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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.
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