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

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call hosted by RateGain Travel Technologies. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhanu Chopra, Chairman and Managing Director from RateGain. Thank you, and over to you, sir.

Thank you, Anushka. Good afternoon, everyone. And thank you for joining us today for RateGain Travel Technologies Earnings Call for the First Quarter of FY '26. I am joined by Rohan Mittal, our CFO; and Divik Anand, our Head of Investor Relations. We announced our Q1 results earlier today, and I hope you've had a chance to review our financials press release and investor presentation available on the stock exchanges and on our website. We started FY '26 with strong momentum. In Q1, RateGain recorded new contract wins of INR 81.7 crores, a 6-quarter high growing 37.7% year-on-year. This includes our highest ever new contract wins for RateGain, excluding Adara, which grew by 53% year-on-year to INR 46.1 crores in the first quarter. These numbers validate the strategic investments we have made since the start of the year in scaling our GTM engine, expanding presence across key geographies and strengthening our product and leadership. In line with this approach and given the growth potential in APAC and Middle East, we've expanded our GTM headcount from 15 to 55 in the region. And this has helped us grow our revenue within the region at 23.2% compared to the same time last year, and we also saw a healthy uptick in new contract wins. We continue to see offshoots from the investments we have been making, and we'll continue to seek to double down on these investments. This is the traction we see in these markets. In the previous quarter, we also spoke about our continued investments in building an AI-first portfolio. We are now seeing early results from these efforts. our AI voice agent is progressing well with initial deployments underway and strong interest from regional players. RG Insights, a real-time analytical solution providing deeper visibility into distribution performance is now used by over 30 partners and praise for its ease of use, real-time insights and clean interface by our customers. Smart ERI, our AI-powered ERI management engine has helped partners reduce AI traffic by 45% without impacting bookings. With that, let's take a brief look at our business units. On the back of new AI capabilities and our ability to deliver at scale the DAS business has been expansion of key existing customers across product lines and verticals. In air, AI-led capabilities for route performance and price intelligence are driving strong momentum supported by new signings and positive feedback from revenue teams. We announced key partnerships with Air Montenegro, Cypress Airways and others. In car and RevAI we've seen expansion across key enterprise accounts and new key signings. For the OTA segment, I'm pleased to announce we won a very large deal and one of the largest travel tech companies expanded key strategic accounts and secured a major deal in Distribution continues to be a key area of investment for us, especially in the mid-market segment. We recently announced partnership with redefine how hotels, hospitals and vacation mentors optimize their distribution strategy using AI-powered capabilities. We see a clear opportunity to evolve from being a connectivity provider to helping hotels drive incremental revenue. Uno continues to be a key investment we are gaining traction in APAC and the Middle East driven by our expanded GPM assets. In our martech business, Adara continued to perform well this quarter with steady growth in both new and renewal business. Within Adara our renewals grew by 41% compared to Q1 of last year, a great validation of the value and ROAS we are delivering to our customers. We have seen good traction within the BMO segment, which remained a key contributor this quarter. We saw a healthy demand across key sectors, including airlines, financial services, hospitality and the Demand booster also saw a consistent increase in client acquisition across regions, reinforcing the relevance of our solutions in helping hotels drive direct demand. continues to lead industry conversations of the future of distribution in hospitality. This quarter, we released the second edition of the State of Distribution 2025 with New York University, SPS, Dish Center and Vietnam based on insights from over 700 hotel brands and 21,000-plus properties. The report highlights how distribution is becoming leaner and more integrated. It reinforces our focus on building solutions that simplify operations and support faster, more connected decision making. In line with broader industry trends, the travel index a 3% year-on-year increase in global travel performance in the first half of 2025 supported by resilience in North America, APAC and Latin America. Booking windows have shortened and there's growing caution in leisure spending, but overall travel activity remains steady. You've also seen some commentary of leading travel brands, which talk about improving demand for the second half of the year reinforcing optimism across the sector. We also continue to invest in strengthening our leadership team. This quarter, we made 3 key appointments. Tiwari has joined us as Executive Vice President and General Manager for Distribution. He will lead the global strategy, innovation and growth of RateGain's distribution business. brings over 17 years of experience in strategy, operations and digital transformation across diverse industries. He joined us from PayTm and has held positions at PPG and NBN Strategy and Finance from Ion Capita. Ashish Sikka has joined us as Senior Vice President and Business Head of Uno. He joins to lead Uno RateGain's AI proceeds from mining CRS channel manager, booking engine and Viva with responsibility for product strategy, innovation and global adoption. He has over 17 years of experience in strategy transformation and regional leadership at firms across India, Europe and Southeast Asia. His prior roles include leadership positions at e-com Express and at Oyo. joined us as Executive Vice President and General and car business. He will oversee global strategy, operations and growth for RateGain's RevAI and car verticals working closely with regional teams to scale innovation and performance. He brings entrepreneurial experience, having founded the Sequoia-backed startup and has held senior leadership growth at Lazara and Group One. He's an Illumina of IIT Delhi and IIM Calcutta. Continuing with our vision of AI-first organization this quarter, we also introduced Remo, RateGain's first AI employee as part of our people and culture teams designed to foster a more inclusive and empathetic workplace, Remo creates a safe pace for honest dialogue reflection and employee will be. Alongside product innovation, we are also investing in clean adoption. Over 300 employees have been trained on core concepts and use cases with more training sessions underway. These skills are being applied across engineering, sales and marketing and support to drive faster execution and better decision making. Also, I'm pleased to share that RateGain was once again recognized by Great Place to Work India as one of the top 100 midsized companies to work for in 2025. The company was ranked 77th, meeting a 20 place jump from previous year. We also won the Economic Times award for best B2B campaign for the state of Distribution report. These awards reflect the commitment of our team we continue to nurture. With that, now I'll hand it over to Rohan to walk you through the financials. Thank you.

