Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Onward Technologies Ltd (BOM:517536, Financial) achieved INR472 crores of revenue last year, marking significant growth.
- The company delivered double-digit EBITDA for the first time last year.
- Onward Technologies Ltd has been a dividend-paying company for nine consecutive years, with an increase from INR3 to INR5 recently approved by shareholders.
- The company has a strong management team and board, with key leadership positions filled by experienced professionals.
- There is a positive demand environment, especially in the US and Europe, with significant opportunities in digital, AI, and data analytics.
Negative Points
- Q1 FY25 revenue was INR117.6 crores, which was lower than expected and a marginal drop from the previous quarter.
- The company faced execution challenges, particularly in the US and Europe, due to a lack of technical personnel.
- There were delays in project starts in Europe, impacting revenue recognition.
- Onward Technologies Ltd had to exit several businesses and clients, leading to a reduction in headcount and revenue.
- Despite positive demand, the company struggled with hiring the right talent, particularly for high-demand areas like digital and AI.
Q & A Highlights
Q: Regarding the growth, being a small player, why are we growing only 10% to 15%? And what is our target for revenue from America in the next two years?
A: We expect to see growth from Q2 onwards. We have a strong demand, especially in the US and Europe, and are building capabilities to meet this demand. Our target is to have 70% of our revenue come from outside India, focusing heavily on the US and Europe markets.
Q: Was there any lost sales in Q1 FY25?
A: No, we haven't had any significant losses in the last seven years. The issue was more about execution rather than demand.
Q: What were the execution challenges in Q1 FY25?
A: In the US, we lacked technical people, causing some delays. In Europe, projects that were supposed to start billing in Q4 got delayed. In India, client budgets accelerated faster than we anticipated, and we were not ready for the sudden demand.
Q: How many people have we added on a net basis from Q4 to Q1?
A: We have added around 150 to 200 people. Our current headcount is approximately 2,550 to 2,600.
Q: Are we seeing any deferment from customers in the automotive or IT sectors?
A: Execution challenges continue in Europe and the US. Customers want to start projects immediately, but we don't have a large bench of ready-to-deploy engineers. We are working on improving this.
Q: Do we have any concrete deals in hand for Q2?
A: Yes, we have a strong pipeline and visibility from our customers. It's now about execution. We have hired smarter people and are getting positive feedback from customers.
Q: How does the customer view our credibility when we face execution issues?
A: Long-term customers understand and get creative with us. Newer customers might move to the next vendor if we can't meet their timelines. It's crucial to communicate transparently and directly with customers.
Q: How is the demand from India GCC shared with Onward? Is it RFP-based?
A: All demand comes through RFPs, whether it's for headcount or projects. The challenge is managing multiple demands from different territories and aligning our best people with the best customers.
Q: What is the attrition rate within the core business now?
A: Attrition is normal compared to other companies in the R&D industry. We aim to become the best-paying company in our industry to reduce attrition further.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
