AGSTRANSEQ2 FY 2023November 16, 2022

AGS Transact Technologies Limited

11,000words
60turns
8analyst exchanges
5executives
Management on call
Ravi Goyal
CHAIRMAN & MANAGING
Saurabh Lal
CHIEF FINANCIAL OFFICER, AGS TRANSACT TECHNOLOGIES LIMITED
Stanley Johnson
EXECUTIVE DIRECTOR, AGS TRANSACT TECHNOLOGIES LIMITED
Vinayak Goyal
EXECUTIVE DIRECTOR, AGS TRANSACT TECHNOLOGIES LIMITED
Shailesh Shetty
MANAGING DIRECTOR, SECUREVALUE INDIA LIMITED
Key numbers — 40 extracted
25%
to meet our target of highest ever PAT in FY23 and will continue to sustain our EBITDA margin of 25% plus. Going by the RFPs already floated in the market and those in the pipeline, the ATM/CRM ne
Rs. 4,206 million
points across 2,200 cities and towns in India. Total consolidated income for the quarter stood at Rs. 4,206 million for Q2 FY23 as against 4,856 million for Q2 FY22. The same figures for H1 FY23 stand at Rs. 8,4
4,856 million
ndia. Total consolidated income for the quarter stood at Rs. 4,206 million for Q2 FY23 as against 4,856 million for Q2 FY22. The same figures for H1 FY23 stand at Rs. 8,478 million as against Rs. 8,993 million
Rs. 8,478 million
6 million for Q2 FY23 as against 4,856 million for Q2 FY22. The same figures for H1 FY23 stand at Rs. 8,478 million as against Rs. 8,993 million in H1 FY22. We have worked on improving our operational efficiencies
Rs. 8,993 million
nst 4,856 million for Q2 FY22. The same figures for H1 FY23 stand at Rs. 8,478 million as against Rs. 8,993 million in H1 FY22. We have worked on improving our operational efficiencies, which resulted in a strong
9%
ng operating performance with our consolidated and adjusted EBITDA for the half year improving by 9% and PAT for the quarter increasing by 400%. As of September 30, 2022, A
400%
dated and adjusted EBITDA for the half year improving by 9% and PAT for the quarter increasing by 400%. As of September 30, 2022, AGS has installed, maintained or managed a net
24%
y accounting for a higher proportion of our total revenue pie - this contribution increasing from 24% in Q2 FY22 to 29% in the current year. Moreover, even the margins from this business have shown a
29%
higher proportion of our total revenue pie - this contribution increasing from 24% in Q2 FY22 to 29% in the current year. Moreover, even the margins from this business have shown a stark improvement
14%
nt year. Moreover, even the margins from this business have shown a stark improvement rising from 14% to 20% from Q2 FY22 to Q2 FY23. Additionally, with new contract wins for AGS, more business wil
20%
. Moreover, even the margins from this business have shown a stark improvement rising from 14% to 20% from Q2 FY22 to Q2 FY23. Additionally, with new contract wins for AGS, more business will syner
46%
ourcing business, which works on a transaction or on a fixed fee basis, contributed approximately 46% of our quarterly top line. Another 14% of top line came from AMC services and upgrades. Cash ma
Guidance — 20 items
Ravi Goyal
opening
“The quarter gone by was a relatively soft quarter, but we are confident to meet our target of highest ever PAT in FY23 and will continue to sustain our EBITDA margin of 25% plus.”
Ravi Goyal
opening
“These will start coming on-stream from the next quarter onwards and will be rolled out over the next 12 months.”
Ravi Goyal
opening
“We expect this to further strengthen our ATM and CRM Outsourcing business and synergistically grow our cash management business as well.”
Ravi Goyal
opening
“In order to promote financial inclusion and further expand our company, we intend to use the technology and goods produced in India and offer them in other nations.”
Saurabh Lal
qa
“And then, going forward, it will have a full year impact or annualized impact on the company.”
Saurabh Lal
qa
“As we move forward in this quarter, we will be able to share more details with respect to how many numbers of ATMs getting added to our portfolio, but definitely, it will be a sizable number of ATMs that we are getting in our portfolio, and they will have a significant upside on the revenue and on the bottom line of the company.”
Saurabh Lal
qa
“So, from those fronts, I think, all this will help us to conclude and reach us to the target levels that we have given.”
Saurabh Lal
qa
“It will help us to realize our larger part of a payment or omni channel payment integration platform that we are planning to build both from the issuance side, acquiring side and various other value-added services that we plan to add.”
Saurabh Lal
qa
“And we are confident that and very hopeful that by this quarter end, we should be able to close these reconciliations and these reconciliations will not have a major impact as we move forward in the next quarter or the half yearly period that is going to come.”
