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

Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Q2 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference call is being recorded. I now hand the conference over to Mr. Bhanu Chopra. Thank you, and over to you, sir.

Thank you very much, and a very good afternoon to everyone. And thank you very much for joining the earnings call for RateGain Travel Technologies Limited for the second quarter of fiscal year 2025. It's great to connect again with all of you, and I'm excited to share some key updates from the quarter. So joining me on the call are Mr. Tanmaya Das, our CFO; and Mr. Divik Anand, our Head for Investor Relations. We announced our second quarter and H1 results for the fiscal year 2025 earlier today, 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. I'm happy to report that the company has delivered another notable quarter marked by balanced growth, record margins and healthy performance across key operating metrics, underlining the strength of our business model. A balanced and disciplined approach has been key to delivering a strong operational performance, leading to another record operating margin of 21.7% demonstrating the resilience and efficiency of our SaaS-based model. Our commitment to sustainable growth remains a core focus. Our AI powered SaaS solutions continue to empower leading hospitality and travel brands, providing actionable insights that drive profitability and optimize decision making. We continue to make inroads into key accounts, forging partnerships and enhancing footprint in emerging markets. Looking ahead, we are dedicated to advancing customer excellence through strategic investments in product innovation and forming partnerships that yield long term value. With a robust pipeline and clear vision, we are well positioned to capture new opportunities and strengthen RateGain's role as a leading technology partner with our tailored data-driven solutions powered by AI. With that, I would like to capture some of the key operating and financial metrics from the past quarter. Our annual recurring revenue, ARR, now stands at a new high of INR 1,109 crores growing at over 18%. We continue to see steady traction across all our 3 segments with a strong pipeline as we look to drive value for our customers. Revenues for Q2 grew by 18.1% compared to the same period last year, with well-balanced growth across all 3 verticals. Our new contract wins came in at INR 127.6 crores as we deepen our presence across some of our long standing relationships, continue to add new customers who seek to drive better outcomes, and maximize revenue with our AI-driven solution. We continue to see improvement across the key operating and financial metrics. Our LTV to CAC stands at an industry-leading number of 15.1x, with a steady revenue per employee capturing healthy employee productivity and the ability to scale-up in a sustainable manner. At RateGain, we are approaching Gen-AI as a cultural change instead of looking it as a product or tech innovation. Throughout the organization, across functional, internal customer facing as well as our customers, we are working to create an AI-first mindset to ensure that our product sales, marketing and people team think of AI as an alternative to existing problems. Some highlights of the innovation that our product teams are incorporating on the customer side. We are now using Gen-AI summaries on our DaaS products to help summarize key highlights and actionable insights for our customers. We have launched now Rate behavioral intelligence, which uses AI to determine patterns of competitive pricing behavior on price changes. revAI, our RMS tool for car rental companies, we continuously improve the revAI algorithm for better demand forecasting, and thus, improved pricing recommendation. As part of our RevMax platform, we have recently launched the voice module where we are building an assistive channel, and they have AI agents for taking reservations and handling customer queries on behalf of hotels. In our paid digital marketing, we are using end-to-end AI-enabled platforms to drive better RoAS on behalf of our customs. Internally, we are using AI in the following ways. There is an extensive use of Copilot, leading to higher developer productivity. This developer productivity will help us focus on creating better products and faster deployment. We are using AI in our marketing and sales function for increasing reach, better targeting and capturing intent, as well as improving conversion. Finally, we are using AI in HR in helping us find the right talent, determining employee sentiment and taking proactive action. We are also proud to be working with Google and AWS'’ workshops as well as we partner for Gen-AI Hackathon in building solutions for the travel industry. On the state of the industry, global travel industry continues to hold steady in the face of evolving situations in some pockets. Skift Travel Index stood at 107 in September, showing steady growth in APAC geography, with all countries growing year-on-year basis, and Europe demand continue to hold steady as well. The summer of 2024 was unique for the industry, with both political and global events impacting travel demand. Few trends that have emerged in 2024 are, Asia Pacific continues to show growth year-on-year with some Middle East destinations still growing in spite of the ongoing uncertainty, providing an opportunity to grow in new markets. Leisure travel is seeing resilience as travelers seek memorable experiences. Luxury travel continues to show growth across markets, providing a significant opportunity to capture their marketing spends. Business travel is slowly climbing