Thank you, Bhanu, and a very warm welcome to everyone on this call. It's a pleasure to connect with you all today. Starting with an update on the numbers for the quarter 1 FY '26. We have reported a revenue of INR 273 crores, which reflects a growth of 5% year-on-year. Our operating margins came at 18.2%. We continue to maintain a healthy margin with a relentless focus on cost control. And this reflects in the fact that our quarter 1 margins also carry the impact of annual wage hikes as well as the investment ramp-up. As was mentioned in the last quarter's call, could drive the next leg of growth. Our PAT grew marginally compared to last year and stood at INR 46.9 crores in this quarter. Our market vertical witnessed strong growth in this quarter at 16.5% year-on-year growth with continued strong traction in Adara, -- that business continues to be momentum on the back of a strong value proposition, delivering superior as for our customers. Our DAS vertical degrew by 3.1% in this quarter, and this was mainly due to the shift from Adara to Adara This has been a strategic call and focus for us since the acquisition of Adara given that Adara market is higher of the value chain in terms of offering to our customers, and we own the entire relationship. Organic RateGain excluding grew at 5.9% year-on-year with continued traction in key subsegments of travel. We continue to drive investments in our Uno RevMax platform within our distribution business and are committed to scaling this up in the coming few quarters. Along with this, we continue to establish key partnerships with travel software companies to scale up presence across their established customer base. As management, we are committed to drive investments in key areas, which will help us deliver growth in line with our aspiration, and I'm happy to see the traction in this quarter. Our new contract wins came in at a 6-quarter high growing at 37.7% compared to the last year and stood at INR 81.7 crores. This was also the highest ever new contract wins for RateGain excluding Adara with both DaaS and distribution outperforming. New contract wins within the DaaS segment 68% compared to Q1 last year with a large order win with one of the largest travel-tech companies on the planet. In distribution as well, our new contract wins in quarter 1 came in at over 65% of the entire new contract wins of last year. Along with this, we saw strong growth in the APAC and Middle East markets. This has been a high investment market for us for the past few quarters, and we continue to see positive traction with the customers. We continue to see steady growth in our North American market in quarter 1 as well. With continued traction across key customer segments and geographies. We have a healthy pipeline in which currently stands at INR 52.3 crores. We've added INR 41 crores of fresh pipeline in quarter 1 itself. We continue to have a strong balance sheet with our net worth currently at INR 1,740 crores and our cash and cash equivalent at the end of the quarter stood at INR 281 crores. With that, I would like to close my remarks and happy to open the floor for questions. Thank you.

[Operator Instructions] We take the first question from the line of Jyoti Singh from Arihant Capital Markets Limited.

