Ladies and gentlemen, good day, and welcome to the RateGain Travel Technologies Limited Q1 FY 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the 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 call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhanu Chopra, Chairman and Managing Director, RateGain Travel Technologies Limited. Thank you, and over to you, sir. Thank you very much, and good afternoon, everyone, and thank you for joining the earnings call for RateGain Travel Technologies Limited for the financial year ending June 30th. We are very excited to meet all of you and share the key highlights of Q1 for this next fiscal year. Joining me on the call are Tanmaya Das, the CFO of RateGain, Ankit Chaturvedi, our Global Head of Marketing, Divik Anand our Head for Investor Relations, and Thomas Joshua, Company Secretary of the company. Alongside, we also have our Investor Relations partner, Strategic Growth Advisors. We announced our first quarter results for the fiscal year 2023, and I hope you've had a chance to go through our financial results, press release and investor presentation that are available on the stock exchanges and also on our company website. Our performance this quarter once again shows our commitment to our shareholders as we continue on our path of fiscal prudence and continue to be one of the very few profitable SaaS companies globally. We stay committed to improving profitability through cost optimization and revisiting our commercial agreements to increase revenue per customer. In addition, the nonlinear nature of our business led to 10% sequential increase in revenue quarter-over-quarter, while headcount only increased by 3%. Our results are a testament to the faith shown by our long-standing relationships with industry leaders that continue to trust us for helping them unlock new revenue. Given the labor shortages that we are all hearing about in our industry, there is an acceleration towards digitization, and RateGain is well positioned to capture this opportunity, given the innovation and new product launches that we are doing using AI/ML to help our customers acquire guests, retain them, and expand on their wallet share. Talking about the macro level, we continue to see improvement in travel demand across the world, with more countries now reporting numbers at pre-COVID levels or higher as per Skift Travel Health Index. We continue to see little or no impact of the overall travel industry as well as our business due to the ongoing increase in inflation, or talk about rising interest rates or the ongoing Ukraine conflict. On a year-on-year basis, we continue to see very healthy improvements across all our critical business metrics with continued margin expansion, taking into account the wage increments that we had this quarter, the increased travel given we are a B2B business and increased marketing spend. Compared sequentially, we see robust growth in our annual recurring revenue is now 20% higher than pre-COVID levels and is 10% higher level compared to the last quarter. I want to commend the team on their continued endeavor to deliver consistently strong results, even as most companies are facing strong headwinds. While the world battled the pandemic for the last two years, traditionally, the first quarter of our financial year is a busy time for our customers across the world. In 2022, with the resumption of international travel and ease of restrictions across the U.S. and Europe, we're witnessing the same as people travel in huge numbers for the first time in three years. The MarTech business now has a recurring revenue of 99%, contributing 41% of our overall revenue, emerging as our biggest vertical as we predicted last year in previous earnings calls. Our growth has been driven by an increase in existing volumes and our metasearch product. In the wake of rising costs and need to optimize marketing spend, the business unit continues to see considerable demand for its metasearch and digital marketing offerings as more hotels strive to optimize costs, improve ROI and generate direct revenue through metasearch platforms to reduce cost of customer acquisition. We also added iconic luxury properties in Orlando and New York, and our bundling of DaaS products with our MarTech business is resonating very well and is a great differentiator in our MarTech business. Our way forward for this business unit, as detailed earlier, is to capture the complete digital marketing function and drive results by providing hotels the additional capability of connecting to metasearch platforms, social media platforms, and getting real-time insights through our task product to be able to deliver better returns. Our distribution business segment with recurring revenue of 99.5% and contributed 34% of our overall revenue in the first quarter. Given the return of travel, our transactional volume is up by close to 40%, powered by increased number of pairings as well as existing pairings going back to pre-COVID levels. The big deals that we announced in Q3 of last fiscal year are now fully monetized. The DaaS business unit grew on the back of strong volumes of our OTA and airline products driven by existing T ier 1 accounts and new accounts. Also, we entered adjacent sub-verticals within travel, such as destination management companies and vacation rental companies, and I signed up a set of customers. One of our new products that I've talked about earlier in our DaaS business line, revAI, saw continued traction by addition of net new accounts and expansion of some key accounts. This business of revAI now growing over 100% year-on-year. We found the right product market fit within the car rental industry and holiday parks industry. With the key CRS integrations in place within this quarter, we believe we have built a moat in this business. Our strategy is to continue to penetrate these two verticals for revAI and then look at other sub-verticals within the travel industry. The recurring revenue for DaaS business is around 98.2% and contributed to 25% of the revenue in the first quarter. Just to give you some key highlights on M&A, we have a very, very robust pipeline, and we are looking to consummate only if the value is right. These opportunities spread across our different business lines and will strengthen each of them. On RG Labs, our R&D division, we continue to invest in scaling our existing offerings. RevAI