IRIS Business Services Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from IRIS Business Services Ltd (IRIS) Q4 FY24 Earnings Concall

• Financial Performance
  • Revenue growth of 37% for the full year.
  • Profit before tax nearly doubled compared to the previous year.
  • Return on net worth improved to 21% from 14% in the previous year.
  • Effective collection process with reduced days of sales outstanding (80 days).
• Growth Strategies
  • Aiming to capture more market share with available cash resources.
  • Focused on scaling the SaaS business in a meaningful manner.
  • Recent sales hire to strengthen SaaS sales experience.
  • Exploring opportunities beyond mandated business.
• Cash Flow Management
  • Net operating cash flow close to 12 crores, more than doubled from the previous year.
  • Improved balance sheet cash position, providing flexibility for growth investments.
  • Emphasis on better cash flow generation in the future.
• Future Outlook
  • Confidence in mounting a reasonable attempt at capturing more market share.
  • Translating momentum and cash resources into revenue growth is a current focus.
  • Positive sentiments about the company’s growth trajectory.
• Collect Business Pipeline/Expansion
  • Exploring potential for geographical expansion of the Collect Business.
  • Approach involves engaging with regulators to position as suitable partners for regulatory filing platform implementation.
  • Success depends on winning bids against competitors for regulator-issued RFPs.
  • The Collect Business pipeline looks promising with more inquiries and tenders in the market.
  • Expectation of being able to announce some deal wins in the coming months.
  • Ongoing execution of the significant South African contract (around 30-35% completed).
• Create Segment Strategy
  • Achieved 20% growth in the Create segment despite no new mandates.
  • Indication of gaining market share through existing sales and marketing efforts.
  • Example of a former partner reconnecting due to superiority of Iris Carbon’s product over alternatives.
  • Advantage of serving multiple geographies, preparing for diverse mandate complexities.
• Sales and Marketing Efforts
  • Recent hire of a Chief Sales Officer to strengthen SaaS sales experience.
  • Strategy to convert more customers to Iris Carbon, overcoming product stickiness challenges.
  • Exploring pricing models focused on volume growth rather than increasing prices.
  • Competitive landscape with basket solutions offered by rivals.
• Conversion Challenges
  • Upfront cost savings alone may not justify the effort for finance teams to switch products.
  • Need to emphasize broader value beyond cost reduction.
  • Overcoming inertia and change management efforts within customer organizations.
• Consumer Segment Growth
  • Considered the highest margin business.
  • Plans to invest more in this segment for future growth.
  • Can leverage consumer data as a marketing tool to acquire customers.
  • Potential to monetize data through APIs and analytics offerings.
• Data APIs and Analytics
  • Providing data APIs to lenders and intermediary platforms.
  • Utilizing consent and non-consent data for KYC and credit monitoring.
  • Bundling analytics with overall compliance tech offerings.
• ERC Mandate Updates
  • ERC mandate to start rolling out next year.
  • Initially focused on the contracting market for ERC reporting.
  • Expect wider adoption across US states in the coming years.
  • Currently no revenue generated from the ERC offering.
• Revenue and Margins
  • In FY24, the capitalized R&D amount was around 2.3-2.4 crores.
  • Total capitalized intangible assets, including work-in-progress, amounted to around 4 crores.
  • The effective tax rate for FY24 is expected to be around 10-12% due to accumulated tax credits.
• Market Positioning
  • Historically focused on mid-market (under $1 billion revenue) customers.
  • Now preparing to enter enterprise segment (over $1 billion revenue) more proactively.
  • Targeting both mid-market and enterprise customers in North America and Europe.
• Total Addressable Market
  • Estimated global TAM for Iris Carbon is $10-15 billion.
  • Potential to grow TAM by adding more functionalities to the product.
  • Core product can be sold without necessarily adding new features.
  • Focusing on underserved regions like Africa and Asia.
  • Exploring opportunities in India, following the CIG report on data standards.
• Fundraising Plans
  • Have approval for raising equity capital, but not actively raising funds currently.
  • Seeking resources to scale up and mount a meaningful assault on target markets.
  • Not considering debt financing, only equity.