainty on those figures on the other segments? Am I getting it right?

So I would say that we will -- we are -- like we mentioned that most people, most customers were signing up on Challenges Arena, new customers. And for them we will be upselling the existing products that we already had. So I won't say that there is no scope for increase. I would say that -- and we are working on things which could take up. But if I were to say that there's going to be substantial increase in the earlier products it would be wrong. The major part of growth, like I said, is going to come from Challenges Arena and ONMO, the new products which will give us new growth.

Okay. So...

If you look at our strategy -- if you look at this quarter actually, Tones grew. And we actually -- we are signing up -- I'll ask Nandi to talk about his sales strategy after, but we are signing up new customers on Tones. All I'd like you to really grasp is that our strategy from now on is really gaming. So we will position this product and there's a way to leverage all these products to support gaming and integrate the gaming and give education into them. And that's exactly what we're going to do so that we make sure that our gaming-first strategy is really pushed on by these products and obviously ensure that they are growing also. It's just the growth of these products that we've been having for multiple years now is dwarfed by the growth that we're talking about on Challenges Arena and ONMO, obviously. When we talk about doubling every quarter, that's not the case for Tones and video. I just want to be clear here. So that's...

[indiscernible] I couldn't understand that.

I think the last part of doubling the growth that you mentioned.

Sorry, I missed the question. The line is not too good. Sanjay, can you answer?

So okay. So what FC is mentioning is that we've been doubling, for Challenges Arena, the revenue every quarter for the last 3 quarters. We expect that to continue for Q4 also. So that kind of growth will obviously not happen in the other products. We are more stable and will stay that way. The real big growth is going to come from Challenges Arena. That's what...

Challenges Arena and ONMO. And really, the key -- to use the big product with big volume to support our gaming strategy both for ONMO and Challenges Arena. That's the strategy for both tones and video.

We have the next question from the line of V.P. Rajesh from Banyan Capital. .

Congratulations on wonderful results on the Challengers Arena. And the question is then, can we expect from Q1, you'll be sharing similar data set for ONMO as well?

Yes. The intention is to segment the 2 things separately, the B2C part and ONMO separately and the B2B part. We'll have 2 segments and therefore, we'll show it separately.

Okay. And then just going back to the Tones business. If I understood your comments so far, but you're saying is that Tones will also grow on its own. But obviously, Challenges Arena will grow much, much faster. But combined together, there will be a substantial growth as Challenges Arena become larger and larger part of that particular B2B business.

That's correct, Rajesh. Absolutely right. Challenges Arena will help us to grow the overall revenue for the B2B part significantly. We've not seen that in the last few years. But now we are seeing the traction. We are seeing actual numbers on the ground. We've been sharing with you Q4 already. We are posting and we've given a heads up in terms of our target, that we will double this revenue for this quarter again. And we see substantial growth happening, which will mean that overall revenue growth will be a good number to go with for the year.

Okay. No, that's helpful. My other question is on the Chingari side. What is the valuation of that business now? And what is our percentage stake in that business?

So we've maintained our percentage. There have been 2 rounds. I don't think Chingari has really announced particularly the value. But let me say that we've had 2 rounds. And the second round, the valuation has already doubled. I would not want to comment something where Chingari has headed back the details. But yes, I mean, as of now, what I can say from the first round to the second, the valuation is up.

Okay. So if I may ask, what was our percentage stake before the second round? And what is it now?

No. So we have maintained the 10%. We are still at 10%. 10%, we maintained.

Okay. So -- and you have invested around INR 11 crores in this round, right, in the second half?

Yes. You can do the mathematics, yes.

Right. No, that's why I'm asking. I just want to make sure [indiscernible].

I know.

Yes. Okay. Understood. In total, we have invested [indiscernible] crores or so in this business?

Yes. No, I think I don't have these numbers. I think [ INR 31 ] was the first time that we connected and then we -- adding to the round to maintain our numbers, we did another INR 11-odd crores.

Okay. Okay. So are we planning to do more such deals to get the distribution? Or what is the thinking? Because from what I understand, my sense is that we are behind on ONMO. We haven't raised the funds. The launches were delayed and now we have changed the strategy. It seems to go from going global to focusing on India. So if you can just -- and honestly...

Yes, FC, please, yes. Go ahead.