Saurabh Lal
qa
“But we are confident that, Manik, maybe in this quarter three and quarter four, we will be able to close these out and we may not have this line item as we move forward from a provision point of view.”
Risks & concerns — 13 flagged
So, I understand that, but then what essentially is driving the sequential decline in terms of the ATM and managed services revenues on a sequential basis almost like a 20 crores sequential drop there?
— Manik Taneja
So, maybe the absolute number increase from each PoS machine is difficult, but how we actually take record of the metrics internally is that whatever additional deployment of PoS machines that we are doing or whatever total PoS machines that we deploy, how much GTV is getting generating on an average basis per PoS machine?
— Saurabh Lal
So, on an overall basis, yes, there is a decline in the revenue of specifically ATM outsourcing which I expressed to Manik also.
— Saurabh Lal
So, the first major challenge is, I would say, which comes always from the retail outlet for us is that since they already have those machines from a local partners, local banks that they have in their vicinity from where they have other banking relationships, so those banks always ensure that their machine should always be there, and whatever transaction happens on their petrol pump, the floats should come to them directly.
— Saurabh Lal
Second challenge that we see with them is that this OMC machines that they have those with the retail outlets or these retail outlets have those PoS machines of the local bank, they enjoy a lot of working capital limits also from those banks in the form of buying the fuel or making other working capital arrangements.
— Saurabh Lal
The third thing which we have seen and the practical challenge as you rightly asked the question is that all these merchants always want an immediate, urgent settlement of their transactions.
— Saurabh Lal
I would not say challenge, but definitely, these are the learnings from our deployment of these machines, and we are building up our products and services to overcome all these things.
— Saurabh Lal
So, I think those are the guidelines on which we as a management of the company is working on, but for the FY24 guidance, I think it's difficult to give you any specific guidance.
— Saurabh Lal
So, on the transaction front, where you are seeing a decline in transaction, most of our, major of our portfolio we have around in the private sector bank, a lot of ATMs on captive sites.
— Stanley Johnson
So, the decline is mainly on captive sites, and we are talking to the bank to relocate into different geographies across.
— Stanley Johnson
So, I am sure everyone knows that whenever we try to capture the market and everything, you always see a decline as per the throughput per machine, whether it's an ATM network, whether it's a PoS network, whether it's an expansion for any other strategy for us.
— Saurabh Lal
So, the portion with respect to the value is very, very difficult to, I will say, answer because this is a continuous reconciliation that keep on happening.
— Saurabh Lal
So, that is why they said, on a cautious basis, you should take some more provision.
— Saurabh Lal
Q&A — 8 exchanges
Q
Thank you for the opportunity, and just wanted to Ravi mentioned that quarter guidance of recording the highest annual profit for this year. So, if you could also talk about how shall we be thinking about growth because after first quarter you had suggested about getting to a double digit growth in FY23, and given the way we have performed in first half of the year, the asking rate in terms of revenue growth for second half usually is in excess of 25%. So, it could help us understand how are you seeing things there, and then I had a couple of other bookkeeping questions as well. Thank you.
Saurabh Lal
Thank you, Manik. As Ravi has also mentioned definitely in the last call also, Manik, we continue to believe that we have targeted ourselves and the business and everyone in the company is targeting to ensure that whatever has been committed is based on the very, very strong order book that we have. So, the order book which Ravi also mentioned in his speech that we have various wins in this quarter which will translate or start converting into the revenue and through the profitability of the company starting from this quarter, which is quarter three right now, and it will continue in quarter f
Q
Hi Good morning. Three questions from my side. First one, as we can see in the press release, the CRMs have increased, PoS terminals have increased, but how long does it take to get them to reflect into the revenue piece by piece if you can give the details like PoS machines, OMC, the PoS terminals and the CRMs? That's the first question.
Saurabh Lal
Thank you, Avadhoot. With respect to the deployment of both those PoS machines and the CRMs, so if you see the total number of PoS machines that we have deployed in this business with respect to the overall machines that we have deployed in the petroleum vertical, so we basically deployed, Avadhoot, machines for PoS in two types of major business vertical internally within our company ITSL. One is the deployment of PoS machines for the oil marketing company, and the second is the PoS machines that would deploy as with respect to various non-OMC companies which is basically retail customers or
Q
Yes.
Management
Q
Good afternoon. This is Vasav from Quant. I just have a question regarding the reduction in average GTV. So, what are some of the challenges faced at the OMC level? Is there some issue with regarding the value-added services? Or you know, what is the exact feedback that you are getting from the OMC?
