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JustDial earnings Q1 FY19: to increase ad spend, possible partnerships with telcos

Online classifieds and e-commerce company JustDial has reported a net profit of Rs 38.5 crore for the quarter ending June 30th 2018 (Q1 FY19), marginally up 1% on year. However, the company’s bottom-line fell 1.1% on a quarter-on-quarter (QoQ) basis. JustDial largely attributed its fall in profits to the massive slump in its other income, which fell due to a surge in bond yields during the quarter. JustDial’s other income stood at Rs 8.2 crore for the quarter, down 69% from Rs 26.6 crore in the same quarter last year.

Yet, the company remains optimistic over its future. In its earnings call for the quarter ending June, JustDial’s CFO Abhishek Bansal said that the last few quarters had laid a strong foundation for the company in the coming years. The company highlighted the fact that despite having a substantial user base of 100 million quarterly unique users, it recorded a growth of 25% on-year to about 125 million users in Q1 FY19. Answering a question, Bansal said that while the Apr-June quarter has typically yielded high traffic for JustDial, the launch of the firm’s new mobile website also aided the number of visitors.

Explaining the rationale behind the company’s optimism, Bansal said that over the last few quarters JustDial had focused on improving its products, as they believed that it would lead to an increase in its user base, which in turn would lead to higher profits. He said, “As we have mentioned earlier as well that first of all user growth has to come in and the monetization growth will come with that because in our case it’s an indirect co-relation. Just Dial advertisers, Just Dial gets more users. Over time, SMEs realize they get more visibility by investing in Just Dial. That makes more SMEs come to Just Dial. And that makes the existing SMEs pay more to Just Dial. So, that particular thing is playing out.” 

Other notes from the earnings call

Revamping mobile website and applications

During the quarter, the company finished revamping its mobile site, which reportedly cut page load time by about 40% and helped it not only retain old users but attract new ones. It expects its new iOS application, which was released last week, to mirror the success of its mobile website. “The new iOS app has got released this week which is not only blazing fast; it has a very sleek design, loaded with curated content, chat messenger and other user-friendly features,” Bansal said. During the con call, he also said that the company will soon release a new and equally feature rich application for Android.

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On team expansion

In the earnings call, Bansal explained that JustDial will prioritise enhancing the productivity of its existing workforce over making fresh recruitments. “Squeezing efficiencies is an ongoing process. Even currently, I would say that productivity can be enhanced further,” Bansal said. It has put in place systems and processes to ensure that they don’t make unnecessary recruitments, according to Bansal.  However, the company will accelerate its hiring policies when its employees achieve their threshold productivity level, which it aims to do as soon as possible, the CFO added.

To a different question on the matter, Bansal said that the company would want to expand its ‘feet-on-street cold calling team’ over the next four to six quarters. He also attributed the sharp rise in JustDial’s employee count for Q1 FY19 largely to this particular team’s ‘healthy growth rate’. However, he said that its uncertain if the said hiring would happen over the next one or two quarters.

In June, JustDial’s employee count increased to 12,281 from 11,262, up by 9% from the same quarter last year. Sequentially, it increased by 7.2% from last quarter.

Employee cost and other expenses

To a question on whether JustDial will try to bring down its employee cost (as a percentage of sales), which in Q1 FY19 stood at 53%, Bansal said that it’s not a specific percentage that they target. He explained, “For example, in case we are able to launch certain alternate revenues, for example over the next few years if we are able to increase the online contribution such that customers themselves sign up, this particular employee cost can go down. Or if you launch a reseller programme where we have resellers selling Just Dial product purely on a commission basis, that can bring that down.”

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To a different question on the subject, Bansal said that JustDial’s operating expenses, excluding advertising, have been optimized significantly over the last four to six quarters and going forward, the company expects these expenses to grow in line with inflation trends.

Tier 2 and Tier 3 vs Tier 1 cities

Answering a question on the company’s growth in Tier 2 and Tier 3 cities, Bansal said that they growing at a much faster rate than Tier 1 cities and currently ‘contribute about 44% by campaigns and about 22.5% by revenue’.  In the previous quarter, these numbers stood at 43% and 21% respectively. He added that Tier 1 cities to contributed about 77% to revenues as compared to about 79% in the previous quarter.

Ad spend increase

Bansal said that they will be spending a lot more in the next few quarters than the Rs 65 crores JustDial did last year. He claimed that the company will spend 8-9% of the it’s top line on promotion of its products. Bansal explained that as JustDial was in a process of revamping their mobile website and applications in the last two quarters (including Q1 FY19), the company felt that spending on advertisements post the revamp would be more beneficial.

However, he also said that ad expenses could fluctuate in the next few quarters. “On a quarterly basis, definitely there can be fluctuations, so in a particularly quarter where we have a mass media campaign coming in or any other large-scale promotional activity this particular number should ideally jump up,” h added.

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On potential partnerships

When asked about JustDial’s take on partnering with telecom operators/internet providers like Jio, Bansal said that the company is ‘always open’ to any kind of collaborative effort, and that they have been talking to some operators already. “We would see as it moves forward. That has to be a win-win kind of a collaboration. So, when such kind of an opportunity arises, we will definitely grab that. Obviously getting easy traffic by way of such type of distribution is definitely a smarter way and must way to do.” he said.

On competition

When asked about JustDial’s competition, Bansal explained, “on one hand we can possibly say that there is significant competition from vertical players; on the other hand, it is right to say that there is no direct competition. No single vertical contributes more than 3 to 4% of our revenues. So to that extent, we are extremely well diversified.” He went on to say that JustDial is a dedicated local search engine which can not only curate content but make it more customizable as compared to other players ‘who have kind of an identity as a generic destination or a social destination.’

Download: Call Transcript

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