RateGain Travel Technologies Limited (RATEGAIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the RateGain Travel Technologies Limited Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhanu Chopra, Chairman and Managing Director, RateGain Travel Technologies Limited. Thank you, and over to you, sir.

Thank you very much, and good afternoon, everyone, and thank you for joining the earnings call for RateGain Travel Technologies Limited for the financial year ended March 31, 2022. We are very excited to meet all of you again and share with you how the last one year has been, what is driving growth for us and where we are headed. Joining me on the call are Mr. Tanmaya Das, the CFO of RateGain; Mr. Ankit Chaturvedi, our Global Head of Marketing; Mr. Thomas Joshua, our Company Secretary of the company; and alongside, we have our Investor Relations partner, Strategic Growth Advisors. So we announced our annual and fourth quarter results yesterday, and I hope you've had a chance to go through our financial results, press release and investor presentation that are available on the stock exchanges and on our company website. So as we start, it is important for everyone on this call to understand what we have really achieved in the last one year. So there are very few years in the entire trajectory of a company where you go through multiple transformations. And FY '22 will always be a special year in the history of RateGain as it stands as a testament what a culture of collaboration, nurturing talent and innovation can achieve. So a few high points that I'd like to share with you with all of you. First off, on a run rate basis now, we're exceeding our pre-COVID annual recurring revenue by 8%, which was last achieved in fiscal year '20, which was pre-COVID. And so it is the highest in the history of the company. We launched three new industry-leading products completely built in-house, powered by AI to serve the new use cases as the industry moves towards digitization, and we see very good adoption across all of these products. We now have an end-to-end digital marketing platform under our Martech business to help hotels drive higher ROAS and brand engagement. One of the things we talk about is always our ability to mine our large customer base, and we were able to do that this year and improved our penetration in this customer base, and I increased our revenue from existing customers by 14%. So for those of you who are joining us for the first time and would like to understand more about RateGain, we are a provider of SaaS solutions that work with close to 2,400 travel and hospitality companies to help them maximize revenue through AI-powered SaaS solutions. Every day, our solutions are used by the leading 23 of 30 hotel chains of the world, 25 out of the top 30 largest online travel companies of the world, all the leading car rentals of the world, airlines and tour operators to engage, acquire, retain guests and also drive wallet share expansion with them. So our business internally is aligned around three major segments: Data-as-a-Service that provides competitive insights around pricing, demand and now also we have an end-to-end pricing platform. Our second business line is distribution that provides connectivity to our customers that is hoteliers to get travel demand from OTAs as well as GDSs, which are the traditional travel agent system. Our third business line is Martech, which is the end-to-end digital marketing platform to digitally acquire customers, elevate brand equity through brand education, awareness and engagement. So now let me also talk about the global travel health. So as we all know, COVID has now really entered the endemic stage. If you think about it, all of us are traveling now and the impact of COVID seems to have subsided and entered the endemic stage. So it has really been impacted given the changing attitude towards COVID. So if you look at earning reports from leading hotel chains and our own numbers, we're seeing that leisure travel is touching 2019 levels and in some cases, it's being reported that leisure travel is actually higher than 2019 levels in certain key markets such as U.S. and Mexico. So as we had indicated earlier, U.S. was first to open, but because of the booster vaccination programs in Asia and European countries, it has really helped international travel resume, and we're expecting the 2022 summer to help in accelerating recovery and go beyond 2019 levels in these regions. The conflict in Europe continues to have lesser impact in returning travel as Western and Central Europe are seeing a 500% increase in bookings on our systems despite of hotels and airline prices also rising. So some of the macro level economic changes that are impacting the industry that I've touched upon earlier as well, and I would like to revisit. There is a structural shift happening in our industry. We've all heard of the great resignation in U.S., there are labor shortages. And also just like other industries, we are seeing a faster digital adoption in travel and hospitality. So thus, we see acceleration of adoption of our new AI/ML-based products. This has really been the heart and soul of what we've been working on and see acceleration of new product development at RateGain. This is also helping the -- elevate the positioning of the company as an innovative leader for the industry to capture this immense travel demand. We continue to focus on innovation and working on solutions to help our customers engage better with guests and also lead to wallet share expansion. I'll be happy to share more on this in upcoming quarters. So now let me take you through each of our business lines. So I'll start off with Martech. The Martech business unit has a recurring revenue of 98% and now contributes 33% of our overall revenue. Growth has been driven by an increase in existing volumes in our Metasearch product, which grew by 175% year-on-year on net revenue. The business unit continues to see considerable demand for its Metasearch offerings as more hotels try to optimize costs, improve ROI and generate direct revenue through Metasearch platforms to reduce cost of customer acquisition. FY '22 was a year when our Martech division really recovered from the pandemic and delivered the biggest sales in the history of the division. The immediate focus of the company is to continue to build on this momentum and increase penetration in our existing client base as we look at building an end-to-end digital marketing platform, which will allow hotels to get a unique platform, manage and drive performance across all digital channels. It's the only platform that allows both connectivity and optimization to Metasearch channels, and this is also our 10x differentiator against our competition. It's the only platform that uses demand forecasting data to provide smart insights to improve return on ad spend. Our distribution business segment also continued to grow with recurring revenue of 97.2% and contributed to 38% of the revenue in fiscal year '22 with our volumes now even higher than 2019 levels. We enabled 50-plus new pairings between existing supply partners and demand partners, which helped in driving growth. This included connecting the top 5 hotel chains of the world to regional leading OTAs such as Rakuten as well as new emerging OTAs such as Per that is now the fastest-growing mobile-first travel application in the U.S. The DaaS business unit registered strong growth in its airline and OTA customer segments on the back of acquiring marquee customers as well as expansion of volumes in our existing OTA customers. We serve one of the largest hotel chains in Latin America, Caesars Entertainment in the United States, one of the top 10 airlines in the U.S. and many more. The recurring revenue for this business was 97.1% and contributed to 29% of the revenue in FY '22. RateGain's AI-powered products, revAI, Content AI and Demand AI launched as part of RGLabs have packed leaders in their respective segments. Content AI and Demand AI have been selected by one of the largest operators of hotels in Germany and one of the largest hotel chains in Spain, respectively. revAI continues to onboard car rental franchisees to solve the problem of automation and revenue maximization and was also selected by Budget Rental Cars largest franchisee in the United States. In terms of awards and recognition, our people, our product and our commitment to our customers have all been recognized this year, making FY '22 the biggest year in terms of award wins as well. We were recognized by both Booking.com and Expedia.com as a premier and preferred connectivity partner. We achieved the distinction with Booking.com for a fifth year in the row. We continue to show our excellence in innovation by winning four awards for Demand AI, Content AI and BCV at the recently concluded HSMAI Adrian Award that recognizes the best technology and talent from the industry. We won top honors at Hotel Tech Awards, which recognizes the best products awarded by over 100,000-plus hoteliers and came in as first runners up in rate intelligence, parity and channel manager categories as well as finish as one of the most loved companies of 2022. On the people front, we were recognized as a Great Place to Work for a third year in a row and awarded as the Best Employer brand as well by the World HRD Congress. I'd like to now ask our CFO, Mr. Tanmaya Das, to take you through the performance of the year.

