Onward Technologies Limited
5,041words
77turns
9analyst exchanges
3executives
Management on call
Anuj Sonpal
CEO of Valorem Advisors. Thank you
Devanand Ramandasani
Chief Financial
Key numbers — 37 extracted
INR 100 crore
to take this opportunity to congratulate my entire team delivering robust Q2 performance crossing INR 100 crore of quarterly revenue at INR 110 crores/ in Q2 and highest ever year-on-year growth at 51%. We are
INR
110 crore
te my entire team delivering robust Q2 performance crossing INR 100 crore of quarterly revenue at INR 110 crores/ in Q2 and highest ever year-on-year growth at 51%. We are continuing to see strong demand for o
51%
R 100 crore of quarterly revenue at INR 110 crores/ in Q2 and highest ever year-on-year growth at 51%. We are continuing to see strong demand for our services in line with our medium- term objective
100 million
nuing to see strong demand for our services in line with our medium- term objectives in achieving $100 million of annual revenue. Our focus is to grow the top global 25 customers which are now contributing to
78%
of annual revenue. Our focus is to grow the top global 25 customers which are now contributing to 78% of our consolidated revenue in the last quarter. Our quarter-on-quarter growth has been the hig
18%
r consolidated revenue in the last quarter. Our quarter-on-quarter growth has been the highest at 18%. On the cost side this quarter we also completed our annual increments of the entire team and all
110 crore
he Q2 financial performance of our company at consolidate basis. The operating income was 110 crore which is grew by 18% on quarter-on-quarter basis and 51% on year-on-year basis. EBITDA is reporte
3.2 crore
h is grew by 18% on quarter-on-quarter basis and 51% on year-on-year basis. EBITDA is reported at 3.2 crores and net profit after tax reported is 58 lakh. Coming to the consolidate performance of H1 the
58 lakh
1% on year-on-year basis. EBITDA is reported at 3.2 crores and net profit after tax reported is 58 lakh. Coming to the consolidate performance of H1 the operating income was 204 crores which is grew by
204 crore
r tax reported is 58 lakh. Coming to the consolidate performance of H1 the operating income was 204 crores which is grew by around 43% on year- on-year basis. The EBITDA reported is 6 crores and the net p
43%
to the consolidate performance of H1 the operating income was 204 crores which is grew by around 43% on year- on-year basis. The EBITDA reported is 6 crores and the net profit after tax reported is
6 crore
g income was 204 crores which is grew by around 43% on year- on-year basis. The EBITDA reported is 6 crores and the net profit after tax reported is 1.8 crores. Company experienced substantial growth in t
Guidance — 20 items
“Now, we expect the EBITDA margin to be in line with the industry in FY24.”
“I am also proud to share, that we have 15 clients that contribute a million dollar/ year and we are on track to be 18 clients by end of this financial year.”
“The training courses for this final batch will be completed in Q3.”
“Absolutely, in terms of gross margin at the company level will continue and move towards 35% as the upfront costs of each new project or client is factored in.”
“So, I just had the question around the demand side, so some of the peers on the ER&D side have been saying that there are some concerns around clients and may be some clients delaying spends, so are we seeing any of that sorts especially in the Europe geography I believe that given some of the matter of headwinds there is a energy crisis going on, there are some currency issues going on, so do you see any of that may be factoring in going forward?”
“I continue to remain positive that our Europe business will grow 40% plus this financial year.”
“It will be in the transport segment as well the auto sales where we are doing work around ADAS and everything?”
“Just few question in the previous call as you mentioned that the EBITDA margin would take a hit in the short run and now the guidance is that it will trend towards the industry level in FY2024, so maybe I assume short term to be a few quarters, but this is kind of more than few quarters so you have some comments on this?”
“We are at the end of that cycle and that is why we believe that now all additional new business that we win will be high quality business which will go straight to the bottom line starting FY24.”
“So, I do not think it will be compromised of EBITDA when we started late last year in November.”
Risks & concerns — 1 flagged
I wanted to understand it is any change in the receivable cycles because last year we have seen an uptrend in the receivable days and it has come down in the first half and what is the outlook there why are this number going up because if I look at your OCF and compare to the profit that was generated there is a significant drag because of the working capital, so how should we thinking about receivable days going ahead?