Congratulations on the good set of numbers and a good deal wins execution. Sir, basically, I wanted to get a sense on the new pipeline contract means came from major geography like North America and Europe? And how are you tailoring your offering in the geography versus India or Asia Pacific?

So I'll address the second part of your question about the geographies that we are focusing on from GPN execution and let Rohan fill-in on the numbers specific to the pipeline. So as I remarked in my opening remarks, and something that I've been saying along across past 2 quarters, we've been really investing in the GPM engine, specifically for the SMB market, which is quite prevalent in and we have increased our GBM strength from 15 to 55 people, and that's really yielding very, very good results. Similarly, we have made some incremental investments in Europe and U.S. as well. But our focus really on executing on Ono and the GPM machinery has been really an impact. And that's why you see a good amount of growth in the business -- in the APAC business from last year, and we will continue to see that growth over the next few quarters as well. Rohan, do you want to fill in on the pipeline?

In terms of the pipeline, our current pipeline stands at INR 512 crores. There is a healthy representation across North America, Europe markets. We don't disclose the exact numbers across these markets, but there is a very strong heavy presentation across all 3 markets. I can tell you that if you were to look at the year-on-year numbers, our market, which is the North America market and APAC market has registered the strongest growth. This is just a reflection of the pipeline and the investments that we've done in these markets.

Okay. Just 1 more question. On the revenue side, like 49.1% of revenue now from the subscription and hybrid models. So how do you see the shift impacting customer lifetime value and upsell potential.

So if you look at our numbers, our transaction business, transaction revenue has grown from 40% to almost 51%. If you were to look at the year-on-year numbers, subscription and hybrid business brings up the rest of the business. From a customer life cycle point of view, we mentioned that the renewal in our data business, which primarily contributes to the transaction with you, continues to be exceptionally strong. We are trending at north of 35% renewal rate on a year-on-year basis. So even if it is a transaction business, we continue to retain those businesses and expand those businesses over a longer period of time. So we are not seeing any major concerns or any concerns for that matter on owning the lifetime value of those customers.

Okay. And sir, on the margin side, like a very good show on the margin, 18.2% this time and largely our growth -- our margin guidance, 15% to 17%. If we can guide further, will be remain same guidance or any changes on that side as a lot of good deal wins execution.

So Jyoti, on the question on margins and revised guidance. We want to stick to the guidance that we have given at the beginning of the year, and we really want to forego this thing of actually revising guidance every quarter, it puts unnecessary pressure on us. So we will stick to the guidance that we have provided at the beginning of the year and our aspiration and effort would be that we exceed that.

The next question is from the line of Rahul from Dolat Capital.

So basically, if I look at the booking input that you have shared both on the overall and non-data part of it, it is pretty up -- and you have also separately commented on Adara renewals 40% up. So can we say that the current pain from a distribution point of view, is behind us. And within cash, it's only the data part of the business, which continues to remain and the challenge and rest of the businesses are up for a good double-digit plus growth.

Yes. So I think, Rahul, that's a good summary because as you noted, on the distribution side of the business, Q1 alone -- our new wins were equivalent to 50% of the new wins of all of FY '25. So we have a very, very good order book and even from a pipeline perspective, we are in a very good place. So yes, I would say that given the focus on distribution and something that have settled on all along, eventually, I see it as a very high-growth area given the investments we are meeting in do and new areas like smart distribution. The other part of the business that you mentioned about Adara data that has subsided, and we not be worried about that because it's a strategic call that we made that we want to be more in Managed Media business versus the data business? And overall, Adara business continues to outperform. So yes, overall, it does feel like we are now behind the pain and given the GTM execution and the wins that we are seeing, I feel very, very confident that we should see much higher prospects of growth from here on.

Bhanu, just to further, if I may you on that. So one part of the question, which was on the Adara Dash. I think this business in FY '24 used to be around $15 million, give or take. Can you tell us where it is now, where it was in FY '25? What is structural potential here for this year, next year? Any input on that part would be great. And taken cue from your distribution comment, is it safer to assume sequential growth from this point should continue in that?

So on the Adara -- yes. On the Dara DaaS business, I prefer to Rohan on the exact numbers, but directionally, like I said to you it will continue to remain stagnant or maybe a little bit declining. But like I said, we are seeing very, very good growth on the other side of Adara business. So I'm not concerned about it at all. And as I noted on distribution, again, directionally, we've had some very, very good wins. And we have a very large order book. Now it's really in terms of seeing sequential growth. It's our ability to monetize the order book that we have. But directionally, it should improve from here on.

