Roadzen Inc

Previous wording

The following discussion and analysis of the financial condition and results of operations of Roadzen Inc. and its subsidiaries should be read in conjunction with the “Unaudited Condensed Consolidated Financial Statements of Roadzen Inc. as of and for the three months ended June 30, 2024 and 2023,” together with related notes thereto, included elsewhere in this Form 10-Q (in the section of this Form 10-Q entitled “Financial Information”). The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See the section titled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in the forward-looking statements as a result of various factors, including those set forth or referred to under the section titled “Risk Factors” or elsewhere in this Form 10-Q.

Current wording

The following discussion and analysis of the financial condition and results of operations of Roadzen Inc. and its subsidiaries should be read in conjunction with the “Unaudited Condensed Consolidated Financial Statements of Roadzen Inc. as of and for the three and six months ended September 30, 2024 and 2023,” together with related notes thereto, included elsewhere in this Form 10-Q (in the section of this Form 10-Q entitled “Financial Information”). The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See the section titled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in the forward-looking statements as a result of various factors, including those set forth or referred to under the section titled “Risk Factors” or elsewhere in this Form 10-Q.

Previous wording

Our operations are global, and our partners consists of market-leading insurance companies, fleets and automotive original equipment manufacturers ("OEMs") and carmakers, including AXA, SCOR, Arch, Société Générale Jaguar Land Rover, Audi, Mercedes, Volvo and several others. In June of 2023, we made two acquisitions as part of our market entry strategy into the important U.S. and U.K. markets. Our subsidiary in the U.K., Global Insurance Management Ltd. ("GIM"), is a leading specialist Managing General Agent ("MGA") providing auto insurance, extended warranties, and claims management to insurers, car dealers, car companies, and fleets. GIM delivers services globally, leveraging its MGA licenses in the U.K. market and using third-party licenses elsewhere. GIM provides brokerage services to insurance companies, where it acts as a delegated authority of the insurance company to sell the insurer’s policies using its brokerage platform, as well as to adjudicate and pay claims. GIM collects a commission and an administrative fee as a percentage of the Gross Written Premium ("GWP") from each policy sold from the insurer/re-insurer during this process. GIM’s specialty insurance contracts typically have an average term of five years. GIM is headquartered in Coventry, England. Roadzen's subsidiary in the U.S., National Automobile Club ("NAC"), is a licensed auto club in California and a provider of claims management and 24/7 commercial roadside assistance ("RSA") in the U.S. NAC focuses on the commercial automotive industry and its network comprises over 75,000 professional service providers, offering tow, transport, and first notice of loss (“FNOL”) services. NAC’s customers include government fleets, enterprises, commercial fleets, car companies and insurers across the U.S. NAC is headquartered in Burlingame, California.

Current wording

Our operations are global, and our partners consists of market-leading insurance companies, fleets, automotive original equipment manufacturers ("OEMs") and carmakers, including AXA, SCOR, Arch, Société Générale Jaguar Land Rover, Audi, Mercedes, Volvo and several others. In June of 2023, we made two acquisitions as part of our market entry strategy into the important U.S. and U.K. markets. Our subsidiary in the U.K., Global Insurance Management Ltd. ("GIM"), is a leading specialist Managing General Agent ("MGA") providing auto insurance, extended warranties, and claims management to insurers, car dealers, car companies, and fleets. GIM delivers services globally, leveraging its MGA licenses in the U.K. market and using third-party licenses elsewhere. GIM provides brokerage services to insurance companies, where it acts as a delegated authority of the insurance company to sell the insurer’s policies using its brokerage platform, as well as to adjudicate and pay claims. GIM collects a commission and an administrative fee as a percentage of the Gross Written Premium ("GWP") from each policy sold from the insurer/re-insurer during this process. GIM’s specialty insurance contracts typically have an average term of five years. GIM is headquartered in Coventry, England. Roadzen's subsidiary in the U.S., National Automobile Club ("NAC"), is a licensed auto club in California and a provider of claims management and 24/7 commercial roadside assistance ("RSA") in the U.S. NAC focuses on the commercial automotive industry and its network comprises over 75,000 professional service providers, offering tow, transport, and first notice of loss (“FNOL”) services. NAC’s customers include government fleets, enterprises, commercial fleets, car companies and insurers across the U.S. NAC is headquartered in Burlingame, California.

