Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kellton Tech Solutions Ltd (BOM:519602, Financial) reported a 7.1% year-on-year revenue growth for FY24, reaching approximately INR 985 crores.
- The company achieved an EBITDA of INR 106 crores and a net profit of INR 64 crores for FY24.
- The company secured seven new customers in Q4 FY24, spanning various industries including AI, pharma, auto, and media.
- Kellton Tech Solutions Ltd (BOM:519602) successfully launched 13 AI projects for various customers, indicating a strong pipeline in the AI space.
- The company was recognized by Zinnov Zones and Avasant SAP S/4HANA services, affirming its capabilities in the SME market and SAP services.
Negative Points
- The company is facing challenges due to weakened customer spending, particularly in the US and Europe markets.
- Pricing pressures are present due to wage inflation, which has not been fully passed on to customers.
- The company anticipates slow growth for the next two to three quarters, with a recovery expected only after the elections in the UK and US.
- Despite adding 29 new customers in FY24, the growth in annual revenues has not been as significant as expected.
- The company has a backlog of about eight to nine months' worth of revenue, indicating potential delays in new project commencements.
Q & A Highlights
Q: The current demand scenario in the IT industry is weak. Are we also facing similar challenges right now? What kind of outlook do we see for the coming year?
A: Yes, we are facing similar challenges with weakened spending. However, we are seeing early signs of recovery, particularly in the US market. The Europe market remains flat, while the India market is booming. We expect slow growth for the next two to three quarters, with a more significant recovery starting next calendar year.
Q: Are we facing any pricing pressures, and will we be able to maintain or improve margins?
A: Currently, there are no significant pricing pressures from customers. The main pressure comes from wage inflation. We expect to maintain similar margins for the next year.
Q: What is the current order book as of now?
A: We have about eight to nine months' worth of revenue in backlog, which amounts to approximately INR800 crores.
Q: How many customers do we have, and what is the total customer count?
A: We acquired 29 new customers this year. The total customer count will be provided later as we need to dig up the exact number.
Q: Are we still on track to reach $200 million in the next two to three years?
A: Yes, we still aim to achieve that number. Although we faced headwinds and achieved only single-digit growth this year, we have launched new products and are seeing early signs of revenue from them, which should contribute to our growth over the next few years.
Q: What is the revenue contribution from AI projects?
A: The revenue from AI projects is currently in the million-dollar range. These are early-stage projects, and we anticipate this to grow to a few million dollars over the next year as more customers adopt AI solutions.
Q: What is the current employee strength, and are there any hiring plans for this year?
A: Our employee strength is around 1,800, similar to last year. We are keeping hiring fluid based on demand. We are also working with interns and may offer positions to exceptional candidates.
Q: What percentage of revenue comes from repeat customers, and what percentage is from new projects?
A: About 80% of our revenue comes from repeat customers, while 20% comes from new projects. Our AMS (Application Management Services) revenue is around 5% to 7%.
Q: How does pricing work in your industry, and what factors affect your margins?
A: Our pricing is often on the higher side, but we deliver solutions faster than competitors. We have both time-and-material and fixed-price contracts. The main factors affecting margins are wage inflation and the scope of fixed-price projects.
Q: What are the different channels through which you get business?
A: We get business through various channels, including hyperscalers, partnerships with companies like Microsoft, direct sales, RFPs, and referrals. Most of our business comes from referrals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
