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.