back to pre-pandemic levels, with a stronger focus on cost control, presenting an opportunity to grow the need for competitive intelligence. Large hotel chains are looking to expand into newer markets and reach new audiences, giving an opportunity for new travel aggregators to streamline B2B distribution. I am also extremely proud to mention that RateGain was featured as a case study by the New York University School of Professional Studies, Jonathan M. Tisch Center of Hospitality. It's a great honor for NYU-USPS to have captured the growth of RateGain into a global technology player in the rapidly evolving travel industry. Building a global brand requires synergy across different stakeholders, along with identifying the right opportunity. We are trying to bring the industry together to address the problems we face today and the challenges we can expect tomorrow, and we are just getting started. With that, I will now briefly touch upon the performance across each of our business units. The DaaS business continue -- contributed to 32% of the total revenue for H1 FY ‘'25. This vertical grew at a healthy pace, with continued traction across key enterprise accounts, in addition of new logos across airlines, OTAs, car rentals and cruise. As you might have seen from recent press releases, we've added some great logos in our air segment, including Thai Airways and some fast-growing airlines including TAAG Angola, FlyArystan and Flight Centre Travel Group. We continue to make inroads within this space and air vertical continues to be a key growth driver within our DaaS vertical. We also continue to deepen relationships with key customers across hospitality and OTA. With our newly launched navigator platform, we are seeing traction and have had some win-backs here and have a healthy pipeline. Given our ability to deliver large volumes of data, we continue to see incremental volume demand coming from our existing enterprise customers driven by evolving customer behavior, steady travel demand and product innovation. Our distribution segment accounted for 20.6% of our total revenue. We were recognized as a strategic partner by Agoda, and as a preferred partner by Trip.com, which is a validation of the high-quality connectivity solutions we enable for our hotel partners. This enables our hotel partners to grow further with a reliable partner and drive efficiencies in how they distribute their inventory. These recognitions are a validation of the strength and reliability of the platform and the value we are driving for our customers and partners. We are also integrated with TCA now a leading PMS in Latin America, that will enable us to further enhance our footprint in the LatAm region. We have had some key new deal wins in this segment along with expansion with some of our existing partnerships. We are confident of healthy growth within our distribution segment going forward. We continue to make inroads with our RevMax platform across mid-sized chains in the APAC and Middle East and are focused on scaling up in the coming quarters. We continue to add features and enable further integrations to help create the best-in-class product. Our MarTech business contributed to 47.7% of our total revenues for H1 FY ’'25, backed by healthy growth in the paid digital marketing segment, and steady traction in our social media engagement segment, with some leading hospitality brands in the North American geography. With the continuous focus from hotels on driving direct ROI, a PDM offering that we refer to as demand booster, continues to see increased traction with hotel chains across Europe and APAC regions. Given the integrated offering we have on this with our RevMax platform, we are excited about the prospects of a holistic offering where we will help drive more direct bookings for hotel partners. A PDM offering in the Adara continues to deliver strong performance on the back of brands looking to drive better outcomes from their digital marketing campaign. In fact, we had our best sales quarter in Q2, signing 89 new logos in the quarter, and expect this trend to continue into Q3. The value we are driving for these brands basis the strength of the travel intent beta, a strong product proposition, is really allowing us to drive growth within the DMO segment and close deals with enterprise customers across retail, financial services, entertainment parks, airports, airlines and hotels, making RateGain Adara the partner of choice. With the added measurement capabilities and partnerships that we have established, we continue to strengthen our product proposition. With that, I also have some key updates and milestones on the people front. We continue to see improved attrition rate now at a new low of 10.3%, which reflects our strong commitment to retaining and nurturing top talent. At RateGain, we proudly report a workforce composition of 72% male and 28% female. While this progress is notable, we recognize the importance of further enhancing gender balance across our organization. A commitment to diversity stems from a belief that diverse perspectives drive innovation and better decision making, enriching our company culture, and we strive to create a more balanced and inclusive workplace. This quarter, we celebrated the graduation of participants from RG GOLD Program, our flagship RateGain global organizational leadership development program in collaboration with NMIMS. This reflects our commitment to building a strong talent pipeline and nurturing leadership from within, ensuring we have the depth and diversity of talent to propel us forward. With that, I would like to now ask our CFO, Mr. Tanmaya Das, to take you through the performance of Q2 and H1 of the fiscal year.