Thank you, Bhanu, and a very warm welcome to everyone on this call. It has been a strong quarter and a historical year for RateGain. Our strong fundamentals and steady improvement in key KPIs is a testament to our business model. RateGain's performance showcases how new age tech companies can drive growth as well as profitability in a tough macro environment. The global environment is improving in favor of travel, even though macroeconomic uncertainties continue to persist due to multiple factors. However, high demand shows the industry has grown resilient. Due to seasonality of our business, due to travel booking patterns throughout the year, it's more relevant to see year-over-year performance rather than quarterly sequential performance. Talking about the financial highlights of Q4 FY '22, our top line registered a growth of 51% year-over-year. Adjusted EBITDA margin achieved was 11.7%, registering a growth of 66% year-over-year, indicating margin expansion due to growth. The growth was aided by 101% growth in new contract wins compared to the same quarter in the previous fiscal year and some large contracts signed in each of our businesses. The EBITDA margins of Q4 was higher than expected by 50 basis points due to delay in hiring a few positions, which will spill over to Q1 of FY '23. On similar lines, the revenues for FY '22 registered a growth of 46% over FY '21. Adjusted EBITDA margin improved to 10.3% as against 9.4% in corresponding previous year, registering a 59% growth. After two years of negative PAT reported, we returned to a positive PAT this year, registering INR 116.1 million and INR 84.2 million PAT for Q4 FY '22 and FY '22, respectively. The adjusted PAT after adding back amortization of acquisition costs stood at INR 117.8 million, which is 16.5% of revenue for Q4 and INR 317.9 million, which is 8.7% of revenue for FY '22, registering multifold growth. Our revenue model remains highly predictable, scalable, recurring and resilient. The gross revenue retention is 90%, while the net revenue retention stands at 114%, indicating lower churn and expansion of our existing relationships. The recurring revenues across all our businesses ranged from 97% to 99%. 75% of our revenue came from subscription revenue. Leisure travel dominated the revenue by type of travel standing at 95%. U.S. remained our largest market with 62% revenue contribution, followed by Europe at 24%. Another metric that we feel extremely proud about is our LTV to CAC ratio, which stands for far above the industry benchmark at 12.9%, which improved from 11.9% last quarter. During the quarter, we have repaid all our borrowings utilizing IPO proceeds and have become completely debt-free, which will result in higher PAT going forward. In respect of guidance for FY '23, we expect to grow our revenue around 30% organically. In terms of EBITDA margins, we expect to improve our margins to around 12.5% for FY '23 as against 10.3% in FY '22. Our business needs to be looked at annual basis. Q4 is our strongest quarter, whereas Q1 is our weakest quarter, both from revenue and profitability perspective. The EBITDA will gradually grow from around 10% in Q1 to around 14% in Q4, which is an increase of 200 basis points each quarter when compared to annual basis. With this, I'll open the floor for Q&A. Thank you.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Praveen Sahay from Edelweiss Financial.

So as you had guided for 30% of organic growth, can you a bit elaborate on your segment-wise? So like how much of the Martech or distribution expected to grow organically?

