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

Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhanu Chopra from RateGain. Thank you, and over to you, sir.

Thank you so much, and a very good afternoon, everyone, and thank you for joining RateGain Travel Technologies Earnings Call for the first quarter of FY 2027. This is the first time we are speaking since we closed the defining year for RateGain, and I'm pleased to say we have opened FY '27 with real momentum carrying forward the trajectory we laid out on our last call. We begin this year as a stronger, more integrated company than we were ever six months ago and better positioned than ever for the opportunity ahead. For Q1 FY '27, we reported our highest ever quarterly operating revenue of INR 785 crores, up 188% year-on-year. With this, our annualized revenue run rate now stands at a new all-time high of INR 3,140 crores. Within this, organic revenue growth for the combined entity stood at 17.5% year-on-year as we continue to build on the investments we made over the past 18 months. Our adjusted EBITDA margin stood at 24.6%, another record margin with our adjusted EBITDA coming at INR 193 crores, up 289% compared to the same period last year. This reflects the true operating margin of the business. Our EBITDA is adjusted to exclude the deferred deal consideration payable to the Sojern team over three years. That deferred consideration will run at roughly INR 80 crores to INR 90 crores a year and will be incurred up to Q3 FY '29. Our free cash flow generation for the quarter was healthy with conversion at 78.8%. FCF generation typically improves as the year progresses, and we are on track for 75% conversion or better for the full year. In regard to this, I'm also happy to report that we have made an additional repayment of $16 million on our outstanding debt yesterday and now have repaid 38% of our total debt taken in November 2025 for the Sojern acquisition. Given our continued momentum on cash generation, we remain on track to retire the balance of our acquisition-related debt and be net debt free by FY '28. Before I turn to the segments, let me set the context because the numbers alone don't tell the full story. FY'26 was the year weight gain crossed the structural inflection point marked by the Sojern acquisition, the unification of Adara under the Sojern brand and the creation of the world's largest source of travel intent data. We entered FY '26 as a strong travel technology platform, and now we enter FY '27 as an AI-powered operating system for travel revenue growth, connecting demand generation, distribution and revenue optimization on one platform. No other player combines travel intent data at this scale, provides distribution infrastructure of this depth and an AI-powered commercial intelligence under one roof. This integrated stack is our moat, and AI now runs across every one of our products and lines of business. It's simply how we build. The first phase of the Sojern integration, bringing the two companies together and delivering the cost synergies is complete and was executed well. Our focus now is firmly on the second phase, the revenue and go-to-market synergies and the early signs are strong, most visibly APMEA, which I'll come to shortly. On the data side, we brought the partnerships carried by Adara and Sojern into a single unified source of travel and debt. Our ecosystem now spans more than 320 data partners across travel brands, and we grew our addressable travel audience by around 14.5% year-on-year. That scale is what makes our AI genuinely differentiated and it translates into pricing power and commercial momentum through FY '27. The demand backdrop helped travel hub help firm across our major markets with the FIFA World Cup lifting activity in North America even as the Middle East continues to face uncertainty. The FIFA World Cup and related campaigns that we manage for destinations provided a revenue uplift of $2.5 million, and we don't expect that to repeat at the same scale in Q2. On the Middle East, our revenue from the region has moved from the range of $970,000 a month before the disruption to about $425,000 a month today. And while it remains a headwind, we see it as a recovery opportunities as conditions stabilize and a strong quarter of profitability, our highest ever EBITDA shows the platform converting that demand efficiently. That scale is also why media increasingly comes to us for a read on travel demand. This quarter, our data and our people featured across outlets, including Skift and CNBC Asia on World Cup demand. We're steadily becoming the definitive voice on where the world wants to travel, a position no competitor in our space holds today. Our focus for FY '27 is clear, driving go-to-market growth and converting platform strength into commercial momentum. With more than 14,000 customers across the combined business, the cross-sell opportunity is significant, and we are pursuing it with structure and urgency. Every product we build and every commercial motion we drive is aligned to three outcomes for our customers: acquire guests efficiently, engage them meaningfully and expand wallet share over time. Now let me talk about our MarTech business, our largest growth engine and now contributing over 81% of revenue. I'll share the way we run it across properties, destinations and corporate and then call out APMEA separately. Our proposition for hotels is simple, drive direct bookings and improve marketing ROI. And because much of this business is outcome-based, we grow as our hotels grow. New wins and Sojern commission accelerated compared to last year with another strong quarter of new property additions. With a bigger global GTM team now empowered to sell this product, the momentum we are seeing is significant, and we see it as a big growth driver given the strength of the product and the value proposition for our customer base. Within this, e-mail is a new channel we have recently introduced, and we are seeing strong early adoption, which is helping us expand our presence with customers and lift net revenue retention. Our bidding technology has also become significantly more sophisticated this quarter with machine learning models powered by expanded travel intent data set now driving much of our real-time bidding decision. That's translating into a meaningful increase in ARPU as our smarter bidding is driving more bookings and higher revenue per property across our hotel base. We also continue to see strong traction with the large enterprise brands and properties we cater to with a healthy revenue uptick year-on-year. Our Destination segment had a strong quarter with a healthy uptick around the recently concluded FIFA World Cup. We saw healthy growth across key accounts in the North American market and within co-op programs, which we continue to focus on and scale. Co-op programs are jointly run marketing campaigns that Sojern manages in partnership with destinations and a travel supply partner to target the right customers, attract visitors and deliver joint outcomes. A key differentiator for us in this segment has been the economic impact reports we generate, which enable our destination partners to understand exactly what their marketing spend delivered in terms of visitor arrivals and economic impact, not just clicks or impressions. We continue to improve this reporting and add new features with the goal of becoming the most trusted measurement partner for destinations anywhere in the world. Within Corporate, we saw two main trends this quarter. We are seeing traction with our existing data partners, converting them into customers. This flywheel continues to gain traction, and we expect to build on it further in the coming quarters. One of our key partners in this segment signed a two-year extension with us and other larger brands continue to scale up their spending. We're also seeing renewed momentum in the car rental segment, driven by closer collaboration with our DaaS team, which has strong existing relationships with large car rental companies. That's