Matrimony.com Limited — Call Transcript 2018

Nov 14, 2018

matrimony.com

November 14,2018

National Stock Exchange of India Ltd	r orate Relationship Department
Exchange Plaza, 5th Floor	BSE .,
Plot No: C/1, G Block	Phiroze Jeejhee Towers
Bandra Kurla Complex, Bandra (E)	Dalal Street, Mumbai - "'\J"'~
Mumbai - 400 051

Dear Sir/Madam,

Sub: Call transcript of Investor/Analyst conference call under regulation 30(6) of SEBI (Listing Obligations & Disclosure Reguirements) Regulations. 2015.

Ref: BSE Scrip code: 5407041 NSE Symbol: MATRIMONY

Pursuant to Regulation 30(6) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the call transcript of Investor/Analyst Conference call with the Company held on 15t November 2018 is attached herewith.

The aforesaid information is also being hosted on the website of the Company viz., www.matrimony.com.

Submitted for your information and records.

Thanking you

Yours faithfully,

For Matrimony.com Limited

'') s~::.t::

Company Secretary & Compliance Officer ACS: 18951 No.94, TVH Beliciaa Towers, Tower II, 10th Floor, MRC Nagar, Chennai - 600028

matrimony. com

"Matrimony.com Q2FY20 19 Earnings Conference Call"

November 01, 2018

Management: MR. MURUGA VEL JANAKIRAMAN PROMOTER & MANAGING DIRECTOR

MR. BALASUBRAMANIAN K CHIEF FINANCIAL OFFICER

• Moderator: Ladies and gentlemen,good dayand welcometo the Matrimony.comQ2 FY2019Earning ConferenceCall, hostedby AxisCapital.As a reminder,all participantlineswill be in the listenonly mode and there will be an opportunityfor you to ask questionsafterthe presentation concludes.Shouldyou need assistanceduringthe conferencecall, please signal an operatorby entering"*"then "0" on yourtouchtonetelephone.Please note thatthis conferenceis being recorded.I now hand the conferenceoverto Mr. SantoshSinha fromAxis Capital.Thankyou, and over to you Sir!
• Santosh Sinha: Thanks Melissa. A very good afternoonto all the participantson this call. I welcome you to the Q2 FY2019 earnings call for matrimony.com. We have with us Mr. Murugavel Janakiraman, Promoter & ManagingDirector and Mr. Balasubramanian,Chief Financial Officer.The call will begin with a brief management discussion on the performance for the quarter. This will be followedby a Q&A session.I will now hand over the floor to Mr. MurugavelJanakiraman.Over to you Sir!
• Murugavel J: Thank you. Good evening and advance Happy Diwali wishes. Welcome all to our FY2019 Q2 investor call. BeforeI begin,I also wantto share that I recently completedadvancedmanagement programme at Harvard, quite enjoyed the entire learning experience. I shall take you through initially the consolidated financial performance of the company and then we will cover the performance on each of the two segments we operate. In the end we will be happy to take questions.

Consolidated results matrimony.com, the leading online matrimony company has achieved consolidated revenue of Rs.87.58 Crores for the quarter, a growth of 5.4% against a corresponding quarter of the previous year. The gross margin before marketing expenses was at 41.0% as against 40.1% in the corresponding quarter of the previous year. The company has incurredhighermarketingspend ofRs.5.8 Crores againstthe correspondingquarter of the previous year. The earning before interest tax and depreciation EBITDA for the quarter were at Rs.17.4 Crores as against Rs.20.6 Crores for the corresponding quarter of the previous year. The EBITDA margin for the quarter was at 19.7% as against 24.6% for the corresponding quarter of the previous year. The company's consolidated net profit before tax for the quarter was at Rs.18.2 Crores against Rs.18.8 Crores the corresponding quarter of the previous year. The PBT margin for the quarter was at 20.1% as against 22.5% for the corresponding quarter of the previous year. The income tax charge in the previous financial year is lower due to the availing of the carry forward loss and the recognition of previously unrecognizednet deferredtax assets.