So we have been giving guidance of DaaS segment growing around 15% to 20%, Distribution 20% to 25% and Martech 50%. We don't see that mix changing. It will be the same mix.

Okay. And second question is your hybrid revenue contribution is increasing. So where you wanted to see this contribution to go?

I think hybrid and subscription as a similar in nature. Hybrid is where we charge a minimum subscription fee and we also charge for excess usage, right? So I would probably keep them in the same bucket, which is around a 75% subscription revenue. My growth will -- as I'm expecting my market to grow more than distribution business, the subscription revenue contribution will increase further.

So is there any -- the same customer moving to the hybrid, is it like also happening like from your existing model, the person moving to a hybrid model because that's a mix of both. So is it also happening?

No. The same customer is not moving to hybrid. I think hybrid is increasing primarily because of the increase in volume. So as travel is coming back, more people get more data like OTAs and car rentals and airlines, I think that's because of that, the hybrid percentage is increasing.

Okay. And one clarification. As the rate -- the fare for air fare or the hotel room rate is increasing, is that also going to impact your revenue in a positive way?

Our pricing model are not linked to airlines or hotel revenues. Just if you're talking about the ADRs, they are more linked to volume. So number of -- increase in number of bookings, that will improve our revenue, but not the average price increase.

Okay. Okay. Just a last question, sir. As you had mentioned that the Q4 being the strongest quarter, can you bit elaborate that? Why is it so?

So the way the world travels, generally in Q1, generally all the travel plans happens in Q4. So the bookings happens majorly in Q4 for all. And also the Q4 is the first quarter of the budget year for many companies which are in U.S. and Europe. So the spending happens more in Q1. So that's how we experience that our Q4 is always strongest than -- stronger than rest of the quarters.

Okay. It's more to do with the industry, travel industry.

Yes. Absolutely.

I'll just add that largely in Q1 is when you think about leisure travel, a lot of the bookings happen for summer, and that's why we see that trend.

Okay. But as you are moving to the subscription or the hybrid model, so that will...

Yes, the subscription hybrid model remains constant in terms of pattern. We might see some hike in subscription model when we see more wins in Q4. But from a transaction perspective, like we have 25% revenue dependent upon transactions. Those are higher in Q4 than the rest of the quarter.

[Operator Instructions] The next question is from the line of Debotro Sinha from ICICI Securities.

Sir, I would like to know a bit more about the business. Sir, who are the target customers for your company? Is it the hotels or the travelers? And in case it is the hotels, like what segment of hotels are you targeting? And in case it is the travelers, is it domestic travelers or international travelers?

Sure. So we are a B2B company. So our customers are basically people who are either what I refer to as travel suppliers or travel intermediary in the travel ecosystem that ultimately serve the travelers. So we don't deal directly with the traveler or the consumer. We provide solutions to these B2B companies, which enable them to acquire the travelers, retain and engage with them and have a wallet share expansion with them. So if you think about who our customers are specifically, it's these hotel companies, it's the airlines, it's the car rental company these intermediaries, which are the online travel agents, also tour operators, cruise liners. And now we also deal with vacation rental companies that you see on Airbnb.

Okay. Sir, one more question. Sir, in that case, do you provide any packages, entire holiday packages, including traveling and lodging and everything included?

So we actually -- we don't do the packaging, and it depends on -- it actually depends on the supplier. Are they using prepackaged products to sell? Or are they using dynamic packaging on their own website. But what we do provide is the availability of rates and availability of the hotels that they can put together in the package through the distribution platform that we have.

Sorry to interrupt, I would request you to please come back in the queue. The next question is from the line of Nilesh Jethani from BOI Mutual Funds.

My question was on this Martech business. So just when I was calculating on average clients for FY '22 and our earnings, the number comes at around $45,000 to $50,000 earning per client. So I wanted to understand when we sign up, what is the bare minimum we ask for the client for the Martech business? What are the opportunities to ramp up? So if client wants to increase its spending, does it impact our profitability in a better way? Or are we charged just a fixed amount for the entire year and then whatever client requires us, we just do the gross up and build the clients, whatever actual expenses are. Can you please explain that business?

Sure. So let me first talk through what is the Martech business and get into a little bit more details there. And then I'll let Tanmaya step in and talk about how do we price our offering. So our Martech offering is really -- think about it simply put -- it's an end-to-end digital marketing platform. And if you think about marketing, it enables you to do two things, right? It enables you to acquire customers or travelers or guests. And two, it does brand engagement. So we do this on the entire gamut of digital channels that are available, whether they are social channels like Instagram, Facebook, Twitter or the traditional digital marketing channels like the Google, PPC. And in the case of travel, another important digital channel is what is called Metasearch sites. These are price comparison sites, which I'm sure most of you have used also -- which also -- whose business model is also like a Google model, which is an ad model. So we basically enable our customers to acquire guests and drive traffic to their own website through any of these digital channels. The second thing that we do in our Martech platform is we also do brand engagement. As you know, social selling has become extremely important if you were to target the millennial customer. So we do a lot of brand engagement where we advertise and talk about all the new things that are happening at the hotel, what are the different offers that they have and also monitor and engage with guests on a real-time basis as and when they put out commentary about the particular hotel. So it could be while they are at the hotel or they're looking to book a stay where we are engaging with the customer. So what we do is we do offer each of these components at different modules and the pricing of each is different. And I'll let Tanmaya come in and talk about how different modules are priced.

