Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thyrocare Technologies Ltd (BOM:539871, Financial) reported a 16% year-on-year revenue growth for Q1 FY25, driven primarily by the pathology business.
- The company has successfully implemented a slab-based pricing model, which has been well accepted by the franchisee network, leading to increased motivation and volume growth.
- 25 out of 30 NABL labs are now NABL accredited, with 94% of total sample load processed in these labs, showcasing a strong commitment to quality.
- The company processed 6 million samples and served 4 million patients in Q1 FY25, reflecting a 13% and 9% year-on-year growth in volume, respectively.
- Thyrocare Technologies Ltd (BOM:539871) has entered into a business transfer agreement to acquire Polo Labs Private Limited, expanding its footprint in North India.
Negative Points
- The EBITDA margin for the quarter decreased by 1 percentage point year-on-year, primarily due to increased material costs and foreign exchange fluctuations.
- Employee expenses have increased year-on-year due to annual increments and new business acquisitions, impacting overall profitability.
- The radiology business, despite showing some revenue growth, continues to contribute minimally to the bottom line, with significant maintenance costs due to old equipment.
- The company has seen a decline in realization per sample in the partnership business, attributed to the addition of lower-cost tests during sample collection.
- There is a long tail in the partnership business, with the top five partners contributing 50-60% of the revenue, indicating potential dependency on a few key partners.
Q & A Highlights
Q: What is the quarterly cadence of depreciation that was around INR13 crores in the last two quarters, and why has it reduced this quarter?
A: The depreciation cost dipped by INR1.6 crores this quarter because in Q4, we took a one-time depreciation cost for delayed depreciation of the Pulse entity. This has now normalized. In Q3, we had significant capitalizations due to infrastructure development, which increased depreciation temporarily. Going forward, depreciation will be between INR11 crores to INR12 crores per quarter, subject to further business expansion. (Rahul Guha, MD and CEO)
Q: How do you see the partnership revenue growth trajectory going forward?
A: Many partnerships were added in the second half of last year, leading to a significant jump in revenue. API is also back on the growth path, contributing to the boost. We expect this trajectory to continue, with a strong pipeline of new partnerships and growing existing accounts. (Rahul Guha, MD and CEO; Nitin Chugh, Chief Commercial Officer)
Q: Can you explain the seasonality in pathology revenues and the year-on-year growth?
A: The base business is seasonal, with Q4 typically being the strongest due to annual health checkups for tax benefits. Q1 usually sees a mild dip, but this year we maintained sequential growth. Year-on-year, our non-COVID business has been growing at a CAGR of roughly 18%-19%, so the 16% growth this quarter is strong. (Rahul Guha, MD and CEO)
Q: What factors are driving the growth and contribution from larger franchisees?
A: We have added roughly 600 large franchisees year-on-year, while the number of small franchisees has remained stable. This shift in mix towards larger franchisees is driving our growth. We expect franchisee business to grow in the low double digits to mid-teens, with partnerships growing faster. (Rahul Guha, MD and CEO)
Q: What is the outlook for EBITDA margins, given the recent dip?
A: The 1% dip in EBITDA margin is primarily due to increased material costs, higher employee expenses, and marketing spends. We expect EBITDA margins to be between 27% to 30% in the coming quarters. (Alok Jagnani, CFO)
Q: Can you provide details on the ESOP program and its impact on financials?
A: The ESOPs are issued by the parent company and reflected as an expense in our P&L and as an equity contribution from the parent in our balance sheet. This is a cashless charge and does not affect our cash outflow. (Rahul Guha, MD and CEO)
Q: What is the total capital outlay for non-Indian operations, specifically in Africa?
A: We have spent INR8 crores in total for our Tanzania lab, with INR4 crores from our side and INR4 crores from our partner. As of now, we have no further plans for additional capital outlay until we assess the outcomes. (Rahul Guha, MD and CEO; Alok Jagnani, CFO)
Q: What is the status and future outlook for the radiology business?
A: The radiology business is now profitable but not generating substantial profit due to high maintenance costs of old equipment. We are not planning significant investments in this segment currently and are focusing on the pathology business. (Rahul Guha, MD and CEO)
Q: How do you define large and small franchisees, and who are your major competitors in the franchisee business?
A: A large franchisee bills more than INR50,000 at Thyrocare billing levels, while a small franchisee bills less. Competitors include both large established players like Metropolis and Lal, as well as region-specific local players. (Rahul Guha, MD and CEO; Nitin Chugh, Chief Commercial Officer)
Q: What is driving the growth in the partnership business, and is there a difference in margins between franchisee and partnership businesses?
A: Growth is driven by both new partners and increased contributions from existing ones. The margins at the gross and EBITDA levels are fairly similar between the franchisee and partnership businesses, so the growth in partnerships will not dent our EBITDA margin. (Rahul Guha, MD and CEO; Nitin Chugh, Chief Commercial Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