The company's consolidatednet after tax for the quarter was at Rs.13.4 Crores againstRs.19.2 Crores the corresponding quarter of the previous year. Matrimony will continue to invest additionally in marketing and as a result the EBITDA margin will be lower than the earlier period. The talent pool has been strengthenedacross organization,which should result in higher performance in the coming quarter. Overall, profiles added for the quarter were at 10 lakhs of which 60% were posted by the prospectsthemselves, 17%of the profiles were added by parents, and 23% ofprofiJes were added by siblings,relatives, and o~ers. Around 55000 succ~~~<Ori,?, ~'.. have been reportedto the companyin HI ofthe currentfinancialyear. . :~':~::..~;\

ty"','o;,' I'D '.. ,->;Ci

..,-...._."._/

Moving on to segment results matchmaking, active profile grew by 12% and the average realization improvedby 4.7% in the current quarter when compared to the correspondingquarter of the previous year.Matchmakingsegmentsalesfor the current quarter was at Rs.83.5Crores as againstRs.77.0 Croresforthe correspondingquarter ofthe previous yearresulting in a growthof 8.5%. Segmentrevenue for the current quarter was at Rs.85.1 Crores as against Rs.79.0 Crores for the corresponding quarter of the previous year resulting in a growth of 7.7%. The gross margin before marketingexpenseswas at 49%, which is in line with the correspondingquarter of the previous year. Marketingspend in Q2 as percentageof revenue is higher by 6% over the Q2 of the previous year and consequentlythe EBITDAmargin is at 27.7%. EBITDAfor the quarter was at Rs.23.5 Crores as against Rs.26.7 Crores for the corresponding quarter of the previous year.

Moving onto marriage services, the marriage service revenue for the current quarter was at Rs.2.4 Crores as against Rs.4.6 Crores. The marriage service segment, which is in nascentstate, has opportunities(Inaudible 5.24), which are being addressed. This segment expects a healthy growth from Q3 onwards as Q2 is historical lean quarter for marriage services. The cash bums for the quarter was Rs.3.5 Crores as comparedto Rs.3.8 Croresfor the correspondingquarter of the previousyear.We are now open to take any questionsthat youmay have. Thankyou.

• Moderator: Thank you. Ladies and gentlemenwe will now begin the question and answer session. Ladies and gentlemen,we will wait for a momentwhile the question queue assembles.We have the first question fromthe line of RohanAdvantfromMultiAct.Please go ahead.
• Rohan Advant: Thanks for the opportunity.My first question was regarding the advertising spend now that we are increasingthe advertisingintensity,I would have thought that the revenue growth should be higher, but if you see the paid subscriptiongrowth is quite low, so why is the advertisingspend not translating into higher growthor isthe competitiononly focused on volumegrowth and so its spends are for that volume growth only and so we are not being able to generate revenuegrowth out ofthis?
• Murugavel J: Thank you Rohan. The increase in advertising spend has just started. The ben e fit 0 f the inc rea sed s pen d will hap pen 0 v era per i 0 d 0 f tim e. As you are aware post the increased advertising spend, the free profiles will increase which will translate into first time conversions and renewals. We have just started the higher spends in marketing and we will furtherstepup our marketing spend over the couple of quarters. This we believethat this effortwilltranslate into better growth.
• Rohan Advant: On the ad spends, we have done about Rs.18 Crores this quarter, generally the second half is higher ad spend, so can you guide us as to what would be the ad spends in the second half in amount?
• Murugavel J: As said earlier, we will be embarkingon higher marketingspend includingroping a celebrityto achieve the higher growth.We are not in a position to quantify, howeverthe marketingspend in H2 will be higherthan HI. Consequentlythe EBIDTAmarginswill have an impact. .-"---;-;:-:-...... / \0.....'1)1)1 0_-.", ( 0

Rohan Advant: Lastly we have an extremely strong competitive position in the South and lesser relatlve. ~:

') (OJ,:) JIT> - . -'/0. /'

competitive position in other geographies,so can we do differential pricing like have a higher revenue per customerin the South and lowerin others where the competition is more, do we do that alreadyor can we do it in the future?