Sure, Bhanu. So on Martech, look, as one was talking about like we cater to like Facebook, Twitter and Instagram. So the customer can choose what level of scope solution he wants to take. I think the $45,000 you talked about, I think what you probably have done is that you have taken the total Martech revenue and divide it by customer. But I think in Martech, we provide two separate solution. One is the BCV solution and the other is the myhotel solution. I think the average price is more relevant to the BCV solution where the average price per property that we charge is around $25,000, but there are graded solution levels that they can get into. I think it starts with $15,000, some hotels pay us even more than $50,000 to $60,000. So it depends upon what level of solution they take. And obviously, once they get in at a smaller price, if they want to avail more solutions, then the price increases.

Got it. That was really helpful. And my second question is on the overall margin. So in the initial comment, you said that the two high-margin subscription-based business will grow in the range of 15% and 20%, respectively, but Martech will grow at 50%. So how confident are you to taking our overall company's EBITDA levels to mid-teens in the next one or two if years Martech growth would come at a very higher pace vis-a-vis the SaaS business?

I think, yes, the Martech gross margins are around 60%, which is at a pretty high level. And if you talk about a SaaS company gross margin is around 63%. IT services company gross margins are at 40%. So even if I grow Martech 50% year-over-year with a 60% gross margin, quite a chunk of growth will flow down to EBITDA, right? And obviously, DaaS and Distribution, both are pure platform plays. And with a 90% gross margin, their growth will flow down to EBITDA. So as we're giving a guidance of 200 basis point increase year-over-year, that's what we are targeting to, and we're pretty confident about that.

But wouldn't -- sorry, the last question from my side, but wouldn't such growth in...

Sir, I would please request you to please come back in the queue. [Operator Instructions] The next question is from the line of Prolin Nandu from GMO.

Thank you for this update on your quarterly and yearly performance. So two broad questions. One is on the operating metrics that you say, right, in terms of net retention rate and CAC to LTV or LTV to CAC. So just wanted to understand what is our aspiration? Whom are we benchmarking against in terms of the numbers where we want to see these numbers in a couple of years' time? And on this, I was a bit perplexed that our net retention rate of 120%, which we reported in nine months have dropped to 114% in the strongest quarter Q4. So could you help us understand -- could you help me understand these two broad questions on your operating metrics?

So the benchmarks for SaaS companies for net retention rate is 115% to 120% is a good benchmark. As far as LTV to CAC is concerned, anything 3% to 5% is a great benchmark. But we are -- in net retention, we are at par in LTV to CAC, it's 12.9%, which is much, much better than SaaS benchmarks. But considering many SaaS companies don't make profits and we are profitable. So the 12.9% originates well. I think it's at a very fair level. From a net retention perspective, we -- I would love to increase that from 115% to 120% in future quarters. Your question of reduction in net retention rate is that, look, I -- my gross retention rate is at 90%. It was around 91% last quarter. So we have not churned a lot. The factor is that we had some great new sales from -- which contributed to revenue growth. Both -- we had a very good Q4, Q3. It was the highest in the history of RateGain. And then we also had a very good Q4. So there are new logos that has been added. So that probably is decreasing the net retention rate because if you see the churn rates are not gone down significantly.

But I'm sorry, but I mean, just on this, I thought that the new retention rate should not impact your net retention rate, right, because that's old customer, let's say, he's giving you INR 100 without any adding anything, you would be getting INR 20, right? So I had an understanding that your new client acquisition should not actually impact your NRR? Or am I wrong in that understanding?

No, I think I was answering from a revenue growth perspective that's why my net retention is around 114%, whereas my growth is around 46%. So I was probably answering from that perspective. But I think you're right, 114% is what the net retention rate is. We -- maybe I'll just recircle back with you with SGA on this...

Why Tanmaya I'm harping on this is that your nine-month retention rate was at 120%. For you to report a full year NRR of 114%, there has to be a significant drop in Q4. I mean, is my understanding. So again, a bit -- if you can circle back, that would be great, right? I mean, on this number.

I'll take your connect from SGA and I'll circle back to you.

Great. And second question, you have given FY '23 EBITDA margin expansion of 200 bps, right, in some sense. So slightly more medium-term questions on margin and operating leverage, right, in some sense. Could you help us understand what are the levers wherein we can increase revenue per employee, we can spread out the other costs and how the depreciation and amortization will also normalize over the few years, right? Not in terms of quantity. I'm not looking for a number for FY '24, '25, but in medium term, in two to three years' time, how does these three major cost items look like as a percentage of sales going forward?

Yes. So we currently -- at the end of the day, we are still a very small company, right? And there is a huge market to tap into, and we can grow really fast. So we have been investing in our sales and distribution network where we spend almost 20% of our revenue. We are spending 5% on innovations, which RGLabs Bhanu talked about because we want to get more new age products, which will propel growth. And so those are the investments once the growth happens, those are the investments in terms of percentage of revenue will go down. Now if you look at my revenue per employee, it has increased 17% year-over-year. In fact, pre-COVID, when I was -- we were around a INR 400 crore company, the number of employees we had was around 630, 640 people. And today, we have exceeded the run rate revenue by 8%. The annual recurring revenue is around INR 435 crores. We have only 606 people. So there is definite synergies that will come in when the growth happens. All the segment of costs, like we talk about SG&A or sales and marketing or investment into new products in terms of percentage of revenue will come down when the growth comes.

