Newgen Software Technologies Ltd Q4 2024 Earnings Call Transcript

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

Question: Baidik Sarkar - Unifi Capital - Analyst : Hi, good evening. Congrats to you and the team on a strong quarter and what's been a phenomenal year overall. Obviously, multiple things are firing for us today at the same time. I think the best way to simplify all of that is to ask you in your words like you said this in the past few quarters, is your order book and equally pipeline is perhaps growing at a pace that is faster than your revenue booking pace? And B, given where our order pipeline today, where do you think we are in this cycle, right? Are we -- I mean, do we reckon we're in the middle of the cycle or perhaps moving towards the end of the cycle in terms of how banks and financial institutions are thinking about their digital journeys and how that's relevant to us?

Question: Baidik Sarkar - Unifi Capital - Analyst : Sure. So obviously, multiple moving parts, and I will not get into details here, but I think you had highlighted (technical difficulty) $500 million by the end of FY27, right? So if we have to slice that into the products and the initiatives that will help us get there, how should we imagine each of these thoughts better?

Question: Baidik Sarkar - Unifi Capital - Analyst : Yeah. Just last one before I get back to queue. The pace of growth has been so momentous that investment means that our operating leverage expectations have probably been faster than what you expected, right? So just keeping that growth in mind, how should we read your margin profile in the year ahead?

Question: Baidik Sarkar - Unifi Capital - Analyst : And just in terms of seasonal variability, Q1 has always been a step down. I mean, obviously, that correlation was broken last year, Q1 of FY24, given how things have shaped up for us the last 2 quarters and you're already a month into Q1 '25. I mean, will you revert to the previous relationship of a step down? Or how should we read that?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Congratulations on good set of numbers. Sir, I wanted to understand the growth in the order book. I mean at this time, in the presentation we mentioned that the growth in the order book is 20% versus this number was 30% last year same time when we started the year. So should we all see normalizing of growth rate -- growth happening because there has been quite a stellar growth. So should one see us coming back to 22% growth because given the fact that now we are starting the order book at 20% growth and last time, it was 30% growth. So want some understanding how that will improve?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sure, sir. And how should one understand the group dimension. I mean you mentioned order book is not the only thing to repair for the growth rate. So which are the other dimensions that you are mentioning, if you can provide some clarity around that, that would be helpful?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sure. Understood. Sir, second question was on the insurance. I mean, you mentioned that insurance you expect this year to be getting quite strong. Can you provide some more color around this or what conversations are you having with the clients? Is it like an insurance or is it P&G? And what outcome can we see on the lead side or the revenue side for insurance, if you can?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sure. So what is the growth in order book for insurance? I mean at company level, it is 20%. So for insurance, what could be the ballpark numbers?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : I think last year, we saw the YoY growth starts from 34% and then end at 23% in the fourth quarter. You highlighted that the trajectory this year also probably should be the same in terms of the way we should expect it. I was just wondering why should that be the case? And what was it last year as well that drove this anomaly?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : So just to reconfirm if I understand correctly, so while the linear business obviously is steady state, you're saying that the closures of deals now happen in a more spread out fashion versus probably the previous year.

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Okay, understood. Got it. And secondly, you mentioned about a couple of vertical solutions that are doing well for you, like digital lending, trade finance. I just wanted to understand as to what would be the nature of solution in the insurance vertical as well, which we are looking at in terms of the problem point that will be -- the problem statement that you would be looking to solve? And also -- and the vertical solutions today, what percentage of your revenues would be coming from such very specific industry?

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Yes, it does. And you mentioned that you expect a next year for APAC to be a very strong recovery year. Is that on the back of the largest deal that you signed in that region? Or are there some more elements also that have contributed to the same? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 10:30AM, NEWG.NS - Q4 2024 Newgen Software Technologies Ltd Earnings Call

Question: Ashish Chopra - Goldman Sachs Asset Management - Analyst : Understood. And just lastly from my side, on the DSOs, as we exited the year at around 130 days. So on a fourth quarter basis, is that the number -- is that the growth you tend to witness in the last quarter, would that be on the expected lines? Or do you think that it may have come higher than what we would have been targeting?

Question: Jyoti Singh - Arihant Capital Markets Limited - Analyst : Yeah. So thank you for the opportunity. Sir, if you can just give an idea on the BPO segment that is very small for Newgen, 2%. But what are the impact that we are seeing because of the GenAI? And what are expectations from here onwards?

Question: Jyoti Singh - Arihant Capital Markets Limited - Analyst : Okay. Thank you. And sir, next question is on the GenAI side. So like, since when we are starting, it will be a revenue generation for us?

Question: Tushar Sarda - Athena Investments - Analyst : Thank you. I have two questions. One is you said mature markets are to fire much higher. So what growth rate would you look at to reach your aspiration month targets? That's one. And second, because markets are not doing well, M&A should be much easier in this kind of market. So your thoughts on that?

Question: Devang Bhatt - IDBI Capital - Analyst : Hi sir, thank you for taking my question. Just one question that you had highlighted that you are recently setting your sales strategy in the US. So from the past, what different are you doing? Like you have already tapped GSIs and all to tap the mature markets. So what kind of resetting in sales strategy are doing in the US?

Question: Devang Bhatt - IDBI Capital - Analyst : Sir, we have been trying this. I mean, previously also, we were doing this of targeting the larger banks. So in terms of -- I mean -- now for targeting larger banks, have you -- I mean do you -- have come out with some other sales strategy that was not working in the past, and now it will work? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 10:30AM, NEWG.NS - Q4 2024 Newgen Software Technologies Ltd Earnings Call

Question: Devang Bhatt - IDBI Capital - Analyst : Great, sir. And last one thing. Would you be targeting any M&A in this mature market, which will help you in garnering these larger banks?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sir, you mentioned that banks above $50 billion is somewhere your larger accounts are. Can you report how many banks are there, which are more than $50 billion as of now and how many clients are there?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Okay, sure. And as of now, are there any accounts over there in that range?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Okay. And these three have we handed last year or how was it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 10:30AM, NEWG.NS - Q4 2024 Newgen Software Technologies Ltd Earnings Call

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sure. Sir, I just wanted to understand this fundamentally. I mean, as we move the value chain up to larger banks, do you need to fill more product gaps or anything around it? Or we -- is the same product offering even applicable for larger banks? I mean, how would you see that?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Okay. Sure. So what I understand that the gap, which is there is GTM strategy and not product per se?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Sure. My second question was the on the trade finance revenue. What's the trade finance revenue in FY24?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Okay. So six to seven deals with roughly INR100 crores of revenue?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : Of course. Just a rough number and what was this number in FY23?

Question: Mihir Manohar - Carnelian Asset Managemen - Analyst : And what kind of traction? I mean, what kind of inquiries are you seeing incrementally for FY25 on the trade finance side?

Question: Vinay Nadkarni - Hathway Investments - Analyst : Yeah, hi. Just one question. How has Marvin being accepted by everyone and what is the channel response to it? And what is the revenue that we have formed out of it this year?

Question: Vinay Nadkarni - Hathway Investments - Analyst : Okay. One small bookkeeping question. You have 9% expenditure on R&D, it has been expensed out in the books, correct? That's the way you have been doing --

Question: Vinay Nadkarni - Hathway Investments - Analyst : And lastly, just more forward-looking things since between banking and insurance, almost 77% of your revenue comes from these two industries. I understand that you're focusing on that as a primary driver. But going forward, is there any other areas that you are looking at? Because your health care and BPO has not really taken off much. So are we going to be reaching our staff only on banking and finance going forward?