Previous wording

On September 20, 2023, Roadzen Inc., a British Virgin Islands business company (the “Parent Company”, formerly known as Vahanna Tech Edge Acquisition I Corp; and sometimes referred to in this filing as "Vahanna") completed the business Business Combination in which it acquired Roadzen (DE). Roadzen (DE) was determined to be the accounting acquiror in the Business Combination. Accordingly, the historical financial statements of Roadzen (DE) became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Roadzen (DE) prior to the Business Combination; (ii) the combined results of the Parent Company and Roadzen (DE) following the Closing of the Business Combination; (iii) the assets and liabilities of Roadzen (DE) at their historical cost; and (iv) the Company’s equity structure for all periods presented.

Current wording

On September 20, 2023, Roadzen Inc., a British Virgin Islands business company (the “Parent Company”, formerly known as Vahanna Tech Edge Acquisition I Corp; and sometimes referred to in this filing as "Vahanna") completed the Business Combination in which it acquired Roadzen (DE). Roadzen (DE) was determined to be the accounting acquiror in the Business Combination. Accordingly, the historical financial statements of Roadzen (DE) became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Roadzen (DE) prior to the Business Combination; (ii) the combined results of the Parent Company and Roadzen (DE) following the Closing of the Business Combination; (iii) the assets and liabilities of Roadzen (DE) at their historical cost; and (iv) the Company’s equity structure for all periods presented.

Previous wording

StrandD: enables digital, real-time dispatch and tracking for roadside assistance ("RSA") and FNOL during accident claims; and

Current wording

StrandD: enables digital, real-time dispatch and tracking for roadside assistance ("RSA") and FNOL during accident claims;

Previous wording

Sales of Roadzen’s IaaS platform represented approximately 65% of revenues for the three months ended June 30, 2024.

Current wording

Sales of Roadzen’s IaaS platform represented approximately 50% and 56% of revenues for the for the three and six months ended September 30, 2024.

Previous wording

Roadzen acts as an insurance broker utilizing its technology to sell insurance through our embedded and Business to Business to Consumer ("B2B2C") distribution model. The policies are sold by insurance intermediaries such as agents and through captive distributors such as dealerships, fleets and used car platforms. Our B2B2C channel partners choose us for a variety of reasons — for the ease of integrating our technology through APIs into their ecosystem, for a seamless, fully digital customer experience from obtaining a policy to submitting a claim, and for integrations with a large number of insurance companies who sell their policies through our platform to give the users a handful of policy options. Lastly, we can provide a superior customer experience by bundling telematics for road safety, RSA and claims management to the customer — a customer experience that we believe is unrivaled by other traditional brokers. Roadzen’s revenues are based on commissions and other fees that are paid by our insurance carrier partners as a percentage of the Gross Written Premium ("GWP") underwritten for each policy.

Current wording

Roadzen acts as an insurance broker utilizing its technology to sell insurance through our embedded and Business to Business to Consumer ("B2B2C") distribution model. The policies are sold by insurance intermediaries such as agents and through captive distributors such as dealerships, fleets and used car platforms. Our B2B2C channel partners choose us for a variety of reasons — for the ease of integrating our technology through APIs into their ecosystem, for a seamless, fully digital customer experience from obtaining a policy to submitting a claim, and for integrations with a large number of insurance companies who sell their policies through our platform to give users a handful of policy options. Lastly, we can provide a superior customer experience by bundling telematics for road safety, RSA and claims management to the customer — a customer experience that we believe is unrivaled by other traditional brokers. Roadzen’s revenues from brokerage services are based on commissions and other fees that are paid by our insurance carrier partners as a percentage of the Gross Written Premium ("GWP") underwritten for each policy.