• Murugavel J: The management will continue to experiment different pricing strategies and look at the opportunitieswhich can maximisethe revenue.
• Rohan Advant: Okay.Thanksfortakingmy questionsand all the best.
• Moderator: Thankyou. We have the next question fromthe line ofPranav Kshatriya fromEdelweiss.Please go ahead.
• Pranav Kshatriya: Sir. Thanks for the opportunity. Sir we are aware that this space we are seeing increasing competitive intensity, can you just commenthow the competition is reacting to your increase in advertisementspend or how we should see this and secondly if advertisementexpenditureis one of the things, which is actually leading to lower EBIIDA margin and if it is a response to the competitive intensitythen how sure you are that it can get over in one or two quarters, can it not prolong for a longerperiod oftime?
• Murugavel J: The marketingstrategywhichwe plan to adoptover the next two quarterswillresult in higher revenuewith a lag. The growthin revenuewill be higherthan the growth in the marketingspend as a result of the strategyto be adopted,whichwillresult in improvedEBIDTAmargin fromthe current level.
• Pranav Kshatriya: Sir can you also commenton the competition,how competitionisreactingto higherspend?
• Murugavel J: Our primary competitionis from northern and westernmarkets and we are seeing an increase in marketingspendby Competitors.We are the only profit making companyin this space, operating at certainEBIIDA marginand in a positionto sustain higher marketing spendsfor a while.
• Pranav Kshatriya: Sir sorry to drill down a little bit on this, but is the competition reacting primarily with higher marketing budget or there are some price accents also, are they offering some discount or something and second point you alluded to some of the challenges, can you just discuss a bit what exactly youmean by someof the challenges?
• Murugavel J: Yes. There is an increase in the advertisingspend and discount by the competitorsparticularlyin north and west. Since the majorityof revenuewhat we get is from south, we are fairly insulated fromany activity by competitorsin thosemarkets.

Pranav Kshatriya: Sir that is it,I will comeback in the queue.Thankyou so much.

Moderator: Thank you. We have the next question from the line of Nikhil Dawda from Motilal Oswal SecuritiesLimited.Please go ahead.

Nikhil Dawda: Thank you. Sir I have three questions, first one is on the EBIIDA margin profile, given the marketing spends which we are increasing due to the competitive intensity, do you think ~ '._-:::~ wouldbe the newnormalcloseto ²⁰ andthat isthe firstquestion? ^c ,> -~-.:.?!(~\

((l::henr}~i S: \~28 ~ , ", "'-. .....____

"-- 'R ---

Murugavel J: You want me to respond for the first question okay. Yes. the EBIDTAmargin can slightlygo down, but again we see that it will be for a couple of quarters and post that the marginwill start improving.

• Nikhil Dawda: But what gives us is confidenceof bouncingback?
• Murugavel J: I think we definitelysee that the steps whatwe are taking in terms of increasingmarketingspend will result in higher profile. We are taking certain steps to increase the conversionand we are confidentof highergrowthwith all the revisedapproachin matchmaking.
• Nikhil Dawda: Yes Sir, so secondquestionbeing given south beingour forte, given better services,do you think any inorganic growth opportunitiesmake sense in the north to capture marketshare or organic is the best way?
• Murugavel J: In southernmarket, we are strong.We have a fairly strong market penetration in the north as well .If inorganicgrowthopportunitiesexists,we will evaluate and take appropriateaction..
• Nikhil Dawda: My point is, are there any opportunities, are enough good players to acquire or it is too fragmenteda marketwhereyou see organicallyyou maybe able to grow better?
• Murugavel J: Consideringthe marketopportunities,there is a scope for higher organic growth. Will evaluate inorganic opportunities as well.
• Nikhil Dawda: Okay, third and last question is, if you can throw some light on new areas of growth, any new areas of growth that youmaybe seeing?
• Murugavel J: Our wedding services segment has considerable market opportunity and will grow from Q3 onwards. All necessary steps in this regard including hiring of business heads with adequate experiences have been taken which will result in higher growth rate over the coming quarters.
• Nikhil Dawda: Thankyou.
• Moderator: Thank you. We have the next question from the line of Prajwal Gote from Batlivala & Karani Securities.Please go ahead.
• Prajwal Gote: Thanks for taking my question.Just wanted to understand on marriage services part, you had guided that you would be doingtopline ofRs.3.5 Croresto RsA Crores on a quarterlybasis,just wanted to understandon that can you please throw out numbersfor marriage servicesnumberof eventual than in the photographyand the other part of businessfor marriage services, this is my first question.
• Murugavel J: The number of events probablymay be around 600.
• Prajwal Gote: So that was on the photographySir, other part of business which you said that it is scaling up how is that going and you said you are tryingto expand it out of the South India, you wantedt~ _-.-.;(~ add otherregions also, how isthat going Sir? ~,,-;:;). ,~._./' )