The next question is from the line of Sameer Dosani from ICICI Prudential Asset Management.

Just two questions. One, when I look at DaaS revenue on a Q-on-Q basis, we see there is a 20% degrowth on a Q-on-Q basis. Could you explain that? And second, also, when you look at gross margins, when I compare FY '22 to FY '21, there's a 3.5% drop in the gross margins. So can you just explain this?

I'm not sure about the first question because what I see is that you are comparing Q3 FY '22 versus Q4 FY '22, I think there's a 5% increase quarter-over-quarter. Now at the end of the day, DaaS or any of the businesses have not declined quarter-over-quarter. Maybe if you have a different calculation, we can touch base offline. But from what I see or what the numbers I have is a 5% sequential increase in Q4. On the second question on margin front, I think I explained that also. Look, DaaS and distribution are steady growth businesses. We experienced a high growth in Martech. DaaS grew 15% distribution grew 20% this year, whereas Martech grew around 100%. So there was a reduction in gross margin because Martech is a slightly lower gross margin business than others.

Only mix change is you are saying?

Yes, yes.

And also, if I can squeeze in one more. What is the ESOP cost? Is that an ESOP cost reversal in Q4 that we see?

Yes, Yes. So there is a reversal because there's unvested portion of exited employees that we had to reverse.

Okay. So going forward, this ESOP cost, what could be for FY '23 or what would be the impact in FY '23 for ESOP cost?

It will not be very significant. As such, most of the vested ESOPs -- most of the ESOPs are vested and we took those costs in the P&L last year when we went public. So this year, it will be maybe in the range of INR 2 crores to INR 3 crores max.

INR 2 crores to INR 3 crores for the entire year.

Yes.

The next question is from the line of Ashish Chopra from Goldman Sachs.

Two questions from my side. Firstly, Bhanu, if you could just share -- you mentioned the LTV to CAC of 12.9%. If you could just split that out in terms of what was your CAC last year compared to pre-COVID? And how should we expect that to trend going forward?

You're talking about the customer acquisition cost?

Yes.

Okay. One second. So we have been continuously seeing improvement in our LTV to CAC. Exact CAC what it was during the pre-COVID levels, let me dig that out. But I think the -- okay, one reason why the LTV to CAC has increased -- I think it was pre-COVID level, LTV to CAC was around 8%, and it has increased to 12.9% this year. I think what -- a couple of things that is contributing to that is that we had a very large year in terms of new contract wins. We closed around INR 104 crores of new contracts. Last year, it was roughly around INR 30 crores, INR 40 crores because that was COVID impact. But pre-COVID, we used to close around INR 60 crores, INR 70 crores or a $10 million range. So we -- there has been significant increase in sales efforts with lower cost. As I talked about pre-COVID levels, we had lesser employees -- more employees than what we have now. So the sales and marketing effort cost is lesser than what it is. I think one reason also factored in is that people are selling out of India or not traveling. So travel cost is saved. And we have kind of recognized the fact is that can be an efficient way to sell. So I think that's how it has improvement happened.

Yes. And if I may add, one of the other things that's happening at RateGain from a go-to-market perspective is, as you might have seen with other SaaS companies, there's a transformation in the whole framework where what is referred to as a product-led model, where you basically let the product sell itself, it's completely self-serve. So you've seen it with likes of Zoom, et cetera. So we are -- I won't say we are there yet, but we are making now investments also in how we go to market. So instead of being the traditional sales model of inside sales coupled with marketing and feet on the street, we're trying to now become more and more of a product-led model, which from a GTM perspective is extremely sales efficient. And that's why you're seeing some of the benefits of that. And we'll continue to move in that direction. We are not there completely, but we'll continue to move in that direction.

Sure. So you're saying that these levels can be sustained going forward as well?

That's correct.

Got it. And my second question was, so when you mentioned that the organic growth in Martech next year could be 50%. Just to be clear on the definition there. So the business from my hotel Shop, would you consider that as entirely organic, considering that it was not integrated for the full year in FY '22?

No, we'll do an apple-to-apple. I'm talking about an apple-to-apple comparison. So if I'm consolidating like seven months from myhotelshop, we'll report seven months growth only, yes.

Understood. So the reported number can be higher than.

Yes.

The next question is from the line of Ranjithgopal KA from HSBC Asset Management.

I have a couple of questions. First one is on the growth that you mentioned about 30% organic growth. So in terms of what we are seeing from an industry perspective, we've seen clearly recovery happening. So I mean, in terms of our growth assessment, is it coming from the kind of contracts that we have signed over the course of FY '22? Or is it more on the confidence of the trajectory of improvement that we are seeing currently? So if you can give some color on the growth that we are seeing, especially on the Martech side, you mentioned about 50% growth. So how do you look at the color of the growth in FY '23? That's my first question.

