OnMobile Global : Q1 FY2024 Investor's Call Transcript

"OnMobile Global Limited

Q1FY24 Earnings Conference Call"

August 8, 2023

MANAGEMENT: MR. FRANCOIS - CHARLES SIROIS - EXECUTIVE

CHAIRMAN

MR. SANJAY BAWEJA - MANAGING DIRECTOR,

GLOBAL CEO

MR. ASHEESH CHATTERJEE - GLOBAL GROUP CFO

MR. BISWAJIT NANDI - CHIEF BUSINESS OFFICER

MS. RADHIKA VENUGOPAL - VP, FINANCE

Page 1 of 15

OnMobile Global Limited

August 8, 2023

Moderator:Ladies and gentlemen, good day, and welcome to the OnMobile Global Limited Q1 FY'24 Earnings Conference Call.

As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Pratik Jagtap from E&Y IR. Thank you, and over to you, sir.

Pratik Jagtap:Thank you, Aman. Good day, and welcome to the Q1 FY'24 Earnings Call of OnMobile Global Limited.

Representing the Management today we have FC - Executive Chairman; Sanjay Baweja - Managing Director and Global CEO; Asheesh Chatterjee - Global Group CFO; Biswajit Nandi

• Chief Business Officer; and Radhika Venugopal - Vice President (Finance).

The call will start with a brief update about the overall performance during the quarter by Sanjay Baweja, Asheesh will update on financials, which will be then followed by FC speaking on overall business activity and sharing his thoughts on future plan. We will then open the floor for question-and-answer session.

I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties that we see. For a list of such considerations, please refer to the earnings presentation. OnMobile Global undertakes no obligation to publicly revise any forward-looking statement to reflect future or likely events or circumstances.

Having said that, I now hand over the call to Mr. Sanjay. Over to you, sir.

Sanjay Baweja:Thank you, Pratik. Good evening, everybody. I'm really happy to interact with all of you once again, and I thank you all for taking time to join us today. Hope all of you are doing well. The results and presentation are already hosted on our website, and hopefully all of you had a chance to look at them. As always, I will give a brief update on the products and business, and then Asheesh will take you all through the highlights of our financial performance.

Let me start off by saying that this has been a really good quarter for us. Though the revenue growth is modest on a sequential basis, we have managed to improve our profitability significantly. And we will try to continue with this momentum in the coming quarters.

Let me quickly jump to the update on Challenges Arena. This quarter, Challenges Arena sales saw a marginal revenue growth due to slow revenue ramp-up from our new operators. Also, marketing optimization is taking slightly longer than expected to maximize revenue and profitability. During the quarter, however, cumulatively 54 customers went live as against 42 in Q4 of FY'23, reflecting an increase of 29%.

Page 2 of 15

OnMobile Global Limited

August 8, 2023

In terms of revenue, CA has grown 2x year-on-year. And it has increased 22x in the last 9 quarters. Further, in Q1 FY'24, 7 new customers agreed to our Challenges Arena and taking our overall cumulative agreements to as high as 73. We expect the momentum to continue and these cumulative agreements to reach around 81 by the end of Q2 FY'24, driven by successful outbound sales effort resulting in increased sales.

We continue our discussions with potential customers around the globe currently. If we were to include our existing partners, we are in conversations with more than 120 customers as we speak. As of Q1 FY'24 out of the 73 customer confirmations, 57 are new logos, which is 78%. And this clearly highlights our accomplishments as well as our potential for future cross-selling opportunities with these customers. In terms of usage and actual consumers cumulative gross paying subscribers at the end of current quarter stood at 21.34 million as compared to 17.56 million at the end of March 2023, a growth of 22%. We are targeting to touch a figure of 24 million-plus subscribers by the end of Q2 FY'24. We are continuing to see healthy pipeline and expect to be live and find more clients in the coming quarters. Challenges Arena's net active base saw steady growth from 3.1 million to 3.5 million at the end of Q1 FY'24. We are targeting to touch 3.74 million subscribers in Q2 FY'24.

This quarter we experienced some slowdown in CA revenue due to delayed launches. As we said, we are using the second quarter to really consolidate our positioning across with some of our customers who are changing their business models. But we are sure with many new customers joining the CA platform, we will emerge even stronger in H2. I'd like to emphasize that this is a subscription business, and that revenue will continue to improve as we add more and more subscribers. Indeed, we believe that Challenges Arena will significantly boost our revenues in the coming H2 and beyond and will give us better profitability. And our exit for Q4 is targeted to be much beyond the current levels. We are currently in the investment phase, as mentioned in the previous earning calls, investing in growth through disproportionately high marketing spend, particularly in the new geographies or operators with which we are constantly going live. We expect Challenges Arena to generate an EBITDA of more than 30% in the coming quarters, as you know, which will boost our profitability even further in the next couple of quarters.

Coming now to ONMO:

As of Q1 FY'24, we have 25 customers who confirmed for this product out of which 10 are already live. We expect cumulative agreements to reach around 32 by the end of Q2 FY'24. Revenue grew by 18% quarter-on-quarter basis and close to 13x since its inception. Our focus has been to go live with more and more telcos efficiently and smoothly. We have crossed the 600,000 live subscriber mark and are expected to go up to 1 million within the next few quarters. We are significantly improving the product in terms of the B2B support, the onboarding, the progressive mechanics and more features to promote deeper engagement and long-term retention. Prospective customers continue to show significant traction. In FY'24, we anticipate generating much higher B2B revenue.

Page 3 of 15

OnMobile Global Limited

August 8, 2023

Let me also give you now a small update on Gamize. As of Q1 FY'24, we have 2 customer confirmations in this segment. As you're aware, we've just kind of launched it. We have a robust deal pipeline for this new segment, and we expect to see healthy growth in the customer confirmations in the coming quarters.

