Rediff.com India Limited
First Quarter Earnings Conference
Call, Financial Year 2010
July 21,
2009
Moderator: Good
morning and welcome to the Rediff.com Conference Call announcing the earnings
results for the first quarter ended June 30, 2009.
During the call, all telephone lines are in the listen-only mode. After the call, we will conduct a question
and answer session, and instructions will follow at that time. If anyone should require assistance during
the call, please press the * button followed by the 0 on your touchtone
phone. As a reminder, this conference is
being recorded. I would now like to
introduce your host for the conference, Mandar Narvekar.
Mandar Narvekar: Thanks
Sandra. Good morning and thank you for
being with us to discuss Rediff.com’s financials for the first quarter ended June
30, 2009. I would like to introduce you to the members
of the management present on this call, who will take you through the
highlights of our company’s performance.
We have with us Mr. Ajit Balakrishnan, Chairman and CEO and Mr. Joy
Basu, our CFO. As mentioned earlier, all
of you are currently on a listen-in mode only.
This conference call will last for about 20 minutes and then we will be
glad to answer any questions that you may have.
For your immediate and ready reference, we have also posted the earnings
release for the first quarter ended June 30, 2009, on our website at
http://investor.rediff.com. You may also
call me at our office in India at 91-22-244-9144, extension 138,
and we will be glad to fax or email you a copy during the course of this
call. Before proceeding, I would like to
mention that during this conference call except for the historical information
and discussions contained herein, statements may
constitute forward-looking statements for the purpose of the safe harbor
provision and under the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified
by the use of forward-looking terminology such as may, will, expect, believe,
estimate, project, anticipate, continue or similar terms, variations of those
terms or the negatives of those terms.
These statements involve a number of risks, uncertainties, and other
factors that can cause actual results to differ materially from those that may
be projected by the forward-looking statements.
These risks and uncertainties include, but are not limited to a slowdown
in the economy worldwide and in the sectors in which our clients are based, a
slowdown in the internet and IT sectors worldwide, competition, the success or
failure of our past or future acquisitions, attracting, recruiting and
retaining highly-skilled employees, technology-related risks, legal and
regulatory policies, managing risks associated with customer products and a
widespread acceptance of the internet.
Listeners should carefully review the risk factors and any other
cautionary statements contained in our latest annual report on Form 20-F and
any other reports filed by Rediff.com available with the SEC from time to
time. These reports are available with
SEC or are available upon request by emailing Rediff.com at investor@rediff.co.in. Rediff.com and its subsidiaries may from time
to time make additional written and oral forward-looking statements including
statements contained in the company’s filings with the SEC and our reports to
shareholders. Rediff.com and its
subsidiaries do not undertake any obligation to update any forward-looking
statements that may be made from time to time by or on their behalf whether as
a result of new information, future events, or otherwise. I would like to now introduce Mr. Ajit
Balakrishnan, our Chairman and CEO.
Ajit Balakrishnan: Good morning to all present. Revenues for the quarter ended June
20, 2009, reflect
mixed signals. Overall revenues have
grown 11% in dollar terms and 7% in rupee terms, thus giving rise to some
cautious optimism. The sequential
quarterly growth is largely from a growth in India online revenues. Revenues from our US operations have marginally declined
over the period. However, on a
year-on-year basis, overall revenue shows a decline of 40% in dollar terms and
31% in rupee terms. India online growth has been driven by
display advertising while performance advertising remained largely flat on a
quarter-on-quarter basis. With regard to
industry priorities, the banking and financial services and
insurance industry continues to hold top spot followed by IT products,
that is revenues from PC makers such as Dell and HP. We have not seen any change in the overall
online advertising pricing rates as measured in ECPM on a year-on-year
basis. Not withstanding our cautious
optimism, the current economic environment continues to be challenging for many
of our advertisers, particularly those in the online travel, jobs, matrimony,
shopping, and real estate segments, who in normal times are large spenders
online. Many of these businesses are
dependent on external venture funding which has been adversely affected by the
downturn. The online recruitment sites
and other important component have been affected by the slowdown in recruitment
by the IT services companies in India.