Thank you, Bhanu, and a very warm welcome to everyone on this call. I am delighted to report that the company has delivered another quarter with healthy operating performance, marked by healthy broad-based revenue growth, coupled with strong margin expansion of 190 basis points, demonstrating operational excellence and in line with the guidance given at the start of the year. This has helped us deliver a 19-quarter high EBITDA margin of 21.7%. We maintain a focus on profitable growth while investing strategically to drive sustainable value for our customers and stakeholders. This balanced approach enables us to deliver strong results and build a solid foundation for long-term success. Some of the key financial and operating highlights from the quarter gone by. The company reported a record revenue of INR 277.3 crores with year-over-year growth of 18.1%. This was on the back of healthy growth across all 3 segments. Given the evolving landscape unchanged in customer behavior, the data volumes or enterprise clients continue to rise. And as we continue to add new logos on the air side, our DaaS segment grew at 20.2%. Our PDM offering continues to find flavor with travel and hospitality brands, who are seeking to drive better returns from the digital dollars they are spending, aiding a growth of 18.3% in our MarTech segment. And with a steady rise in volumes, growth picked up in our distribution segment to 14.6% for the Q2. EBITDA grew ahead of revenue at 30% to INR 60.2 crores for Q2 FY ‘'25 with the margins improving to a new high of 21.7%, up from 19.8% last year. This is on the back of operating leverage picking in, and a balanced approach. Our PAT grew by 73.8% to INR 52.2 crores, compared to INR 30 crores in the previous year. For the first half of the year, the company reported revenue of INR 537.3 crores, with year-overyear growth of 19.6%. This was on the back of strong growth from all three verticals at DaaS growing at 19%, distribution at 10% and MarTech at 25% for the first half. EBITDA grew by 31% to INR 110 crores for H1, with margins coming at 20.5%, up by 180 basis points from the same time last year. The H1 EBITDA expansion is aided by healthy growth in our high margin business DaaS vertical, and with continued traction in PDM MarTech offerings. Our PAT grew by 77.6% in H1 compared to the same time last year, coming INR 97.6 crores from INR 55 crores. The company continues to have strong customer relationships with low churn, and a focus to expand existing relationships to build sustainable and reliable revenue streams. Our gross revenue retention improved to 91% and our net revenue retention stood at 105%. Our customer base currently stands at 3,225 customers. We continue to have a strong balance sheet with our net worth currently at INR 1,557 crores, and our cash and cash equivalents balance as at quarter end stood at INR 1,131 crores. With that, I would like to close my remarks and we are happy to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Karan Uppal from PhillipCapital.

Congratulations on a broad-based growth as well as strong margins. So the question is to, Bhanu. So Bhanu, travel market is largely looking normalized now after 2.5 to 3 years of very strong growth but RateGain's growth continues to be in strong double-digits, almost 20% growth in H1. So is this reflective of the increased market share given the small size of ours? And also, is it also reflective of the good cross-sell and up-sell which we are doing across the portfolio? So how do you characterize the growth and what's the sustainability of this growth?

Yes. So thank you. So as you rightly noted, we've had some very, very robust growth. And also, frankly, on a much larger base, from the time we listed we are now almost 3x the size with INR 300 crores now we are run rating at -- our ARR is at INR 1,100 crores. So I think I would give credit to the entire RateGain team with then just focused heads down on execution. I also believe that the strategy to build out additional capabilities to realize that vision of having one integrated tech stack is also paying dividends, now that we have multiple products set and capabilities. And I believe each of these product areas have huge headroom for growth, and we continue to invest in adding adjacent features or capabilities that help us position as a far superior partner to our customers because we are being viewed as a one-stop-shop instead of having to deal with multiple vendors. And the fact that all our solutions talk to each other and are seamlessly integrated, there is a huge value we can drive in terms of actionable insights in driving more revenue for our customers.

Okay. Great. Secondly, the guidance was missing in the prepared remarks. So shall we assume the last guidance is impact on both growth and margins?

