OnMobile Global Limited (ONMOBILE) Earnings Call Transcript & Summary

Good evening, everyone, and welcome to Q1 FY '27 Earnings Call of OnMobile Global Limited. Representing the management today, we have FC, Executive Chairman and CEO, Radhika Venugopal, Whole-time Director and CFO, Bikram Sherawat, President and COO. The call will start with brief update about the overall performance during the quarter by FC, then Bikram will share insights on operations, and then Radhika will update on financials. After that, we will open the floor for Q&A session. Before we start, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties that we face. For such lists and considerations, please refer to the earnings presentation. OnMobile Global undertakes no obligation to publicly revise any forward-looking statement to reflect future or likely events or circumstances. Having said that, I now hand over the floor to FC. Over to you.

Thank you. Thank you, Pratik. Thank you all for joining. Exciting quarter on the ONMO+ side. We launched on 26th of June, 4 days in the last days of the quarter. As you know, we had planned to launch earlier. We were actually ready earlier. Unfortunately, Flipkart, for many marketing reasons, preferred to push out the date. So obviously when your partner wants to push out, we have to push out. But as you can see, we were live. The first thing I must say, you know, when we went live was call center. I was present in the office with the team and the big question was you know, will people be able to activate the service in 60 seconds as we promised? And what kind of problems people will have? To our very big surprise, there was no activation issue. Everybody were able to activate. The calls in the call center were more on the actual gameplay and, you know, some challenges on the TV adjustment because we stream in 1080 and some TVs are a bit smaller, but that's very small. Percentage of subscribers. Overall, really, really satisfied with the quality of product. We're expecting to have a good product, but right now the stats that we have is fantastic. The service works better than we had expected. If we looked at what kind of users that use the service and usage, we shared in the deck the information. And just as a side note, normally we would not share these stats with the market, you know, for strategic reason. We would not share this to have any competitors look at, you know, how the service is performing. Obviously, we're a public company and I want to share this information with you so that you at least confirm that, you know, we have a good service. I know you can buy the box and use it. You can see the comments also that we have great comments, but I think it's very important that we see that we can show you with real data what is the performance today of the actual platform. So those that we shared in the deck here, we're not going to share on a quarterly basis for strategic reason. Again, we're going to make sure to, you know, we want to make sure to share it with you. But let's just go on the next slide. I just want to share, you know, the actual age group. First of all, age group is really a sweet spot, 25-34. 82% are under 35 years old. So, you know, very interesting demographic, very the core of what we want. The approach of the system to be able to use the controller and service on multiple devices, and average people use on 2.3 devices, meaning a lot of people use it on 3 devices. As you can see, number of sessions here on desktops, 44%. TV, 31% of sessions. Mobile, lots of sessions on mobile also. And tablets, a bit less than what it is, but obviously people prefer the big screen. Very interesting stat is that 75% of users have used more than 5 games, 45% use more than 10 games, so usage really high. If we can see also the hours used, and that's the most important stats. [Operator Instructions] 70 minutes per subscriber is very high. It's higher than what we planned. It's twice the top PC median, top 10% PC median, very, very high. As you can see, stickiness on daily average users, on monthly average users, we're 1.3 times X the industry. Retention, D7 versus D30 today, we're at 2.7 times industry. All this to say, and all I want you to realize is that we have a good product. And this is, you know, we can do all the tests in the world. We can get the best gamers to confirm that we have in lab the best thing in the world. Till you're out in the market and the market tells you that this is a good product, you have nothing, right? So it's a very big step forward that we took going live. As you can see, 226 cities logged in across India. So this is not just a Bangalore, Mumbai, Delhi. It's across the country. So we have across the country people connecting and again, you know, using the service and really liking the service everywhere. So what happened till then, right now, now that we're live, I must say that we have a lot of interest by lots of groups. We're in discussions right now with advanced discussions with very big retailer groups across India. You know, they confirm also from a retail perspective that this kind of product, it does not exist in the retail world. Right. There's cloud gaming providers that are very big. As you know, as we know, we're competing with trillion-dollar companies here. So they're in the cloud. In stores, this product category doesn't exist with the controller that we have. As we can see that you can sync up your service on multiple devices at this price point, it doesn't exist. So lots of interest from very big groups to, to be in stores. We're right now negotiating and planning to be in stores by Diwali festive season. So we have to be ready by October. So lots of work right now on how many stores, where do we plan to have promoters. The model's a bit