,_'~nn~'}1 ···~}lf

."'_.--~-_.-/

• Murugavel J: The matrimonybazaarbusinessdefinitelywe are seeingbetter traction. We have three businesses which you know as a part of wedding services, one in matrimony photography and second is matrimonybazaar and third is matrimonymandaps.We see a good growth in Matrimonybazaar in the coming quarters and would like to operate only in south for some more time before we decide to get into other market.
• Prajwal Gote: UnderstoodSir and how aboutthe pricingpart you saidthat you had bought of flat pricing,so the weakness in revenue of marriage services basically there are two weakness in events is that correctunderstandingSir?
• Murugavel J: Definitelythere is an increase in the ARPUin photographydivision since we have tightened the prices.
• Prajwal Gote: Exactly,so decliningnumberof eventsbasicallycomingdownto...
• Murugavel J: Q2 hasinauspiciousmonths and as a resultthe volumeswill be lower.
• Prajwal Gote: Understood Sir, my last question is basically on pricing for matchmaking Sir. As you said that you are trying to penetratemore in the north Indian market which is a faster growing market,but as I could see that the pricing had increased in fact perform in the base guidance of flat with decline in pricing, I just wanted to understand on that part, what has changed there and what wouldbe the pricing in the comingperiod?
• Murugavel J: The ATV has movedup, in Q2 which is, 4542, a growthof 4.7%.ATV is a result of productmix and price realization.
• Prajwal Gote: Understood,thanksfor givingme the opportunity.
• Moderator: Thankyou. We have the next questionfromthe line of Shiv Kumar fromUnifi Capital.Pleasego ahead.

ShivKumar: Thank you for the opportunity.Can you give us a sense as to how the ATV willtrend in a typical year, is it like going by last year you typically take a hike during Q2 or what is the in-house strategy with respect to the ATV, how do you drive it and how should we forecast going forward?

Murugavel J: As said earlier, ATV is a result of multiple drivers. One being the product mix - Standard Package which has three months,six months,one year etc and other personalized packages like assisted matchmaking, elite matrimony which operate at a higher ARPU. Any change in the mix of the above packages will have an impact on ATV. We also tighten the discountsresultingin higherrealizationand ATV. The other being the base price increase. Over the period, the ATV has been on the increase as a result of better product mix tightening the discount and increase in base price. The growth is largely coming as a result of, increase in profile or increase in the conversionsor increase in the average transaction value, . We believe that 0 the increase in marketingspend will help us in acquiring more profiles which will leadto betterconversions.

• Shiv Kumar: While the active profiles have grown by about 12% year-on-year,the paid subscriptions,which have been on boarded on this particularquarter grew by only 4%, so what needs to be done to actuallymatch the growth in activeprofiles?
• Murugavel J: In a quarter, around 184000profileshave become paid members.The free profile growth as you rightly point out is around 12% year on year. On an annual basis, out of 100 free profiles registeredaround 13%becomea paid member.Asthe membersdo take time to convertfromfree to paid, it is appropriate to review the conversion rate on an annual basis instead of quarterly basis.

Shiv Kumar: How was the trend overthe lastone year Sir, whatwasit in Q2 lastyearthis 13%number?

