GuruFocus –
- Gain: INR 361 crores, 23% YoY growth.
- Sales growth in EMIA region: 21% annually.
- Sales growth in India region: 19% annually.
- Sales growth APAC region: 53% on an annual basis.
- Sales growth American region: 17% annually.
- License sales growth: 52% on an annual basis.
- Profit after tax: INR 70 crores, 47% YoY growth.
- R&D expenses: 9% of turnover.
- Sales and marketing costs: 22% of turnover.
- Net trade receivables: INR 442 crores as on September 30, 2024.
- Net DSO: 217 days.
- Turnover over six months: INR 676 crores, 24% growth.
- Six-month profit after taxes: INR 118 crores, 51% growth.
Release date: October 15, 2024
For the full earnings call transcript, please refer to the full earnings call transcript.
Positive points
- Newgen Software Technologies Ltd (NSE:NEWGEN) reported a strong quarter with 23% year-on-year revenue growth reaching INR361 crores.
- The APAC region showed impressive performance with 53% year-on-year growth for the second consecutive quarter.
- The company witnessed a significant increase in license sales, which grew by 52% year-on-year.
- Major deals were signed, including a project worth INR 25 crores with a major insurance company in India and a 1.5 million order from a financial leasing company in Saudi Arabia.
- Newgen Software Technologies Ltd continues to receive critical acclaim and is recognized in Forrester’s third quarter 2024 automation software landscape and content platform landscape.
Negative points
- Annuity revenue growth was weaker this quarter, at 14%, falling below 20% for the first time in ten quarters.
- The US market showed slower growth of 17% year-on-year, with deal closing challenges and slower deal velocity.
- The company’s net trade receivables rose to INR442 crores, resulting in a net DSO of 217 days.
- There are concerns about slower realization of revenue from large deals due to longer execution cycles.
- Despite strong growth in certain regions, bank revenue growth was slightly lower than the corporate average, raising questions about sustained growth in the medium term.
Q&A highlights Q: APAC has recorded growth of more than 50% for the second consecutive quarter. Is this growth sustainable?
A: Diwakar Nigam, Managing Director: Growth in APAC is driven by substantial licensing deals on a weaker basis than last year. These deals will execute over the next 18 months, indicating a long line of revenue. Growth is driven by acquiring licenses and acquiring new logos.
Q: Annuity-based revenue growth was softer this quarter. Can you explain the reason and future trajectory?
A: Diwakar Nigam, Managing Director: The shift from smaller to larger accounts in the US has had an impact on annuity growth. Execution cycles for big wins have gotten longer, delaying revenue realization. This is expected to be transient; recovery is expected within one to two quarters.
Q: How has the order book grown in the first half of FY25, and what is the outlook for the pipeline?
A: Diwakar Nigam, Managing Director: The order book has grown by approximately 22% in the first half year. The pipeline is strong, with traditional markets continuing to grow and new initiatives in the insurance and government sectors expected to contribute significantly in the future.
Q: What is the response to the LumYn GenAI product launched last quarter?
A: Diwakar Nigam, Managing Director: There is great interest in AI and GenAI across industries. While AI is central to many use cases, its capabilities are not driven solely by AI. The focus is on integrating AI into existing processes such as lending and claims.
Q: Can you explain your business model and the type of customers you serve?
A: Diwakar Nigam, Managing Director: Newgen is a software product company focused on enterprise customers, primarily in the financial services industry. We provide customer service, loan processing and account management solutions, sitting between core systems and users to orchestrate digital journeys.
For the full earnings call transcript, please refer to the full earnings call transcript.
This content was originally published on Gurufocus.com