opening up a significant cross-sell opportunity. I want to call out the APMEA on its own because it's where our FY '27 go-to-market synergy thesis is playing out fastest. APMEA delivered its strongest ever quarter for new customer wins, up 200% year-on-year. We also saw significant momentum on our properties commission product, signing a record number of new properties in the region. This is the clearest early proof of the Phase 2 go-to-market synergies I spoke about a moment ago, and we expect to build further on this in the coming new quarters. In Distribution, the strategic work of the past year is translating into a stronger, more differentiated platform. Enterprise conversations increasingly moved beyond connectivity towards distribution optimization, profitability and AI-native automation across the full stack. We've increasingly seen not as a connectivity provider, but as a strategic outcome-oriented infrastructure partner for modern hotel commerce. Agentic ARI makes UNO the world's first channel manager built on intelligent distribution logic, prioritizing rate and inventory updates by booking urgency and commercial impact. Hotels are seeing up to 30% to 40% optimization in ARI traffic and meaningfully better rate accuracy. This quarter, enterprise customers are increasingly adopting it alongside RateIQ to drive the next of growth. RateIQ, as I mentioned, is one of our new offerings, is resonating very strongly with enterprise customers. It solves a real problem for large chains connected to a dozen of OTAs, using AI to show which channels are truly driving bookings and where revenue is leaking, whether through missing inventory, parity breaks or underperforming connections. It also quantifies the commercial impact of each. This is resonating really well with both supply and demand partners since it leads to better channel optimization and lift in bookings. UNO VIVA, our Agentic ARI voice platform has expanded from voice into multichannel activation and now supports more than 50 languages, including channels like WhatsApp. We continue to see improved adoption and conversion with key customers across geographies and are also on the verge of signing a very large customer in the Middle East, which would be a strong validation of the product and catalyst for future growth. Our direct stack, bringing booking engine, connectivity and payments together had a strong quarter with good traction in APMEA. It's a clear proof point of our unified platform strategy and points to a cross-sell opportunity that could be significant growth enabler for us. Our DaaS segment delivered steady, reliable performance in Q1 and continues to gain traction in key segments. AirGain continues to be a winner. A clear highlight was our Philip Airlines partnership, strengthening our position in Southeast Asia, where we are now the dominant provider with most of the region's major airlines and our customers. Across our base of airline customers within DaaS, we see strong cross-sell potential into our MarTech performance marketing product. On the product side, AirGain's AI Digest is now live with all our customers, and we've extended it into conversational analytics, positioning AirGain as an AI-first pricing intelligence platform. On the OTA side, we renewed our partnership with one of the world's leading global OTAs for a multiyear term and continue to deepen our presence across key accounts with healthy volume growth. In card, we delivered strong performance with continued enterprise engagement and expansion discussions progressing across key markets for our revAI price recommendation product. Let me spend a moment on AI because it runs through everything I have described. Our approach is to build AI agents that do the actual work of our industry, a revenue manager agent, a distribution agent, a marketing agent. They begin semi-autonomous and become fully autonomous as customers grow comfortable. Today, we largely provide the tools these teams use. Our direction is to provide the agent that actually does the job. On AI price visibility, which is live across Navigator and Parity, lets hotels see how their pricing shows up on the emerging AI-driven search and discovery platforms that travelers are starting to use. The next generation of Parity+ launched this quarter as AI-powered issue identification and prioritization and automates much of the test booking process for our enterprise customers. ChatGPT ads on property also launched this quarter, let us capture travel intent upstream as discovery itself shifts towards AI. UNO VIVA, our CRS integrated AI voice agent, now supports more than 50 languages across multiple channels, including WhatsApp and continues to recover revenue from hotel calls that would otherwise go unanswered. On the DaaS side, AirGain has moved beyond search into conversational analytics, surfacing trends, anomalies and insights in natural language with AI digest now live for every customer, positioning AirGain as an AI-first pricing intelligence platform in its own right. This quarter, our people were featured in Skift's flagship coverage on AI and travel, discussing how AI is reshaping the industry and what changing travel behavior means for marketers. They were the voices explaining what AI means for this industry, not simply a company that uses it, which is the clear sign that this is an experimental. AI is now embedded across our commercial workflows, spanning marketing, pricing, distribution and guest engagement, and we are building it as an AI company from India for the world. This quarter marked a shift from building the foundations of great game to operating as one company. With the people integration agenda now substantially complete across policies, processes, rewards and systems, our focus has moved to scaling what we've built, a unified performance rhythm, an AI-native people ecosystem and people leadership continuity across every region we operate in. Now let me turn to the guidance for FY '27. Before I get into it, I do want to mention that we did see a onetime revenue uplift of $2.5 million in Q1 on the back of FIFA World Cup and our strong presence within those markets. This positively impacted our EBITDA in Q1 as well. This did give us a strong start to the fiscal, and we do expect this to normalize marginally going into Q2. Building on the momentum we are seeing across the platform, we are revising '27 guidance. We now expect full year revenue to come in at the upper end of the range we shared with you last quarter, around INR 3,100 crores for FY '27. This signifies growth of 70% year-on-year and captures double-digit growth for the combined base. On margins, we now expect adjusted EBITDA margins of between 22.5% to 23.5% for FY '27, roughly 100 basis points or 1 percentage point uplift from the earlier 21.5% to 22.5% range, I shared with you last quarter. This reflects the successful execution of the first phase of our integration, the growth visibility we have across the combined entity and further synergies we see ahead as we go to market and it accelerates. Taken together, that gives us the confidence to revise our margin guidance upward. We'll continue to look for ways to reinvest into the business for higher growth, consistent with our aspiration to grow at 15% to 20% in the near to medium term. The nature of reinvestment is different for a B2B company like ours, compared to a B2C business, and we will continue to strengthen our product and our presence in key geographies as we see the right opportunities. To close, FY '26 was a year of transformation, foundation building and validation. As we move through FY '27, our focus shifts decisively from integration to monetization, scaling enterprise adoption, deepening wallet share and turning platform scale into durable, profitable growth. The platform is built, the data is unmatched. The first phase of the integration is behind us and the revenue synergies are ahead. The opportunity in front of us is the largest in our history. With that, I hand over to Ankit to walk you through the financials. Thank you.

