NEWGENNSEMay 02, 2023

Newgen Software Technologies Limited

8,320words
77turns
11analyst exchanges
5executives
Management on call
Diwakar Nigam
CHAIRMAN AND MANAGING
T.S.Varadarajan
WHOLE-TIME DIRECTOR – NEWGEN SOFTWARE TECHNOLOGIES LIMITED
Virender Jeet
CHIEF EXECUTIVE OFFICER – NEWGEN SOFTWARE TECHNOLOGIES LIMITED
Arun Kumar Gupta
CHIEF FINANCIAL
Deepti Mehra Chugh
HEAD, INVESTOR
Key numbers — 40 extracted
INR1,000 crore
joining us today for our Q4 results call. It is a happy moment for us at Newgen as we crossed the INR1,000 crores milestone to total income in this financial year. We witnessed a growth of 25% in revenue over l
25%
ed the INR1,000 crores milestone to total income in this financial year. We witnessed a growth of 25% in revenue over last year. The growth was primarily driven by our traditional markets with India
41%
over last year. The growth was primarily driven by our traditional markets with India growing at 41%, followed by EMEA at 28%, APAC at 17%, and US at 10%. We have made significant progress as an org
28%
was primarily driven by our traditional markets with India growing at 41%, followed by EMEA at 28%, APAC at 17%, and US at 10%. We have made significant progress as an organization and delivered s
17%
ily driven by our traditional markets with India growing at 41%, followed by EMEA at 28%, APAC at 17%, and US at 10%. We have made significant progress as an organization and delivered strong perform
10%
ur traditional markets with India growing at 41%, followed by EMEA at 28%, APAC at 17%, and US at 10%. We have made significant progress as an organization and delivered strong performance across all
INR323 crore
om license to subscription revenues. Our subscription revenues have now reached INR323 crores. This revenue stream is predictable and recurring in nature and grew faster than the overall rev
31%
d recurring in nature and grew faster than the overall revenue growth rate of the organization at 31% Y-o-Y. This comprised 33% of share of our total revenue. Growing large customer base, our solut
33%
grew faster than the overall revenue growth rate of the organization at 31% Y-o-Y. This comprised 33% of share of our total revenue. Growing large customer base, our solutions today are driving deepe
INR5 crore
size per customer. Of the 520-odd active customers today, 51 customers had a billing in excess of INR5 crores for the year compared to 38 last year. At the same time, we continue to maintain low level of cl
rs,
sly working on building our direct sales channel, along with the focused alliances with our partners, especially the system integrators. To expand our market, we have been participating in and hosting
INR212 crore
On profits and margins, we delivered healthy margins during the year. Our EBITDA was stable at INR212 crores, resulting in a margin of 22%. And profit after tax was INR176 crores, leading to net margin of
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Guidance — 18 items
Deepti Chugh
opening
“Nigam for presentation of the results, which will be followed by Q&A by Mr.”
Virender Jeet
qa
“So going further for the next year, as of now, we don't see any systematic risk or any risk in terms of recession or any other thing from account [inaudible 0:14:21].”
Baidik Sarkar
qa
“Do you reckon we can continue with this momentum, or would you caution saying that this is a cyclical high just given the commodity prices have been and it will be difficult for us to kind of repeat this kind of performance.”
Virender Jeet
qa
“See, we don't give guidance, and I think that's a standard answer you guys are used to.”
Virender Jeet
qa
“And as of now, if all things remain the same, we think that we can continue the growth momentum going next year.”
Virender Jeet
qa
“And we had set up a target of being around 18% of net margin and around 21% to 20% of EBITDA.”
Virender Jeet
qa
“We have a very extremely healthy funnel for the next year.”
Harsh Shah
qa
“And if I have to talk about our growth potential for next three years to five years, how do you expect the growth to come?”
Virender Jeet
qa
“We do expect to improve that in the next two years, three years.”
Virender Jeet
qa
“So we expect the deal sizes to be same or better.”
Risks & concerns — 9 flagged
But in light of the systemic banking crisis that the US is subject to today, is there a risk to our pipeline per se?
— Baidik Sarkar
Today, we don't see any risk in terms of our pipeline on that.
— Virender Jeet
So in that case, I don't see a substantial risk right now.
— Virender Jeet
So going further for the next year, as of now, we don't see any systematic risk or any risk in terms of recession or any other thing from account [inaudible 0:14:21].
— Virender Jeet
Do you reckon we can continue with this momentum, or would you caution saying that this is a cyclical high just given the commodity prices have been and it will be difficult for us to kind of repeat this kind of performance.
— Baidik Sarkar
For the US, we have seen interest on trade finance, but I would be slightly cautious in terms of we don't have a real go-to-market strategy built around trade finance right now.
— Virender Jeet
But how should we see FY '24, FY '25 going ahead, given the fact that there is like a 300 basis points kind of a decline at least on a Y-o-Y basis for FY '23?
— Mihir
And also in the US, given that the larger companies are seeing some sort of pressure or some sort of slowdown in their revenue growth.