• Murugavel J: Number wise, it is prettymuchthe same.
• Shiv Kumar: One more question with regardsto the ATV, typically I notice from the little research that I did you have almost the package levels are the same across the portals whether it be a Tamil Matrimony or Telugu Matrimony why are you not customizing depending on your market leadershipin that particulardomain?
• Murugavel J: We continue to look at variouswaysto maximizethe revenue opportunity.At this point of time, we have a standard pricing across all domains. Since we have various sales channels, at this point of time we have adoptedstandard pricing package. While the price of the packagemay be the same across regions, in terms of discount what we offer vary from market-tomarket.
• Shiv Kumar: One last question with regardsto the statementyou made in the press release you said the talent pool has been strengthened,so whatparticularsegmenthas been strengthenedin this quarter?
• Murugavel J: Recently we have recruited a business head for photography,matrimony bazaar and also a COO for our matchmakingbusiness which strengthens our leadership team.
• Shiv Kumar: Thankyou Sir. That isit frommy side.

Murugavel J:

• Moderator: Thank you. We have the next question from the line of Irnran Khan from Ratnatraya Capital. Please go ahead.
• Imran Khan: Thanksfor the opportunity.I have one questionon the marriageservicesbusiness,so howdo you guys get to know if somebody is about to get married let us say in a month or two, so that you can sell the marriageservices?
• Murugavel J: Members delete their profiles post finding their match. We capture the reasons for deletion which triggersthe opportunityfor marriageservices.
• Imran Khan: I get it, but you get to know it after they got married right, once the guy is married there is no point trackingthat right? ">.._) ---....., ...

As said earlier, based on the deleteddatabaseof the registeredmembers,the marriageservicesteam

do connect with the members constantly and firm up the opportunities in the marriage services space. We also have tieup with various agencies connected with wedding like marriage hall, wedding card designers etc. Based on the above, the services team keep track and monitor the same.

• ImranKhan: Thank you. Next question is you have earned some 24 million in revenues from the marriage services business and spends some 35 million INR, so can you please tell us what is the salary part out of this 35 million?
• Murugavel J: We are not giving the breakup, but majority will be salary.
• ImranKhan: Majority would be salary, no problem. Just one small question on the matchmaking side, can you please tell us what percentage of the volume comes from the Tier-II and Tier-III cities?
• Murugavel J: We are not giving the breakup of Tier-lor Tier-Il, Tier-III, but there is definitely an increase in the number of people creating a profile from Tier-III due to internet growth and penetration.
• Imran Khan: Thanks a lot. Best ofluck. Thank you.
• Moderator: Thank you. We have the next question from the line of Deep Shah from Ambit Capital. Please go ahead.
• Deep Shah: Yes. Thank you for the opportunity. I just had one question, Sir could you please throw some light on the UAE part of business?
• Murugavel J: We are in the process of setting up of an office in UAE, so probably sometime end of this month or may be early next month we will commence our operation in UAE because it is primarily targeting Indians living in that part of the world.
• Deep Shah: Thank you.
• Moderator: Thank you. We have the next question from the line of Mit en Lathia from HDFC Mutual Fund. Please go ahead.

Miten Lathia: The ad spend per profile acquired was very flattish for the last seven quarters and it has certainly gone up by about 20%, so is the industry in aggregate spending much more money to acquire the sarne number of profiles or would our share of profile acquisitions have gone down?

Murugavel J: In North and west market, there are multiple players spending substantial amount on ad spends coupled with lower realization and as a result the profitability of those players will be lower. Currently we are not spending sufficiently in the north market as the advertisement in Hindi through GEC channels is very expensive. Now we are changing our approach to our marketing effort in the northern market by appointing a celebrity as a brand ambassador to leverage the opportunity. As a result of this, our spend towards marketing in these areas will increase in the next few quarters.

Miten Lathia: Sure Sir. Understood. Thank you Sir.

---

Moderator: Thank you. We have the next question fromthe line of Prajwal Gote from Batlivala& Karani SecuritiesIndiaPrivateLimited.Pleasego ahead.