already talked about Demand.AI and Content.AI. On the back of the success of these new products, we are investing in launching new products, and we are test piloting them in this quarter, and I'll be able to share more details in the next quarter. In terms of awards and recognition on the people front, we were recognized this quarter as one of the best companies for career growth in the U.S. at Comparably, which is a leading provider of compensation and culture data globally. I'll now ask our CFO, Tanmaya Das, to take you through the performance of Q1. Thank you, Bhanu, and a very warm welcome to everyone on this call. We continue to go from strength to strength on the back of another robust quarterly performance. We continue to improve our margins year-over-year in a quarter that is facing global headwinds in the macroeconomic environment. Strong revenue growth and margin expansion reflect the business performance in a historically challenging quarter. We also are now able to see revenue diversification with our expanding footprint in Europe. The global environment, such uncertainty continues, but travel demand remains strong across key geographies, reflecting the industry remaining on a strong footing. Due to seasonality of our business due to the travel booking patterns throughout the year, it's more relevant to see year-over-year performance rather than quarterly sequential performance as Q1 historically has been our weakest quarter and Q4 the strongest, both in terms of revenue and profitability. Despite this trend, we grew sequentially 10% in Q1 as against Q4 last financial year. Continuing with the momentum last couple of quarters, the company registered a 59% year-over-year revenue growth, with Q1 FY 2023 revenue at INR 119.3 crore compared to INR 74.9 crore in the corresponding quarter last year. The growth is primarily on the back of large amount of new contracts won in Q3 and Q4 of last financial year. In terms of profitability, in our last earnings call, we had given a guidance of 10% adjusted EBITDA for Q1, which will continue to improve in subsequent quarters to register 12.5% adjusted EBITDA for financial year 2023. Happy to report that the company reported 10.4% adjusted EBITDA as against 8.1% in Q1 FY 2022. It registered a strong growth of 103% coming in at INR 12.3 crore in Q1 FY 2023 over INR 6.1 crore in Q1 FY 2022. Adjusted PAT to that, INR 14.9 crore in Q1 FY 2023 compared to INR 4.05 crore in Q1 FY 2022, which was a 267% growth. The EBITDA margins of Q1 are in line with our expectations and the guidance given and will continue to improve sequentially even after taking into consideration annual appraisals, increased marketing spends and travel expenses. Our payroll costs, which saw an increase this quarter by 13% sequentially, excluding the resource expenses, as we had a large reversal in Q4 FY 2022 to the tune of INR 2.7 crore, primarily because of annual increments which kicked in in April and some key hires which were delayed in Q4, as indicated in our last earnings call. The payroll cost will see minimal increase in rest of the quarters, whereas revenue will continue to increase quarter-over-quarter at a higher rate, resulting in higher margins. The company continues to have strong customer relationships that are helping in building predictable, stable and sustainable revenue streams. Recurring revenues for the quarter stood at 99%. 77% of our revenue are in subscription nature, which improved from 75% in last quarter. Gross revenue retention was 90% and net revenue retention was at 105%. Our new contract wins remain steady to last year same quarter at INR 18.9 crore. So was our LTV to CAC, which stood at 8.9 for the quarter. Our employee headcounts saw a 3% increase sequentially whereas revenue growth was 10%, resulting in a higher revenue per employee by 10%, which stood at INR 0.77 crore per employee. Our annual recurring revenue stood at INR 477.2 crore, which is at 20% more than pre-COVID levels. Our pipeline increased by 10% to INR 308.6 crore compared to last quarter. We continue to have strong balance sheet where our net worth increased by 3% as compared to last quarter and stood at INR 634.8 crore. Our cash and cash equivalent balance for the quarter increased by INR 8.1 crore and now stands at INR 417.1 crore. In terms of guidance for Q2 and FY 2023, we expect to continue our growth north of 30% year-over-year and expand our margins to 12% next quarter. We can now open the floor for Q&A. Thank you. Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge who wish to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the queue, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Anmol Grover from Albatross Capital. Please go ahead. Hello. Good afternoon. Sir, am I audible? Yeah. Yeah. Okay. First of all, congrats on a good September, and thank you for the opportunity. I have three questions, sir. My first question is can you shed some light on what is the current pricing environment that you are seeing with the new deals coming up? My second question is on the cash utilization. Now your P&L is in the green and you're generating some cash. I think you have also some proceeds from the IPO. What is your cash utilization? How is it gonna be going forward? My third question is, what would be the three-year margin guidance, if you can give any going forward? Thank you. Sorry, I missed your first question. It was regarding the new contract wins. My first question was on the pricing environment, on what is the current pricing environment that you are seeing as of now? Yeah. Obviously it is, you know, kind of varies from our three business units. Distribution business is a very sticky business, and we really drive our pricing power there. We do like the CPI increases every year year-over-year. We don't get much resistance there. On the DaaS and MarTech divisions, we are now in most of our contracts back to the pre-COVID levels in terms of revising the prices. There are still few customers who are running at pre-COVID levels, but now we are pushing them to come back to the pre-COVID level pricings. That's the current scenario. Obviously price is sensitive at this point of time because profitability for hotels is paramount at this point of time. We see much higher ADRs. If you see, the hotel prices have increased significantly and all. That will in the long term is going to help us in improving