Yes. So let me take a minute to talk about the future guidance. So as you also noted, there are several things that are happening, and I'd like to address each one of them. So as you know U.S. is one of our biggest market. And we saw, because of the elections, our contract wins haven't been satisfactory. So we expected some large wins to come in, but I think because of the delayed decision making, we believe that some of this -- now that Trump in back in power, some of these decisions should get taken and we should be able to realize some of the larger deals that have been awaiting signatures. The second thing that has happened is, which was sort of unexpected, that we lost a very large client on our MarTech side. It was equivalent to almost 4% of our revenue. I had alluded to this in the last quarterly call also, and we were able to sort of put a size on the amount of loss. So obviously, 4% loss is a big loss and that impacts our ability to continue to grow at like 20%. So all efforts are to fill back this loss because it was kind of unexpected. And the loss was really this German Company, it was a mid-sized chain, got acquired by a very large U.S. chain. So we didn't lose the business to a competitor, but this larger chain, it was on our MarTech side and they were using one of our MarTech solutions. And the U.S. chain already had this capability in house. And the third sort of, I would say, trend that we are seeing is, on couple of our larger DaaS contracts we are seeing some pricing pressure. So it's yet to be known on what will happen to those contracts in terms of the pricing concessions we might need to give. So definitely there are both macro level challenges, as you noted, that the travel has kind of normalized, especially in NorAm and in Europe also, in APAC we continue to see growth. And also, some micro challenges that I mentioned about losing a larger client. But on the flip side, I should also share with you all the positive news where we -- as I mentioned in my commentary, we've had a great quarter on the Adara side, it was the best sales quarter ever. And just last week, we won a very large contract with one of the larger chains, it was almost close to $2.5 million. So that gives me a lot of encouragement and optimism that there is an opportunity to again surpass all previous records on the Adara side on sales in Q3. And similarly, we are seeing some very, very good traction on our RevMax platform that we are now calling UNO, where we have won some large deals, including one with PIF. And I feel very confident that given this unexpected loss that we had that we are able to recover. But net-net, just on the conservative side, we've been guiding now for like a 15% growth.

Okay. 15% growth for the full year. Okay, great.

That is correct.

And just lastly, on Adara. So if you can share what's the annualized run rate and the margin profile currently?

I'll defer that to Tanmaya.

Yes. So annualized run rate will be close to around $48 million to $49 million, we expect to close and the margin profile is around 18%.

The next question is from the line of Anmol Garg from DAM Capital.

Just a couple of questions. Firstly, if I look at our total number of customers, then you indicated that we have added 89 new customers in this quarter. However, despite that, the total number of customers have reduced by around 74, 75 during the quarter. Is this intentional in terms of cutting down the nonprofitable tail accounts? Or is this something that we have seen as a headwind during the quarter?

So let me clarify the commentary that I talked about adding 89 logos that was only specific to Adara. Now to your overall question of some reduction in overall customers. So in case of -- as I mentioned, in some cases, when we account for large hotel accounts, we sometimes depending on how we do the invoicing, we count the number of customers basis the number of invoices even if it's part of the same chain. So there was a -- as a result of that, because of that loss of big account that we had, we see some reduction. And on our brand monitoring and brand engagement, also, we saw some nonprofitable accounts that we had cut down as well.

Understood. Understood. And secondly, we have seen strong traction coming back in our distribution business this quarter. If you can indicate what has this led to -- led by? And will this traction continue going ahead as well?

Yes. So our distribution business comprises of the large hotel chains that we do connectivity for, for demand partners. And we also count UNO, our RevMax platform, which is the integrated tech stack also as part of our distribution business. And something that I've been saying all along is the big growth driver for us is going to be UNO, and we saw some very, very good traction in the past sort of couple of quarters where now we have released the product, and we've had some large wins. So I do see distribution to be a very, very big growth driver for us in the next couple of years. We haven't reached that tipping point on UNO, but I do believe that the market potential is quite significant. And compared to our competitors, our AI-first mentality in how we are rolling out this product, like how I talked about in my commentary about our voice module, which is truly AI-based module, which can handle reservations and customer queries on behalf of hotels, which a lot of these mid-market and smaller hotels don't have would put us in a very, very unique position. So there are -- there is a very healthy and robust pipeline that we have on UNO, and we are very confident about the go-to-market strategy we are using where we are using what's popular in SaaS called land and expand, where we land with one module and then sell the entire tech stack to the customer, and it's working quite well. So yes, so to answer your question, I do see continued traction. And hopefully, in the next sort of 2, 3 quarters down the line, also expecting larger numbers to flow in on account of UNO.