Sure. So let me take this, Tanmaya. So when we talk about the growth drivers for FY '23, see, one is just organically now that we all know everybody is traveling People are talking about prevent travel. So we're just seeing more volumes coming back. So when I talk about our DaaS business, we are seeing significant growth in our OTA customer segment. They just want more data. Similarly, on our distribution business, as Tanmaya pointed out, we are seeing a lot more transactions. And to your point, we did some very, very large deals in our distribution business, and I'm happy to report a lot of those deals have now been monetized. And as a result of which we're actually seeing transactional volumes exceed pre-COVID levels in this quarter. The second thing that we are also seeing is these are that we had sold last year that I talked about RGLabs, and these are going to also drive growth, especially revAI, it's been a great success for us within the car franchisee market, and we are seeing great amount of traction on our Demand AI product also. So we are also excited about what these products are doing, and we want to continue to invest in sales and marketing of some of these new products, which we see huge growth areas for us. And we are also encouraged by the reception that we've had on these new products that we are experimenting on some other product launches this year that we'll be able to talk about later in later quarters. And something that I've always talked about is we have a very, very large customer base. And now that things have opened up, we are ramping our investments in sales and marketing in our Martech business and really focusing on cross-selling and upselling to our existing set of customers, so which should see good growth. And we were in a pause situation because U.S. opened first. And then as I pointed out in my opening remarks, now we see Asia and Europe has looked up also. And in this March ending quarter, we made significant investments in ramping up our GTM infrastructure also. So we see all across, we will see as a result of that investment, additional go-to-market push as well. And specifically in our DaaS segment, we are also have now entered adjacent customer segments. We all know about vacation rental that we look up on Airbnb. It's become a big market and it's very organized now, and we've had some customers inquire and sign up on our DaaS platform. And similarly, we also are seeing a lot of interest by destination management companies on our Demand AI product. So there is an opportunity to get into these adjacent customer segments as well that should enable growth.

The next question is on any inorganic initiative that we have planned for FY '23? And will it be around Martech and an amortization charge is around INR 23, 24 for the past two years? And will it be actually -- it's on the similar lines for FY '23 as well.

Yes. So I'll let Tanmaya address the second part of your question on the cost amortization. On the first part, just general, and I'm glad you asked that question. Generally, I'll give you some commentary on our M&A endeavor. So when we evaluate -- first of all, we run it as a proper program. There is a dedicated team, and we are constantly engaging with the marketplace for opportunities, and we evaluate opportunities from a lens of three criteria. One, are these product capabilities that are part of our overall product vision? Two, does it help us get deeper into certain geographies? So we want to continue to get deeper in Western markets, U.S. and Europe, and we continue to look at opportunities where we can get more customers. And third, opportunistically, we want to look at competitors. Something that I commented on earlier is for each of our business lines, we have a different set of competitors. There's not truly an apple-to-apple comparison to RateGain because most of these are point solutions. So we opportunistically look at those as well because they can be very, very synergistic for us in terms of acquiring customers. And I'm happy to report that given the overall environment, as you see, especially in the U.S. NASDAQ market that it's creating very, very good opportunity. So in terms of market opportunities in evaluating companies, we've never seen a more robust pipeline. But at the same time, I would say that we have demonstrated that we are very, very disciplined about what we are willing to pay. So the conversations are on, and there are multiple conversations, and they actually span all the criteria that I talked about. And these are all related to the different lines of businesses we have. So I want to say there is more than one opportunity per business line that we have as we evaluate currently.

I think there was a second question on the amortization cost, right? So yes, I think the FY '23 also will have similar amortization cost for FY '22 as FY '22. It will go down from FY '24 onwards.

The next question from the line Vishnu K G from Singular Capital.

Two questions from my side. First on the Martech business, could you call out the number of properties at the end of the fiscal year? And over the next three to four years, how do you see this panning out?

Sir, your voice is coming a bit muffled.

Is it better?

Yes, you can go ahead, sir.

Yes, sir. So my question was, could you call out the number of properties in the Martech business at the end of FY '22? And that over the next three to four years, what is the number that we can target? And second bookkeeping question. Your working capital seems to have slowed in FY '22. Anything particular to call out?

The first question was in terms of number of properties, right?

Yes, sir.

We are talking about all the business units or any particular business. Actually, it was not very audible.

Martech business, the number of properties?

Martech business, okay. So they are like we have got two segments in Martech business now. We've got BCV and we got myhotelshop, which is in Germany. BCV is close to 375 properties today and myhotelshop is close to around 800 properties today. So was that the question? Did I answer the question in the first part?

Yes, sir.

Sorry about that. Vishnu, actually, your voice is very muffled. If you're using any earphones or external device, you can drop that and please go ahead. Maybe you can e-mail your questions because it's not very audible. We'll move to the next question from the line of Sanjay Awatramani from Envision Capital.

As you've just given the answer for properties in the Martech business. So in the last con call, you mentioned that in the Martech business, we have 400 properties. And in the short term, we are planning for 1,000 properties. So can you clarify, I mean, how are we moving ahead in this? And what is the number we can expect in the next four to five years down the line? What are the properties we are expecting to be in with us?

