Newgen Software Technologies Limited Q3 FY22 Earnings Conference Call Summary

Key highlights from Newgen Software Technologies Limited (NEWGEN) Q3 FY22 Earnings Concall

Management Update:

• NEWGEN commented that it saw acceleration in business from existing customers and healthy operating margins. The company’s subscription revenue continues to be the strongest component, seeing 20% growth YoY.

Q&A Highlights:

• Analyst Dipesh Mehta asked about the one-time work that the company did in the US. CEO Virender Jeet said that it was somewhere in the range of 20-30 crores.

• Dipesh also asked about the traction on the government part of the business in India.  CEO Virender Jeet commented that the company is not seeing a lot of government initiatives coming in the typical spaces where the government is operating. But excluding government part, other segments like new financial services and existing accounts are seeing good momentum building over the next quarters.

• Karan Doshi from Edelweiss Financial Service enquired about the proportion of new deals and logos from mature markets like North America and Europe. Virender Jeet answered by saying that the company did have wins in US, Europe and Australia. CEO added that once the base and run rate is established, these wins should reflect in the topline in the next two quarters.

• On a question asked by Akshay Satija from Alpha Invesco Research about the number of SaaS customers the company has compared to last year, Virender Jeet said that it’s around 30 customers currently on cloud.

• Akshay also asked about the proportion of sales team in the US from the overall sales and marketing team of 300 people. Virender answered that around 60 people are there but not all are in sales, but some are serving the service element also. CEO added that there are 10-12 people in direct sales, with 20-25 people in sales and sales enablement roles.

•  Heenal Gada of ICICI Securities enquired about wage hikes and employee cost as a percentage of revenue declining sequentially. CEO replied by saying that employee cost will drop as the company scales out because a lot of its revenue streams have no direct process with that, especially the license and subscription. On the wage hikes, NEWGEN said it is looking  to improve compensations to manage attrition, people and talent, which could further increase the cost in the quarter.

• Nilesh Jethani of BOI AXA Mutual Fund asked about GSI business model. CEO said that GSI business itself is new and its partner based revenue is about around 20%. The company added that in the next 4 to 5 years this business will contribute around 40%, 50% more overall business.