Understood. And just one last one is that -- as you indicated that we have lost a larger customer, can you also indicate the profitability of this particular customer? And how should we look at our EBITDA margins going forward? Will this have a larger impact in Q3? Yes.

So on the EBITDA margin, from a customer perspective, and I will not be able to disclose that. But I can tell you that the numbers in Q2 account for almost 70% of this loss of this customer. And as you have seen in our margin profile, it didn't impact our margin. In fact, our margins are continuously going up, and we were at 21.7%. So I'm pretty confident that our guidance on margin stays intact. And that's the beauty of the SaaS model as you increase revenue, most of that revenue falls to the bottom line and you have the power of operating leverage.

Understood. Understood. Just one last thing. Because of the reduction of the customers, can we -- would there be any decline in revenues in the third quarter? Or we'll have growth quarters for third and fourth one?

That is correct. We continue some growth in Q3 and Q4. I think my point about -- as I mentioned earlier, it impacts our growth. So as we were guiding 20% growth and we lost a customer that makes about 4% of our revenue today, that's why I'm indicating a lower growth for the full year, which is more around 15% now.

The next question is from the line of [ Miten Shah ], an Individual Investor.

Hello?

Yes?

Yes, am I audible?

Yes.

Yes. Congratulations on posting a good set of numbers. So my question would be a little bit nontechnical, not related to the performance first. So I would like to post is that if you see our IPO which came out with a face value of INR 1, face value of INR 1. So I mean, just a question. If in case future the share price increases and all those things to a very high level, so a 4-digit figure you'd be optimistic. Why is it placed at the face value INR 1 and -- I mean compared to industry standard of INR 10? Any specific reason for that?

So at the time of the IPO, we had announced -- actually, we'd done the bonus shares right before the IPO. And as a result of which it came down to INR 1. And your point about it going to 4 digits, and it absolutely will or higher 4 digits and how do we tackle that? Yes. So well, look, I'm sure we are a company, do I have a solution on that question today? No. But do I feel confident that we'll find a solution that would be favorable to all stakeholders? I'm very confident. So yes, I may not be answering your question now, but at the appropriate time, I'm confident that we'll be able to find the right solution.

Sure. And just one more question. Is it possible to give a breakdown of the margin of customers like who fits into the $1 million category and how many customers are into $1 million category or $500,000 or $100,000 category? Is it possible to give a breakup like that in the subsequent presentation?

No. We'll not be very comfortable sharing that information because as a public company, our competitors also have access to that data then. So unfortunately, we'll not be able to give you that breakup. But -- yes, but maybe we can on a one-on-one, give you some color on it.

Sure, sure. I mean that answers my query. I really appreciate. Congratulations again.

The next question is from the line of Prolin Nandu from Edelweiss.

Bhanu, a few questions from my side. Now you mentioned that since IPO, you have grown to 3x, 3x the size. If I look at the trend, right, even before IPO, what happens is that you have an organic growth of, let's say, 15%, 20%. When you acquire an asset, the growth inches up because of that acquisition one time. And then again, there is a lag effect of that acquisition for a couple of more years. And again, the growth inches back to 15% to 20%. Now given our size, right, in terms of how small we are in overall travel tech market and also versus our peers, when you look at the organic part of your business, let's say, over the last 5-year period, are you satisfied with the kind of growth that you have seen? And some of the operating metrics that you report on a consolidated basis, it could be NRR, it could be CAC, cost of acquisition and LTV, et cetera, et cetera. How would they look if we only were to evaluate the standalone business?