So yes. So you're right. So what we've seen is as we are going through and thanks to the education we are getting from public markets, there is a very, very large focus on margin expansion. And as a result of which in our Martech business, we saw there were some deals done because of the COVID situation at deep discounts. So as a result of which, as we look to expand our margins, we decided to let go of some of these properties. And now we are very, very focused on ensuring that we uphold our prices and continue to actually expand on our prices so that we can have a margin expansion. So we saw a great addition to a number of properties, but at the same time, we did have attrition of properties as well. As I mentioned, there were some low-priced property engagements that we have. Our target continues to be to get to all across -- so our first target is to now -- as I mentioned, our Martech business is about selling both on social channels, which is BCV and social engagement and two is also selling on digital channels. So our first target is to now have a much, much larger cross-sell, upsell initiative where we can get hotels to be across both the platforms. And overall target continues to remain to get to 1,000. But at the same time, like I said, we are now extremely sensitive about driving our margins higher. So we've calibrated our efforts to focus first more on getting our margins to be higher and driving sustainable growth forward.

Okay. This is very clear, sir. And last thing from my end that for FY '23, you have given a target of 12.5% of EBITDA margin. Is this correct? And the second thing is on Q4, you said that you'll be hiring some senior team members or team leaders. So what is the margin impact on -- for this on Q1?

No. I think the Q4, we registered 11.7%. What I talked about is that we were expecting 50 basis points lesser margin because there were some new positions that could not be filled up and probably spill over to Q1. But I think, as I say, like Q1 is in terms of revenue and profitability, it's lesser than Q2 or Q3 or Q4. So we'll start -- we're expecting around a 10% margin in Q1 and gradually increasing so that we average out around 12.5%.

And the last one is that Martech is a high-tech point business. And as we -- I mean, work on pitches and we need to be on the ground. So are we working on some campaign tweaking? And what is the scaling -- I mean, how will we manage the people which will be required for this Martech business?

Sorry, can you repeat the question?

I'll repeat my question. Martech is a high touch point business. And as we need to work on pitches for the marketing campaign basically to manage the marketing campaigns or tweaking them. So this will require a large team on the ground, right? And plus, we do require, I mean, unique campaigns to attract people on the RateGain platform or for the customers which we get on board, I mean, the hotels and the other intermediaries, which we spoke about. So how we are planning to manage the scale or how many people will be required in the future to move ahead with this Martech business?

Yes, correct. So that's a great observation. You're right. This is a more managed service part of our business versus being completely a platform play. So the analogy that I usually use is we provide the platform for the car, but we also give you the shopper or the driver to drive the car. So our goal is to do two things really. One, we want to continue to stitch together everything that we have into one platform and make this platform a lot more intelligent that's across the industry because we are able to have a lot of these nuggets like we know how travel demand is trending. We know how your competitors and your distributors are distributing your price. So all that information is absolutely critical in driving a much smarter ad spend so that you can drive a much better ROI. So the fact that we are the only company that can pull all of this together, thanks to the integration of DaaS and distribution components, we see that the value that we can charge on each of these customers, we can continue to drive much higher ticket price as we sort of move forward and stitch all of this together. Now the second thing that we are really focusing on is automating and productizing some of these managed service elements such that the number of people is not completely linear to the number of hotels that we had. And we're happy to get offline with you and provide you some statistics where we are seeing the number of -- the number of hotels that each team member can support is increasing as we look to automate and productize a lot of these tasks.

The next question is from the line of Karan Uppal from PhillipCapital.

One question is on the -- if you can provide any color on the new products which you have launched, revAI, Demand AI and Content AI. What is the market response from these new products? And any contribution you are expecting in the 30% online growth guidance which you have given?

Yes, sure. So very quickly, what Demand AI does is basically gives you a sense of how travel demand is in any particular market. So think of Delhi, and we will say in the month of June, we give it a score on a scale of 1 to 200 that travel demand is going to be, let's say, 90, which means it's going to be high. And using that information, hoteliers can do two things. One, they can decide how they want to price their product, if the demand is going to be high, they can increase the rates. And that's what we are seeing across markets, right? Because the demand is high, they're increasing rates. And b, they can also plan to optimally staff up their hotel. And three, it's also useful information on how you do your sort of digital marketing. So we are seeing some very, very good traction on Demand AI. As I mentioned earlier, we signed up one of the largest hotel chains in Spain. We've also signed up a lot of these that I referred to DMOs, think of visit Dubai, Oman tourism, all these big tourism boards that are supported by the different governments to attract tourists. They're also keen to understand how travel demand is working out in their area. So it wasn't something that we targeted. But incidentally, it's taken a huge liking by a lot of these DMOs. In fact, we are also seeing as big events happen, the tourism boards of those events, whether it's FIFA or World Cup also showing a lot of interest. So it's opened up an adjacent segment for us. And on revAI, what it does is it takes Demand AI and our competitive intelligence solution from that and puts all of it together and goes one step further and makes a recommendation on how you price. So we actually tell our customer how they should price. So you guys are going to hate me, but if you're seeing increase in prices, maybe some of it is as a result of people using gate software because we see there is increased demand, but not as much inventory and we recommend our customers to increase. So we're doing that for -- we deliberately decided to go after the car rental franchisee market because we see that as a white space and greenfield opportunity. And I'm happy to report just within the first year of launch and just six months of marketing, we signed up about $1 million ACV in revAI. And then Content AI is a content distribution management and content augmentation tool because what hotels also, as I talked about, are suffering from this great resignation, they are unable to provide updated content on what are health and safety protocols. Now there's a lot of talk about sustainability. So we've provided an automated tool through which hotels can upgrade content with their third-party partners and also enhance the quality of the images. So on all these products, we are at different stages of evolution. I would say revAI is where we have seen great traction. And I think we are in the final stage of getting to having the product market fit before we start to scale. In terms of the 30% growth margin, the growth percentage, what contribution this would have, I'll let Tanmaya comment on it.

