Affle: Future Growth Outlook | NDTV Profit
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00:00Hello and welcome to NDTV Profit. My name is Rucha Somaiya and today we have with us
00:05Mr. Anuj Khanna Soham, the founder, MD and CEO of AFL India. Thank you for joining us
00:11on the show, sir.
00:12Hi, good morning.
00:13Good morning. Okay, so AFL reported healthy numbers. Revenue was up about 3% while margin
00:21was largely flat on a quarter-on-quarter basis at around 20%. So what is your first take
00:27on the results, Mr. Soham?
00:29Well, AFL has done consistently well over the last five years. If you look at our revenue
00:34has grown 6x, profits have grown 5x and the growth journey has been very consistent over
00:40a long period of time. And Q1 this quarter was very special because not only did we deliver
00:47106 crore of profit before tax EBITDA and PBD, being over 100 crores was for the first
00:54time for us. And the revenue growth has been robust both, you know, in emerging markets
01:01as well as in developed markets. Organic growth was over 20%, consolidated basis close to
01:0728% growth year-on-year basis. So it's a very consistent growth performance. Even on margin
01:14expansion, if you see EBITDA margin has actually expanded year-on-year basis as well as sequentially
01:20it is on a positive trend line. So I'm very, very happy with the way the team has performed
01:25throughout this period.
01:27Right. Mr. Soham, profits were largely down because of a higher effective tax rate in
01:33the current quarter. So do you expect the current tax rates to continue or do you expect
01:38that to go down?
01:40In the long term, all the, you know, geographies around the world, they are basically working
01:48towards a certain fair baseline taxation. So you would expect all companies, all jurisdictions
01:55around the world to be in that 15 to 20% tax range. So I think where you see today, we
02:01have taken a conservative approach that for our UAE entity, we have actually taken and
02:06provisioned as if there will be tax in that jurisdiction because the laws are, you know,
02:11already there, but it's still not clear. So we've taken a conservative position. But what
02:15we wanted to present from this financial year onwards is that, you know, this is a
02:20fair tax basis on even on a fully sort of taxed basis, we are delivering a sensible
02:28sort of bottom line performance. So if you see it on a pro forma basis and apply the
02:32same tax rate that we had last year, you would see a much higher growth impact, you know,
02:37just on a like-to-like basis.
02:39So what you see now is a fair, fully loaded tax basis. And we think that we are doing
02:44really well, even with that taken on board.
02:48Right. Okay, so let me move on to the CPCU, that is cost per converted user kind of business.
02:55It's a really healthy growth of around 37% and which is like almost 99% of the revenue.
03:02So that 1% of the non-CPCU business, you had mentioned last time that, you know, you would
03:07like to reduce the focus over there. So what kind of revenue proportion do you expect from
03:13the CPCU and non-CPCU business going ahead?
03:17So our endeavor has always been that, you know, we are a consolidated consumer platform,
03:22a single cash generating unit, you know, all our acquired businesses, as well as, you know,
03:28markets, both emerging and developed markets is one cash generating unit for us. And we
03:34are seeing this CPCU business as a dominant factor within the consumer platform business.
03:39So I would expect 100% of the revenue to be a consumer platform business. And within
03:44that decisively, you know, 90%, 95% to be CPCU business.
03:505% to be CPCU business, is it?
03:54I said over 95% to be CPCU business. And it is part of what we define as a consumer platform
04:00business, you know, which is largely derived from giving digital advertisement.
04:05Right. Okay, got that. So one, one other question from my side is, these Apple OEMs, etc. These
04:13guys have come out with a new feature wherein they would allow users to ask them whether
04:19the app can track their activity or not. So do you see some kind of risk from, say, Apple
04:27users, because of this kind of privacy issue, because privacy has now become a very important
04:31concern for users. So how does that affect our business?