our prices as well. Your second question was on the- Cash utilization. Cash utilization. Look, we did raise INR 350 odd crore in the IPO, and we have paid our debt. Balance is supposed to be utilized for M&A and some tech investments. The tech investments have slowly started now. I think from next quarter onwards you'll see some utilization there. As Bhanu stated about M&A, we are in pursuit, but we'll do the deal if the price is right only and it's kind of value accretive. The timing of that we cannot commit, but we are on it at this point of time. Yeah, we are generating cash every year. I think it's a healthy margins that we are going to expect going forward as well. Your last question is on the long-term margin guidance, right? You know, in the IPO roadshow, the guidance that we had given is to from a three to four years timeline will tend to be around 20%-25% EBITDA margin. I think we are en route to that. We expect to improve our margin 200-300 basis points each year. Based upon Q1 results, we saw almost a 200-230 basis point improvement over Q1 of last year. I think we're on track to that. All right. Anmol, I just want to add on the question on the pricing environment, also is a function of what the competitive intensity is. You know, a lot of the new product launches that we are doing, they're pretty greenfield with limited to no competitive intensity. As a result of which, you know, we are able to charge, you know, based on what value we are driving for our customers. The gross margins on all these new product launches is significantly higher, you know, north of 90%. I see you know, given the value, given the competitive intensity, you know, in everything new that we are doing, you know, it's quite favorable for us. All right, sir. Thank you for your time and all the best. Thank you. We have our next question from the line of Ankit Kanodia from Smart Sync Services. Please go ahead. Thank you for taking my question, and congratulations on the good set of numbers. I have two questions. One will be regarding the industry and the other will be focusing your company's performance. Mr. Kanodia, sorry to interrupt. Yeah. Can you speak a bit louder, please? Is it better now? Yes. Please go ahead. Okay. My first question is related to industry. In India we are looking at everything, really where in terms of demand and occupancy in terms of the hotels. We wanted to hear from you because our market is more towards, U.S. Because, recently we read an article where it said that, the growth of U.S. vacation rental demand is quickly decelerating. Just wanted your view on this and how it is panning out. That would be great. Yeah, sure. In terms of, as you rightly pointed out, most of our business, you know, comes from U.S. and Europe. As a result of the headwinds those markets are seeing in terms of recession and rising interest rates and also the Ukraine conflict. You know, so far, we haven't seen any changes in terms of the demand and in terms of the volumes that we see, the transactional volumes that we see. You know, they are fairly consistent and robust. I will be able to give you more color whenever we speak next. As far as we can tell and whatever reports we are reading, you know, consumers are readjusting how they do their discretionary spend. Travel is, you know, on top of the list and a priority given that all of us have been locked up for the last two years. Right. Thank you. Thank you so much. That helped. My next question would be related to some SaaS metrics, which we declare in our results. We all know the rule of 40, which is used for comparing SaaS companies. Anyways, till now we are anyway much ahead of that. Because if we add the EBITDA margin with our growth rate of revenue, we are somewhere north of 50%. I just wanted your direction in the sense that, say one year or two years down the line, which do you think EBITDA going up will be much faster trajectory or it will be more led by revenue growth only? I hope I could make my question clear, or shall I repeat? Yeah, I've understood your question. I think what you're seeking is the focus more on, you know, revenue growth or is it more on, EBITDA growth? I think that's what you're alluding to, right? Right. Yeah. Look, you know, we believe that, you know, at a minimum, we should be growing at 30%. You know, the growth of 30% and more is quite paramount to us. As you would notice in our numbers this quarter and you know, even if you look at our numbers in the previous two quarters, you know, we're exceeding that number quite comfortably. As a result of which, you know, the focus now became more on profitability and margin expansion. As long as we are meeting and growing beyond that 30% threshold, we wanna do it profitably and focus will go on, you know, on our margins. If our growth goes down, then the focus will be to continue to keep it above 30%. The outlook that I can see for the next at least couple of years, we feel very, very comfortable. One, our industry is growing at 26%. Two, you know, given the penetration that we are enjoying because we already work with all the large hotel chains, you know, the top 25 out of the top 30 hotel chains, the top 23 out of the top 25 OTAs, all the big car rental companies. Our game is of penetrating. With all these new product launches, which is unprecedented over the last two years, we have more products to sell. You know, given all the good stuff that's happening with penetration and new product launches, you know, we feel very, very comfortable on the growth, and we wanna do it sensibly. That's why the focus now has become more on margins. Our goal is, as we have guided earlier, to continuously expand the margins by 200 basis points year-over-year. Thank you. Just a follow-up on this. On growth, if you can segregate the growth into how much of that will be because of cross-selling and how much would be new acquisitions, any ballpark. I know you cannot comment or give any clear guidance, but any ballpark number as to how much do you think it will be led by? Because we have g ot new businesses. We are acquiring new businesses where we see a lot of cross-selling opportunity already within our existing set of customers. Let me clarify. You know, when we talk about cross-selling and upselling, how does it really work? You know, for instance, I'll take an example of a large hotel chain like a Marriott. Marriott could be