Yes. So it's a great question. So there were a couple of questions there, and I'll answer one by one. So your first question about our organic growth, am I satisfied with it? The answer is absolutely not. I feel that there is huge amount of headroom for us to grow. As a composite company, looking at across all our products, we are at INR 1,100 crores, but there are lots of products that we have that individually are at maybe INR 10 crores or INR 20 crores. And I see the potential for each one of those smaller products and in another call, I referred to them as babies or teenagers. I see the potential for them to also be hundreds of crores. So I do think that there is -- I am very confident of the RateGain strategy on a go-forward basis. I am very confident of the simple thesis that we have a set of customers that we need to sell to and we need to gain their trust and sell them more and more products. That's the entire thesis on which we're building the company, and we have a number of products that can see a much larger attach rate with these customers. So I am confident about our strategy. I do think that we need to implement a better execution, and we need to continuously get better execution, whether it is on the product side, largely around how we onboard customers and making it quite frictionless and seamless but also on the go-to-market motion, how we sell to enterprise customers versus mid-market, what are the different nuances to be taken care of from a go-to-market motion for each of the geographies. So there is calibration going on continuously. So just as an example, we are now calibrating to help create a better sales pipeline by using a lot of AI tools, but also complementing that with what is called in SaaS an SDR function. So up until now, we didn't have an SDR function. But in the last sort of 2, 3 months, we've invested quite heavily in building out an SDR function, and we now have got 20 people whose sole job would be to help create sales pipeline and opportunity. In addition to that, we've added, as I've talked about earlier, a lot of -- I see a lot of opportunity in the APAC region. So we've added a bunch of salespeople in APAC region. So I do believe the strategy is right. The execution needs to continuously be calibrated. But even the basis of all the products that we have, I do think that we should see acceleration of our growth. Obviously, all of us would like to see the acceleration of that growth happen sooner than later. But I'm fairly confident that if we are putting our heads down, executing well, we can be well north of 20% on an organic growth basis alone.

That's great, Bhanu. Now second question is on acquisition, right? While we completely respect you being very, very conscious about the price that you pay and maybe some of the past acquisitions that we have made on price to sales multiple might be difficult. But in some of the past meetings that we have had, you had mentioned that some of your targets have still not been acquired. So from a seller's point of view, is there no urgency as such? Because I don't think so they are -- I mean, on its own, they are not that great businesses in terms of the return ratio profitability. So is there no urgency and still most of the targets that are there in the market still available? And we have a very successful template in terms of Adara in other acquisition as well. So is it -- I mean, since we are not able to find a price, is there a midway or change in our strategy where we make some of the seller also maybe you buy 70%, 80% and give that 20% kind of an upside to the seller. Is there a requirement for change in strategy which is there in the market? Because I mean, those kind of multiples are difficult to come back to, right, in terms of what we have acquired. So anything on your M&A, if you can help in the context of whatever I mentioned?

Yes. So I'm sure you've all read and heard 90% of M&A sales. And while at RateGain, we've been very, very successful and not just us, I've also referred to Constellation Software and other serial acquirers that do it quite well. And one common theme amongst good serial acquirers is just one, it's discipline. So I don't look at is the seller eager to sell now because he's not been able to sell and is there an urgency? What is the change in environment? To me, none of those factors are as important as having a template, having a discipline of chasing value creation through these acquisitions. What is the strategic value and how does that translate into numbers? And I've talked about this. We have our IRR targets, our payback period thresholds. And I'm very confident that we will continue to do acquisitions within those thresholds because we haven't done one, we have done 4, and we will continue to do them. And it may also happen that we haven't done anything now for 2 years, but there is a chance that we might end up doing 1 or 2 together as long as our thresholds and internal metrics are being matched. So my point around this is I think M&A is really a story of patience and discipline. Having done it successfully and looking at our pipeline, I feel confident that we'll be able to consummate something soon. And it may also happen that, like I said, we may do more than one in quick succession as we find deals that fit our metrics.

Sure. And one last point, Bhanu, right? I mean, last quarter, we heard some pricing pressure in distribution. This time, you're talking about some pricing pressure in DaaS, right? Is there something more to read in these as to the value that we are offering, it's not being felt by the customer and hence, they are asking for price cut. Is it more to it? And do we hear pricing pressure more going forward? Or how should one think about it?