04:35So if you look at our track record, over 19 years, Apple has been leading this business
04:41consistently. And in fact, the change in Apple's privacy policy that you're talking about
04:46happened in 2021, in the early part of 2021. And we have shown that in 2021 itself, we
04:53turned it into a competitive advantage by being better prepared, by taking the position
04:59in a strong way, because our IP, which is, you know, anchored on 36 patents now, includes
05:06forward-looking Gen AI preparation as well. But most importantly, it is fundamentally
05:12privacy compliant by design. Since inception, since April 2005, our company has stood for
05:19consumer consent, consumer privacy. In fact, our first patent was filed in April 2005,
05:25and it talked about consumer acceptable advertising. Even in this title, it talks about
05:31consumer acceptance. So we are very much in favor of consumers' consent, being honorable
05:37and responsible, taking privacy seriously. And our IP for the future is also privacy
05:43ready by design. And we have actually turned the Apple privacy changes since 2021 to a
05:51competitive advantage. In fact, one of the case studies we have shared in our earnings
05:56presentation this time talks about how we are helping advertisers in India to succeed on
06:01the Apple platform. And I mean, this is amazing. So we are ready. And another thing that I
06:08would like to mention is that Google, just in the last month, has announced that it is
06:13no longer going to deprecate the cookies, at least not in the foreseeable future. And
06:17this is something Google had said they will do four years ago. And now in 2024, they have
06:23said they won't do it anymore. So their privacy sandbox project is also delayed. So I'm not
06:29expecting any major, let's say, ecosystem level changes in the next couple of years.
06:34So there's a very clear runway for consistent, predictable, profitable growth for our company.
06:40So just a follow up on that, if this kind of project gets implemented in the next, say,
06:47after five years, in the next six to seven years, will it affect our business? I mean,
06:54not in the near term, as you likely said, because it's not expected. But what after that?
06:59So we have already demonstrated that when Apple did this change in 2021, by the way, Apple is
07:04always ahead in these changes versus Google. And their change in 2021 made most of the industry
07:11players quite nervous. But Apple took it head on and converted into a competitive advantage.
07:16So having dealt with that several times in the 19 years, and most recently with the Apple privacy
07:23changes, what I'm saying to you is that Apple's platform is already privacy compliant. What I'm
07:29also saying to you is that our future proofing with Gen AI related use cases covered in the 36
07:37patents that we have filed and the IP portfolio, we are future ready and privacy compliant by
07:43design. So I'm not worried about data privacy related changes making as much of an impact
07:50because we have already negotiated it and converted it to our competitive advantage in the past.
07:56Right. So privacy compliant is what Apple is about. Got that. Okay. So moving on to the
08:03inventory part of the company. So largely, Apple pays for mobile ad inventory, regardless of
08:11whether a user is generating revenue or not. So can you explain to our viewers,
08:15how does this affect the dynamics, the profitability dynamics of Apple India?
08:21I think we have shown consistency in our bottom line performance as an organization.
08:26And we are absolutely clear that what we are delivering to the advertiser is a bottom line
08:35sensible ROI focused deep funnel conversion based platform capability. So the advertiser only pays
08:42us when they see ROI, when they see conversions, and that's the way we command the budgets.
08:48As far as our own profitability is concerned, if you look at the last five years,
08:55or even longer, pre IPO, post IPO track record of our company, we as a DNA are a bottom line
09:03sensible company. Cashflow positive operations, profitability is super important to us.
09:09We have done acquisitions in the last several years, and those companies were not as efficient
09:15on the bottom line. And we have consistently brought them up, turned them around to give a
09:19consolidated 20% plus a bit of positive performance in the last several quarters.
09:24So I am very, very clear about our focus on margins. As far as the inventory costs are
09:32concerned, most of the places in emerging markets, as well as in developed markets,
09:39there is a significant supply of inventory. As more and more people are using mobile phones,
09:44more and more people are going using mobile apps, even to make payments, everything that you can
09:51imagine is going digital. I mean, the consumption habits are going more and more online. And
09:56therefore, there will be a lot of inventory. What do you think about the fraud links that
10:01are happening across? I mean, how good is your fraud detection technology? And how important
10:07is it for our business? First of all, what we call fraud today, you know, is essentially
10:14what's non-human traffic, right? When on an internet, you see ads being either clicked by,
10:21you know, machines or what's defined as non-human engagement on the internet is today
10:27classified as fraud. Now, we have several patents filed across jurisdictions that are essentially
10:34dealing with, you know, detecting, preventing digital fraud from happening. And also very
10:40importantly for the future as more and more gen AI agents and, you know, using technology
10:47on an authenticated basis will become a base, you know, an important use case. We see this
10:53detection of human versus non-human traffic as a core intellectual property of the company. And
10:59it's super, super important. One of the reasons why our margins are healthy and are strong is
11:04because we are able to deal with this very, very efficiently. And we are able to also ensure that
11:10our acquired companies are now adopting our fraud analytics tool and platform and therefore
11:17improving their margin profile. So it's all work in progress, but we have differentiated IP in this
11:22area and we are doing really well to curb and to control this. Right. Okay. Thank you for that
11:29interesting insight and all the best for your future quarters. We really appreciate your time.
11:35So that was Mr. Soham from Apple India, but do stay tuned for more.