X

Newgen Software Technologies Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Newgen Software Technologies Limited (NEWGEN) Q3 FY24 Earnings Concall

  • Financial Performance
    • Revenue at INR 324 crores, up 27% year-over-year.
    • Profit after tax at INR 68 crores, up 45%.
    • Healthy growth across geographies like India, EMEA, APAC, Americas.
    • Annuity revenues comprise 59% of total at INR 191 crores.
    • Growth from ATS/AMC compounding and shift of licenses to subscription.
    • Annuitized licenses expected to continue growing faster than company.
  • New Product Innovations
    • Launched NewgenONE Marvin powered by generative AI to enable faster, smarter application development.
    • Received positive response from customers globally.
  • Growth Drivers
    • Added 11 new logos in Q3, 38 year-to-date.
    • Expanding partnerships, like recent one with Duck Creek.
    • Continued investments in R&D; 10% of revenue, and sales and marketing; 21% of revenue.
    • Strong cash flow from operations at INR 193 crores.
  • Order Book Growth and Revenue Outlook
    • Order book has grown around 20% in the first 9 months of FY’24, which will drive revenue growth over the next 2-3 quarters.
    • Growth will be driven by larger deal sizes and multi-year contracts.
    • Q3 and Q4 are significant growth quarters, so expect strong Q4 based on high Q3 growth.
    • Growth momentum expected to continue based on deal velocity in India, Middle East and USA.
  • Subscription Revenue Growth Drivers
    • Subscription revenue grew 33% year-on-year.
    • Larger subscription revenue base in USA, but adding new logos in other geographies for subscription deals.
    • Overall subscription growth driven by total company revenue across geographies.
  • New AI Capabilities
    • Launched NewgenONE Marvin using generative AI to enhance product capabilities.
    • Horizontal capabilities added across products to make them more competitive.
    • Not a separate revenue stream, but bundled into overall product capabilities.
    • New deals will include Marvin capabilities by default or as a priced component.
  • Growth Outlook and Seasonality
    • Faster growth creates challenge of even higher growth next quarter.
    • Annuity revenue and long-term relationships provide compounding effect.
    • Hard work ahead but no constraints seen on growth currently.
  • US Market Performance
    • Grew 25% YTD but below company average and own expectations.
    • Initiatives like GSI partnerships, larger banks, insurance in progress.
    • Significant opportunity for higher growth in large U.S. market.
  • Product Partnerships
    • Partnerships with platforms like Duck Creek & Guidewire in insurance.
    • Integrations allow Newgen to tap into partner ecosystems.
    • Early stage but opens up insurance use cases and joint go-to-market.
    • Banking integrations with core platforms already established.
  • License and Implementation Revenue
    • Implementation revenue growing faster recently, driven by larger deal sizes changing license vs implementation mix.
    • Short term spike but expect balance as deal velocity increases.
    • Annuity revenues expected to grow faster over mid-long term.
  • Logo Addition Strategy
    • Conscious pivot towards larger deals and customers, affecting logo rate.
    • Aim to increase logo rate to 60-70 per year from current about 50.
    • No concentration risk with 500+ customers and <3% revenue per customer.
    • Diversifying markets and verticals should help increase logos.
Related Post