So as one of the other analysts asked about the overall travel has now normalized. So if you look at the big hotel companies and their revenues, these are all listed companies like Hyatt, IHG, Marriott, et cetera. So there is definitely pressure on them in terms of growth. And as a result of which when things are growing really, really well, there is a tendency to overlook. And as things tighten up, people usually tighten up their first string. So as a result of that, we are seeing more pricing discussions. But fortunately, the value that we provide and the place that we are at, there are not too many other options that are available to these customers. So we're trying to hold tight and create more value. The other benefit that we have is, again, the benefit of adding more products, so providing better value to the customer. So if we are negotiating on one product, we have the ability to say, okay, I'll give you a 5% discount, but buy this other product. So it's creating those kinds of opportunities also. So it's not all doom and groom. It's also creating some opportunities for us from a cross-selling perspective. And on the overall impact, I'd just like to be cautious and set the right expectations, but I don't see this to be an overarching concern. If you ask me what keeps me up at night is, as I've talked about, the strategy is there is just honing in on our execution.

[Operator Instructions] The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

So just one question mathematically. So I think, Bhanu, you mentioned 70% of the impact of the client loss has already come in 2Q, given that it was 4% of revenues, that's about 300 bps. So effectively, in 1H, we have grown at almost 20%, including the impact in 2Q on a Y-o-Y basis also. At your guidance, we are implying about 10% to 11% kind of Y-o-Y growth in second half. And including the 400 bps also, we are talking about 15% growth. So there is still slowdown in our revenue growth even if we don't take into account the impact of client loss. So one, is this 10% to 11% math seem correct? And two, if you can just comment on the slowdown in revenue growth ex of this in the second half, given that some of the headwinds around elections and other things are behind us?

Yes. So Rishi, it's a cautionary note given our contract wins for the first half has slowed down year-on-year. And although the pipeline has grown quite healthy, it's up almost 20%. So it's more of a cautionary note to investors. But like I said, good things also emerge like we did the largest deal for Adara last week, which was about $2.4 million. So there are some very large deals that are awaiting signatures. And if those happen, that should make us look very, very good and also backfill this customer loss that we've had. The math that you were doing, I didn't quite follow, but maybe we can arrange a follow-up call. But net of net, I do see some slowdown in our growth on the back of lower contract wins because the contract wins year-over-year are at 6%, which is quite low. And that will definitely impact. But I do see -- I am hoping and optimistic about acceleration of our contract wins. As I said, there are a bunch of contracts up there, and we did have a positive surprise last week also. So that recovers now that election is behind us. Because largely, if I see also, just to give you a geographic breakdown as well, we are doing extremely well in Europe, U.S. -- I'm sorry, in APAC, LatAm, it's really the U.S. that we have seen the impact. I mean rest of the regions, even from contract wins as well as revenue growth, it's been north of 20%.

Got it. And just very quickly, so in case I missed earlier, if you can give the reason for that client loss and have we lost it to another vendor to in-house or the business has gone down? And secondly, any updates on acquisitions?

Yes. So on your first question about losing the large customer, so basically, it was a midsized chain in Germany, and it got bought over by one of the larger chains in the U.S. And we were selling a MarTech product to them. And the large chain was using an in-house -- basically, they run all their paid digital campaigns in-house. So as a result of which we lost this to an in-house team. But at the same time, again, there is -- I'm not factoring any of these potential positives. But very recently, we heard from the chain that they're not seeing the same level of traction on those campaigns as they were seeing from us. So there is an opportunity that they might come back and start again with us in the new year. So let's see. We'll keep you informed. On your second question around M&A, so the pipeline is quite robust. We are in very active conversations with a couple of prospects. And you can say we are doing our preliminary due diligence. On the valuation side, we're in sort of in the ballpark numbers. But now it's really about us doing our due diligence and I don't want to commit to anything because just very recently, also we were in a place where -- so it's not always about valuations. We had agreed on a valuation with this other company, but we found things that we were not comfortable and willing to take onboard as risk as a result of which we had to move forward. So yes, so there are a couple of companies where from a valuation perspective, pricing perspective, we are in the ballpark range. We just need to be comfortable with whatever discoveries we are doing and our ability to mitigate those risks.

The next question is from the line of [ Deepak from Sundaram Mutual Fund ].

Bhanu, I had a couple of questions. One was regarding the total pipeline. So what I could see is last quarter, we had reported a pipeline of INR 555 crores. And this quarter, we have mentioned in our PPT at INR 469 crores. So is this because of all the reasons which we have discussed thus far, that slowdown and client loss and et cetera? Or is it something else to it?

So. Go ahead, Tanmaya.