Tanmaya Das, are you able to hear us?

Yes. I actually missed the last part, the comment, 30%, sorry, Bhanu.

Tanmaya, what is the contribution of the new products in our revenue growth in the 30%?

Yes, it will be roughly around 4%.

Thanks for the detailed answer. Second question was on your transaction business. Right now, it is around 20% to25% of the overall revenue. But with a very strong demand -- travel demand, which is there currently. So can this transaction business go up to maybe 35% to 40% of revenue at the end of FY '23?

Well, obviously, if the demand goes through the roof, obviously, we will be beneficiary of that, but I can't predict that today.

The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.

I had one question on the working capital position of the company, which when I look at the trade and other receivables shooting up, and also some significant write-offs. So give us some color on that. And my second question was that how many properties, like we have some 2,400 customers, companies that we are working for. So how many hotels does that translate into? So you've given some numbers on the Martech side, but then on the total thing, if you could just give us a flavor.

Yes, sure. So taking the first question, look, the working cap -- we have had a large quarter in terms of revenue. The revenue increased by 51%, which is around INR 36 crores or INR 37 crore increase in revenue as against the last quarter -- last quarter of last year. So we have a large debtor balance that was accumulated because of the billings that happened in Q4, which is getting collected in Q1. And which is -- if you talk about a percentage of revenue, it will be the same for last year and this year. So that's fine. The question on write-offs, if you see the last, last year, it was higher because of COVID year. We had to give discounts, waivers and all. We had some slippage to this year of those, which we have taken care of now. But I think it is -- generally, we -- in a good year, it is around a 1% of revenue that we experienced as write-offs. In a bad is around 2% of revenue that we experienced. I think the COVID year has been a little bit slight higher, but this year, it is within that limit. And we expect to -- we now cleaned up all COVID-related issues now, and we expect to improve it further next year. The other question you had was on the properties. Look, it's different in different segments. For example, a distribution segment, we have got like the Marriotts of the world or the big chains of the world who are like connected to multiple hotels of there. So distribution segment itself caters to around 130,000 hotels. But not all hotels might be producing because they are connected with us basically. On DaaS segment, there will be around 3,000 properties with us. So in total, if you are talking about, I think we connect or provide solution to around 140,000-odd hotels.

We'll move to the next question. The next question is from the line of Rahul Jha from Bay Capital.

Can you give us how much revenue was contributed by myhotelshop for the full year and for this quarter? And secondly, on the Martech new client addition, what portion is due to this acquisition of myhotelshop? And what is organic?

Overall basis, as I talked about, we grew 46% year-over-year, right? And if I just take out Martech -- myhotelshop, then we grew around 30% organically and 16% was contributed by myhotelshop, if that answers your question.

Right. And for the new client additions in Martech?

The INR 104 crores, we had a very -- because we acquired the company in October and there were like three months of cross training and all. So there will be not a very significant amount of new sales from my hotel sub recorded. It is primarily the existing client expanding the growth came in. So, yes.

And on the receivables front, I see that like some INR 16 crores, INR 17 crores receivables have increased. But actually, if you look at quarter-on-quarter, if you look at, say, from December to March, December '21 to March '22, receivables have increased by INR 17 crores, but your revenue has actually increased by INR 7 crores, INR 8 crores. So what is really happening here?

Well, obviously, the increase against December '21, so we grew around 9% sequentially, and that is a INR 7 crore increase, right? So the DSO of the company is around 80 days. It went up to 105 days in the COVID time. In pre-COVID, it was around 60 days. So it has obviously gradually decreasing from 105 days to have come down to 80 days, and it's going to further decrease on that. There are certain large clients which where we have agreed for an extended pay period, which still continues and we are trying to negotiate to bring it down further. But as long as the -- we reduce the DSO going forward, the situation will improve further.

Due to time constraints, this was the last question for today. I now hand the conference over to management for closing comments. Mr. Bhanu Chopra, you may proceed with the closing comments.

Yes. So I just wanted to thank everybody who could take the opportunity to participate on the call today. I hope we've been able to give you a good overview about our company, insight into the performance thus far and the growth story that lies ahead. Moreover, I hope we have answered all your questions appropriately. And if there are anything that anybody else wanted to ask, please feel free to contact our partner, SGA, and they can relay the questions to us, and we'll be happy to also jump on a call if required. So thank you, everyone.

Thank you very much. On behalf of RateGain Travel Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.