using, you know, under each of our business lines we have several products. They could be using, you know, one of our products across maybe a few hundred properties, versus all the 6,000 properties that they have. One goal is to continue to expand the base that we have with Marriott across all the properties, which we call sort of land and expand. The other is, you know, cross-selling additional capabilities, additional products under our different business lines. You know, both those mechanisms are in play. I'll let Tanmaya talk about how much of it is cross-sell, upsell versus net new. Net new is largely. You know, I wanna say there are of course new hotel chains we are acquiring as customers, but, you know, as I talked about in my opening remarks, we continue to also look for segments other, in other verticals of travel, other subvertical. You know, for instance, in this quarter, it was almost an accident how we entered into destination management companies and vacation rental companies, and we are seeing great, you know, it resonating very well, our DaaS products. You know, that's where we see when we go into new sub-verticals, larger net new addition of customers. Yeah. I can add to that in terms of numbers, like when we're targeting a 30% growth, the targeted net retention rate that we do is around 110%-115%. I would say like 10%-15% should come from the existing customers by cross-selling and upselling, and balance should be like from the new customers. Q1 was 105% because it's a slow quarter for us and it is going to sequentially increase to reach to that level. I would say like 10%-15% from existing customers and balance from new customers, if that answers your query. Thank you so much. That really helps. Thank you, and all the best. Thank you. Reminder to participants to press star and one to ask a question. We have our next question from the line of Madhuc handa Dey from MC Pro. Please go ahead. Hi. Thanks for the opportunity. I just had couple of questions. The first one is, was there any surprise in terms of the revenue that you reported in Q1? If yes, what led to the surprise? I think the results are as per the expectations. Yeah, I mean, I think there were some positive surprises in terms of, I did not expect the business travel to come back so strongly. That actually really helped in our volume increases and all, because we expected the business travel to be around 50%-60% of pre-COVID levels this quarter, but it really has gone up to like 80% of pre-COVID levels. That was a positive surprise for us. Bhanu, do you want to add anything? I don't see. I think it was as per the expectation. Okay. The second question is, since, like, I'm pretty new to your company, I just wanted to understand the model a little better. How much of your revenue volatility is linked to, you know, upswing or downswing in travel? The reason I'm asking you this question is, of course there's a looming fear of recession in most of the Western markets, and should that impact, you know, discretionary consumption, including travel, what percentage of your projection or expectation would be at threat? I think we have 77%—this quarter, we had 77% of subscription revenue and 23% is on transaction revenue. It's an optimum mix actually because of the subscription, high subscription revenue, our degrowth in the COVID year was much lesser than some of the big players. Like, everyone was down by 60%-70%, but we are down only 30% because of the high subscription revenue. When the transaction revenue really multi-folds when the demand is high. We have, like, high subscription-based revenue, so I think the impact will be much lesser if any impact happens. Maybe your client addition and client mining engine would slow down. That is what you are guiding to, right? Are you talking about the, what will happen in the recession? Yeah. Should there be a recession? Yeah. I'll take that, Tanmaya. As Tanmaya pointed out, you know, to put it simply, if there is a recession and you know, the consumption story is impacted as well, although all the reports suggest otherwise. Even if there were a recession, what we are hearing or reading is that, you know, travel is now on top of the list and people are prioritizing it. At least in the near term, we should not see an impact. Even if the spend were to normalize, you know, this will impact our transactional revenues. As Tanmaya indicated, transactional revenues are 23% of our overall pie. There is another trend that we are seeing that should hopefully offset, you know, any dip in discretionary spend. That trend is, you know, the move towards digitization using really technology. I'm sure all of you have experienced that, you know, hotels are the least digitized industry. What has happened is because of this pent-up demand you know, now a lot of the stuff that was very people dependent is suffering. You know, we are hearing about all the chaos that's happening in Europe, et cetera. I think the industry has woken up and the trend that we see is a much faster acceleration of adopting technology. You know, given that, in fact, there is a report that talks about, you know, an 18% CAGR of technology spend over the next four to five years in travel and hospitality. As a result of this digitization accelerating, if there were to be a recession, we believe it should offset, you know, some of our transactional business revenue. Yeah. The last question from my side is, what is the sweet spot of revenue where a company of your type typically sees a steady acceleration in margin? Or I mean, I'm aware that you have given a guidance of, say, 200 basis points, 200-300 basis points annual expansion. But at the same time you are guiding toward 20%-25% in three to four years, which means that there will be an inflection point where, and after which, there could be a much sharper, you know, expansion in margin. So what kind of revenue or ballpark is that inflection point? Yeah. I mean, it's difficult to guide for an overall revenue, but if I had to take a guess, I would say it'll be close to a, let's say $100 million number. But the way I see that operating leverage and you know, everything that you make on the top line falling to your bottom line, I see that happen based on each of our business lines more so as, you know, each business scales, we'll see that inflection point occur in each of those businesses. Some of these new product