different, right? You need people in stores to promote your service. How many boxes per store? So all this planning is right now being done. Contrary to another service where obviously you can sell software, We need, we have that box, we need the box to be produced and be shipped out in all these stores. So that's exactly what we're doing right now. So that's what I wanted to share with you. You know, from our expertise, what we see, we have a 12 months to 18 month lead time in the market from competition to wanting to actually look at what we're doing and decide to enter the market like we're doing. We want to use this in good essence The feedback we're going-- getting from retailers, a new category in India, we're getting the same feedback here in Spain from retailers in Spain where they already sell consoles in Spain, and they see this as a new product category also. Even top gamers in Spain look at this on the retail side, and so it's got a very interesting potential here. So we're going on both sides. We're really pushing to be able to be in stores again by October, November, December here in Spain while we do it in India. So it's a dual market approach right now. And really, the retail world is different than the operator world. Bikram will talk a bit about the operator discussions that are now really enthusiastic after this feedback. But it's very different because we control our destiny, right? And we see it right away. Retailers are very open to push our product and be moving very, very fast compared to what we see in the carrier business. Now that we talk about carrier business and the results, as you see, right, we have the core of the business is carrier business today. The focus has been really on profitability. Profitability is key for many reasons for both services, right, mobile gaming and the mobile entertainment and kind communication. We need profitability on both sides to be able to use the cash into the ONMO+ launch. We had to take difficult decision on the team side. We had to do a small restructuring and let go some team members to increase profitability on the business. As you can see, you know, in the core business, we're at 20% profitability, in the range of 20%. We're going to push to go in the 25% range on the mobile entertainment and communication side. As we grow, and just a side note on this, right, there was a degrowth this quarter on mobile entertainment, mostly all driven here in Europe on the video service. It's something we know. It's been going on multiple quarters going down, right? We have a new service in that category that has great potential, already been in discussion for multiple quarters with the operator, already did market tests, feedback tests. Really good. So it's only a matter again that carriers take a lot of time to implement new services. Once you're there, you're there for a long time. So in the meantime, we unfortunately follow this downward trend while we correct on a yearly basis. So when I look at this on a yearly basis, year to year, you know, I don't see any issues. On the quarter, because we have to take some restructuring costs, you see the impact. On the mobile gaming side, it's the same. We took the decision to stop operators that don't produce the right profitability. A lot of operators we pushed on high marketing. You know, you saw our marketing costs decrease over the years. A lot of operators had high marketing costs. We stopped the marketing. So obviously it had an impact on revenue going down. So some operators, you know, where the profitability is not there, where we don't want to push and we're really like re-putting the marketing budget below the 50% mark. So that's, that's where the profitability is, right? So we really took the decision that mobile gaming has to be profitable. It was in Q4. You know, the range right now is to be in between 10% going to 25% EBITDA also this year for mobile gaming. And to do that, we need to have optimized marketing in most accounts. We can't carry on accounts that drive revenue but not profitability. So that's the switch that we see. We still foresee a very nice growth on mobile gaming, but it's going to be a smart growth rather than trying to push revenue over profitability. So overall, I think it's important that we look at it on an annual basis. When we look at last year, we doubled the EBITDA. We brought the mobile gaming business to profitability. Now we'll have a full year of profitability for both mobile gaming and mobile entertainment. So the entire business will be profitable so that we can invest into market launches and deployments for ONMO+ and just as a side note, right, between Spain, which is a high gaming market with a population obviously way smaller than India, and India with a very big population and the fact that consoles are really not in households, The penetration of household is very low. That's why we have a huge opportunity. But between these 2 markets, there are tens of other countries that, you know, are in the same profiles of these 2 which could be launched, right? So now it's going to be a decision to use our lead time advantage globally to decide how many countries you want to launch. Obviously, we have to do the retail launch properly for both India and Spain. But the big decision towards the year 2027 is which other country do we launch I mean, in Europe, there's a lot more countries in gaming than Spain. And again, Asia and Africa, there's a lot of countries that compare to India in terms of potential for that kind of product. So lots of potential. We need to be smart on the investment and which country we go. So all this to say, that's what I have to say. I'll pass the ball to Bikram for explaining more on the business side what's happening. And then Radhika on the finance. Thank you.