Now I would want to talk about the mobile entertainment section, mainly tones and videos. Videos saw a decent 5.2% growth on quarter-on-quarter basis due to increased subscriber base in the Europe region. Infotainment growth on a sequential basis due to increased contests in India and Middle East. Tones slightly de-grew on a quarter-on-quarter basis due to some amount of Forex impact and lower subscriber base in one of the operators. Simultaneously, we've been able to cross-sell our business to new logos which we've acquired through CA. And we are positive about some more customer agreements happening in the coming quarter for the mobile entertainment business. We will be going live with some of the new customers that we've acquired. And we expect that to happen by the end of this quarter or early next quarter. So, clearly that revenue is going to happen for our business.

But on the other thing that I want to talk about is the organizational transformation, which has helped us increase our profitability this quarter. As was mentioned in our most recent call, we wish to continue this performance in the coming quarters, which will help us meet our revenue target of greater than INR 600 crores for FY'24 with higher margins. Also, I want to take this opportunity to highlight here that the 28% GST which is applied on online gaming will not have much impact on our gaming business as our products, first of all, do not come under the real money gaming. And our gaming growth actually is coming more and more from global customers where this is absolutely not applicable.

Now before I pass on to Asheesh, let me reemphasize that we have our battles cut-out on 3 fronts. First being revenue, second is profitability, and last but definitely not the least is cash. I believe that we've started on our revenue growth and new products are leading the charge. It is a matter of couple of quarters when you will really see solid numbers on that front. Our profitability, on the other hand, has improved, and we are unlikely to see any volatility on that front. On our cash, while we've been investing on new products and marketing and you've seen that our cash reserves have depleted, we are at the threshold where we will start increasing our cash from H2 onwards. So, all in all, I can assure you that our H2 is targeted to be far superior to H1 on all the 3 parameters, which we, as a company, are focused on.

With this, I would like to hand over the call to Asheesh to talk more about the financial performance. Thank you.

Asheesh Chatterjee: Thank you, Sanjay. A warm welcome, and thank you, everyone, to join us on this call. I'll share the key highlights of our financial performance for the first quarter ended June 30, 2023. In terms of Q1 FY'24 performance, we reported a revenue of INR 139.6 crores, marginally up by 3.8% on a quarter-on-quarter basis. Gross profits witnessed a healthy growth of 10% on a Y-o-Y basis to INR 77.1 crores. And gross margin improved by 437 basis points to 56.3% on a Y-o-Y basis.

Page 4 of 15

OnMobile Global Limited

August 8, 2023

On our gaming business today, Challenges Arena and ONMO put together, we have now 98 contracted confirmations and 64 live customers. This is up 3x on a year-on-year basis. Our gaming revenues today constitute 18% of our total revenues, up 2.5x on a year-on-year basis. Our mobile entertainment business remains steady and very profitable. We saw upsides in Europe, which helped in the revenue growth.

On the cost front, manpower cost is reduced by 13.3% on a quarter-on-quarter basis. Operational costs are also reduced by 15.8% on a quarter-on-quarter basis due to cost optimization efforts. We continue in our efforts to improve efficiency and productivity. These reductions in the cost have resulted in improved EBITDA for the quarter, which stood at INR 12.3 crores, up by almost 6x on a quarter-on-quarter basis and 58.5% growth on a Y-o-Y basis. EBITDA margins for the quarter are at 9% as compared to 1.6% last quarter. We reported a PAT of INR 9.8 crore, up by 138% on a Y-o-Y basis. PAT margins for the quarter is at 7.2%. Overall, DSO stands at 119 days for quarter 1 FY'24. In terms of geographies, Middle East and Africa registered the highest growth at 16.2%, followed by Asia and Europe, growing at 2.7% and 5% on a year-on-year basis. During this quarter, we also incurred R&D or product development expenditures of around INR 17.8 crores as we continue our foray into the B2B space in gaming.

With this, I will now hand over the call to FC.

Francois-CharlesSirois: Thank you, Asheesh. Thank you all. Last quarter, we discussed the big changes in streamlining that we did in the company. Clearly shows in 1 quarter. And you can see right away the people cost went down. We streamlined the operation to make sure we could actually have a bigger output on number of operators that go live. You see it right in the chart, they used to be 7, 10 operators a quarter for both CA and ONMO. And now we're at 18 going to 20 a quarter, and we should be at 20 average a quarter for the year. 20 a quarter for a year, that's 80 operators going live this year for both CA and ONMO which is quite huge where we never did 80 operators in 23 years history with OnMobile launching whatever kind of service. Now we're really focused on streamlining, on getting this operation out. So, congrats to the team for being able to do that change which operationally was key to do because, obviously, it's one thing to sign an operator and another thing to make the service live and then capture the revenue. So, it's a 3-step process. We signed the operator, we get it live and then we capture the revenue by investing in marketing, and it's key to invest in marketing at the good ratios also so that we don't waste money, that we're sure that we do it in a smart way and that we show the profitability, and that's exactly what we did this quarter. So, congrats to the team on this.

When we see and overlook on the year, mobile gaming will be 25% of our revenues or more. The big change this year is now getting both CA and ONMO are getting with scale. As said, both Sanjay and Asheesh talked about the profitability there. The size is there, activating the number of operators that we're talking about, now we're in the 100s with our target by 2025 to be at 200, it does create a lot of scale. But the big change also is that we go from the 3-year investment, as we all know, we invested a lot of money into building these gaming products to now being pretty much breakeven soon. And next year, all products will be breakeven or

Page 5 of 15