Thank you, and very warm welcome to everyone on this call. This quarter reflects a strong all-around performance across revenue growth, profitability and financial discipline capturing healthy performance across segments and strength of the underlying business model. Starting with the number for Q1 FY '27. We reported our highest ever quarterly revenue of INR 785 crore, up 187.6% year-on-year basis. On sequential basis, revenue grew 9.7% over Q4 FY 2026, capturing the underlying momentum and focus on growth. The organic growth for Q1 FY 2027 for combined entity stood at 17.5% year-on-year. Our DaaS segment grew 22.7% year-on-year with healthy performance across air, OTA, and car. Distribution grew 3.1% year-on-year. While this is more modest, we are seeing strong traction in strong early traction in newer launches like Agentic ARI and RateIQ, which we expect to convert into meaningful revenue contribution in the coming quarters. MarTech segment grew by 341% year-on-year basis with the consolidation of Sojern and strong growth within our property and destination segment. Our adjusted EBITDA margin came in at 24.6%, with the adjusted EBITDA of INR 193.4 crore, up 29.3% year-on-year. On reported basis, EBITDA was INR 171.5 crore, a margin of 21.9%. As a reminder, this adjustment adds back the deferred consideration payable to the Sojern team, which is contingent on revenue growth and EBITDA targets over three years and will end in Q3 FY 2029. This quarter's add back was INR 21.9 crore, consistent with the INR 20 crore-INR 22 crore per quarter range we had previously guided to. Adjusted PAT, which also adds back the same deferred consideration, was INR 116.8 crore, a margin of 14.9%, up 148.8% year-on-year basis. On the reported basis, PAT was INR 94.9 crore, a margin of 12.1%. I would like to walk the bridge from EBITDA to PAT since it's a context for the year ahead. Amortization of acquisition cost was INR 33.8 crores, up from INR 6.8 crores in Q1 FY 2026, mainly due to the additional amortization related to the Sojern acquisition. Finance costs were INR 16.5 crores reflecting the debt on our book. On the debt repayment, we have maintained strong discipline having repaid $47.5 million to date equivalent to 38% of our original loan, bringing our outstanding balance down to $77.5 million as on date. Other income was lower at INR 3.1 crores, down from INR 20.7 crores last year as surplus cash earning interest was deployed towards the Sojern acquisition. This is a structural relocation of capital, not a recurring operational drag. Our focus remains on driving higher and sustainable organic growth, accelerating cross-sell, and expanding our presence in high-growth geographies. Free cash flow generation this quarter was strong at INR 135.2 crore with a conversion at 78.8%, highest ever in the RateGain history. We continue to maintain a strong balance sheet with net worth at INR 2,114.2 crore as of June 30, 2026. Cash and cash equivalents of INR 255.6 crore and a net debt of INR 615.4 crore. The broader travel industry continues to prioritize technology investments that deliver measurable revenue outcomes and operational efficiency. We believe this positions RateGain strongly given our expanding footprint diversified product portfolio and increasing relevance across the travel and hospitality ecosystem. As we move ahead, our focus remains on sustaining profitable growth, executing our integration thoughtfully and continuing to strengthen our platform for long-term value creation. With that, I close my remarks. We are happy to take the questions. Thank you.