Thank you, FC. Welcome, everybody. See, what you see on the screen is all the complete product breadth of OnMobile, from our mobile entertainment and communications business to mobile gaming and the newly launched Smart Console. What I will do in the next few minutes is take you through key updates around sales, products, where we see the business is headed, And as FC mentioned, the core theme across each of our initiatives when we look at our lines of business, right? Let me start with sales. Since we have gone live with ONMO+ on 26th of June, the interest from potential customers have been very high. So as a part of this slide deck also, we have explained our go-to-market and distribution strategy. We have started with D2C in India. FC has already mentioned that we are going to go with the retail route in the country. We are also in discussion with a few broadband operators within the country to be able to distribute our service. Beyond this, right now as we speak, internationally across the board, we are in active discussions with 20 operators or broadband providers for Smart Consoles, of which 10 of them are in commercial discussions. In fact, I was just checking with the team last few weeks, we are on a run rate of sending either 2 or 3 commercial proposals to our customers. Obviously, this trend won't continue because we want to close the 10 commercial discussion deals into actual closures. So that's something which we are really bullish about and we want to go forward with. Beyond Smart Console, if you see the other platforms which are there on the slide, right, our funnel is very healthy. In entertainment and communications, we have a strong set of deals which are in play and discussions. When it comes to tones, we are in discussions with a very large operator in Middle East and North Africa region. Buzzmo, we are on verge of signing a deal, and similarly for [ Master ] Viasat and Gameye. A good part of these deals, what we believe is we want to sign off in this financial year and try and get some revenue in this financial year as well. For the gaming and entertainment platform, we secured a new business in the last quarter and our pipeline continues to grow. FC spoke about gaming subscription. In the last quarter, our gaming subscription business, we clearly focused on profitability. We broke even in this business in Q3 of last financial year. If you see the data points, 2 years back, our cost of marketing was around 65% And we are trending below 50% right now and we want to be even more efficient. We are using technologies like AI, etc., to become even more efficient. But in the last quarter, we were very conscious about accounts where we need to be investing in marketing, what is the kind of return on ad spends we are getting from those accounts, and to be able to, you know, in some cases not look at revenue alone, but look at the actual cash profit which comes into the organization. I'm happy to state that our results are already showing, the kind of inputs which we have given, and we have started off better in Q2, and we see, it improving. Moving to Entertainment and Comms, in the slide below, you also see that we are targeting to take the profitability and efficiency from 20% to 25% range. This is the business which is the cash cow for the company. The Tones business remains stable. We are live across 27 customers. I have already explained that we are in active discussions with one large customer in Middle East and North Africa and two deployments in Latin America which are going to go live in the next few months for us. Alongside this, we have taken an initiative where we are Also looking at how to become even more efficient for this line of business. We have developed a completely cloud-native platform which we will be rolling out in our existing '27 deployments over the next few many quarters. This is going to make us even more efficient on how we service this business. Buzzmo, the customer engagement market is moving from simple bulk messaging towards customer journey and AI-led campaign. I've already mentioned that we are on the verge of closing another deal. We have also engaged many other customers in Africa. We are moving forward in those discussions in a very positive way. We believe that we would have a couple of more signups throughout the year as we go ahead. Looking forward, the priorities are absolutely clear: grow the margins on the legacy business, be very, very sharp when it comes to focus on margins and profitability on those lines of business, improve the marketing efficiency on our gaming subscription business, be very, very clear in terms of the accounts where we will need to spend. Our Smart Console business, ONMO+ business, has started off very strongly. We are seeing huge interest to be able to close significant B2B deals in this financial year, launch on retail in another market in Europe, which we mentioned, Spain. We are confident that by the end of FY '27, we will be in a far stronger position than we were in the previous financial year. Thank you. And I'll hand over to Radhika, who will take us through the financials.