• Prajwal Gote: Just wanted to understand on the advertisementpart, the last time you had guided for Rs.70 Croresof advertisementspendfor FY2019and you have already done 35 in the firsthalf and you have been adding that you are trying to acquire celebrities and all in the second half, so just wanted to understandwhatwould be your guidance for that in the comingperiod, so will it cross 70 or what wouldbe the range forthe year2019 and forthe year 2020 as well?
• Murugavel J: The marketing spend will further move up in the second half, definitely which will impact EBITDA margin. . We are not giving the exact number, but definitely it will be more than the firsthalf.
• Prajwal Gote: Thanksforthe clarification.Thatis all frommy side.
• Moderator: Thank you. We have the next question from the line of Nilesh Shah from Envision Capital. Please go ahead.
• Nilesh Shah: Yes. Thank you for taking my call. In betweenI think sometime in last month there is a startup called better half, which got some funding, which is an artificial intelligence powered matchmaking platform, so I just wanted to understand that, in case if you are aware that what they are doing or whatthey intendto do isthat anythingdisruptive, isthis a threat for playerslike us who have been around forso long leader,so if you couldjust kind of really spend sometimein terms of helpingus understandifthis is a fresh formof competition,which is comingup?
• Murugavel J: We do not think so because as a company we believe that AI is an enabler for better conversion and continue to improveour matching algorithm to show the relevant profiles. As we have stronger brand and large database of profiles, we believe AI can only be an enabler.
• Nilesh Shah: Just in terms of the technologicalcapabilities,would it be that they would have of course yes we kind of way ahead of them in all the other areas, but in terms of technology do you believe that they have some extra capabilityor somebetter competencyversus us?
• Murugavel J: We don't have informationon their technologicalcompetencies.However,we as a Company continue to invest behind artificial intelligence and many machine learning for better algorithm,
• Nilesh Shah: That is very helpful. The second questionI have is on the marriage services business,so first of all clarification that in that space we are into the transaction based business and not the listing based businessisthat understandingcorrect?
• Murugavel J: No, Photographybusinessistransactionbased.But revenue fromMatrimonybazaar and Mandaps willbe frombothtransactionand listing.

J: Murugavel	Yes there is a listing fee and a transaction fee
Nilesh Shah:	Thank you so much and all the best.
Moderator:	Thank you. We have the next question from the line ofPranav Kshatriya from Edelweiss. Please go ahead.
Pranav Kshatriya:	Thanks for the opportunity. Sir you talked about differential spending by different operators in the north and the western market, has there been any market share shift visible at this point of time or any pattern in the spend of number one, two, three operators?
J: Murugavel	In terms of number three they have been flat for the last so many quarters. So that way with the incremental revenue from that market, we believe we have been growing. Since we do not have any data about number two, we are not in a position to comment on that one.
Pranav Kshatriya:	But looking at the overall activity you think that the number two player and I am referring specifically to the northern and the western market is there has been any shift in the spending pattern per se, is the number two player advertising as much as number three and number one player?
J: Murugavel	Definitely at this point of time the other players are definitely spending more money than what we are spending in the northern market, so that is one of the reasons we are going to step up our marketing in the northern market because north as a market we are not being so well penetrated.
Pranav Kshatriya:	Thank you. That is it from my side. Thank you so much.
Moderator:	As we have Thank you. no further questions I would like to hand the floor back to the management for closing comments. Please go ahead.
J: Murugavel	Thank you so much. The impact on the EBIDTA margins due to higher ad spends, we believe it is temporary in nature. With our revised approach, we are positive and bullish on the future performance of both match making and marriage services.
	Thank you so much.
Moderator:	Thank you. Ladies and gentlemen, on behalf of Axis Capital that concludes this conference call. Thank you for joining us. You may now disconnect your lines.

(This document has been edited for readability)

For further information, please contact:

Vijayanand S Company Secretary Matrimony.com Ltd. No: 94, TVH Beliciaa Towers, Tower 2, 10th Floor, MRC Nagar, Mandaveli, Chennai- 600028, Tamil Nadu, India. Phone: 044-24631500 Email: investors@.matrimony.com CIN: L63090TN2001PLC047432