— Sugandhi Sood
Q&A — 9 exchanges
Q
My first question would be on the absorption of your pressures under the TAP program and if you could give us some color of the net addition plus quarter of how much was from laterals and fresher and also if you could generally give commentary on how your traction has been on the billing side in terms of the incremental business that you are doing?
Jigar Mehta
Good afternoon. On your first question in terms of the TAP program for freshers. Out of the 250 engineers getting trained across our India offices, we have 150 engineers deployed on projects by end of Q2 and another 50 engineers which are deployed over the first few weeks of Oct. So, 200 engineers are deployed on projects now and we will see full utilization in Q3 and mostly importantly in Q4 when the balance 50 are on fulltime projects. The training courses for this final batch will be completed in Q3. As we shared last month we are planning to start the next batch in Q4 or Q1 of next financi
Q
So, I just had the question around the demand side, so some of the peers on the ER&D side have been saying that there are some concerns around clients and may be some clients delaying spends, so are we seeing any of that sorts especially in the Europe geography I believe that given some of the matter of headwinds there is a energy crisis going on, there are some currency issues going on, so do you see any of that may be factoring in going forward?
Jigar Mehta
Great question. These are similar questions which lot of people have been asking since I got back from Europe last night. I was there for the last 8 days visiting customers & prospects across Germany, Netherlands and UK and we continue to see lot of traction in the market for outsourcing services. We met some of the biggest companies across Europe and all of them are looking at new service providers to meet their additional outsourcing demands. I continue to remain positive that our Europe business will grow 40% plus this financial year. It will be in the transport segment as well the auto sal
Q
Just few question in the previous call as you mentioned that the EBITDA margin would take a hit in the short run and now the guidance is that it will trend towards the industry level in FY2024, so maybe I assume short term to be a few quarters, but this is kind of more than few quarters so you have some comments on this?
Jigar Mehta
I think top line growth is what we have been sharing for the last few quarters in terms of the visibility that we are seeing from our customers. In terms of EBITDA as I said what we believe is we went through our investment cycle where we had committed approximately INR 25 crores of OPEX investment in sales and manpower in SME, delivery, etc. . We are at the end of that cycle and that is why we believe that now all additional new business that we win will be high quality business which will go straight to the bottom line starting FY24. I think if you look at press release at management comment
Q
Just wanted to pick your brains on a couple of things so one is obviously this time you have grown 18% quarter-on-quarter, just wanted to double check if there is any sort of onetime some new project revenue sitting there in the quarter or can you consider this 110 crores as a new base?
Jigar Mehta
Yes, there is no onetime substantial revenue in Q2. Our engagement model focus is time and material (T&M) which last quarter was 88% of our revenues and 12% is fixed price. We continue to bid for more T&M assignments as we believe it is the right model of a company of our size to understand the client processes, getting trained on new technology, etc. So, of these projects that you are working on these are multiyear engagement site not let one time non recurring kind of engagements? I would like to bring to you notice that some majority our customer engagement with OEMs and once you enter with
Q
I wanted to understand it is any change in the receivable cycles because last year we have seen an uptrend in the receivable days and it has come down in the first half and what is the outlook there why are this number going up because if I look at your OCF and compare to the profit that was generated there is a significant drag because of the working capital, so how should we thinking about receivable days going ahead?
Devanand Ramandasani
Good witness is that we are improving our DSO cycle and there is no change in methodology of that. So, our DSO is improved by approximately 5 days from last year to first half this month and what we have done that we have improve our existing set of process where we sent invoices on the time or we promptly sent to the customer and we process on the basis on the value invoices on priority basis and the digitization which we have done in the last year where the ERP and the other time sheet system which now they are giving inputs on time which will helping us to sending, raising the invoices on t
Q
So, margins you have mentioned that we will see the returns directly impacting margins in the company coming quarters. We expect EBITDA margin to went towards the industry level during FY24, so what I am trying to understand is when I see the large players leaving aside Tata Elxsi because that set the industry leading margins, but if I look at L&T Technologies or if I look at KPIT or the other companies they are all in the range of 60 into 18%, so are you indicating that FY24 we should be inching towards that is my first question?