Hi, good evening everyone. I'll take you through the numbers for Q1. In Q1 FY '27, our revenue stood at INR 124.1 crores, reflecting a 3.8% decline quarter-on-quarter. despite the overall revenue softness, our gaming business continued to deliver steady growth, with our gaming revenue reaching INR 39.4 crores, up by 2.4% quarter-on-quarter. Our gaming subscriber base stood at 13.8 million. EBITDA was at INR 1.5 crores, translating into an EBITDA margin of 1.2%. This is lower as compared to the previous quarter, and this is mainly on account of ONMO+ launch expenses which were accounted in this quarter. PAT for the quarter was at a loss of INR 28.9 crores, and this is-- this includes a one-time severance cost of INR 14.1 crores, and this is associated with these restructuring program which was undertaken by the company. Within entertainment, entertainment revenues, mobile entertainment revenue stood at INR 84.6 crores, reflecting a decline of 6.5% quarter-on-quarter. This quarter, we closed cash with a cash position of INR 135.5 crores, which was down from the previous quarter, attributed mainly due to investment in ONMO+ and also repayment of short-term credit facilities. Operating costs, cost discipline, operating discipline remains our key focus area. In this quarter, people costs were down by 1.1% and were at INR 27.9 crores. Our DSO stood at 121 days. This was down by 10 days. Our ONMO+ start -- Smart Console launch, along with other strong-- along with our strong pipeline, positions us well for the growth in the coming quarters. We remain focused on improving our profitability, sustaining EBITDA growth, and stronger cash generation. As our gaming business scales, increasing operating leverage is expected to drive greater efficiency, and we remain confident in delivering sustainable growth and creating long-term value for shareholders. Thank you.

Thank you, Radhika, Bikram, and FC. We will now open the floor for Q&A session. [Operator Instructions] So we have the first question from [ Ashish Basim ]. Ashish, you can ask your question. You can go ahead and ask your question.

So, see, the first question is, in gaming business, the subscription gaming, revenue is now coming down in last 2 quarters. So are we seeing some slowdown there? Because earlier we were, we were having a plan of reaching a 2 million per month kind of revenue by March of, 2026. Then now it has been deferred again, going forward. So what's, what's, why that revenue is getting, reduced?

So, Ashish, I'll take that. So Ashish, I mentioned it that what we actually looked at when we went positive in quarter 3 of last financial year, we've been very conscious, in the last quarter in terms of where our marketing spends are going. So when we looked at all our accounts where we are live, we are currently, live with more than 50+ accounts where we looked at what are the kind of return on ad spends which we are getting. And there are certain accounts where we were not at the efficiency where we want to be. So we have paused. We are under discussions with telcos there or changing the way we market. There are a lot of initiatives which we are undertaking in parallel to try and improve our efficiency further and also the revenue, which is basically AI-led decision-making, which we see probably coming in the next few quarters. We're looking at multiple channels beyond Google. We are also looking at multiple other partners for us to reach the subscriber. In addition to that, we are also in discussion with few of our telco partners to look at organic marketing wherever applicable. So we are also-- we are looking at-- and that's what we have showed in our presentation also to improve our revenues in the upcoming quarters. At this stage, whether we will be able to reach 2 million MRR in the next 3 quarters, that's the, 3 quarters to 4 quarters, that's what we want to go. But I can't, for sure say, but, we will definitely try and improve our margins there.

Sure, thank you. the next question is, see, last quarter we have written off, approximately 45 CR, which was been given to DeOSphere. So any update on that? What's a big-- see, we paid this amount to DeOSphere And then we canceled our contract and still we need to recover this amount. Or what's the-- I mean, what's the update on that?

No, no, this is amount due by the DeOSphere, right? So for services that we rendered, honestly, one way or the other, we have to settle in the next 2 quarters, right? I mean, for me, we're not going to drag this and drag this, right? So that's something we need to address now.

Sure. On the entertainment business side, see, our revenues used to be INR 100 crores per quarter. Now it is lagging at INR 85 crores around. So is there-- I mean, what, what is the management forecast for the next year? Whether we'll be reached that-- whether we'll be able to reach that level again, or it will be still, I mean, at a lower level going forward?