Yes. It's very important. Since day 1, we said it's a cutting-edge product, right? It's not just an app. Like, for example quiz and puzzle with Challenges Arena, it's a simple app and we have a lot of content that we [indiscernible] to it. In the case of ONMO, we really went cutting-edge and I just want all investors to realize nobody else in the world is doing what we're doing here. We're combining cloud gaming with AI recognition to be able to cut off moments and do challenges, eSports challenges on a specific moment of a game. Nobody in the world doing this today. So technology-wise, cutting-edge, it takes some time to fine-tune the platform. It was always planned that we would launch first. We're based in India. The strategy has always been we will launch in India first, make a success out of India and then go worldwide. The strategy worldwide, we'll see it next quarter and we'll discuss about the worldwide strategy. But right now, we had to integrate the whole app within the service within Chingari in itself. I don't want to diminish the team's effort that you need to, to be able to migrate millions -- Chingari's got millions of subscribers of daily subscribers. We need to do that seamless integration with no fault, right, and get all the volume. So that's always been the strategy to deploy first. That's why we did the Chingari investment. So we could get their base marketing-wise, so we don't have to spend the first push in marketing. That critical mass is very key when you launch such a service. So the critical mass is done through Chingari, which is great. It's a great partnership. And as soon as we get that critical mass, then we invest in marketing with a great marketing campaign that's really well done. So that's exactly the plan right now that we're following. To your first question, is the Chingari deal a great deal that we could do with other companies in other geographies? Definitely, that's something we're looking at because it's a true win-win, right? And would we get [indiscernible] the marketing in other geographies? I don't know. But that kind of partnership where we actually integrate our service within a short video form app or another service is certainly a great strategy to go in into other geographies. So right now when I say ONMO is lagging in B2B versus Challenges Arena because Challenges Arena is way easier to deploy and to sign. And it addresses any kind of subscribers, 3G, 4G, it's not just the 4G and 5G subscribers. So that's why that curve that you see right now where we sign a lot of subscribers on the B2B side for Challenges Arena, you will see the same growth going along with ONMO. But I just want you to keep in mind that what we're doing is cutting-edge and nobody else is doing, right? And there's true value here. And we will succeed in India to be the dominant platform in social Esports and we will deploy worldwide. So that's -- so I hope that answers your question.

It does. Look, I understand it's a complex product. I understand -- no one has done that. And obviously, as an investor, I'm invested in the success of the team. So I just wanted to make sure you understand that. All I'm trying to understand is that has the strategy changed from what we were thinking a year ago? For the simple reason that, as you said, it will require a lot of marketing dollars and our balance sheet has come down from INR 250 crores or thereabouts to INR [ 166 ] crores now and a lot of that has gone into R&D as well. So I was just thinking if you start spending on marketing as well, then where does the balance sheet settle down before it starts coming back up? So that's really where I was coming from. And I do appreciate what you guys are doing on the product side.

So let me try and answer that bit of balance sheet coming down. And we are absolutely mindful of the fact that we are using up the cash that we've generated over the years. And like I mentioned in the initial part of my -- what I said, it is our aim to raise money over this next 2 quarters and we are on it. There have been discussions with a few strategic guys. They have been invested with some bankers. So these discussions are going on. We hope to raise money in the next few months to enable us to spend the money in terms of dollars and that's the aim. We raise the money and then we -- that's the money that we spend on the marketing on dollars, especially when we launch overseas, which will happen in the new year.

Got it. And again, congratulations on the Chingari investment as well. I think that has surely created value for all of us. That's all.

Thank you.

Thank you.

We have the next question from the line of Mithun Aswath from Kivah Advisors.

I just wanted to understand on the Challenges Arena business, if you do the math, I think you're at about INR 3 crores sort of a run rate. And you mentioned that the next quarter, we could go up to maybe INR 6 crores. Just wanted to understand from your previous calls you've always mentioned that potentially gaming and ONMO and Challenges Arena will become a reasonably large chunk of your business. I just want to know where do you think this Challenges Arena business could be in the next couple of years as well as obviously, baby steps on ONMO as of now? So just wanted to understand over the next couple of years how the revenue mix would change. That was the first question. And also in your presentation, you have mentioned a certain percentage of your revenue is coming from gaming. I just wanted to understand what does that really refer to. You have a certain percentage which you've given as games, which is about 6%. So if you could just touch upon that.

