Route Mobile Ltd (ROUTE) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Route Mobile Limited Q2 FY27 Earnings Conference Call. 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
Moderator: tell an operator by pressing "*" then "0" on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Agnihotri, Chief Executive Officer, Route Mobile Limited. Thank you, and over to you, sir.
Tushar Agnihotri (Route Mobile Ltd): Thank you. Good evening, everyone, and thank you for joining us for Route Mobile's earning call for the second quarter and first half of fiscal year 2027. I am Tushar and it's my pleasure to welcome you all. Joining me today are Vinay Benial, who will take you through the operational and strategic highlights of the quarter and Raj Gill, who will walk you through our financial performance in detail. Following our opening remarks, we will open the floor for questions. Before we begin, a quick note, our quarterly earnings presentation was uploaded yesterday. And I hope you had an opportunity to review it. Some of the statements made during the call may be forward-looking in nature and are subject to risks and uncertainties. Please refer to disclaimers in our presentations for further details. Now, let me begin by setting the context for the quarter. At our strategy update in May, the outline an ambition to move Route Mobile up the value chain from a messaging provider to a full-stack, AI-enabled customer engagement platform, while continuing to strengthen our operator business. 6 months into this journey, we're beginning to see this strategy taking shape in what our customers are buying, in the capabilities we've added, and in how we're working with the wider Proximus group. When we spoke in July, we explained that the dip in gross margin was driven by the loss of traffic from few large high-margin customers. We also indicated that we expected to recover from this. Now, this quarter, we made progress on that front. Gross margin recovered from 22.4% in quarter 2 from 20.9 in quarter 1. Also revenue, on a y-on-y basis, grew by 5.4%. Our focus this quarter was not simply on adding volume, but also on improving the quality and mix of our revenue. And that distinction is very important. Our portfolio of new products including RCS, WhatsApp, and other IP messaging solutions grew more than 30% on year-on-year basis, and now contribute to over a tenth of our revenue. This is the shift in revenue mix we committed to at our strategic update in May. And we are now seeing it's reflected clearly in our numbers. Q2 was also our first quarter with Helitar as part of Route Mobile. Now, as you are aware, Helitar adds our AI native, no-code engagement layer to our existing channels. We've already taken these capabilities to our enterprise customer base to the Route Mobile and Proximus sales team. This strengthens our move of the value chain from messaging towards full-stack customer engagement platform. Alongside our enterprise team, our enterprise business, we're also building the operator business. Our AI-driven firewall solutions are now deployed at 12 operators and we see a healthy pipeline of new opportunities. These solutions offer the potential for high margin recurrent revenues. Together with network API, which we are developing with the Proximus global ecosystem, they provide an additional growth opportunity alongside enterprise messaging. Our association with global telecom group gives us an important advantage as we develop these capabilities and take them to the market. We've also strengthened our leadership and presence in key markets. In Latin America, Marco has joined us as CEO of Masiv, our Colombian subsidiary, to lead the next phase of growth across the region. And in India, our participation at Global FinTech Fest help deepen our engagement with financial service leaders and ecosystem partners. BFSI continues to be our largest vertical, making this as an important market for us. Looking ahead to the second quarter, second half of the year, sorry, our priorities are clear. First, we will focus on converting a pipeline, particularly in high-margin opportunity across firewall solution and new products. Second, we will scale Helitar across markets, leveraging the broader Route Mobile and Proximus global sales ecosystem. And third, we will maintain a large focus on cost discipline. Our priority remains execution, improving the quality of revenue, building high higher-value capabilities,
Vinay Benial (Route Mobile Ltd): Thank you, Tushar. Good evening everyone. I hope you're all doing well. As Tushar mentioned we uploaded our quarterly earnings presentation earlier and I hope you had a chance to review it. Let me structure my comments in four parts: First, the shape of our revenue growth this quarter; second, gross margin and how the specific items we discussed in Q1 have played out; third, a few key business metrics; and finally, the key business developments of the quarter. Starting with revenue, in Q2 FY '27, the revenue from operations was 1,180 crore rupees, up 5.4% year-on-year and 2.4% quarter-on-quarter. For the first half of FY '27, revenue grew 7.4% year-on-year to rupees 2,331 crore. We processed 47.6 billion billable transactions during the quarter and 93.4 billion in the first half, approximately 11% more than in the first half of last year. I would again highlight the quality of this growth. Our new products portfolio comprising RCS, WhatsApp, and other