So Ashish, let me say the, the plan for the way we planned this year's AOP also, we are very, very conscious on which is the new business which we are picking up on the, entertainment and communication side. It has to be profitable. We should be able to quickly go to market with that. We have had businesses which we have walked away from because it was not getting-- giving us the margins or returns which we were expecting. we are under active discussions on 3, 4, actually 4 or 5 key deals which are significant platform deals with decent margins which we are looking at. Depends on the sales and the closure, and our endeavor is to grow that business, with a healthy margin and focus on profitability. And the target on profitability which we have mentioned is that we want to take it from 20% to 25% for us.

Sure. Just last question. Can you also tell how many consoles we have been able to sell till now?

No, you know, that's a very strategic every, we work with POs, right? So every retailer, e-commerce or retailers that we're dealing with have POs. And strategically, for many reasons, we can't disclose, you know, how many POs we get by each retailer or in total. Also, I just want to, you know, because that's a question I get from every investor. And the problem we have also is I want you to keep in mind that we're competing against trillion-dollar companies, right? The two main competitors right now is Xbox with xCloud, right? And GeForce with NVIDIA. Both companies are trillion-dollar companies. So the last thing I want to show is for many strategic reasons where we're selling and how much we're selling, right? So we took the decision to keep it private for now because, you know, we really view that we have a lead time of 12 months to 18 months. Last thing I want is these two to come in the market full-fledged because they see where we're going. So.

We have the next question from [ Josh Burji ]. Josh, you can ask your question.

How's it going?

Very good. You?

All well. So Bikram mentioned that 10 operators we are in commercial discussion with. So what is the size of the deal that we're talking about? Like each operator will roughly add how much potential to the top line?

It depends a lot, depends on the strategy of each operator. You know, just to give you a minimum ballpark, right, when we approach operator right now, we approach it with a minimum set up in their premise. We don't take the risk on hardware, right? Because we don't want to be dependent on deploying all the hardware and then they take 2 years to launch a service. And this happened before with the Tone service. So right now, I mean, we, you know, in countries where we're not ready yet to launch retail, the operators have to pay for the minimum CapEx and the minimum boxes. So, you know, it's about a $50K a month minimum plan. In some other cases, you know, it can be double, 3x that, depending on how much bundling they want to do and how aggressive they want to be in their market also, right? So that's the range right now.

Understood. And regarding the unit economics that we're targeting for the virtual console internally, what is the measure that we're having? Is it customer acquisition cost? Payback period, or like how should we be looking at this?

You know, you know, Josh, I'm really cash-oriented. So when I look at it, an investment, for example, retail in India, we have a business case right now. How many retailers? What's the actual cost of marketing, performance marketing, promoters, display and store displays? You know, there's a lot of things that we have to pay for, right? And inventory. The goal is over a period of 4 years to recoup all the investment. Obviously, as we grow, we need more investment in servers, we need more investment in controller and the cash flow for controllers. And depending on the payment terms of the retailers also, right, has an impact. But overall, whatever the investment we put in, you know, obviously it starts to be cash positive after 2 years, 3 years, right? And depending on the growth, it keeps on going. But that's the view that we have, right? Cash-on-cash investment. Now, most of that investment can be leased. We can raise other money from lenders. It does not need to come from our equity, right? So depending on the aggressiveness of the plan, right, because we have a low-volume plan, mid-volume plan, high-volume plan, it all matters also of how much investment we're willing to put in the business, right? So having a view that we have a lead time of 12 months to 18 months, obviously I'm more aimed towards a realistic to high volume plan than a low volume plan. But that has direct implication on how much cash we need.

[Operator Instructions] In the meantime, we take the question from the chat box. We have a question from [ Jitendra Bhutoria ]. He is asking, what is the status on Chingari divestment and what is the current valuation of that investment? And what is the status on DeOSphere contract? Is there any chance of revenue being booked on account of DeOSphere revenues in future?