Yes. Okay. So I think -- let me say that, that while not giving exact numbers, but Challenges Arena will form a significant part of our revenue going forward. We are going to double this quarter and therefore, we will continue to grow very rapidly as both FC and I have mentioned. There will be significant of compounding or multiply effect which will happen over time. We have many, many more customers who we are talking to, many of them have already agreed on the terms and the process is on for getting them live. So over the next 2, 3 years, it will be a huge part of our revenue. As far as the ONMO gaming overall is concerned that is our understanding and that's the target that we are taking, that revenue is at -- will, in a few years brought the other part of our revenue. So the B2C revenue will definitely be bigger than the B2B revenue that we have. So that's the broad statement we are making and that is what we are sticking to without giving specific numbers and the time period that it will take us, maybe a couple of years, maybe 3, 4 years. So that's where we are in terms of our growth forward, whether it's the B2C business or the B2B part of the business. That's clearly our target from now on. From a profitability perspective, the Challenges Arena is a significantly profitable product for us and we could expect next year to look much better in terms of our EBITDA and overall profit. You asked about the games, I want maybe Nandi and Radhika to talk about games, the 6% gain that we have bought in there, which we can talk on the legacy games.

Yes. Thanks, Sanjay. That's a product that you acquired from Appland, which is a downloadable and HTML5 gaming platform, where we power the gaming stores of multiple telcos across Asia, Middle East, Africa and Europe. That is the revenue that you see at 6%, which [indiscernible] games.

We have the next question from the line of Subrata Sarkar from Mount Intra Finance.

So my question is more, if you can throw more [indiscernible] some numbers. Like what is your internal estimate like with how much -- what is the number of the tentative customer that we can break even in case of like ONMO or this Challenges. So on the contrary, what is our estimate regarding how much time will it take to breakeven? So this is one thing. And if you can highlight a little bit more on the business revenue side like what is the revenue model? Like how we are planning to monetize in terms of -- at least some unit economics and numbers that will help us to understand like a little bit on the quantitative side. So that's it for me.

Let me start by talking about Challenges Arena, and then I'll request Krish to talk about the ONMO part. So Challenges Arena, the B2B product is profitable as we go. So today, as we see Challenges Arena as profitable and it will continue to get more profitable as we go along and add more customers to the volume, volume of it. The content cost is particularly low. And we will -- as we go along, we -- that will reflect in the overall numbers of the company. As for ONMO, I'll let Krish speak about the profitability and other parts. And Krish?

Thanks, Sanjay. So on ONMO, there are 2 aspects, right? One is the B2B and B2C and I'll explain the economics of it. So on the B2B part it's a subscription-based product and obviously there's a revenue share with the operators and you reach profitability quite quickly. On B2C, our revenue model is primarily Esports. And of course, there will be a little bit of subscription, but it's an Esports-driven model. It will take a little bit of time to get unit economics right and reach profitability. Typically, in most of these B2C direct-to-consumer gaming products you should be hitting that within the first 2 to 3 years.

Okay. One thing I was trying to understand, like both in case of like B2C model of...

Sir, your line is not very clear.

Yes, yes. So what I'm asking like both on the Challenges side as well as like B2B ONMO side, sir, is there any scale advantage or it's a fixed kind of agreement that we are getting -- we are entering with the telcos? So that like what I mean to say is like a customer unit economics that will remain same or there is a scale advantage once we add more customer in terms of revenue? I'm not talking about the cost side, only on the revenue side.

Yes. So revenue side, while there'll be no revenue side scale advantage, but there will be an operating leverage that will kick in as we grow our Challenges Arena revenue. And there will -- the profitability because there is -- as a company, there is a significant amount of fixed cost. And since the gross profit from Challenges Arena is high, we will quickly see all of that -- a lot of that coming into the profitability. So to your point, there is a scale advantage of the operating leverage, which will happen as we grow in Challenges Arena. So you will see -- notice that profitability creeping up pretty rapidly. So -- and from a single customer, per se, there is no real advantage as far as Challenges Arena is concerned from a end consumer [indiscernible] consumers, I would not want to quantify that piece at that unit. But on overall level, there will be a significant leverage that we will have because of very high gross profit margin.