Jigar Mehta
We believe, we now have a global team in place, we have a running engine. I believe we have good visibility to deliver industry level numbers Few of the companies you mentioned are about 10 to 20 times a size and we do not compete or compare with them, but I will talk about companies in about INR 400- 500 crore revenues. We believe post full loaded costs, we can deliver from low teens to mid teens in terms of EBITDA margins. On the top line you have delivered 18% quarter-on-quarter and you said that you have a pretty robust pipeline, so would it fair to extrapolate and say that you will be abl
Q
Just wanted to understand the revenues from geographical side how it is breakup across the geographies and in the revenue growth of 18% what is the contribution from international part and currency part which is coming toward this revenue growth?
Devanand Ramandasani
So, I would like to clarify to you that our revenue proportion is that 51% comes from the international business and 49% from the India business the last year last quarter we have the 50-50 and this is the proportionate on that. So, technically in percentage term you see that both are the group on the same proportionate. So, in internal part is it US predominant or Europe? Yes out of 51% US contribute about 43% and balance is Europe. So, in this 18% we can say 4% to 5% is added by the currency kind of? Yes currency part is also there. Can you quantity it because it will be quite helpful that w
Q
Just a clarification to Dev when you say 51-49 international and domestic I presume these are all the top fortune customers, but 51 being serviced onsite and 49 being serviced offshore, is that understanding correct?
Devanand Ramandasani
This is not the right interpretation so 51 contribution from the India business as you know that we have the two-business vertical. One is the India business vertical and is the international business vertical; international business verticals means where we bill in the foreign currency and India business vertical means as we bill in INR currency. So, that is the proportion: 51 for I business and 49% for the India business. Offshore and onsite business are different model where we see that the if the people our resources are working from the Onward premises then it is quite offshore and if the
Q
Again thank you everybody for joining us today. It has been an absolute pleasure. We are very excited with the progress we have done last quarter with record revenue growth both on a quarter-on-quarter basis and year- on-year basis and crossing the 100 crore a quarter milestone which is the first time in our history. We are positive of maintaining the momentum and are excited with closing out a year and looking forward to 2023 and 2024. Happy Diwali to everybody and speak to you all soon. Thank you.
Opening remarks
Anuj Sonpal
Thank you. Good afternoon everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Onward Technologies Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings call for the second quarter and first half of financial year 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call maybe forward looking in nature. Such forward looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s belief as well as assumptions made by an information currently available to management. Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundam
Jigar Mehta
Thank you Anuj and Good afternoon everybody. It is a pleasure to welcome you all to this earnings conference call for the second quarter and first half financial year 2023. I hope you all keeping well and safe. I want to take this opportunity to congratulate my entire team delivering robust Q2 performance crossing INR 100 crore of quarterly revenue at INR 110 crores/ in Q2 and highest ever year-on-year growth at 51%. We are continuing to see strong demand for our services in line with our medium- term objectives in achieving $100 million of annual revenue. Our focus is to grow the top global 25 customers which are now contributing to 78% of our consolidated revenue in the last quarter. Our quarter-on-quarter growth has been the highest at 18%. On the cost side this quarter we also completed our annual increments of the entire team and all the new investments that we had planned and shared with you earlier at the start of the year in upgrading the infrastructure. Now, we expect the EBIT
Devanand Ramandasani
Thank you Jigar and Good afternoon everyone and wish you Happy Diwali 2022 in advance. Let me take you through the Q2 financial performance of our company at consolidate basis. The operating income was 110 crore which is grew by 18% on quarter-on-quarter basis and 51% on year-on-year basis. EBITDA is reported at 3.2 crores and net profit after tax reported is 58 lakh. Coming to the consolidate performance of H1 the operating income was 204 crores which is grew by around 43% on year- on-year basis. The EBITDA reported is 6 crores and the net profit after tax reported is 1.8 crores. Company experienced substantial growth in the revenue from focus vertical industrial equipment & heavy machinery contributing 54 percentage of the revenue and transportation & mobility contributing to 30% of consolidated revenue at H1. Digital service line of business reported double digit growth contribution of 12% of consolidated revenue of H1 we have a net addition of 199 employees in Q2 across its offices