Yes, DeOSphere, I answered the question, right? It's one way or the other, we have to solve this in the next two quarters so that, you know, we'll get back to you. For Chingari, we did push to get the shares to be bought back. The timing is a bit off. They're really restructuring their business on growth, and they need an additional 12 months. So unfortunately, it's a bit delayed. I would have preferred to cash in on our investment, but we'll have to wait another 12 months to 18 months on that front.

Okay, the next question from his side is, any chance of any business coming from Vodafone, since in the last call we had stated that talks are continuing and we are likely to get on the Vodafone with improvement in Vodafone turnaround? So.

Yes, Bikram.

Yes, yes, yes. So basically, yes, we are talking to them on two propositions. One of them is Smart Console as well. Discussions are underway. We are waiting to hear from them in terms of what their interest level is in terms of distribution of the product through their channel. If all goes well, we will be able to announce that, but it actually depends on what is the kind of commitment Vodafone is actually willing to put along with us in this business. So that's where we are. we are under discussions with them.

Okay, and further to that, he has another question. What was the need for recent borrowings of INR 100 crores via debenture issue at 14% interest, considering the fact that we have cash of about INR 135 crores with us? What is the budget expenditure?

Radhika?

So, the recent borrowing was INR 65 crores via the debenture issue at a rate of around 13.4%.This is mainly to fund our ONMO console gaming business as well as to settle some short-term credit facilities which we had taken. So this gives, this gives us a leverage on cash and helps us to have long-term commitments for CapEx. So, also this INR 135 crores of cash what we have with us is split across geographies with certain places having restrictions in moving cash across. And this gives us more liquidity in terms of expansion of our business and expansion of our gaming business.

And for all investors, sorry, Radhika just say, you know, for all investors, the more cash you have, the more boring you get, the more, you know, everything goes right. So we don't want to be in a tight cash situation, especially not with the deployment of, you know, this, this kind of product here. So that, that's why, you know, we prefer to have more availabilities on multiple facilities and more partners than, than try to just deal, you know, tightly with the current banks or local facilities that we have. Right. Obviously we have that too, but it's important to have a good mix around the table.

So next question from Jitendra is what is the total requirement for CapEx in FY '27?

Well, that's, that's a key question which I can't answer now because it all depends on how aggressive we're going in each market. You know, as I was saying before, right, the business case we have today in India versus the business case we have in Spain and how many other countries in between we need to deploy or that we want to deploy directly, right? Which is very different again from the carrier business. Carrier business, carrier space, right? It rolls. This year it's very different, right? It's most of it is leased. We still need to increase our leasing capacity. But again, you know, we have investment in content, we have investment in marketing, we have investment in retail, as I was saying, right? Investment in promoters and displays. And so it's a totally different new business, right? So right now we have two, to be honest with everybody, this business is totally different than the carrier business that we have. So we have two businesses within one right now. So we're trying to manage the cash that we have in all this. But, you know, at one point it's going to be important also to look at equity, you know, how do we get partners on board to really be more aggressive if we want to take this outside of India and Spain, right? Right now we're good with our budgets for Spain and India. If we want to go more aggressive, we'll need to raise money. QIP, sorry, I see the-- yes, QIP is one option. To be honest with you guys, again, I don't like the current pricing, but at one point it doesn't matter because the upside we can get on ONMO+ is way higher than the pricing. Would I prefer the pricing to be more, you know, in line for a QIP? Yes. I still prefer to have, you know, a couple of key investors on board that would step in and say, hey, we really believe in the plan and we invest, you know, with you rather than just doing a general QIP. I think it can be a mix of both. Right. So, so right now that's exactly what we're assessing. We're completing the exact retail plan that we have for India, retail plan that we have in Spain. And from this, we do the total business case of what, you know, what does it look like as today, what we would like to expand as other markets, how many other markets like to expand. So how much money we really need, how much should be the fundraising? No-brainer should be between $5 million and $10 million fundraising. If we want to go higher, then that's another option also, right? So that's, that's my thoughts today. But we're moving quite fast on this.

Hope that answers your question, Jitendra. So next question is from [ Balaji ]. Balaji, you can unmute yourself and ask your question.

You're on mute, Balaji.

Hello sir, am I audible?