Got it. Sir, just last question on the cash side, sir. Let's assume whatever is our cash, like currently at INR 144, 145 crores, whatever, with these like as long as -- my point is, what is the like -- what is the time period we can sustain with this cash [indiscernible] without raising -- I understand we have a cash raising plan, fundraising plan. But without fundraising, what should be the pathway like how many years of funding like cash, is it adequate for us? Just one...

As far as legacy business is concerned, we will continue to generate more cash. We are a highly profitable business. The B2B side is highly profitable. So that will continue to generate more cash. The cash is required for the ONMO part of the business and we have focused on a significant amount of marketing spend that would happen in the new year or coming years. And clearly for that we will need funding. We will need funding in the next year. So let me put it that way. And that will only be for ONMO not for the legacy. Legacy business is profitable.

I understand. I'm talking about only ONMO side, sir. So let's assume like what is our targeted like advertising budget for next year, let's say?

Sorry, we don't know...

Let me.

Yes, sorry. Go ahead, FC.

So everybody understands clearly. So to be successful in India including our Chingari deal and adding to it, we're planning about USD 10 million to invest to succeed in India. We have the money for this, right, guys? So I mean we can use $10 million of our money, make a huge success out of India. And we're in India. Not saying we're not going international with this. I'm just saying that's the budget if we want to be successful in India and that's what we carved aside. From that point, obviously the value of the old project is totally different once we show you real success, right? If you look at all the other platforms out there, they succeeded in India first, then they raised the money at high valuation, then they go worldwide. We're going worldwide anyway because right now the flavor of the product is worldwide, but the main focus on marketing is in India. To make a global success and especially in the U.S. and Europe, we'll need $100 million. So I mean, there's different ways to get that kind of money. But first, we have to show the success. And that's why I'm saying, you know what, let's make a huge success out of India and then that's attack the rest of the world. I don't want to come short in the U.S. and Europe and deploy a worldwide strategy with not enough money. So we need that kind of money. Is it $75 million? Is it $100 million? I'm just making it around. So we understand each other clearly, we need $100 million to succeed worldwide. So that's the kind of numbers we're talking about. And that's why we segment also the numbers of ONMO versus the mobile B2B and Challenges Arena business. Because if you invest that kind of money obviously our P&L is going to be a bit changed. So we have to segregate the numbers. We have to make it -- they're 2 different endeavors, right? The B2B business is totally different than a B2C business. In our case, we're really -- they're all tied up because the B2B2C business, so a lot of the subscribers were signing up on ONMO actually benefit the operators also when they launch in their countries. So there's truly a social link here that the operators want to leverage on and that's what we're selling to. So both models will feed each other, but that's the kind of numbers we're talking about.

Okay. Perfect, sir. Perfect. I got your strategy. Just last one on the bookkeeping side, sir. So what is our accounting strategy regarding Chingari? For example, if there is any mark-to-market -- if there is any gain we keep it on the investment and do you -- will we do some mark-to-market or fair value investment and charge it to P&L? Or like we will pass through balance sheet only?

So we have done a mark-to-market this quarter. And if you see in our other comprehensive income, it is mentioned there, the increase in value. It is 193 million.

Okay. That is because of Chingari, sir?

Yes.

We have the next question from the line of [ Vishal Asalekar ] from Apex.

Yes. Actually, I had a few questions, but now in Q&A session, it got resolved. But I have one question. That is what is the revenue target you set for the next year quarter end, that is December 2020?

December 2022?

Sorry, sir. 2022, sorry.

So we've not given a specific target for December 2022. But what we are saying is for the next fiscal overall, we will grow in double digits for sure. So that's the broad thing we are seeing. We've not seen that. We've been stable or slightly decreasing in the last 2, 3 years. But next year overall for the next fiscal, we will definitely be growing in double digits.

Okay. And one more thing. I just want to highlight that since last 3 months, I was searching for where is the ONMO advertised? Or any digital marketing things are there. Because I saw Lintas, your tie with Lintas in October and I was searching on net, Facebook everywhere. And surprisingly, I got your channel in YouTube. But the subscriber and your reviews were so low that I thought you're not keeping an eye on that digital marketing somewhere like YouTube or anything.

Not yet. Krish, would you want to talk about that, please?

Yes. As I mentioned earlier our marketing campaign -- aggressive marketing campaign starts in March. So till now, we've had minimal exposure. But that's been good enough for us to fine-tune the product, launch the beta tournaments, launch the cash tournaments. We are doing a lot of digital marketing, per se, on channels like Instagram and where the millennial audience and the gaming audience in particular hangs out. So we are already doing that and you're going to see more of that happening starting March and for the next few months.