investments that we are doing, it requires a separate team, separate R&D department. That's where, you know, a lot of our investments go in, and we don't actually capitalize any of those investments. My belief is, as each of those products and business lines scale, that's where we should see that inflection point come on. You know, my general guess would be, you know, once we start to exceed the $100 million number. Yeah. Thanks a lot for answering all my questions. Thank you and all the best. Thank you. Thank you. In the interest of time, may I request participants to restrict their questions to two at a time? Our next question is from the line of Pranay Roop Chatterjee from Burman Capital. Please go ahead. Hi, good afternoon to all. Am I audible? Yes, sir. Yes. Go ahead. Thanks for taking my questions. Again, I'm slightly new to the business, so I just wanted to understand your MarTech business a bit better, given you know majority of our revenue is coming from there. If you could just throw some light on what exactly is the value proposition there. Again, I'm aware of the fundamentals, but let's say when you are having a discussion with a potential client, during their BD, business development process, what are the key questions that the clients ask? You know, what are the in terms of your response, what is the competitive edge or the value add that you know you try to pitch to the clients? That would be my first question. Second question, again, linked to the same thing, i s the traction of new client additions. Again, you have given the number for Q1. My question is the traction that you're seeing on a monthly basis recently, is it as per expectations or is it above or below your expectations, new clients in MarTech? Like same topic, in terms of the competition, how exactly is the digital marketing landscape right now, you know, the pie, the budget that you're trying to target and who are they? If you could just throw some light on this. Sure. I'll take the question on, you know, what is the value proposition and how do we differentiate. Then I'll let you know, Tanmaya talk about the net customer additions. You know, in terms of the value proposition, what we offer in our MarTech business is really, really two things. What we are offering is we're helping you establish your brand in the social universe because as we all know, you know, today's traveler is the millennial, and they are all across the social universe, and they need to be engaged. And the second is, how do you use these digital platforms like Google, where people are searching on price comparison websites as well as social channels, how do you bring them to your own website so that you can, you know, acquire those customers digitally? Our MarTech offering actually caters to those particular needs. We help the hotel engage with the customer online on social universe. You know, we basically send out messages around what is new at the hotel, you know, what are some of the exciting activities targeted to a particular demographic. If there is some chatter or engagement or there is a poor experience, you know, we also, on behalf of the hotel, will engage in response and hopefully convert a negative sentiment to a positive sentiment. The other big thing that we do, which is actually a big part of our MarTech offering, is we enable customer acquisition through these digital channels, right? If you're a hotel and you say, "Look, I have, you know, $10,000 to spend to get customers," and as we all know, the days of offline marketing are over, so people, you know, are reluctant to use, you know, newspapers and print media, but more now focused on digitally being everywhere on these different social channels as well as, you know, when, let's say, you go and search for a hotel in Mumbai, are you seeing that hotel's ad, w hen you go do a price comparison on Google or on Trivago, you see, you know, that hotel come up. What we make sure is, you know, that the hotel is present and we are maximizing, you know, the return on ad spend, let's say the $10,000 that I took as an example. How do you allocate between Facebook, Twitter, Snap, TikTok, you know, social influencers, Google, metasearch site? There is a plethora of options that are available. What we do is we do two things. We are able to first establish connectivity to all these platforms. These are technical pipes that we've already built. Two, because of a lot of the data insight that we are able to have, we're able to optimize these campaigns such that they can maximize the return on ad spend. Give you a couple of examples on how we differentiate. We're able to take, you know, a lot of the intelligence from our DaaS product. Couple of examples are, let's say now, you know, you're planning a visit to Dubai and this hotel is, y ou know, we already know what kind of demand exists in Dubai through our Demand.AI product. If the demand is really, really high and we believe the hotel's gonna be full any which way, there's no point spending and wasting precious marketing dollars. Similarly, we also do, you know, a competitive check on what competition is doing. From a relative perspective, if you are cheaper and provide better value, you could be increasing your ad spend to attract that traveler. Then thirdly, we also do a parity check to make sure that you are offering your hotel on your own website because I'm sure you guys have noticed this, that some hotels, you know, are cheaper on different OTAs versus their own website. Through our parity checking and parity policing, we are again able to use that input in optimizing the ad spends and the campaigns to drive a higher return on ad spend, higher return for the hotel. Tanmaya, can you address the question on the- Yeah. I think, in terms of, new contracts or customer expansion, in Q1, they were as per the expectation. In fact, MarTech division has grew the most in quarter one. You know, to answer whether the growth is as per the expectation or not, look, we have got like 1,200 properties using both Meta and social at this point of time. The TAM is so big. Like if I talk about combined TAM of Meta and social is around $4 billion. We can sell it to at least 200,000 hotels. We always feel that, you know, more can be done. Whatever we expected, I think, we as a MarTech division in terms of revenue and profitability got that in Q1 and the traction looks good as well. Great. Anything