Online advertising from the credit card, home loan, personal loan, and
online brokerage segments continues to be subdued. It is still too early to say when these
sectors spending on online advertising will revive. Revenue concentration has decreased. Revenues from our top 10 advertisers in India now account for only 34% of our
total Indian advertising revenue compared to 45% in the year ago quarter. At this juncture, we believe it is important
for us to invest in resources and grow our user base. We face intense competition from global players
like Google, Yahoo, and MSN who have stepped up their activities in India. We have therefore undertaken a number of
initiatives on the technology front. We
have re-architected our site in line with the model view controller philosophy
which is a clear architecture that separates data from access and access from
presentation. In addition, we have
developed a common data model across our products and services, which now enables us to centrally manage user profiles and
content. We have recently commenced
sponsorship of Hypertable, an open source project to create a high-performance
data storage system designed to support applications requiring very high
scalability and reliability. We have
also adopted a RESTful architecture scheme across all our services to make them
intuitive for users and simple for developers.
Our services are now accessible with equal ease from both PCs and mobile
phones. We have also built intelligence
to detect browser capabilities to serve pages with the appropriate layouts and
supported features. We have improved
upon our search technology and have introduced social and collective
intelligence features across all our services.
Our new web search now not only returns relevant search but also from
news, images, maps, shopping, Q&A, and other services. Key benefits of all these initiatives are
improved user experience, scalability, and the simplicity with which we can add
new features to existing products to keep pace with our fast evolving
industry. In our desire for improved
user experience, we have reduced the number of ads saved on our site and in particular,
eliminated all ads from our home page.
As a consequence of this, we are likely to experience a short-term
decline in our advertising revenue, but are hopeful that a better user
experience will lead to a higher number of users over time. We invite you to visit www.rediff.com to observe this improved user
experience. These and other initiatives
also require us to increase our investments in product development and brand
building over the next two to three quarters.
We thus expect an increase in our operating expenses from our current
levels by an average of about 1 to 1.5 million dollars per quarter over this
period. We believe these investments are
necessary to grow our user base and preserve our leadership position in the India online space and secure the
long-term future of our business. Our
registered user base at the end of the quarter stood at 80.4 million, which
represents a 16% growth on a year-on-year basis. Cash and cash equivalent stood at approximately
46.8 million at the quarter end. I now
request our CFO, Joy Basu to take you through our financial performance for the
quarter ended June 30, 2009.
Joy Basu: Thank
you Ajit and good morning to all.
Overall revenues for the quarter ended June 30,
2009, were
4.96 million dollars, down by 40% over the corresponding quarter last fiscal
year. However, as Ajit mentioned, our
June quarter revenues were 11% higher than the immediately preceding March
quarter. Revenues for the quarter from India online were 3.95 million dollars, a
decrease of 40% over the corresponding quarter last fiscal year and an increase
of 15% over the immediately preceding quarter.
In terms of Indian rupees, revenues from the quarter from India online were 192 million, a decrease
of 30% over the year ago quarter and an increase of 11% over the immediately
preceding quarter. Revenues from our US publishing business were 1.01
million dollars for the quarter, a decrease of 43% over the same quarter last
fiscal year and a decrease of 5% over the immediately preceding quarter. Gross margins for the quarter ended June
30, 2009,
were 71% as compared to 80% for the same quarter last fiscal year. Operating expenses during the quarter
decreased by 12% in dollar terms to 4.89 million dollars as compared to 5.54
million dollars for the same quarter last fiscal year. Operating EBITDA showed a loss of 1.36
million dollars for the quarter ended June 30, 2009, as compared to a positive
operating EBITDA of 1.10 million dollars for the corresponding quarter last
year. As you are aware, operating EBITDA
is a non-GAAP measure, and we direct you to our press release dated today which
sets out a reconciliation of operating EBITDA to net income. Depreciation and amortization expenses
decreased to 1.18 million dollars for the quarter as compared to 1.68 million
dollars for the same quarter last fiscal year.
Net loss for the quarter ended June 30, 2009, was 1.43 million dollars
as compared to a net income of 0.77 million dollars for the comparable quarter
last fiscal year. Net loss per ADS for
the quarter was 0.049 dollars as compared to a net income per ADS of 0.026
dollars for the same quarter last fiscal year.
That concludes our review of the quarter and fiscal year ended June
30, 2009. I would now request Ajit to sum up the call.
Ajit Balakrishnan: Yes,
I noted earlier our revenues on a sequential basis increased by 11%, but we
believe it is too early to predict a revival in the Indian online advertising,
which we are dependent. We continue to invest
resources to improve the architecture of our services, grow our user base, make our offerings accessible on mobile phones as well as on
PCs as well as build out a brand. With
our registered user base of 80.4 million and a cash balance of about 47 million
dollars, we believe we are in a reasonable position to capitalize on emerging
growth opportunities. Thank you.