Previous wording

Roadzen’s brokerage solutions accounted for 35% of revenues for the three months ended June 30, 2024.

Current wording

Roadzen’s brokerage solutions accounted for 50% and 44% of revenues for the three and six months ended September 30, 2024.

Previous wording

Since January 1, 2023 we began tracking customer segmentation for Roadzen, described as such: enterprise clients that include insurers, automakers and large fleets (above 100 vehicles), and SMB clients, which include agents, brokers, small dealerships, and small fleets (under 100 vehicles). As of June 30, 2024, we had 34 insurance customer agreements (including carriers, self-insureds and other entities processing insurance claims), 71 automotive customer agreements, and approximately 3,400 agents and fleet customers agreements.

Current wording

Since January 1, 2023 we began tracking customer segmentation for Roadzen, described as such: enterprise clients that include insurers, automakers and large fleets (above 100 vehicles), and SMB clients, which include agents, brokers, small dealerships, and small fleets (under 100 vehicles). As of September 30, 2024, we had 34 insurance customer agreements (including carriers, self-insureds and other entities processing insurance claims), 74 automotive customer agreements, and approximately 3,550 agents and fleet customers agreements.

Previous wording

We generate a majority of our revenues through commissions and fees which are a reflection of the total insurance policy premium. Roadzen derived 35% of revenue from its brokerage solutions and 65% from its platform sales of its IaaS platform for the three months ended June 30, 2024. A softening of the insurance market characterized by a period of declining premium rates due to competition or regulation could negatively impact our financial results.

Current wording

We generate a majority of our revenues through commissions and fees which are a reflection of the total insurance policy premium. Roadzen derived 50% of revenue from its brokerage solutions and 50% from its platform sales of its IaaS platform for the three months ended September 30, 2024. A softening of the insurance market characterized by a period of declining premium rates due to competition or regulation could negatively impact our financial results.

Previous wording

In connection with the consummation of the Business Combination, certain holders of equity in Vahanna and Roadzen (DE) entered into lock-up agreements (the “Lock-up Agreements”) with the Parent Company and Roadzen (DE). Pursuant to the Lock-up Agreements, certain holders of Restricted Securities (as defined therein) have agreed, among other things, to be subject to a lock-up period which will last from the Closing until the earliest of (x) the one (1) year anniversary of consummation of the Business Combination, (y) the date that the closing price of Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share recapitalizations, subdivisions, reorganizations and the like), for twenty (20) trading days within any thirty (30) trading day period at least 150 days following the Closing of the Business Combination, and (z) the consummation of a liquidation, merger, capital share exchange, reorganization, tender or exchange offer as the first step of a two-step transaction or other similar transaction that results in all of the Parent Company's shareholders having the right to exchange their equity holdings in the Parent Company for cash, securities or other property; provided, however, that the restrictions on transfers shall not apply to the Permitted Transfers (as defined in the Lock-up Agreements); and provided further that equityholders of Roadzen (DE) that held less than 5% of the equity securities of Roadzen (DE) (on a fully diluted basis) immediately prior to the Closing will be permitted to transfer and/or sell up to 25% of their Restricted Securities (on an fully diluted basis when aggregated with all other Restricted Securities held by such equityholder) following the six (6) month anniversary of the date of the Closing of the Business Combination. On April 1, 2024, 3,502,949 Ordinary Shares were released from the Lock-up Agreements.