On the number side, Rahul, last year, Adara DaaS as a percentage of total revenue, was up 7% revenue of RateGain.

Yes, yes. And last question from my side. Just trying to understand, is there some bit of realignment that we have done within the 3 subsegments the way we define it because the reason of asking this is the aberration in the quarterly performance in the 3 segments have become very, very start? Or is there a mix of seasonality that has evolved in a different manner, which is driving this kind of movement?

No, there hasn't been any change in alignment on how we categorize the revenue around. In distribution, there is some amount of seasonality between different quarters. And similarly, there is some seasonality in the data business as well. Some amount of aberration that you may see in our distribution business is, last quarter, we had some onetime collection of bad debt. And something that I've noted earlier also on the distribution side, we have 1 of our big OTAs that has consolidated as a result of which we continue to see some declining. But given the new order will then the order book, we're able to -- as we monetize, we are able to recover on that.

We take the next question from the line of Karan from Philip Capital.

Congratulations on good set of numbers. The first question is on the Martech segment. So if you can just mention about the segmental breakup within Martech, it used to be within paid digital media, brand management and Adara, if you can highlight how are the subsegments doing? What is the overall contribution of these 3 subsegments to total markets? And what's the outlook in the peak.

Yes. So in the market business, Adara continues to outperform. On the social media, which is around brand engagement and brand monitoring, that's a business that has declined over the last couple of years, and we continue to figure out a way on how we pivot that. But we do feel that we are at a point where the focus on product innovation should land us at a good place on how we dose the business, and we are experimenting in launching the sensor, and there are some experiments underway, but it's a very small part of our business overall, maybe 2% or 3%. And on the digital media, as I had noted a couple of quarters ago, we had lost 1 major client, which was acquired by a big hotel brand. And so as a result of which, we see some attrition, but the new wins that we have and the continued momentum, this is going to be an area of growth and focus. And now that we have really started to focus on the integrated suite. We are now going into the market with Uno, which is our -- starting with our direct booking stack where we are bundling the paid digital media along with the booking engine, along with the Viva along with the channel manager, and that's seeing a very, very good traction and also very healthy contract wins as well.

So Bhanu, can you give us a ballpark number in terms of the split between these 3 segments?

Rohan, can you help me with that, please?

So from a Q1 revenue point of view, Adara would typically continue are typically contribute close to about 65% to 70% of the business and the social media business would contribute to less than 5%, less than 6%. The balance is all media.

The 65% to 70% of Martech, not on the total revenue, right?

Yes, of Martech.

Secondly, I wanted to check on DaaS and distribution. Bhanu, you had mentioned in previous few calls about pricing pressure within these 2 segments. So is the pricing pressure still there? Just just an update on that would be.

Yes, there is no new conversation on pricing renegotiations -- so we actually haven't seen any of that happen in this quarter. And even in the future outlook on renewals that we are having, we continue to insist on CPI increases in our contracts. And so as I mentioned, a couple of contracts were legacy contracts in distribution that we had acquired and that had to have a relook -- so most of that is now behind us. And in that, the mention of pricing pressure maybe was more of an anomaly than a trend. So we don't see any of that anymore.

Thirdly, on the outlook on U.S. geographies. So some of the hotels listed hotels and airlines have spoke quite positively on the demand revival. So what are you seeing in terms of outcome from U.S.

Yes. If I have to talk about macro level, I would say U.S. is kind of holding steady, more focuses on stake to resume in travel versus international, given Trump policies, but the demand is holding steady. Europe is similar, but it's really APAC, where a lot of investment continues to happen. In fact, over the last 1 or 2 quarters every conference and event that I've been at all these hotel majors that you talked about, their seniors are present there and looking to really invest in double down sort really marries very well with our strategy to continue to increase our investments in the APAC region. And really, if you think about our competitors set also they are mostly based in investor economy. So I feel very strongly in the next sort of year or 2 in our backyard, in our neighborhood, we will be the most dominant player.

[Operator Instructions] The next question is from the line of Mountain Finance.

I just want to ask that I was going through your I don't think the annual recurring revenue number is mentioned on this quarter, So can you help us to that number, please?

Rohan, do you want to take that, please?

