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Newgen Software Technologies Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Newgen Software Technologies Limited (NEWGEN) Q4 FY24 Earnings Concall

  • Revenue Growth
    • Revenue increased by 28% year-over-year to INR 1,244 crores.
    • Witnessed strong growth in EMEA, 39% and India, 33% markets.
    • Secured largest project worth INR 97 crores in APAC region.
    • Increased number of customers with billing over INR 45 crores from 51 to 65.
    • Average revenue per customer grew by 29%.
  • Product Innovation
    • Launched AI-enabled version of Newgen platform, Marvin.
    • Released new versions of ECM and CCM platforms.
    • Introduced next-generation trade finance solution, IDP Studio, with advanced machine learning.
    • Incorporated new features like AI, cloud, microservices, and security enhancements.
  • Profitability
    • Profit after tax increased by 42% year-over-year to INR 252 crores.
    • Invested 9% of revenue in R&D initiatives.
    • Spent 22% of revenue on sales and marketing activities.
    • Robust cash flow generation with net operating cash flow of INR 281 crores.
  • Customer Relationships
    • Added 51 new logos during the year, 11 in Q4 alone.
    • Annual revenues from existing banking customers comprised 60% of total revenue.
    • Deeper engagement with clients, automating end-to-end processes.
  • Talent Management
    • Global workforce grew to 4,500 individuals.
    • Focused on talent management and learning initiatives.
  • Order Book Growth
    • Order book expanded to around INR 1,560 crores from INR 1,300 crores previously.
    • Growth in order book at 20% versus 30% in the previous year.
    • Strong order book growth not seen as a constraint for meeting revenue targets.
    • Other factors like new logo additions and average deal size also contribute to growth.
  • Revenue/Margin Growth Outlook
    • Expect to maintain growth momentum and do better in the coming year.
    • Traditional markets like India, Middle East, and financial services showing healthy pipeline.
    • S. market still a work in progress, with efforts to target larger entities.
    • Aspiration of achieving $500 million revenue by FY 2027 driven by core verticals and insurance expansion.
    • Targeting growth ranges similar to previous years.
    • Expect to maintain healthy net margins around 20-21%.
    • EBITDA margins likely to expand, but net margins may be impacted by higher tax rates.
  • Insurance Vertical Expansion
    • Insurance vertical expected to be a substantial part of revenue in the next 2-3 years.
    • Focused on life, general, and health insurance segments.
    • Investing in building teams, capabilities, and products for larger deal sizes in insurance.
    • Current insurance growth rates lower than banking, which was the primary driver at over 30% growth.
  • Seasonality Impact
    • Aim to reduce seasonality, but Q1 unlikely to be bigger than Q4.
    • Expect Q1 growth rate to be slightly higher than average growth rate.
    • Q1, Q2 growth rates historically higher, followed by relatively lower growth in subsequent quarters.
  • M&A Strategy
    • Looking for tactical acquisitions for speed-to-market and market access, predominantly in major markets.
    • No specific targets identified yet, but the work is in progress.
    • Expect to make acquisitions in the next 1-2 years to accelerate growth in mature markets.
  • GSI-led Strategy
    • Working on enablement and product-to-product tie-ups with GSIs, but growth in the funnel has been slow.
    • Targeting mature markets where GSI business has not been strong, impacting funnel growth.
    • Exploring partnerships with top-tier consulting firms for early funnel building.
    • Resetting the GSI strategy due to long deal cycles and varying deal sizes.
  • Pricing Environment
    • Global prices have peaked for IT products, manpower, and services.
    • Evaluating pricing components across products and services.
    • Working with customers to revise rates and implement pricing initiatives in the next few quarters.
  • BPO and GenAI Impact
    • BPO segment has been a traditional partner for accounts payable and receivable processes.
    • Potential for horizontal play exists, but traction has been limited in India and globally.
    • Exploring GenAI use cases in BPO for automating routine tasks and improving operational efficiency.
    • GenAI offerings in products like content summarization, rule building, and multilingual communication.
  • US Sales Strategy Reset
    • Pivoting from smaller banks ($2B-$20B assets) to larger banks ($20B-$200B assets), around 100 accounts.
    • Lifetime value of larger accounts is more meaningful for the company’s growth aspirations.
    • Building dedicated sales team, tailoring product definitions, and partnering with consulting firms.
    • Initial inroads made with a few larger bank accounts, but work in progress.
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