Newgen Software Technologies Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Newgen Software Technologies Limited (NEWGEN) Q2 FY24 Earnings Concall

• Revenue Growth Across Geographies
  • Newgen witnessed robust 30% YoY revenue growth to INR293 crores in Q2 FY24.
  • Strong growth seen in India region with 38% YoY growth; significant orders from public and private banks.
  • EMEA region grew 34% YoY with large value deals; expanding business in Saudi Arabia.
  • Americas grew 30% YoY; added new logos like leading analytics provider.
  • Healthy growth in booking and billing in H1; added 14 new logos across geographies.
  • Investments to grow US business will likely start bearing fruit over the next couple of years.
• Digital Banking Solutions Driving Growth
  • Seeing significant pickup in digital banking demand across geographies.
  • Becoming preferred platform for banks to accelerate lending and reduce risk.
  • Received high value orders for digital lending platform in Q2.
  • Won largest order of INR68 crores from public sector bank for digital banking platform.
  • Working with large Indian bank for agri lending solution.
  • Signed project with Saudi bank for digital transformation of banking loan processes
• Strong Financial Performance
  • Profit after tax grew 59% YoY to INR48 crores in Q2.
  • Annuity revenues growing at 26% to INR179 crores.
  • Steady growth seen in subscription and license revenues.
  • Implementation and support revenues growing on large deals.
  • Investing 11% in R&D and 21% in sales and marketing.
  • Net cash from operations at INR146 crores in H1 FY24.
  • Profitability also improved with expansion of EBITDA margins compared to last year.
  • The momentum is expected to continue in Q3 and Q4 which are seasonally stronger quarters.
• Growth In Order Bookings
  • Order book has grown at over 30% in recent quarters, faster than revenue growth.
  • Ability to continue winning large license deals will be key to sustaining growth momentum.
  • The company is now able to win larger sized deals compared to the past.
  • Deal tenure remains short term, mostly for execution over the next 12 months.
• BFSI Growth Drivers
  • Digital transformation efforts, especially in lending and customer experience.
  • Traction in emerging markets like India, Middle East, APAC where economic activity is high.
  • Tier 1 banks looking to transform legacy processes and reduce costs.
• Trade Finance Progress
  • Trade finance deals are large in size but have a long sales cycle due to complexity.
  • Expects to close more deals in the next two quarters.
  • Key markets are India, Middle East, APAC, and large US and European banks.
• Margin Expansion Opportunity
  • Investments in H1 2022 expected to benefit H2 margins.
  • If Newgen exceeds budgeted top line growth, margins can expand above 18-21% guided range.
  • Q2 and H2 typically stronger margin quarters compared to H1.
  • Targeting over 20% sustainable EBITDA margins long-term
• Market Opportunity And Strategy
  • The company has less than 1% market share currently, so there is a large growth opportunity.
  • Growth is coming from both taking share in traditional ECM/BPM and new digital use cases in industries like banking and insurance.
  • The company is focused on modernizing and replacing legacy ECM solutions.
• DSO Improvement And Efficiency
  • DSO decreased significantly, indicating better collection efficiency.
  • The company aims to achieve a 90-day DSO in the future, reflecting its focus on financial discipline.