IP-based messaging solutions, grew 36.7% year-on-year and 35.8% quarter-on-quarter to rupees 128 crore in Q2. It now contributes more than 10% of our revenue compared with approximately 8% a year ago, and continues to grow meaningfully faster than the company as a whole. We are seeing this growth across use cases such as conversational commerce, customer care, and banking journeys, as well as in RCS supported by the expansion of our direct operator coverage. The ILD business continues to face growth challenges and we remain focused on managing it for absolute gross profit rather than volume. Second, on gross profit. Last quarter we explained that our gross profit margin of 20.9% was affected primarily by a temporary disruption in traffic from select large high-margin customers while we deployed new solution capabilities for them. A smaller part of the impact came from the security incident at our Colombian subsidiary. As I said then, this was not business we had lost. In Q2, gross profit margin recovered to 22.4% compared to 20.9% in Q1 and 22.1% in Q2 last year. Gross profit was 264 crore, up 9.8% sequentially and 6.8% year-on-year. The improvement was driven primarily by higher margin traffic from our new products and existing customers. Third, a few key business metrics that I would like to discuss: As detailed in the presentation, net revenue retention for the first half stood at 105%. Recurring revenue, which we define as revenue from customers billed in every month of the period, accounted for 93% of revenue over the 12 months from September last year to September this year, up 89% as we reported in FY '26. On an annualized basis, 80% of the customers now generate more than a million dollars of revenue each in annual billing, compared with 73 in FY '26. Client concentration has also eased slightly, with our top five customers accounting for 30% percent of revenue as compared to 33% last year. By vertical, financial services remains our largest segment, contributing 15% of revenue, followed by digital natives at 12%. Finally, the business developments, the key business developments that we experienced in this quarter: The most significant development of the quarter was the completion of our Helter acquisition in July 2026. We acquired Helter Technologies' AI-driven customer engagement business through a slump sale. The acquisition strengthened our non-SMS portfolio across WhatsApp, RCS, voice, and communication analytics, while adding AI-native low-code customer journey orchestration capabilities for enterprise customers across India and international markets. We signed the business transfer agreement on 13th of July and completed the transaction on 29th July. The total consideration was rupees 33.7 crore, of which rupees 23.9 crore was paid at closing from internal accruals, while the remaining 9.8 crore rupees is deferred and payable 18 months from closing. The operating model remains as outlined in our July presentation. Helter is sold through the Route Mobile and Proximus global sales teams and supported by our existing support teams. Product development continues to be led by Helter's core team, which we are strengthening through targeted hiring. The early signs are encouraging. Several blue-chip enterprises were already live on the platform when we
Vinay Benial (Route Mobile Ltd): business, and we are now seeing early wins across banking, healthcare, retail, consumer durables and education. We are also seeing opportunities emerged in the Middle East and Latin American market. Let me share two examples from India. A healthcare provider in India is using Heltr to enable appointment booking, doctor search, test reports and hospital information to WhatsApp. A fashion brand in India is using the platform for conversational commerce covering the customer's journey from product catalogues and recommendations through to purchase. Commercially, Heltr provides an opportunity to expand our subscription-based and AI led revenue streams as customer accounts grow. Over time, it also creates the potential to move towards outcome-based pricing models rather than pricing based solely on the number of transactions. In Latin America, moving on in Latin America, we strengthened our leadership with the appointment of Marco A. Etcheverry as CEO of Masivian, our Colombian subsidiary. Marco will support the continued growth of the business across Latin America and its integration within the broader Proximus Global ecosystem. In BFSI, our largest vertical, we participated in Global Fintech Fest 2026 as a cloud communications partner and exhibitor. We showcased our omni-channel messaging, intelligent routing, and digital engagement capabilities, engaging with financial services leaders, technology partners, and other ecosystem stakeholders. We also introduced our omnichannel communications and conversational AI capabilities to prospective customers and partners at the event. Discussions focused on how digital customer journeys are evolving across onboarding, servicing, payments, and customer support. To summarize the quarter, revenue growth has continued, gross profit margin has recovered and new products now contribute more than a tenth of our revenue. With Heltr, we have added an AI-native engagement layer to our portfolio and are already taking these capabilities to the market. With that, I will hand over to Raj to walk you through the detailed financial performance. Over to you, Raj.
