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.