Sure Bhanu. So Pratap, we have stopped publishing our ARR numbers from this quarter onwards. And the reason for that is now 50.9% of our business is transaction business. So we don't think it's the right metric to track going forward.

But sir, even in previous quarter, substantial portion was transaction based, and I believe we were taking that into account based on certain estimations in our ARR calculation, right?

You're right about that. If you look at our last quarter, the -- if you look at the entire last financial year, the transaction business was contributing 42.4%, right? Since that number has crossed the 50% threshold. That's why we've taken a call to stop publishing the ARR numbers. But if you still need some additional clarity on the annual recurring revenue, which will come from our -- specifically come from a subscription and hybrid business. I'm happy to connect off-line and shed some light around that.

Sure, sir. That would be great. And just 1 other thing. I noticed that our number has been declining, and we've come to about 100% right now. So do we see any concerns regarding our client churn and how are we trying to make up for this?

So if you look at our GRR and an the GRR, which is really on the churn, it has been hovering around 90%, which is very, very healthy for SaaS companies, and we continue to be on track on that. And the comment that I had made previously also is that given the fact that we are investing in the GTN machinery, a lot of focus is also now on new logo wins. So if you notice that we are selling more, but perhaps we haven't done as great a job of selling to our existing customers. So I think it's an aberration, I don't think this is a long-term trend as we hunt for new logos because the idea is you bring in new logos and ultimately, we will be able to cross-sell and upsell to them. So -- yes. So overall, on the GRR, NRR, I'm not too concerned. And I think it should -- given the fact that GRR has remained at 90% or thereabouts, which is very healthy. I do think that the NRR number, again next couple of quarters will continue to move up as well.

The next question is from the line of Rishika from Bastian Research.

I have a couple of qualitative questions. So my first question is regarding the industry metrology, like I wanted to get a sense on how mature the industry is to which we are catering like if we add a new client in the DaaS segment. So is it like a client who's not already using such services from us or our competitors -- or is the industry mature to the extent that the clients, which we will be acquiring will mostly be from competitors. So if I could get a answer on this.

Yes, it's a great question. And it really depends on where in the life cycle, the product is -- so some of our traditional products and have given this analogy previously also, we qualify our products as babies, teenagers and adults. So I would say for the most part, on products that I would categorize as adults, which are cash cow, there is healthy growth of the industry. So in 50% of the cases, the new win will be a displacement deal and in 50%, it will be new customer acquired. But when it comes to newer products, like our VIVA, our smart distribution, our approach to going in with like an integrated platform like Uno, which I would categorize as more as a teenager -- in those cases, the -- it's more of a greenfield and the opportunities are very, very large. And similarly, with our babies, which are experimental products, some of them made through depending on what we realize in the product market tricycle. And some of them, unfortunately, we have to fill so really depends on where we are in the life cycle. But given the progressive nature, any adverse mentality of the company, we continue to launch new capabilities that we are seeing as an opportunity. And as you can imagine, AI is quite a transformational event for tech industry and our ability to drive a lot of cost efficiencies and revenue opportunities for hospitality industry. So I'm very excited about everything that we are doing. And I feel a lot of it is going to be greenfield. It will take some time to reach the tipping point, but once we do on some of these products, we would see tremendous amount of scale.

The second question I had was as you can see that our business mix is tilting a lot towards market, which is our highest growth segment. So as we move towards market, is it -- is my understanding correct that we'll be moving from a platform-led business to an employee-intensive business.

No, that's incorrect assessment. If you look at our Martech business, it's completely digitized. It's AI-led -- everything that we do is done by machines in terms of how we spend the marketing dollars. And in fact, if you think about the transformation that AI is leading in the Martech area. We are at the forefront of it in terms of doing the creators in terms of devising multichannel programs that optimize the spend to deliver the highest return on our spend. So even if I look at the revenue increase and the number of people that we have, it's nonlinear. So we will continue to see expansion of our margins in that business versus visa versa.

The next question is from the line of from.

Yes. This is here. I had a small query regarding the Slide #9. I think that's very -- sorry where you have a client count. Now when you say this client count, is it unit plants? Or is there a product in different products so you can them as a different plan? Secondly, what is the issue why they are declining from 2024 to now, but every quarter, we are losing customers -- is there some mix if you're trying to change? Or are we declining certain sets of customers? That is what I wanted to understand from the.