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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.
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