Current wording

In connection with the consummation of the Business Combination, certain holders of equity in Vahanna and Roadzen (DE) entered into lock-up agreements (the “Lock-up Agreements”) with the Parent Company and Roadzen (DE). Pursuant to the Lock-up Agreements, certain holders ofour ordinary shares agreed, subject to certain customary exceptions, to be subject to a lock-up period lasting until the earlier of (x) the one year anniversary of consummation of the Business Combination, (y) the date that the closing price of Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share recapitalizations, subdivisions, reorganizations and the like), for 20 trading days within any 30 trading day period at least 150 days following the Closing of the Business Combination, and (z) the consummation of a liquidation, merger, capital share exchange, reorganization, tender or exchange offer as the first step of a two-step transaction or other similar transaction that results in all of the Parent Company's shareholders having the right to exchange their equity holdings in the Parent Company for cash, securities or other property; provided that equityholders of Roadzen (DE) that held less than 5% of the equity securities of Roadzen (DE) (on a fully diluted basis) immediately prior to the Closing were permitted to transfer and/or sell up to 25% of their shares following the six month anniversary of the date of the Closing of the Business Combination. On April 1, 2024, 3,502,949 Ordinary Shares were released from the Lock-up Agreements pursuant to such provisions. In September 2024, holders of approximately 56 million ordinary shares subject to the Lock-up Agreements agreed to extend the lock-up period for an additional twelve months, to September 20, 2025 (subject to earlier termination as described above).

Previous wording

Roadzen sold 99,695 policies for a total GWP of approximately $11.5 million for the three months ended June 30, 2024 as compared to 27,168 policies for a total GWP of approximately $3.5 million for the same period in the prior year. Additionally, 547,233 claims and vehicle inspections were conducted during the three months ended June 30, 2024, compared to 350,107 for the same period in the prior year, representing a 56% increase.

Current wording

Roadzen sold 70,618 policies for a total GWP of approximately $10.1 million for the three months ended September 30, 2024 as compared to 78,009 policies for a total GWP of approximately $20.6 million for the same period in the prior year. Additionally, 607,577 claims, roadside assistance and vehicle inspections were conducted during the three months ended September 30, 2024, compared to 406,897 for the same period in the prior year.

Previous wording

Research and development expenses increased by $1.2 million representing a 212% increase for the three months ended June 30, 2024, compared to the same period in the prior year primarily due to the non-cash compensation expense of $1.4 million related to RSU grants partially offset by a $0.2 million decrease in technology costs.

Current wording

Research and development expenses increased by $0.9 million representing a change of 149% for the three months ended September 30, 2024, compared to the same period in the prior year primarily due to higher non-cash compensation expense of $1.0 million related to RSU grants.

Previous wording

Sales and marketing expenses increased by $2.1 million representing a 59% increase for the three months ended June 30, 2024, compared to the same period in the prior year primarily attributable to $1.9 million of non-cash compensation expense related to RSU grants.

Current wording

Research and development expenses increased by $2.1 million representing a change of 180% for the six months ended September 30, 2023, compared to the same period in the prior year primarily due to increased non-cash compensation expense of $2.4 million related to RSU grants and capitalization of technology personnel costs.

Previous wording

General and administrative expenses ("G&A") increased by $23.2 million representing a 893% increase for the three months ended June 30, 2024, compared to the same period last year primarily due to $22.9 million of non-cash expense related to RSU grants, and $1.2 million of G&A from the acquisitions of GIM and NAC.

Current wording

General and administrative expenses ("G&A") increased by $14.9 million representing a change of 266% for the three months ended September 30, 2024, compared to the same period last year primarily due to $14.6 million of non-cash expense increase related to RSU grants.

Previous wording

Depreciation and amortization increased by $0.1 million representing a 31% increase for the three months ended June 30, 2024, compared to the same period in the prior year.

Current wording

Depreciation and amortization decreased by $0.1 million representing a change of -14% for the six months ended September 30, 2024, compared to the same period in the prior year.

Previous wording

Interest expense increased by $0.6 million representing a 277% increase for the three months ended June 30, 2024, compared to the same period in the prior year primarily due to an increase in borrowings from banks and the issuance of convertible and non-convertible debentures.

Current wording

Interest expense increased by $0.6 million representing a change of 73% for the six months ended September 30, 2024, compared to the same period in the prior year primarily due to an increase in borrowings from banks and the issuance of non-convertible debentures.

Previous wording

Losses on fair valuation changes increased by $17.2 million representing a 100% increase for the three months ended June 30, 2024, compared to the same period in the prior year primarily due to the fair valuation of our Forward Purchase Agreement and convertible instruments.