Okay. So that contract with the Lintas, it is still there or you are canceled?

Yes. I mean we've got marketing agency contracts with all these agencies, for digital marketing, for creative or other marketing initiatives. So yes, those are very much there.

And let me just add. The whole team is working on marketing. It's not -- when we launched beta, as you know, it's very important we get all the metrics, right? It's the conversion metric, the sign up, the engagement, the payment metrics. You need to have align all these metrics before you spend money because, yes, we can easily drop $1 million in marketing tomorrow. And the problem is if you don't have all these metrics lined up, you just waste money. So I can reassure the shareholders that we didn't waste any marketing dollars yet. And when we do, it's not going to be a waste, it's going to be an investment and make sure it does convert into real active users and active payers, right? So that's what we've been doing. And again it was part of the strategy to integrate and launch with Chingari, first. So all this integration has been done now. So that's why everything is all set for real marketing dollars [indiscernible] now.

Okay. So see, actually, I saw you on most pictures on Chingari app. I download the app and everything, but I don't see ONMO in that Chingari app. Simultaneously, I played this ONMO well as the Challenges Arena also. I guess last quarter also once they launched, I played that thing. I found out to be very attractive. But what I thought, why it is not -- that's actually I'm searching for marketing things and I even asked a few kids, do you know these ONMO things or Challenges Arena? But they were said like -- those are their regular players, okay, like Call of Duty and Candy Crush and everything. So one more thing. Do you have any plan to launch any new game like, these are the famous things like Call of Duty, Candy Crush and PUBG [indiscernible] free fire everywhere. These are the most played games, download games. So do you have that plan also?

So just on big brands, we're really targeting the casual games, right? So the Candy Crush kind of games, we have actually a Sweet Rush, right? That's really like Candy Crush. We have some key games brand in the mid-segment. When I say mid, it's really a casual gaming. When you talk games like Call of Duty and PUBG, I just want you to realize it's a different type of gamer here. We're really targeting the average gamer, which is the big part of the population right now. So we're in discussion with key brands on casual gaming. So Krish, do you want to add anything on this?

Yes. As FC mentioned, most of the games that you've mentioned, like the hardcore battle games, they are optimized more for nonmobile experience, right? So it's basically the console or you use controllers to kind of view it on mobile. But the experience is different and it's to a large extent, long-form gaming, right? There's an audience for that, true. But if you look at the vision of ONMO, it's primarily mobile gaming, mobile casual gaming, short gaming moments. And there's a huge audience for that because you've seen over the last few quarters, hypercasual gaming installs and downloads have pretty much taken over the market. So they are slightly different types of games and our gaming strategy is a little different. You had another question on not finding ONMO on Chingari. So as we mentioned, it's on the Chingari beta version of the app. So if you go to the play store and just scroll down, you can join the Chingari beta version. And once you log in, you'll be able to see ONMO.

That being said, we're deploying on the full Chingari app during February so that we get the full volume by the end of February.

We have the next question from the line of [ Shivam Saxena ] from ICICI Bank.

I want to highlight some risk that you have flagged in India. Don't you think the increase in data rates that has taken place recently, these are risks. And second risk is basically opening up the economy. So basically, schools are now open. And I think most of the gaming population is young ones. So don't you think that this consumption time on mobile will be reduced going forward?

I mean, we don't see any such trend, consumption time of gaming going down. I haven't seen any -- I mean, we are closely following the industry in India, reading up research reports. If at all, we are just seeing that the percentage of time that people are spending online has [indiscernible] disproportionately shifted towards gaming. So it's kind of -- people have time for social media, gaming and other forms of entertainment. And gaming definitely is a very, very big proportion of anyone's daily or weekly time. So I think it's a secular trend across the industry. I don't...

Yes. In fact, I'd like to add that what you just said in terms of the change that schools are opening all that, so in fact, it helps our kind of stuff where we are saying we are into short-form gaming, not the longest game where people are playing for 1 hour. In our short-form game, people in play for 2 minutes, 3 minutes, 30 seconds onwards. So that actually helps us much better than the long-form game. So to your point, the long-form gain may be impacted. I'm not sure, and Krish says he hasn't seen that data. But our form of game will definitely be in fact more incentivized.