on the competition piece? Like who exactly are we facing? I request you to come back in the queue. Sure thing. Thank you. Yeah. Next question. I'll just quickly answer the question on the competitors, intensity there. You know, we don't have really one large competitor in that field because there are point solutions that maybe handle just Google, some handle just social, some handle just metasearch. A one comprehensive provider that does all doesn't really exist. If I had to take some names, you know, there are obviously the bigger ad agencies like WPP and Publicis that do social. You know, there are companies like Koddi and Sabre and Amadeus that will handle your Meta and Google. There isn't anyone that is comprehensively connecting to all potential options, like I mentioned, across the social universe and digital offerings, and also are able to use the intelligence that we have using DaaS products. A comprehensive, you know, product suite doesn't really exist out there, and that's why we are running. Thank you. We'll move on to the next question from Mr. Ashish from Goldman Sachs Asset Management. Please go ahead, sir. Yeah. Hi. Thanks for the opportunity. I hope I'm audible. Yes. Yes, Ashish, you are. Okay. Yeah. My first question was actually just to understand the customer additions in this quarter slightly better. I think I came across a slide in your presentation which mentioned 72 new clients added in MarTech, 64 in distribution, 55 in DaaS. There was another data point of overall customer base, increasing by around eight customers from 2,399 to 2,407. If you could just help me reconcile those two data points? Yeah. We actually did some cleanup this quarter in terms of identifying loss-making customers and you know, profitable customers. Because we are now in the process of pushing back all customers to come back to pre-COVID levels. Our focus has always been our enterprise customers and probably do away with small retail customers or maybe, you know, loss-making customers. We did some kind of cleanup there, and that's how. In terms of retention rate, we are still at 90%. We did in terms of head count of customers, there was some churn because we had to close down some of the customers' contracts because they're not profitable. Understood. Would that cleanup be something that is ongoing and will take time to maybe near completion or do you think that would be largely behind you? In terms of average price per customer, that is going to continue to increase. This is a exercise we'll continue to do if any particular customer. Because everybody is now post-COVID and you know no relief should be given because everybody is now the demands are high and all, right? This is a continuous exercise that finance team does between profitable and non-profitable client. Unless it's a strategic client, if it's not making profit, then we'll take a call on that, but it will be probably a continuous process. Sure. My last question would be, Bhanu, on the M&A side, how should we think about the intent going forward between, let's say, looking at some of the weaker competition in the market and consolidating them, versus, maybe looking at completely new streams of revenues, just the way you had added distribution a few years back and then MarTech after that? I think I've talked about our vision, you know, how we want to be one integrated tech stack that enables our customers to acquire guests, retain them, and have a wallet share expansion. All our business lines currently enable one of those goals today. The way we look at, you know, opportunities is really, you know, from a perspective of, you know, can this enable us to add the capability that we're looking to add in part of our, you know, product roadmap, and it speeds it up. Secondly, as you said, Ashish, there are, you know, opportunities available to consolidate and become more dominant in the areas that we operate by looking at some of our competition. We are doing that as well. Third is, you know, we wanna continue to maintain our dominance in, you know, the key markets of U.S. and Europe. If it enables us to get deeper in certain key geography, like in Europe, you know, with our myhotelshop, the last acquisition, they're very, very prominent in, you know, Germany, Austria and Switzerland. It brings us closer to our customers in those regions. We will look at opportunities from that lens as well. I do feel, you know, just the overall knocks that, you know, the tech industry has taken and I do feel like, you know, some good opportunities are brewing, but as you have noticed, we are extremely prudent in what we are willing to pay. I'm hopeful that, you know, some of this should come through given the environment in terms of valuations is also favorable to us. Mr. Ashish? We have our next question from the line of Rishit Parikh. Please go ahead. Yeah. Hi. Thank you for the opportunity. Just a couple of questions, Bhanu. I wanted to understand one, on MarTech. I mean, let's say if you were to look at two to three years out, how would the mix of the business look like? Will MarTech end up becoming, let's say, 60%-70% of the business? Or is there, you know, some of the new products that you roll out will essentially drive that distribution as well? How should we look at the mix, let's say two years out in terms of the business? That's one. Second, on the cash, if you look at the cash flow conversion, right, that's been weak for quite some time or maybe been about 40%-50% of the EBITDA, adjusted EBITDA, right? Could you just help us understand when I look at the subscription business, typically the cash conversion should look better, right? I'm just trying to understand how the cycle works. Thanks. Yeah. Well, you know, to your first question, we've actually done internally some projections, and I wanna be more specific to the answer on, you know, how do I see the revenue split. Tanmaya, would you have access to that internal three year projection that we have done? Yeah. I mean, I think the way we estimate, MarTech would be in the range of closer to 50%, because we are also estimating distribution. We are very bullish about growth of distribution business as well. It will. MarTech will be around 50%. And I'm talking about organic. Like, if we add more capabilities in other areas and all, again, that percentage will reduce for diversity. On cash conversion, look, this quarter we