Raj Gill (Route Mobile Ltd): Thank you, Vinay, and good evening, everybody. I'll summarize our financial and operating performance during the quarter ending September '26 before opening the call to Q&A. As described by Tushar and Vinay, we delivered growth in revenue and gross margin both sequentially and year-on-year. Our Q2 revenue from operations was 11,797 million INR, representing an increase of 5.4% year-on-year and 2.4% sequentially, continuing the momentum from the previous two quarters. This quarter, our new products portfolio grew meaningfully quarter-on-quarter, which demonstrates the strong demand for our solutions and continued customer engagement. In Q2, we reported a gross profit of 2,640 million INR, which is higher by 6.8% year-on-year and higher by 9.8% sequentially. This growth was driven primarily by our new products portfolio, which I mentioned earlier. These carry higher margins than our core messaging traffic. Gross profit margin for the quarter stood at 22.4% versus 22.1% in the same quarter last year and 20.9% in the previous quarter. An expansion of around 30 basis points compared to the prior year, reflecting the richer mix from our new products. On a reported basis, operating costs were higher than previous quarter, mainly due to non-recurring impacts related to Masivian security incident and timing of the provision for performance-related bonuses. Let me be clear, these one-off costs do not impact the run rate and will moderate and return to normal levels in the coming periods, hence positively impacting EBITDA. Adjusted EBITDA for Q2 was 1,184 million INR, which is higher by 8.7% compared to the previous quarter, as the strong GM performance more than offsets the non-recurring costs. This all contributes to an adjusted EBITDA margin of 10%
Moderator: on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Bharat Gulati from Dalal & Broacha. Please go ahead.
Bharat Gulati (Dalal & Broacha): Yeah. Hi, hope I'm audible. Just just a few questions around the recurring revenue and NRR for the quarter and the reported the years that you've shown. Just trying to understand what is the nature of the recurring non-recurring revenues. Let's say, it's been 10% in FY25, 11% in FY26, and last 12 months, it's been around 7 odd percent. So, what's the quality of those revenues? Do they come in again or are they completely non-recurring in nature where those revenues are one-off? Yeah.
Vinay Benial (Route Mobile Ltd): Sure, Bharat. So, let me take that and so so, you know if you look at the kind of business that we do, it's basically supporting different kind of use cases for enterprises. So, you know it could be transaction related communication, it could be promotion or specific campaign related communication and then there are authentication related communication. Now with WhatsApp, we also have more conversational or bi-directional or you know interactive kind of communication which gets supported. But primarily when you look at non-recurring, it is largely one-time campaigns or you know certain marketing campaigns that enterprises run and these are typically not recurring because these are specific to a particular promotion or a particular product you know placement that the the brands or the enterprises want to run and sometimes they go away. But then you know, again these are sporadic. Once again, the same enterprise might come back with a new product promotion or a new campaign that they want to run for a certain certain customer set. So, you can consider them as one-time campaigns which come and go. But the same enterprise might continue certain other businesses with us. Now we classify them under various buckets, you know depending upon how the engagement with the particular enterprise is, and that kind of constitutes the non-recurring part of the business.
Bharat Gulati (Dalal & Broacha): So, let's say if we were to quantify it in terms of our 105% NRR that we reported for H1, you know that comes out to around 22,787 crore million rupees of revenue. How much of this NRR would be recurring and non-recurring? I mean you know, I'm just trying to understand the quality of growth over here, because if you see the non-recurring mix, if we eliminate that out of the business, there's basically no growth. So, is non-recurring business a part of, I mean is that part of our growth or is that just getting, coming into the business to aid numbers temporarily, and then again going out in the next year? Yeah.
Vinay Benial (Route Mobile Ltd): No, so typically, you know even even what might be non-recurring, could could be, on a on an annual basis, it might come back to. The way we redefine net, net recurring revenue is, you know we only look at customers whom we have billed consistently through the entire period. So, so, you know that customer, if if, for an example, you know in the last 6 months, if that particular customer has not run a campaign with us, it would drop out of the non-recurring sorry of the net recurring revenue. But, you know the same customer might come back in the season next year and provide us certain revenues for a new campaign or certain seasonal campaigns that they run typically on an annual basis. So, so that's the way it works, you know it might drop out for a certain month because of which it might not appear in the net recurring revenue, but, you know to give a very accurate answer, we need to do a little bit more deep dive into the numbers and get back to you. So, because you know it's just it's basically a more mathematical calculation here, but we can do another deep dive and come back to you with more specifics.
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