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.