— Harsh Shah
So is there any sort of pricing pressure that you are facing?
— Harsh Shah
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Q&A — 11 exchanges
Q
Hi Mr. Nigam, Virender and the rest of the team. Congrats on a very strong trend. A couple of questions. You have shown good traction this quarter. But in light of the systemic banking crisis that the US is subject to today, is there a risk to our pipeline per se? What's the sense from your current conversations? And secondly, our go-to-market success in the US this quarter, was that courtesy our system integration partners, or was it courtesy our organic initiatives? What's your sense of traction in the geography per se except banking?
Virender Jeet
Thank you, Sarkar. And I think for the US, as you currently understand, our business is pretty diversified in geos. And the presence for us, in US, is in accounts which are typically in financial services and some large enterprise coming from GSIs. Today, we don't see any risk in terms of our pipeline on that. Probably, we don't have the same concerns as the larger GSIs, because I believe that most of our business is still growing from licenses, and which are -- opportunities have generated on both sides in terms of when people are looking at efficiency and reduction of costs, our platform pla
Q
Yes, hi. Thanks for giving the opportunity. And congratulations on a good set of numbers. Largely, I wanted to understand the traction on the trade finance side of the piece. I mean, how are you seeing the traction on the trade finance platform given the deal sizes are slightly larger here? And also wanted to understand in this context, I mean, you mentioned that you are moving from traditional banking to larger accounts in the US. So I mean, given the fact that -- how are we looking at trade finance platform plus this comment that you made upon? And how is the organic sales channel specifical
Virender Jeet
Thanks, Mihir. And let me try to answer, and number one -- remind me if I miss something. So I think you're right absolutely on the trade finance. We did this -- it has been almost like 1.5 years since we hit the market with this, and we are finding substantial traction in the market. And the traction so far what we are converting is predominantly in Middle East and India. That's the market we are really going to focus on. Having said that, we do sense an amount of interest coming from US and other markets as well. But right now, I think if you ask from a business planning perspective, we have
Q
Hi, good afternoon, sir. Just wanted to understand how the competitive landscape is emerging, especially in your traditional markets? And also in the US, given that the larger companies are seeing some sort of pressure or some sort of slowdown in their revenue growth. So is there any sort of pricing pressure that you are facing? So how is the competitor scenario emerging now?
Virender Jeet
Yes. Thanks, Harsh. Regarding competition, I think for our core product categories, I think the competition is pretty standard. And those are -- typically, if you look at the Gartners and Forrester quadrants, you will see all the needs out there. Predominantly, they play in all the markets. Beyond that, for our vertical products, what we do in lending, what we do in origination, or what we do in trade, there are different set of each activity, what we call vertical banking products. Those are the competition. One of the important developments which has happened is on the core product category,
Q
Yes. Congratulations on good set of numbers. I have a couple of questions. In your opening remarks, you mentioned that we are targeting large banking and financial groups. So I would like to understand what strategy we are following to tap such large corporates? And second, on logo addition front, the net logo count compared to previous years is relatively on lower side. So what strategies are there to increase the momentum in terms of logo addition? Yes, I would like to know these two questions.
Virender Jeet
Thanks, Chirag. So Chirag, when I said, our ability to -- we are trying to shift. So initially, our banking in US was focused on typically banks which were somewhere in say sizes of $1 billion to all the way up to $20 billion. We have slightly pivoted and started focusing typically on banks which are at least $10 billion or more, upwards all the way up to $50 billion to $100 billion. And what we have seen is as we have been able to garner some more support in terms of reference ability in US and our solutions have become more mature, we have seen we are able to enter those accounts. We are sti
Q
Hello everyone. So I have two questions. First one, given the macroeconomic situation, that the free money has stopped and the EBITDA negative nature of the business of our peers, are we seeing any passiveness in bidding by them and have we been able to take advantage of that?
Virender Jeet
Yes. Saurabh, thanks for the question. Saurabh, I think the business, most of the conversation what we hear about Indian IT and the economics is typically from service companies angle and I think predominantly driven by the Tier 1, Tier 2 companies, which operate at a very different size and ratios. So we are not very sure about how to answer that question because we are slightly not in that business. We are still in the business of acquiring accounts and being in terms of what we call a hi-tech sale or what we call serious enterprise sale. In terms of right now, what we have seen traditionall
Q
Hi, good evening. Thanks for taking my question. And congratulations for good set of numbers and superb execution. I have a couple of questions. First one is, just wanted to check that our GSI strategy particularly, the way the things are shaping up, like last two years, three years, we are trying to get inroads with our GSI partners. So just wanted to understand, is there something not clicking or something which is leading to a delay in terms of getting the traction on GSI strategy? So if you can give some more colour on that, that will be helpful?