had our annual bonuses that needed to be paid out and that, you know, otherwise we would have had a higher conversion for that. In terms of collections, look, we were challenged because of COVID because some of the large customers are still paying us with a 75 days DSO. The DSO is slowly decreasing. If you see, I had a 10% sequential growth, you know, quarter-over-quarter, but my debtor balance has now reduced as compared to 31st March. The DSO now this quarter has reduced to 70 days, which was 80 days prior. We are continuing to improve upon that, and I estimate in next couple of quarters we should be below 60 days in terms of DSO. That will improve my cash conversion pretty significantly. Okay. Just even in the subscription business, typically the cash would come after 60 days usually. That's essentially the way to think of it? Yeah. I mean, we have a, like, enterprise client clientele, so, you know, I bill them annual in advance, but that invoice payout comes after like, you know, generally 45 days. Ideal 45 days. Because of COVID, it has gone up to 90 days at the COVID time, and then slowly reducing back to below 60 days in two quarters. Okay. I'm seeing a steady improvement in that every quarter. Okay. Understood. On a stable state, that's CFO- Parikh, I request you to come back in the queue, sir. Sure. Thank you. Participants are requested to restrict their questions to two at a time. Our next question is from the line of Saurabh Thadani from IIFL. Please go ahead. Okay. Thank you. Congrats on the good set of numbers, and thanks for taking my question. Most of my questions have been answered. Just one question on the operating leverage. While the operating leverage is clearly visible on the employee benefit expense on a Y- on- Y basis, the same is not reflected in the other expenses. Could you just throw some light on what driven the significant increase in the other expenses? and do you expect this to start normalizing, going forward? In Q1 our marketing and travel costs increased. Historically certain marketing events happens in Q2, but this time they happened in Q1, so the travel and marketing expenses were above what it should have been. It should normalize in subsequent quarters because those are, you know, kind of, not going to happen in Q2 and Q3 or happen lesser. Yeah, I think the goal is to reduce the other expenses as much as possible and you know, we are working towards that. Got it. Thanks. That's it from my side. Thank you. We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead. Hi. Am I audible? Mr. Jain, you're not audible. Is it any better? Sir, you'll have to speak a bit louder. Hello, can you hear me? Yes, sir. Please go ahead. Yeah, sorry for that. Essentially, you know, first of all, congrats on strong quarter. Actually, I want to ask a question which has been asked in different form already, but let me give it a different try. Essentially, I wanted to understand the constituent that can drive scalability to the business in the medium term. We all understand that this space has lot of penetration opportunity. We have the right product and we have the right presence. I think what somewhere I would appreciate your thoughts is that how this business can be much larger than what it is. Because if you keep adding small and several kind of a deal, it will become a challenge to grow at some point. That's our understanding, looking at some other companies, in a similar format. Do you think that is a challenge and what are the solution to it? Secondly, from an area of category addition, which I think, earlier Ashish also asked about. We have entered in this, you know, two, three sub-segment, within the hotel tech category, but there are many, many sub-segment avenues within those. Is there any logical extension that we should work upon to expand the TAM? The genuine TAM for us, not the total tech TAM, that we usually talk about. Yeah. You know, I think the first part of the question, I think maybe what you're saying is how big can we get, right? You know, the answer to that is, look, you know, when we talk about our overall TAM spread across all the three business units, it's significantly large. Something that, you know, I've continuously pointed in our earnings calls also is, while we work with all the top chains in terms of our penetration, you know, we might have a foot in the door, but in terms of ability to expand and grow in terms of both the number of hotels using us at each of these chains and all the multiple products that we have penetrating that, there's a huge opportunity. Let's not forget, you know, just to give you a sense on what has happened over the last sort of three years, there are a couple of things that have happened. One, we were hit by COVID, so, you know, irrespective of whatever good work we were doing, everything was on a halt. Second, you know, we really expanded our capability set really in the last three years, if you look at it, whether they were done organically or inorganically. Because prior to that, we were largely a DaaS company. You know, the good work of building new capabilities and taking it to the market is really beginning now. I do feel, you know, as we've indicated in our TAM and TAM assessments, it's fairly large. The second question that you asked about, you know, what are the logical areas that we can get into. You know, I'll go back to the vision statement that I've been alluding to. We wanna help our customers acquire guests, which is the traveler. Something that I talked about earlier on how our MarTech offering enables that. The second thing that we wanna do is, we really wanna help the guests. As a traveler, when you arrive at a hotel, that experience is completely broken, right? I mean, there is a lot of friction in how you go about organizing your day, you know, fixing up your transportation, finding the right restaurant to your fit. There is a tremendous opportunity how you engage with the traveler. There's already something in the works that we are doing to help solve for that. Then the third is, how do you expand on the traveler's wallet share? I mean, I think the current travel industry does a very, very poor job on not really capitalizing on the captive audience, the travelers that they have, in having a piece of the action on every dollar that the travelers spend. Both from an engagement perspective as well as wallet share expansion, we see, you