Affle India - India Mobile Internet Advertising Leader

[kkrai]

Affle reported a great set of numbers today for Q4-FY2022. Some quick notes

1- Q4-22 top-line came as 315 crores vs 142 crores in Q4-Fy21.

2- EBITDA for the quarter was 58.7 crores vs 34.5 crores last year same quarter.

3- PAT for the quarter was 68.5 crores vs 58.5 crores in Q4-21. Last year same quarter had a one- time 36 crores other income. Adjusting for that profit 98%.

4-In Fy22 India revenue stood at 35% of total sales and 65% was from international markets.

5- Average CPCU saw a sharp increase from 41 rupees to 51 rupees year over year.

6- Converted users stood 5.66 crores in Q4-FY22 vs 29.6 crores in previous year same quarter.

Commentary on future prospects

1- With digital marketing continued to have good tailwind Affle would possibly continue to see good acquisition of new customers and retain old ones to have transactions/engagements.

2-The data enrichment and fraud models of Affle should stand for good in the medium and long term.

3- A major part of the story for Affle so far had been thoughtful acquisitions, and there is good reason to believe that it would continue on the same path.

4- For FY23, I expect Affle to clock about 25% top-line growth which would result in sales of 1350 crores. I also think that the operating profit margin to slowly increase from current 20% and possibly reach 22% for the full year Fy2023.

5- With 22% operating profit margin the operating profit for FY2023 would be 297 crores. Add about 63 crores of other income, and take out 5 crores interest and 35 crores of depreciation to that, and that would result in PBT of 320 crores. This would be about 30% of growth over the FY22.

6- Please note that there are a lot of floating variables with Affle and the calculations done by me could completely wrong. But I would continue to update after future quarterly results about how things are shaping.

Cheers,

Krishna

PS: The post above is based on the results and investor presentation. The earnings call is scheduled for Monday 16th May. I may edit the post after listening to earnings call. Also please note that I am not a SEBI certified analyst. This is not a buy or sell reco. I have ownership bias.

[akshat_investor]

Formidable growth continues. Margin drag is becoming more evident and with current macro events, currency risk is also becoming a factor, overall positive on the business, just finding it difficult to value it.

[nityanandparab]

Margins are compressed as the acquired businesses were working on lower EBIDTA. Management has guided as they refine the processes and amalgamation gets completed we will see improvement in margins.

[enelay]

EBITDA margin of Jampp was 7% for FY22 vs ~0% at acquisition as disclosed by the CFO on the concall. As stated at the time of acquisition the goal was to bring this up to high teens within 2 years and they reiterated this guidance on the call.

[Sambhav_Jain]

Anuj Khanna Sohum Speaks On Affle India's Q3 Results | Bazaar Morning Call | CNBC TV18

Start from 2nd min. In this video ceo said we are not allowed to give future guidance

[ayushgupta2959]

Affle has recently bought additional stakes in IndusOS. With this investment, AGPL and its affiliates now have approximately 60% of investor voting rights tied to the issued preference shares in Indus OS. They have bought these stakes by secondary purchase from Samsung Venture Investment Corporation.
This is a detailed article on Indus OS

[swamikrish2001]

The Revenues have moved from 95 Cr per quarter to 350 Cr. Which is phenomenal. Any split on new business/acquisitions and geo wise ?

[sujay85]

PhonePe acquires Indus OS, says amicable settlement reached with Affle Global

[Jadewade]

so no details on how much PhonePe paid Affle eventually?

[sujay85]

No, PhonePe didn’t reveal. Maybe we can ask Affle regarding that in the next concall.

[Rushabh_Doshi]

They can decide not to reveal it since the transaction is at the parent level

[vibhor_vaish]

Recently started studying this business, fully aware of the the medium term caution.
Medium term macro headwinds seem to have just started and their revenues are bound to take huge hits. Ads are usually the first to take a hit.

[Kapur21]

By the end of the fiscal, how much do you aim to clock as per your revenue?
In Q1 FY2023, Affle’s consolidated revenue from operations was Rs 347.5 crores, registering an increase of 127.9% year-on-year growth. This growth is a factor of both organic and inorganic. Our organic growth was around 45% year-on-year in this quarter. Our goal is very simple, we believe that our industry would grow at least around 30-35% and we should be able to keep pace with that kind of a growth model, even with the macro economic factors that are sometimes concerning. We are confident that we can beat the industry average growth rate in emerging markets.

How Affle is changing mobile advertising landscape through vernacular and...

Disc: Invested

[akshat_investor]

Topline growth does not seem to be an issue, margin guidance and overhang of privacy concern is a watchout.

[Gaurav_Agarwal]

@vibhor_vaish

Medium term macro headwinds seem to have just started and their revenues are bound to take huge hits.

Can you expand a little bit on this? You have not mentioned any details, just the conclusions.

[Ashok_Kumar]

The medium term challenge is in terms of inflationary environment and rising interest rates which will result in tightening money supply and funding to startups and businesses (the clients of Affle) and intern expected to negatively impact the ad spends.
On the other hand the hypothesis that seems convincing that this may even positively impact Affle because in case of less funding availability the startups would like to spend where they get the highest bang for the buck. This is where the Affle’s ROI linked CPCU revenue model can be the differenciator.
Another point is that as of now the inflation related issues are with developed markets like US and Europe which are not the markets from where Affle derives its revenue.

Disc. Invested

[Rushabh_Doshi]

This deal has been terminated as the Buyer has not paid the consideration before the Long Stop Date.

[Parag_Ingle]

Some good article hear

With the introduction of Web 3.0, adtech needs to evolve: Affle’s Anuj Kumar

[gsapte]

While CPCU model looks good to me, I am wondering whether Affle(India) tracking model can track the conversion of User if he/she sees the advertise of the product on Mobile phone and then buy the product using Laptop.
Technically it might be possible to some extent since User ID, IP can be used for tracking but there might be some limitations.
Users might believe that, doing transactions on Android phone might be risky hence may prefer more secure Desktop/Laptop or iPhone to buy the product. How is it tracked?

Overall, business seems good and growth may remain for few more years. Data Privacy acts and Government’s unnecessary intervention might be high risk in this business.

I may be wrong in my analysis, since studying the model for some time.

[Kapur21]

They can track across all connected devices (TV, Phone, Laptop) - given same OS/ Email ids/ cookies etc.