Current wording

Losses on fair valuation changes decreased by $22.5 million representing a change of -95% for the three months ended September 30, 2024, compared to the same period in the prior year primarily due to the fair valuation of our Forward Purchase Agreement and convertible instruments, derivative warrants at each reporting period.

Previous wording

(1) Fair value changes in financial instruments are considered to be financing costs as they relate to convertible notes and the Forward Purchase Agreement. These changes are non-cash as these changes in fair value are affected by the volatility of the Company’s share price.

Current wording

(1)Fair value changes in financial instruments are considered to be financing costs as they relate to convertible notes, share warrants and the Forward Purchase Agreement. These changes are non-cash as these changes in fair value are affected by the volatility of the Company’s share price.

Previous wording

Since our incorporation, we have financed our operations primarily through the issuance of equity, convertible instruments, debt (including working capital lines), and customer payments. As of June 30, 2024, we have raised an aggregate of $43.2 million, net of issuance costs, through the issuance of preferred stock of Roadzen (DE) and the issuance of convertible and non-convertible instruments. Our accumulated deficit stood at $200.3 million as of June 30, 2024, up from $151.6 million from the previous year. These accumulated deficits stem from substantial operating losses which amounted to $41.5 million and $36.1 million, fair valuation losses of $54.3 million and $37.1 million, RSU vesting expenses of $82.5 million and $56.3 million, transaction costs arising from the Business Combination of $0.0 million and $17.7 million, and impairment of investment and intangible assets of $4.3 million and $4.3 million as of June 30, 2024 and March 31, 2024, respectively. We anticipate that we will continue to experience operating losses and generate negative cash flows from operations over an extended period due to the planned investments in our business. Consequently, we may need to secure additional capital resources to support the execution of our strategic initiatives for growing our business in the coming years.

Current wording

Since our incorporation, we have financed our operations primarily through the issuance of equity, convertible instruments, debt (including working capital lines), and customer payments. As of September 30, 2024, we have raised an aggregate of $43.2 million, net of issuance costs, through the issuance of preferred stock of Roadzen (DE) and the issuance of convertible and non-convertible instruments. Our accumulated deficit stood at $222.3 million as of September 30, 2024, up from $151.5 million from March 31, 2024. These accumulated deficits stem from substantial operating losses which amounted to $41.6 million and $36.1 million, fair valuation losses of $55.4 million and $37.1 million, RSU vesting expenses of $103.3 million and $56.3 million, transaction costs arising from the Business Combination of $17.7 million and $17.7 million, and impairment of investment and intangible assets of $4.3 million and $4.3 million as of September 30, 2024 and March 31, 2024, respectively. We anticipate that we will continue to experience operating losses and generate negative cash flows from operations over an extended period due to the planned investments in our business. Consequently, we may need to secure additional capital resources to support the execution of our strategic initiatives for growing our business in the coming years.

Previous wording

Net cash used in operating activities was $5.7 million for the three months ended June 30, 2024, compared to $2.9 million for the three months ended June 30, 2023. This consisted of a net loss of $48.5 million and net cash outflows of $1.0 million provided by changes in our operating assets and liabilities, and partially offset by non-cash charge add-backs of $43.8 million. The non-cash charges were primarily comprised of fair valuation losses of $17.2 million, stock based compensation of $26.2 million and depreciation/amortization of $0.5 million.

Current wording

Net cash used in operating activities was $11.3 million for the six months ended September 30, 2024, compared to $15.1 million for the six months ended September 30, 2023. This consisted of a net loss of $70.3 million and net cash outflows of $3.4 million provided by changes in our operating assets and liabilities, and partially offset by non-cash charge add-backs of $62.5 million. The non-cash charges were primarily comprised of fair valuation losses of $18.2 million, stock based compensation of $47.0 million and depreciation/amortization of $0.7 million.

Previous wording

Cash used in investing activities was $0.2 million for the three months ended June 30, 2024, which primarily consisted of $0.19 million reduction of an investment made in a mutual fund (held for sale).