[Operator Instructions] The first question is from the line of Nitin from Investec.

Congratulations on a very solid all-around quarter. Bhanu, you mentioned about how the combined entity now has increasing far better pricing power. Any examples or client conversations to give some glimpse into that? And how do you see that sort of evolving on a going-forward basis? That was the first one. And the second is considering that a lot of the people integration is largely behind us.

Nitin, you broke up. Can you hear

Yes, I can hear you. I don't know where you missed me. So the first one was on the pricing power on the combined entity. Any examples that are interesting stand out that sort of show that? And the second is on the deal wins. On the deal wins, considering we now have completed people integration, do you think that we should start seeing better deal velocity while it's already strong? Do you think that, that will continue to sort of improve and get stronger?

Yes. So on the MarTech side, in respect to the pricing power that you mentioned, yes, there have been instances where I can't name the clients, but we've been able to command a higher price or let me rephrase it that the need to discount is much lesser now when we are negotiating, we can hold our price as compared to earlier when we were competing with each other. So we see that definitely in the destination space. What we are also seeing is, as I mentioned, our numbers on the DMO side have been quite significant, and we are seeing the second or the third competitor are distant second and third, and we are seeing weakness in them. In fact, one of them approached us to buy them out. So I do see our ability to hold price. In destination specifically, we are now looking at instead of just charging more because even if you have the ability to charge more, the markets don't see it well. So we have to be very, very intelligent in how we bundle it. So what we're intending to do is include some free in terms of our measurement products in how we position this as a pricing power versus saying that we're the only game in town, so you got to pay more. And that's how we are positioning it now. And on the property side, also the ability to now integrate using our platform, we are about to sign a very large deal in India itself where a regional chain is, we've been able to negotiate a higher outcome-based fees versus before as a result of the power of one platform. And to your question on deal velocity, yes, I do believe that integration of teams as well as platforms will continue to accelerate deal velocity. I think a lot of that work on the destination side and corporate side on those customer segments has already been done. On the property side, we've unified the APAC team, but we are yet to unify the team in Europe and U.S. on just the property side of the business. So as and when we do that, that we will see acceleration there as well. So yes, overall, I'm feeling very, very good about where we stand. And as I noted in our opening comments, I think the revenue synergies should continue to play out very, very well in future quarters.

Sure. That's very helpful. Just one quick follow-up. So on the pricing bit, do you think it's more a function of...

Can you please speak a little loudly? We can't hear you properly.