Virender Jeet
Manoj, thanks. And you're absolutely right, last two years, three years we've been building on this GSI strategy. And I think we're very lucky to get some extremely good early wins, which really established both recall of Newgen within the GSI mind share, and also have relation to other GSIs. See, in terms of success or failure of GSI is determined by the ambition we have around that. We do get a lot of business with GSIs. I think in fact, 20% of the revenues today are driven by partners. And we have some amount of marquee wins every year with GSIs. What we expect this to drive the next phase
Q
Hi. Thanks for taking my question. Congrats on a good set of numbers. So one of your GSIs highlighted that low-code and no-code is gaining traction. So are you seeing such increased traction in major markets in the current scenario? Virender Jeet; So I think we are very -- see, I think we have a methodology over the last 20 years of pushing low-code, no-code. And I think we have come through different names, which is BPM, iBPS, low-code, no-code, hyper automation. These are all categories of the same name. There's a huge interest in enterprises across the world that they don't want to take the
Devang Bhatt
So a follow-up is that, will you be able to see a higher US growth in this year because of this? And will you be able to sustain the Q4 kind of margins that you have seen this quarter? Yes. So I think that as part of what we sell, all things we sell are based on low-code strategy. So I don't think there is any different thing out there. We do expect that as soon as in the downturn and the cost optimization projects come, there's renewed interest in automation. And automation is low code based automation because we don't want to have very, very long projects. So there is an interest. Now I thin
Q
Yes, hi. I just have one question that you talked about the partnership with Mambu and Sopra. Can you just explain how these are beneficial? And what are the intersection of the offering? And what are the complementary elements involved here?
Virender Jeet
Yes. So thanks, Rahul. So Rahul, I think what we have done is we are looking at the whole partner ecosystem more broadly in terms of finding what are the complementing products and go-to-market strategies. So these are typically, these are both to do with banking. So while in Sopra we are working on the digital lending side, how we can sell our digital lending product in Europe and adjacent areas, because Sopra is very strong in those markets and that's our alliance. And Mambu, I think this is a core banking product, basically more for digital banks. Again, we are looking at how to extend beyo
Q
Hello. Can you just throw light on the increase in DSO days to 145 days in the current quarter?
Virender Jeet
Yes. So yes, it has increased over the last year. So generally, what happens, our year-end DSOs are very high. As I said, a lot of billing happens towards the later part of the year. And that's the lopsided nature of our business where we do license sales. We have done roughly around more than INR350 crores of billing. And predominantly, the last month would be a significant part of that billing. That does affect the DSO. So our billing has grown at much higher speed than our revenues. So there is much higher DSO. Having said that, we have optimized it from a very large number, and we are targ
Q
Yes. Most of my questions are answered. I have only one question, more of, what do you think is the threat of AI and basically the way things are moving in that particular domain? So if you can throw some colour on that, will it be beneficial for us or it could be some threat?
Virender Jeet
Yes, Jiten, it's a million dollar question. And I think everybody is -- I have a personal opinion on it. I don't know the official -- but I think when you look at any disruption in technology, significant technology disruptions like cloud, mobility,, we have always seen that it helps for the companies because they end up leveraging that technology faster than the market and then creating more products and services around using that technology. So the recent -- what has happened over the last four months in the generative AI, we think that shows up a lot of opportunities for us in content servi
Q
Thank you so much, everyone, for joining us on the call. For any further questions, you can connect with me or you can go to our website. Thank you.
Management
Speaking time
Virender Jeet
28
Moderator
13
Baidik Sarkar
5
Devang Bhatt
5
Rahul Jain
4
Mihir
3
Harsh Shah
3
Chirag Kachhadiya
3
Saurabh Sadhwani
3
Manoj Bahety
3
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Opening remarks
Deepti Chugh
Thank you. Good evening, everyone. I am Deepti Mehra, Investor Relations, Newgen Software Technologies Limited, and I welcome you all to the Q4 FY '23 results of the company. Joining with me today on our call is the management, Mr. Diwakar Nigam, Chairman and Managing Director, Mr. Varadarajan, Whole Time Director, Mr. Virender Jeet, CEO, Mr. Arun Kumar Gupta, CFO. Before we move on to the discussion, let me highlight that this call may contain certain forward- looking statements concerning Newgen's future business prospects and profitability, which are subject to a number of risks and uncertainties, and the actual results could materially vary from the forward-looking statements. Past performance may not be indicative of the future performance. The company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect, or update any forward-looking statements made from time-to-time by or on behalf of the company. For further det
Diwakar Nigam
Good afternoon, everyone. Thank you for joining us today for our Q4 results call. It is a happy moment for us at Newgen as we crossed the INR1,000 crores milestone to total income in this financial year. We witnessed a growth of 25% in revenue over last year. The growth was primarily driven by our traditional markets with India growing at 41%, followed by EMEA at 28%, APAC at 17%, and US at 10%. We have made significant progress as an organization and delivered strong performance across all key business metrics during the financial year. Expansion of subscription revenue. While accomplishing the growth in the revenue, we continued with our smooth transition from license to subscription revenues. Our subscription revenues have now reached INR323 crores. This revenue stream is predictable and recurring in nature and grew faster than the overall revenue growth rate of the organization at 31% Y-o-Y. This comprised 33% of share of our total revenue. Growing large customer base, our solution
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