Newgen Software Technologies Ltd Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ruchi Burde Mukhija - ICICI Securities - Analyst : Congratulations on good execution. My question is regarding your India and USA business. In India, we've been hearing banking deposit growth has been weak. So does that change demand narrative for you in India? And in contrast, for USA, your larger peers have been indicating that the discretionary demand is picking up. So do you see that translating into any uptick in business momentum in USA?

Question: Ruchi Burde Mukhija - ICICI Securities - Analyst : Yes.

Question: Aditi Patil - ICICI Securities - Analyst : My first question is on the strong license sales which we had this quarter. So was this mainly led by APAC and EMEA geography? And how were the license sales in India?

Question: Aditi Patil - ICICI Securities - Analyst : Yes. And has this also -- the longer execution cycle, has that also led to decline in your implementation revenue?

Question: Aditi Patil - ICICI Securities - Analyst : Okay. Got it. And can you let us know the deal bookings growth for nine months FY25? And even you have some of the large significant deals, but can you provide more color on the traction you're seeing in Health Insurance and Government vertical?

Question: Aditi Patil - ICICI Securities - Analyst : Okay. But from here on, like past two years have been a strong growth in banking sector, especially in India and EMEA. So should we see that growth moderating to some extent in next year? At least we are seeing that in bookings, which is like flattish on nine-month basis.

Question: Abhishek Shah - Ambit Limited - Analyst : Congrats on another strong quarter. So just to get some more understanding on the slower growth that we've seen in India and the US. Specifically on India, you mentioned that they are longer cycle orders, so the implementation timeline is longer. But you've also said that the newer orders you've received this financial year are actually short-cycled. So can we expect that in the quarters going forward, growth EBITDA should accelerate again?

Question: Abhishek Shah - Ambit Limited - Analyst : Okay. And any color on the margins for this quarter, because they were significantly higher than we've seen in the past for similar December number. So any color on that?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Jeet, a couple of questions on the trends that you were highlighting. Firstly, on the fact you're mentioning that the execution cycle of the orders you're now winning is maybe slightly shorter in terms of tenure, but there are implementation cycles of previously won orders, which are much larger. So the downstream support and AMC revenue is also kind of getting delayed. But then should that not reflect in your executable order book? So while your nine months order inflow is the same, but could you throw some color on how the executable order book as a consequence of this is changing maybe right now versus where it was this time last year?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Yes, that will really help. That's very clear. And also on the insurance segment, so I think you called out that as an area of focus earlier during the year, and now you've shared some highlights of wins and the wins you expect next quarter. So it seems to be progressing quite encouragingly, just in line with your plans. But just a couple of questions, if you could help us with, in terms of, first, what are the segments within insurance? What's the kind of product or solution that you're selling there versus the likes of digital lending and supply chain trade finance and banking? And secondly, how do the order sizes here compare, let's say, from a mature insurer versus a mature bank when you win an order there?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Understood. That's helpful. And just one last question from my side on the margins. So while you explained that it is the operating leverage of the quarterly seasonality because of which we saw the expansion. But I guess the quantum of expansion this quarter was much higher, I think, 540

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Mihir this side. I think I largely wanted to understand, when we see the license revenue, license revenue has done well over the last two quarters --

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Is it better now?

Question: Mihir Manohar - Carnelian Asset Management - Analyst : So basically, when we see the license business, license business over the last two quarters, I mean, up 25% and 30%. So I wanted to understand what is leading to higher license revenue? Is there some requirement of on-prem business being there? That was the first question.

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Okay, sure. So this is because large banks are adopting it, and they are I think more for license-based approach rather than subscription-based approach. Is that understanding correct?

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Understood. Broadly wanted to get a sense, with a good license, this will follow for a better AMC and a better implementation going ahead, right?

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Sure. So basically, I mean, the higher license revenue, this will be followed by a better AMC and a better implementation revenue, right, coming quarters?

Question: Mihir Manohar - Carnelian Asset Management - Analyst : Sure. Understood. And my third question was just on the India business. India business, you highlighted there is some weakness in the near term on the domestic banking side. I mean, what is leading to this weakness, which is getting compensated by NBFCs? Some color on that will be helpful.

Question: Ashish Thavkar - JMFMF - Analyst : Sir, if you could talk about AI. So what's the development there? So we had this Marvin with intelligent document processing and all those initiatives. How are they panning out when we talk to our customers?

Question: Ashish Thavkar - JMFMF - Analyst : Yes. And in terms of bench strength that we have on the AI side, are we good enough with the investments or there's more to come?

Question: Ashish Thavkar - JMFMF - Analyst : Great. And just two questions on the number front. So you said we have short-cycle deals, which we will start executing in the next six months. So typically, obviously, fourth quarter is the largest for us and 1Q is seasonally the weakest. But could things be different this time around, since there are a lot of short-cycle deal execution? That is the first part. Second part, and in your overall journey of targeting $500 million revenues in the next four years, so does that stay intact? And any update on M&A would be helpful.

Question: Ashish Thavkar - JMFMF - Analyst : Sir, like referring to your $500 million vision that you have in your business, how important is the mature markets to fire up now? And is there a shift in timelines, like is it a three- to four-year or a four- to five-year kind of a vision you have? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 20, 2025 / 10:30AM, NEWG.NS - Q3 2025 Newgen Software Technologies Ltd Earnings Call

Question: Rahul Jain - Dolat Capital - Analyst : My question is related to implementation. I know it's being talked around. What I want to specifically understand is that what could be the challenges as a business we might see as we scale up and there are diversity of deal and market and vertical. So is that a challenge which we might see over time on how well the implementation piece grow? And this is where bulk of the execution capabilities are getting tested, because other pieces are more like once you make a sale, a lot of things happen on its own. But implementation is something which is time-consuming and energy-consuming kind of an exercise.

Question: Rahul Jain - Dolat Capital - Analyst : Right, right. So I got that point. What I'm trying to also understand on top of it is that how we ensure that this scales up, because given the diversity of the geography and vertical in terms of hiring of the talent, our talent across markets are that fungible to ensure that once they are done with one implementation and move to another, there is not any time lapse to that? And what we could do to avoid a situation like what we saw this time and what we are trying to do to mitigate that?

Question: Rahul Jain - Dolat Capital - Analyst : Sure, sure. And just last bit. From a client's perspective, does that change? Is there any part of SLA which leads to this kind of a conflict in terms of any delay of execution, or they are indifferent, or they are also cause of a reason for this to happen?

Question: Chirag Kachhadiya - Ashika Equity - Analyst : Congrats on good performance. Sir, I just wanted to know as on nine months FY25, the deals which we have signed, the growth rate is similar to like last year, or it is relatively lower compared to last year?

Question: Chirag Kachhadiya - Ashika Equity - Analyst : Okay. So whatever we signed, can I assume that the revenue will flow in FY26 or in first half of FY27?