Current wording

Cash used in investing activities was $1.2 million for the six months ended September 30, 2024, which primarily consisted of $1 million received from the FPA and $0.2 million from sale of mutual fund (held for sale).

Previous wording

We have generated negative cash flows from operations since our inception and have supplemented working capital through net proceeds from the issuance of convertible debt and preferred equity securities. Cash provided by financing activities was $1.0 million for the three months ended June 30, 2024, which primarily consisted of loans from banks and other parties.

Current wording

We have generated negative cash flows from operations since our inception and have supplemented working capital through net proceeds from the issuance of convertible debt and preferred equity securities. Cash provided by financing activities was $4.5 million for the six months ended September 30, 2024, which primarily consisted of loans from banks and other parties.

Previous wording

The Company leases office space under non-cancelable operating lease agreements, which expire on various dates through September 2028. The operating lease includes $304,921 of imputed interest due to implementation of ASC-842.

Current wording

The Company leases office space under non-cancelable operating lease agreements, which expire on various dates through September 2028. The operating lease includes $303,701 of imputed interest due to implementation of ASC-842.

Previous wording

On June 30, 2023, Roadzen entered into a Note Purchase Agreement (the "Note Purchase Agreement") with Mizuho Securities USA LLC (“Mizuho”), as administrative agent and collateral agent, and as a purchaser, pursuant to which Mizuho purchased an aggregate principal amount of $7,500,000 of senior secured notes (the "Mizuho Notes"). The Mizuho Notes bear interest at a rate of 15.0% per annum, which will automatically increase by 5% if we fail to prepay the Mizuho Notes upon the occurrence of certain mandatory prepayment events as set forth in the Note Purchase Agreement. The Mizuho Notes were originally scheduled to mature on June 30, 2024. On June 30, 2024, Mizuho granted to the Company a waiver of payment until July 31, 2024. On July 26, 2024, subsequent to the date of the balance sheet, the Company entered into Amendment No. 1 to the senior secured notes, providing for an additional $4 million in principal amount to a total of $11.5 million, and an extension of the maturity date to December 31, 2024. Terms of the notes are otherwise the same as the original notes issued in June 2023, including an interest rate of 15% per annum, and did not require any additional warrants.

Current wording

On June 30, 2023, Roadzen entered into a Note Purchase Agreement (the "Note Purchase Agreement") with Mizuho Securities USA LLC (“Mizuho”), as administrative agent and collateral agent, and as a purchaser, pursuant to which Mizuho purchased an aggregate principal amount of $7,500,000 of senior secured notes (the "Mizuho Notes"). The Mizuho Notes bear interest at a rate of 15.0% per annum, which will automatically increase by 5% if we fail to prepay the Mizuho Notes upon the occurrence of certain mandatory prepayment events as set forth in the Note Purchase Agreement. The Mizuho Notes were originally scheduled to mature on June 30, 2024. On June 30, 2024, Mizuho granted to the Company a waiver of payment until July 31, 2024. On July 26, 2024, the Company entered into Amendment No. 1 to the senior secured notes, providing for an additional $4 million in principal amount to a total of $11.5 million, and an extension of the maturity date to December 31, 2024. Terms of the notes are otherwise the same as the original notes issued in June 2023, including an interest rate of 15% per annum, and did not require any additional warrants.

Previous wording

One of our material subsidiaries issued Secured, Non-Convertible Debentures with NP1 Capital Trust with an aggregate principal amount of $3.7 million during the FY. 22-23 with varying maturity dates between January 2024 and July 2024 and interest rates ranging from 19.25% to 20.00% per annum. The principal outstanding as on March 31, 2024 is $2.22 million.

Current wording

One of our material subsidiaries issued Secured, Non-Convertible Debentures with NP1 Capital Trust with an aggregate principal amount of $3.7 million during the FY. 22-23 with varying maturity dates between January 2024 and July 2024 and interest rates ranging from 19.25% to 20.00% per annum. The principal outstanding as on September 30, 2024 is $2.22 million. On September 30, 2024 the Company entered into an amendment agreement restructuring the principal repayments and extending the maturity date to March 31, 2025.