Yes. That's right. I think Sanjay's point is right. And you can also see that in short-form videos, right? So there's been a huge number of people coming to short-form videos, videos that last about 30 seconds to a minute. And Chingari is a very, very good example, having grown from 30 million installs to over 100 million installs in a year's time. So it shows that the young millennial audience actually likes short burst of entertainment and fun. So you could be playing a game for 2 minutes while waiting for a friend or in between some activity. So that's the market that we are cornering and there's honestly, no one in the market doing that. So we are very confident that we've got the tailwind and all these macro changes are actually in our benefit.

We have the next question from the line of [ Vipul ], an investor.

Am I audible?

Yes, please go ahead. .

So a few days back, I read somewhere the Rovio Entertainment, which is a publisher of Angry Birds, who make a subsidiary with the name of Hatch Technologies on 2016. So those people also developing the same feature, which we are doing today on ONMO. So they are also having a cloud streaming with social, but we are also doing the same things. But somehow, after 2 years, they launched they're not able to catch the market. And somehow at 2020, they shut their business in that domain. So I just wanted to know if we have a same model as Rovio, which is a publisher of Angry Birds, how we can deprecate and how we can...

Yes. Let me just intervene here because I know very well the service. By the way, they offered -- when we did the analysis to develop ONMO, Hatch was already out there. We were testing cloud gaming. They were out in the market already. That's a clear example of too fast in a cloud gaming market because as you know, connectivity and 5G was not ready back then. And they -- just to be very -- and I don't want to go too technical, but Rovio on Hatch add their own technology on cloud gaming, whereby each game has to be [ recoded ] to fit on Hatch to save on bandwidth and lower the streaming costs. The problem they had -- and they were streaming the full games. It was pure cloud gaming, the full game subscription. And at the end, it's just their model didn't work out. So actually we got the option to buy Hatch. And for many reasons, we decided to develop our own technology because we didn't go to save bandwidth. We want to make sure we could actually create snapshots and onboard any game without any code integration. And that's exactly what we had. So we did the full analysis. We decided to launch our own platform. It was very clear that they were shutting down way before we even started spending money on ONMO. And again [indiscernible] that we added snapshot. We added the fact that we can add any game that's in the App Store today, we can stream on our service without any integration. And we added all the video AI on top of it. That was the Rob0 acquisition that we did after that to be able to actually identify the moment, cut out moment and actually do social Esports, which there was nothing about social any sport on the Hatch platform. It was only cloud gaming. So that's the difference here. So I would say, although it looks like the same technology, it's not at all the same service.

We have the next question from the line of Kamal Suri, an investor. .

Congratulations on a decent trend. I think it's very encouraging to see this. I wanted to find out if you've signed up any of the Indian telcos for ONMO.

Nandi, you want to talk about this?

Yes. So India, we are in deep conversation with 2 telcos. And yes, we are in conversation, not yet signed up.

We have the next question from the line of [ Jeevan ] an investor.

This is [ Jeevan ]. So I just have 2 questions. One is that in this budget, this government is also looking for some gaming thing, right? They are more focusing on this gaming one. So what this OnMobile is thinking about getting the opportunity or having some discussion or -- because I'm not sure that what is the plan, full plan from government side. So what's your view here in this? And second is that the technology side. Is this -- this ONMO is a [indiscernible] as a service? Or I mean, how this work actually? Installed on the mobile or something -- some code is there on the mobile or something? How it works actually?

Krish, you want to take.

Sure, sir. I got the second question. I didn't get your first one. Can you just repeat that, please?

So the first question is on this budget also, this union budget. This government is focusing on this gaming thing. They are having more traction on this gaming technology or something gaming platform. So what opportunities you are thinking about at what -- in the line of government initiative on the gaming platform? I hope that you have heard of some speech from Nirmala Sitharaman on gaming thing. They are having some team or something.

Yes. I mean I'll let Sanjay take that, but I also want to say that we have a global product and India is one aspect of it. And from whatever I've read and talked to other people in the Indian gaming industry, the impact isn't material as such. Sanjay, do you have anything to add to it?

