Key highlights from Happiest Minds Technologies Ltd (HAPPSTMNDS) Q4 FY24 Earnings Concall
- GenAI Business Unit
- Dedicated business unit for Generative AI, a transformational change in IT industry.
- 14 active customers across industries, 20 projects spanning use cases like chatbots, learning simulators, contract management, sentiment analysis, content generation.
- Building replicable solutions across industrial technology streams.
- Plans to train all engineers in GenAI, unit expected to grow to 250 employees by year-end.
- Acquisitions
- Acquired PureSoftware and Macmillan Learning, strategically aligned to enhance profitability and productivity.
- Added 1,250 employees, strengthening BFSI, Healthcare, and EduTech industry groups.
- Selective and valuable acquisitions after a careful wait.
- Bioinformatics Capability
- Collaborating with medical research community from prestigious institutions in India and abroad.
- Working on solutions using metagenomics on gut microbiome, anomaly detection in MRI/CT scans, and large cohort research studies for early disease prediction.
- Transformational and significant value-added area for the population.
- Financial Performance
- Total income of ₹1,710 crores, 18% growth year-over-year.
- Operating revenues of $196 million, 11% growth in constant currency.
- EBITDA of ₹421 crores, 24.6% margin, beating guidance range for 16th straight quarter.
- Profit before tax (PBT) of ₹335 crores, 19.6% of revenues.
- Profit after tax (PAT) of ₹248 crores, 14.5% of revenues, 7.5% growth YoY.
- Strong cash conversion, free cash flow of ₹411 crores, 97.5% of EBITDA.
- Operational Highlights
- Ended the year with 250 customers, net addition of 13 customers.
- Crossed milestone of 5,000 employees (organic), net addition of 251 employees.
- Utilization rate of 75.1% in Q4, drop due to hiring for GBS and recent campus hires in training.
- Attrition rate dropped to 13% from 19.8% in the previous year.
- FY25 Guidance
- Estimated revenue growth of 35% to 40% for FY25.
- EBITDA margin guidance of 22% to 24% for FY25.
- Guidance factors in significant investments, acquisitions, drop in cash reserves, investments in GBS, and time for realizing synergies from acquisitions.
- Customer Traction and Growth
- Crossed $50 million quarterly revenue milestone and $200 million annualized revenue.
- Increase in $10 million customer count to 2, and $1 million to $3 million customer count to 37.
- Added 9 new $1 million customers during the year.
- Organic Growth Outlook
- Strong organic growth momentum expected, surpassing industry peers.
- Confident outlook backed by new growth engines (six industry groups) and emerging capabilities (GenAI, bioinformatics).
- Bioinformatics capabilities in healthcare expected to drive significant organic growth.
- Industry-leading organic growth achieved in the past year, anticipating substantial improvement in the coming year.
- Cross-selling Opportunities
- Cross-selling potential between existing and acquired customer bases contributes to variability in growth guidance.
- Speed of integration and ability to leverage cross-selling will impact the upper and lower ends of the guidance range.
- Growth Factors
- Strong pipeline at record high levels expected to translate into new orders and logos.
- Unique growth drivers like new industry groups, GenAI, and bioinformatics capabilities.
- Confident outlook despite muted guidance from larger industry peers.
- India Opportunities
- India market remains a bright spot, with highest revenue share among Indian IT firms.
- Focus on India market from inception, driving consistent quarterly revenue increases at good margins.
- Continued opportunities in the India market expected to contribute to growth.
- Healthcare and Bioinformatics
- Healthcare vertical witnessing steady revenue growth quarter-on-quarter.
- Significant demand in bioinformatics and convergence of hardware/software in MedTech.
- Opportunities in digital transformation for pharma industry.
- 40% revenue growth expected in railway business this year.
- PureSoftware Synergies
- PureSoftware brings complementary capabilities in BFSI and healthcare/life sciences domains.
- Cross-selling opportunities for Happiest Minds’ offerings like AI, GenAI, automation, cybersecurity, digital engineering, and Pimcore platform.
- Potential for cost optimization synergies as the two companies integrate operations.
- EdTech Vertical Outlook
- Vertical facing challenges, with higher education sub-segment impacted by factors like declining enrollment and budget cuts.
- Diversifying focus to K-12, professional development, and workforce development sub-segments.
- Developing offerings and expanding market reach in the new sub-segments to mitigate risk.
- Year-over-year growth in the vertical, despite recent quarterly declines.