Hyderabad-based Tanla Cloud provides value-added services in the communication sector.
In a letter to shareholders, Uday Reddy, Founder President and CEO, said, “There were some operational headwinds in the Enterprise business in Q1, but we have our building blocks in place to accelerate our momentum in the coming quarters. We have a strong balance. Sheet and are excited by the opportunities ahead of us.”
“Our operating headwinds in Q1 are due to a combination of external and internal factors: market disruption, legacy system and infrastructure modernization, and foreign exchange impact,” he said.
Here is the message of CEO of Tanla Platforms to the shareholders
Over the years, we at Tanla have been building a great institution and have consistently been the industry leader in the rapidly evolving space of digital interactions. We have achieved this with 3 strategic focus areas – (i) creating great innovative platforms, (ii) focusing on customer success and (iii) incorporating ESG into everything we do. This is reflected in both the quality of our business (led by the platform, deep relationships with leaders across industry sectors) as well as the strength of our financial performance (13X increase in PAT in 6 years).
Our strategy is working, and I have a huge personal belief in our current direction. In Q1, we made significant progress with the intelligentization of our platform for digital interactions. Some updates to highlight the speed of intelligence:
I. Platform intelligently at VIL: We have deployed our AI/ML based firewall to prevent large scale leakage.
We have also launched Wisely Insights and have received overwhelmingly positive responses from many global tech companies. Behind intelligent insights and an AI/ML based firewall, we are able to deliver a better user experience, demonstrate better compliance and drive better business results (eg, OTP conversions), which will drive more business for us in the second quarter. should be translated.
II Kore.ai and Truecaller on Wisely: I have always believed in deep partnership to drive innovation. We begin our exclusive partnership with Kore.ai, the Gartner Magic Quadrant leader in the conversational AI space supporting 200+ Fortune 2000 companies. With Truecaller, we expect our revenue stream to begin in Q2. We are seeing great interest from enterprise customers and we have an exciting product roadmap.
iii. Innovation & Experience Center: Behind all our innovations is our team. Our innovation team will be housed in a truly unique customer experience and innovation center in Hyderabad, which will be launched in the second quarter. Our innovations are focused on building products that address greenfield opportunities, transforming the financial profile as well as increasing trust across the CPaaS ecosystem.
In this context, I am also very excited that Mr. Sunil Bajpai joined Tanla as Chief Trust Officer in Q1. He will work with the regulatory community, enterprises and partners to drive products and policies that address all consumer concerns in the evolving field of business communications globally.
We remain obsessed with customer success and have seen progress in our customer metrics. Our top customers have product reach 2+, i.e. on an average, we have often sold two solutions at different procurement centers among our key customers. It shows how invested we are in deepening our customer relationships. We are also adding new customers, with 40% of customers adding for new solutions beyond SMS.
While you can see significant progress in our strategic focus areas, we have operational headwinds in Q1. While our revenue grew 28% YoY in the seasonally weak quarter, our profits were under pressure. Our EBITDA and PAT margins are industry-leading even at Q1 levels, but are below the levels we have operated in the past. We have delivered 20%+ EBITDA over the last 5 quarters and this is the level we aspire to. Our operating headwinds in Q1 are due to a combination of external and internal factors:
Market Disruption: We observed market disruption in pricing in both NLD and ILD businesses in select clients, which impacted our EBITDA. We have been quick to respond by adopting a focused investing approach on our priority customers. We are confident that at the end of this cycle, we will emerge stronger with our clients and be able to achieve systematically improved profitability during this financial year.
Modernization of Second Legacy System and Infrastructure: From an internal perspective, we had some challenges in scaling up our legacy infrastructure as our volumes have increased significantly over the years. We have used this opportunity to completely modernize our legacy systems and infrastructure to the highest standards. We had an impact on EBITDA in the first quarter, but we don’t see this impact going forward.
iii. Forex Effect: The sharp depreciation of the Euro against the US Dollar had an impact on EBITDA.
While Q1 didn’t go in the direction we would have liked, it doesn’t take away from my belief how exciting the future is. Our building blocks are coming together, and we are just getting started. We stick to our strategy of ‘Build over Buy’.
While the markets are moving from net growth companies to companies with profitability and cash flow, we are always on a path of profitable growth with strong free cash flow. We have a very strong balance sheet (cash balance of) 9,873Mn and zero debt) as well as a strong cash flow generating business ( 965Mn Operating Cash Flow).
I am very excited by the opportunities and prospects that lie ahead of us. I am confident that we will continue to deliver on our promise of strong, consistent and profitable growth in the years to come.
Thanks for your support.
Uday Reddy
Founding President and CEO
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