Saurabh Lal
So, Vasav, with respect to the deployment of OMC, as you know, we are the only company which has a contract from all these three oil marketing companies. So, we are continuing to deploy those machines over there. If you just go back to a slide back to the history, these machines were always there with this OMC retail outlet, and these machines were largely serviced by the local banks or local branches over there. So, now once after this contract got taken to the head office level by the oil marketing company, because the transaction fees that get debited or get charged on all the digital trans
Q
So, my major question for us is related to the revenue that we might expect in H2, but that you have mentioned that we have some good order wins, so that should take care of it. So, with these new order wins, what do we see our FY24 as panning out so that our next quarterly run rate would be visible in FY24? Or what kind of growth are we seeing out there? That would be my first question.
Saurabh Lal
So, Darshil, with respect to the guidance for FY24, we would like to restrict ourselves right now. I will be honest, but just to give you background with the kind of business in which we are, Darshil, so that you can definitely take out this that we are into a service business, which is basically covering over 90% of our revenue, or I would say, 90% plus of our revenue comes from a service business, which is a contracted business for us, which is a very, very long-term contracted business I would say, whether you talk about ATM outsourcing, whether you talk about the banking automations or oth
Q
Sir, my question is on the deal wins that we have announced. So, is it from existing customers or these are new customers? And what proportion of these are like renewable deals? And what would be lagging in that? And as you mentioned that these are fixed fee contracts, so the realizations of these fixed fee contracts are similar to what we are getting from the existing contracts or is it on the lower side?
Saurabh Lal
Amit, as I said, these are two new wins again from large public sector banks, and on the managed services, and on the fixed fee contract. So, they are long-term contracts running about from four years to five years contract for us. So, it will give a very, very strong visibility of a long term revenue guidance also with respect to these new additional contracts for us. With respect to the capital, as I said to Darshil also, there is no capital deployment for us in that. The nature of this contract will be similar to the one which we have right now in our portfolio that both these two new contr
Q
A couple of questions. One on the working capital side. So, I think, you know, in this first half, the operating cash flow generation has been relatively lower because the working capital cycle has gone up. So, can you please help us understand this? And how you see this moving forward?
Saurabh Lal
So, Naveen, as you rightly said, definitely, the company has been consistent in delivering the margins and the profitability as we were expecting. So, we continue to generate that much EBITDA I would say percentage. So, from operating cash flow that there is a gross cash flow that company got generated. Now from the operating cash flow, if you see from the balance sheet side, there has been a significant reduction in the liabilities that we have paid in this quarter. So, most of the capital or I would say, cash that company has generated in this H1 number, I would say, has been utilized to ens
Q
Thank you everyone for joining us today on the Earnings Call. We appreciate your interest in AGS. If you have any further queries, please contact SGA, our Investor Relations Advisor. Thank you so much.
Management
Speaking time
Saurabh Lal
19
Moderator
10
Avadhoot Joshi
6
Amit Chandra
5
Manik Taneja
4
Naveen Jain
4
Ravi Goyal
3
Vasav
3
Saurabh Lal
3
Darshil Jhaveri
2
Opening remarks
Ravi Goyal
Thank you. Good afternoon everyone. A very warm welcome to each one, and thank you for joining our Q2 FY23 Earnings Call. On this call, I am joined by our CFO – Mr. Saurabh Lal, our Executive Director – Mr. Stanley Johnson, Vinayak Goyal, and Managing Director of our subsidiary Securevalue India – Mr. Shailesh Shetty. The quarter gone by was a relatively soft quarter, but we are confident to meet our target of highest ever PAT in FY23 and will continue to sustain our EBITDA margin of 25% plus. Going by the RFPs already floated in the market and those in the pipeline, the ATM/CRM network in the country is on a growth trajectory. As one of the industry leaders in this segment, we are in the process of tapping into this growth potential, with couple of large contract wins from leading Public Sector Banks. These will start coming on-stream from the next quarter onwards and will be rolled out over the next 12 months. We expect this to further strengthen our ATM and CRM Outsourcing business
Saurabh Lal
Thank you, Ravi. Good afternoon, everyone. Let me now take you through the performance of Q2 FY23. In this quarter that has gone, the total income of the group stood at 4,206 million versus 4,856 million for quarter two of FY22. Talking about our EBITDA number, the adjusted EBITDA of the group for Q2 FY23 stood at 1,235 million as against 1,387 million in Q2 FY22. The corresponding figure for Q2 FY23 stood at INR 1,269 million. The adjusted EBITDA margins for Q2 FY23 stood at around very healthy 29.4% as against 28.6% in Q2 FY22. AGS has redeemed the outstanding NCDs worth 5,500 million INR in FY22 which was part of our object or offer of the IPO. The finance cost benefit of this has already started accruing to us from the last quarter and evident in this quarter two, leading to a reduction of our finance cost by 41% which stood at INR 345 million for the quarter. Talking about the PAT levels, we observed a 400% increase in the PAT rising from Rs. 41 million in Q2 FY22 to 207 million i
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