Yes. So obviously, the pipeline, if you see year-over-year has growth of more than 20%, but we do periodic cleansing of the pipelines because sometimes the pipeline doesn't reflect the true picture. So we have been doing those cleansing in the last quarter. So now it's more accurate pipeline that can be depicted. Obviously, there are closures. We had a large quarter of closure -- of contract wins last quarter. So some of the pipeline has gone into closed one. But it's a combination of both of them.

Okay. Got it. And means in H1, we have already reached highest ever margin and we're at around 20.5%-odd, so in H2, do you expect with this 10% to 12% growth means what would be the margin trajectory, EBITDA margin trajectory for H2?

Look, at the start of the year, we had given a guidance of 200 basis point improvement over last year. So that guidance remains same.

The next question is from the line of Madhuchanda Dey from MC Pro.

I have 2 questions. These topics have been touched upon by many other participants as well. See, you had raised capital quite some time back and looking for an acquisition. Now that the travel industry has done exceedingly well, has stabilized fully, have you found the price very expensive? Or is it out of your budget, which kind of limits the possibility of a deal happening in the near future?

Yes. So as I had alluded earlier, there have been deals which have been in the ballpark valuation, but we were uncomfortable with some systematic risk that existed in the business that we weren't willing to take and as a result of which we had to pass on them. In other cases, look, we've evaluated almost 10 companies and made 10 offers in the last 12 months. A couple of them we did go forward, but had issues in due diligence. For the rest of them, we couldn't arrive on the right valuation. And as I mentioned earlier, I know a lot of investors are pitching for us to do something, but I need to remind everyone that I'll repeat myself, M&A is a game of patience and discipline. And I am not just optimistic. I am supremely confident that we will do the right deals at the right price to create -- to continue to create the success story that we have demonstrated in the past.

Okay. My second question is again on your guidance. There are 3 factors. Please correct me if I'm wrong. You always had mentioned that 4Q is a very strong quarter for you. Second, overall, with U.S. elections behind, that is a big uncertainty. U.S. there's a kind of soft landing in the U.S. Most of the technology companies are alluding to tech demand looking to come back in a big way. and you have already delivered a 20% kind of growth in the first half. And as you mentioned that the client loss, which is 4% of the revenue, 70% of that is already there in the numbers of Q2, which means that about 100, 120 basis points is kind of a spillover into H2. But with your guidance, the growth in the second half according to my calculation is quite abnormally low at 10%, 11%. So how do I reconcile this?

Yes. So the way to think about a SaaS business and trying to bridge future numbers is also is really looking at the churn rates, which are very, very healthy at rate gains. So our churn is about 10% and the other important thing that you need to look at is the new sales number. And then the third, it's a minor point is looking at how quickly do we monetize our sales number or our order book. So what you see in H1 is a result of great shares previously. But as you would notice, our sales numbers have not been that great in H1. It is only 6% if I do an H1-H1 comparison year-over-year. So it's a result lower sales. And as I mentioned, even if you ask me, okay, why -- where did you not sell, it's really the U.S. that where we are not selling. And we have taken a lot of steps also. So while we have a good pipeline, some of it could be named on macros and nats I talked about elections, et cetera. But I do also feel that there is improvement we need to do on our go-to-market motion. And as we talked about how we are doing, improvising, calibrating our sales motion by investing into this SDR team. We've also ramped up on our marketing efforts. We're participating in more stores. We're also looking to revamp and hire more people in the sales team. So there is a lot of focus in building that enabling sales function to solve for the lower wins that we've had in the upcoming quarter. And like I said, there is a good pipeline. There is a very large deal that we did last week with one of the biggest entertainment resorts in America. It was close to $2.4 million -- $2.3 million, $2.4 million. And similarly, we are negotiating and have got verbal agreements on a multimillion dollar deal on our distribution side. But given how we haven't delivered signatures yet, it just makes me a little bit cautious and I just want to set up the right expectations going forward.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Bhanu Chopra for closing comments.

Yes. Thank you, everyone, for giving us the opportunity and participating in the call. I feel very, very optimistic about the future. The building blocks at RateGain have never been stronger. I feel very strongly about the team that we have built, the innovations that we are doing on our products and the value we are bringing to our customers. And with that, we continuously work tirelessly every day to realize our vision of building into a $1 billion revenue company. So thank you, everyone. Thank you.

Thank you.

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