We remain a very strong long-term growth story: Anuj Khanna Sohum, Affle India

“In fact with margin expansion, if you see the overall margin growth, EBITDA growth for this quarter versus the same quarter of the last year, we grew EBITDA by about 22% plus,” says Anuj Khanna Sohum, MD & CEO, Affle India.

I am used to tracking Affle which is a high growth company, grows at 30-35% plus. Suddenly revenue growth for Q4 has gone down to 12%?
Well let me explain that. If you look at the overall annual performance of this year as well, the CPCU business has grown year on year basis over 35%. And when we look at this particular quarter itself, we would see that in India in emerging markets which contributes about 82% of our business, we actually grew 20% in that business as well year on year. And in fact with margin expansion, if you see the overall margin growth, EBITDA growth for this quarter versus the same quarter of the last year, we grew EBITDA by about 22% plus. So overall I think we remain a very strong growth story from an overall perspective. Having said that, in the last two quarters what has happened is that in the developed markets, particularly US and Europe, we saw some headwinds with respect to the macroeconomic conditions and we have also calibrated a very clear turnaround plan so that this year FY2024, we can deliver around 20 to 25% organic growth going forward as well.

So we continue to remain a very strong long-term growth story as far as our performance even in the last quarter or the previous financial years are concerned. You have got to look at an overall trend and when you slice and dice the numbers you find that India and emerging markets continue to be strong. Resilient growth is in the 20-25% range which is consistent with our guidance. Our margin expansion story is very clearly coming out and all that remains to be sold is the developed markets where the macroeconomic conditions are well known to all of you and how we are turning that around this year is what we will demonstrate as we go along.

Well, what is the situation and sentiment on ground? Because everywhere around us we hear about digital, ad spend, mobile marketing, all of it going up. From a CAGR of 55% in the last five years in terms of revenue, do you really think there is growth potential in the medium term?
Well, we have been guiding very consistently that organic growth should be very sensibly in the range of 20 to 25% and we have already delivered that in India and emerging markets consistently even through the last two quarters where there were clearly quite a lot of headwinds. So, even with those headwinds, India and emerging markets which is 82% of our business grew very nicely in the 20-25% range with margin expansion.

So, there is clearly growth in the market. There is growth to be tapped into the market and like I said, the only thing that we need to really solve is how do we double down and develop markets better, execute better over there and we have a very strong turnaround plan which I will be covering on our earnings call with all the investors.

Wanted to also understand a little bit more when it comes to your margins because they have been on the weaker side. What is the outlook as to where your margins could sustain? Do you see them trending towards 25%?
I think if you see even compared to last year to this year, we have seen a margin expansion even for this last quarter. I think we have seen a margin expansion in terms of EBITDA and we have consistently now been giving over 20% EBITDA for the company and going into this FY 2024, we believe that it is very sensible to see 20 to 22% kind of EBITDA in that range while delivering organic growth of 20 to 25% on revenues overall.

So, of course, we will see margin expansion which means that on EBITDA terms, we should be growing organically much more than the 20-25%. So even if you look at this FY 2023 results, you would find that we grew, our EBITDA growth was higher than our revenue growth, right.

So, there is clearly margin expansion. So I would not see weakness in that, I would say that there is a clear trend that we will continue to improve margin by a few basis point each year and if we take a three-year view to it, we should be heading closer to the 25% EBITDA over the next three years yes.