Is it better now? Yes, much better. I'm on the phone, yes. So, on the pricing power, which you explained quite well, I just wanted to understand, do you think it's a function of having bought out competition? Or is it because of our ability to measure outcomes, at least from a destination perspective? Or is it the bundling that we are able to do that sort of gives us a better ability to do that, although we will not really harness that entirely. But what do you think is a bigger sort of standout for us?

Yes, it's a combination of all. I would not attribute it to one of those factors because now the unification of both companies also led to really unification of the data that we have and that has significantly enriched the data that we have in our platform. And that in turn increases the marketing performance of ad dollars that these customers are spending with us. And secondly, the fact that we are now able to also bring in adjacent capabilities and products and bundle it into one platform is also very appealing because look, most of these customers that we work with are not sophisticated customers. Ideally, they want a one-stop shop, and we are able to offer that now, which is the entire unified MarTech stack or if you're looking for direct bookings in case of properties, you're able to provide that entire stack. And definitely, when you take out competition, that helps as well. So I would say all of those factors are contributing to a commanding position that we stand on right now.

The next question is from the line of Pranay Chatterjee from Burman Capital.

So my first question is on organic growth. Just wanted to confirm, 17.5% would be in INR terms, right?

That is correct. Okay.

So basis the data mode that you have in the combined business and the cross-selling potential, do you envisage organic growth potentially reaching in the 15% to 20% growth rate even at a run rate basis by year-end, given we also have the currency tailwinds?

Yes. So you're saying in INR 15% to 20%...

Yes. So what I mean is right now, we are at INR 17.5%, and that has some amount of uptick because of FIFA. But looking beyond that, even by, let's say, the last quarter when you have had sufficient time to combine the teams and start cross-selling, do you see the exit run rate of FY '27 potentially nearing the 20% INR organic growth rate mark, run rate basis exit?

Yes, I would. I mean, basis what we see today, the visibility that we have, I do see it at a higher end of that 15% to 20% range. And I do see given the pipeline that we have, and to the earlier question Nitin pointed out, I do just see an acceleration of momentum because we are behind the lion's share of the integration work. So yes, and all the good has to still play out. So I'm very optimistic about the future quarters, especially Q3 and Q4. And also this FIFA World Cup, we just wanted to call it out, but I don't, in the grand scheme of things, it's not a very large number. But most of our revenue, as you know, is recurring in nature. So we just wanted to provide that transparency and call that out. But I don't see that changes anything in the growth trajectory, and that's why we came in with revising the guidance on the revenue side as well as on the margin side.

Got it, sir. So then in that case, even for full year FY '27, your revised guidance of INR 3,100 crores, is it fair to say it's more like a number you would definitely beat rather than a number you'd be happy achieving?

Yes, that's the number we should definitely beat.

Understood. My next question is on the margin side. So $2.5 million of FIFA revenue is the uptick. And let me call Middle East as one-off, even though we don't know when that ends, but let's call it one-off as well. So about $1 million down from Middle East. So net around $1.5 million uptick in this quarter. What would be the margin benefit from this incremental $1.5 million in that 24.6% adjusted number that you reported...

Yes. So I'll give you ballpark numbers. So the net, okay, so just to be million uplift from FIFA and about $1.5 million is the dip in Middle East. So net-net, you're talking about $1 million. And out of that 1 million, our gross margins are 70%. So I want to say maybe $600,000 to $700,000.

Understood, sir. Got it. And one final question. And when I've asked this question before your answer has been and rightfully so that you don't look at Adara and Sojern separately because it's combined. So let me ask this question mathematically. Before Sojern came in, the margins of RateGain was in the 16%, 17%, 18% range. And right now, we are at 24.5%. There is one-off impact, let's call 24%. So mathematically, there is an external entity that has come and lasted on to RateGain, then there has been synergies realized there, and we are at 24%. So that external entity is right now at nearly 30% EBITDA margin. Is that a fair statement to make?

Yes. So I think as already mentioned that we have a combined entity basis. So the synergies which we are talking about the combined synergies, not only the synergies coming from Sojern. As we are integrating both the platforms, there are some synergies we are seeing from Adara side as well. Saying that the new entity is contributing 30% might be a difficult and challenging number to come up with, as synergies are coming from both the sides, Adara as well as Sojern. In some of the places, we are also adopting the Sojern platforms to run the campaigns, and giving up the Adara stuff. That mix we could work out and maybe we can come up in some later discussions. And same is the case with our corporate business. So we are going in as one unified team called , so and most of the platform integration is also done. So, it's very difficult to do that kind of attribution. And so what Ankit said is what it is that the synergies are being driven on both sides and in the combined unit.

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