I think you're right. We continue to go forward. And the government is only supportive of these things. There's no specific mention. I mean, while Nirmala Sitharaman did talk about gaming, but there's no specific preview of which kind of helps us or doesn't help us. Yes, the aspect of crypto got talked about, although there's this act of tax coming in. But it's a legitimization of -- in a sense, a kind of legitimization of crypto, so which is part of our strategy. In any case, we talked about it and FC talked about it. And Krish talked about it.

What I'm saying is -- why I'm saying is that because this is the first time that someone from Indian government sending some message to gaming industry. Because there was no attraction from any [indiscernible] like before. So is something a signal -- for signal to us?

Yes. So it is going to be positive. [indiscernible] lot of things -- the specifics are yet not out, but we will be thankful if there are things which are helping us. But whether they help us or not, we are going moving forward at a very fast pace. And like Krish mentioned and he'll talk about the global part. This is -- while India is our initial focus and we will succeed in growing this rapidly over the next few months, but our focus is more global. And we'll see that unfolding over the next few quarters. Krish, over to you on the second part of the question.

Yes. I think your second part was what is something distinctive in the product or technology. It's actually the coming together of 2 or 3 things. The first is our challenge creation engine, which makes these short-form moments and snapshots and that's patent pending by the way. So we picked the best parts from any game and create challenges on it based on maybe the number of moves or the score, collectibles, time, et cetera. So if you play different games, many of these different variables will apply to that specific genre of a game. And then in real time, our Vision AI detects the score and the time and then publishes it.

I'm sorry to interrupt you. I'm just -- I was asking about the back end which we are using it. Because now, these days, we are having more focus on legalization, right? So if you are going for the global, then how we are placing our product to different, different countries so that they can use it? Because this is something which I want to know because we are focusing on global, right? So there could be -- the reason that we are not getting from the government, they will stop using their mobile gaming platform for a number of reasons, from legal or something. So how we are placing our application there from each region?

I mean, see, ONMO primarily -- the D2C is primarily a web-based app. So it's not on any Play Store. It doesn't go through any of those play store policies in any of those countries. As of now, we don't have any issue with ONMO being played across in any other country. It's legal. That's all the different jurisdictions go. So there is really no issue back end of the platform. In fact, the fact that you're not in a Play Store gives you a lot of flexibility because you don't need to go through any individual Android or an iOS [indiscernible] or policy. So that what you're trying to do things don't exist for us. It may apply to some of the other gaming companies. But as far as Esports goes, we follow the local rules, whether it's in North America, whether it's in Europe and even in India. It's not allowed in certain states, so you don't have Esports in certain states in India.

We have the next question from the line of Deepak Poddar from Sapphire Capital. .

Sir, I just wanted to understand a little from the perspective of, let's say, next 2 to 3 years, when we have spoken in the past as well of this new business becoming at least what our current business is, maybe about INR 500 crores, INR 600 crores. So is that what we still kind of maintain? Or there has been some delay because of the ONMO change in strategy? Or -- yes, so any comments on that.

Yes. So we -- for Challenges Arena, we keep saying that in 3 years' time, it will be much larger or larger than the current products that we have. For ONMO, very clear, that's our understanding for ONMO will be bigger than the current products in 3 years' time.

Okay. So in 3-year time, Challenges Arena and ONMO together will become larger than what our current size is, right?

ONMO. ONMO will be bigger. Challenges Arena, of course, will continue to grow. And yes, both will definitely be bigger than the current revenue.

Okay. Okay. And when do you expect that we start seeing traction on the revenue side? Like we have already seen on the Challenges Arena side, right? But on the ONMO side, when will we start seeing the traction? And when we see the traction, so what's the base revenue level? It should be much larger than what Challenges Arena might be doing at the start of its [indiscernible] journey.

The start is always from 0, but then the growth will be sharper for Challenges Arena. But it will take time as of now. As of now for the next few quarters, you will see dramatic increases in Challenges Arena, and ONMO will follow.

Okay. So we'll see tremendous growth from first quarter in ONMO in terms of revenue traction?

It will start in the first quarter and then you'll see growth from there.

Thank you. Ladies and gentlemen, that was the last question and we will now close the question queue. I would like to hand the conference back to the management for closing comments. Please go ahead. .

Thank you very much. Next quarter results are in May, so it's a bit of time until we speak. You'll have a lot of news in the meantime on our new incentive coming along, and look forward to speaking with you and share all what's coming up in the next few months. So thank you very much for joining this call and look forward to talking to you again in May. Thanks.

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