know, huge opportunities to do disruptive things. You know, those are the items that we are, you know, working on. I think lastly, one other thing that we've noticed in our industry is there are number of companies providing solutions for number of use cases. There is not one that does it all, right? You know, think about Shopify. You know, is really becoming the Shopify? I think that's our other big endeavor, is to make sure that, you know, this whole integrated tech stack that enables our customers to acquire guests, retain them, and have a wallet share, is one integrated tech stack. That, you know, is the, you know, big endeavor where we are putting it all together on one platform. Right. Right. Appreciate you, Bhanu. Thank you. That's it from my side. Thank you. We have our next question from the line of Karthi from Suyash Advisors. Please go ahead. Yeah. Hi, thanks. I will limit myself to one slightly broader question. In terms of the levers for profitability, can you share some thoughts on there and w hat is the revenue contribution from MHS and profitability there, improvement opportunity there? And secondly, in terms of your direct booking split, volume split that is between GDS and OTAs. And MarTech profitability, if you would kindly comment on that. Thank you. Yeah. In terms of economy of scale, obviously, as I said in my script, look, we, this Q1, we had a large increase in the payroll cost, primarily not because we added a lot of headcount, but because of the, you know, increment impacts and all, and which is going to stay. We'll see minimal impact, minimal increase in rest of the quarters, whereas my revenue is increased at a much higher rate. That will expand the margins and probably guide us to whatever guidance we have given for the year. The gross margins levels are kind of steady at 75%. My DaaS and distribution business, you know, DaaS is around 85%, distribution is around 90%, whereas MarTech is around, trending around 60%. Because of higher growth in MarTech, because we have invested significantly in the sales and marketing, because we are seeing the traction. The profitability in MarTech is. It's still at a breakeven level. I think with growth, with volume, we can easily, you know, come to a double-digit EBITDA margin in MarTech, you know, going forward. Yeah, I think that's probably answered your query, right? Yeah. What has been MHS' contribution and profitability improvement there? When we acquired MHS, it was breaking even. Now it's around a 12% EBITDA business. Right. Lastly, on the volume split between GDS and OTAs. Our all businesses, whether we talk about distribution, MarTech or DaaS, 94% of our business is dependent upon leisure travel and 6% is dependent upon business travel, which is primarily GDSs. Within the distribution segment, I would say like 20% comes from GDSs or business travel and 80% from OTAs. Sure. Sure. Not too much of scope available there for mix change to drive profitability. Is that a reasonable understanding? No, both are profitable. Like GDS and OTA, they both from a distribution perspective is a highly profitable business. Yeah, leisure travel, you know, all, if you see all guidances in industry reports and all, leisure travel is at an all-time high. Improvement of business travel is icing on the cake, basically, because we are not expecting that this year. If whether business travel increases or leisure travel increases, it's going to drive profitability for us. Sure. Sure. Sure. Thank you so much and best wishes. Thank you. We have our next question from the line of Kshitij Saraf from Tusk Investments. Please go ahead. Yeah. Thank you. This is slightly related, question to- Hello. Sorry, your voice is not clear. Is it better now? Sir, can you speak a bit louder, please? Yeah. My question is on the retention. We see the gross retention at 90% and the net revenue retention at 105%. Comparing that with the recurring revenues of 99% across the businesses, is it safe to assume that this difference is mainly on account of the cleanup of the large-scale accounts, or is there another way to read it? It's a combination of two, three things. Yes, cleanup also has had some impact. Also, you know, Q1 historically is a slow quarter in terms of volumes, so that also has an impact. Plus also, if you see, last year when we clocked 115%, in fact, some quarters were ranging 120%, we're coming from a very, you know, low base, like 2021 was a pretty low base of COVID. Historically, pre-COVID levels, we used to operate around 110%. You know, Q1 always has been slow for us and it gradually improves sequentially as we move into the year. But it's kind of as per what was expected. Got it. That's helpful. Just one more question on the revenue front as we go forward. In terms of the volumes of bookings, would the third quarter be the peak or how do you see the bookings evolve as we go in this year or any year in general? The fourth quarter will be the highest, because, you know, January, February, March is where most people plan for their summer travel and the leisure travel bookings because our revenue comes when the booking happens, not when the travel happens, right? Q4 is always our highest quarter and also most of the U.S. companies have their start of the year as calendar year where the budgets are approved and also a lot of decisions happens in terms of new sales or new contract wins in the first quarter as well. For them, first quarter, for us it is Q4. Always Q4 is the highest one. The revenues gradually increase from Q1 to Q2 to Q3 and Q4. Q3 in terms of business travel is slightly low, but the leisure travel compensates that. That's how the booking pattern goes. Got it. Thank you so much and all the best. Thank you. Ladies and gentlemen, due to time constraints, that was the last question for the day. I now hand the call over to Mr. Tanmaya Das for closing comments. Over to you, sir. Well, thank you and it has been a great quarter as expected. Q1 as I talked about that is our soft quarter and it gradually sequentially the growth from a revenue and profitability perspective will improve. We are, you know, pretty confident of the guidance that was given in Q4. We'll be able to make that. Thank you very much for attending and taking time out. All the best. Thank you. On behalf of RateGain Travel Technologies Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you. My pleasure, sir.