Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nucleus Software Exports Ltd (BOM:531209, Financial) is investing heavily in long-term strategic initiatives based on Toyota Production System principles to enhance customer experience.
- The company has a strong order book position of INR813.4 crores, indicating a healthy pipeline of future business.
- Cash and cash equivalents have increased to INR920.8 crores, providing a strong financial cushion for future investments.
- The company is focusing on expanding its international market presence, including developed markets like Australia and Japan.
- Nucleus Software Exports Ltd (BOM:531209) has not lost any customers due to repricing, indicating strong customer retention.
Negative Points
- The company reported a decline in both top-line and bottom-line figures for the quarter.
- Revenue from projects and services decreased from INR30.9 crores to INR27.4 crores quarter on quarter.
- Marketing and sales expenses have increased, impacting overall profitability.
- No revenue was generated from new customers in the last quarter, indicating challenges in new client acquisition.
- Lead times for customer conversions are longer than expected, affecting revenue growth momentum.
Q & A Highlights
Q: Just a question on our growth prospect. Going forward in the domestic market, you mentioned before that in one new account for 60% to 70% of all retail loans that are given out by Indian finance companies. So I'm just wondering, would you say that you are more or less saturated as part still new one is concerned in the domestic market? Or the customers that we could possibly convert to our product?
A: Thank you for your question. This is Parag here. No, there's no indication or belief that we have that the market is saturated. In fact, as we have been maintaining, we are getting good traction, both from domestic market as outside markets. So there is actively no saturation. We don't believe that.
Q: So I'm trying to understand like when we are thinking of our top-line growth in the future, would that come from selling more fine domestically, selling more of our other products in Axia domestically? Or would it come from selling FinnOne Neo to other geographies?
A: So I think you mentioned in the past, look, I think thanks to the COVID, when we -- the product really started moving more in the domestic market, so last couple of years, we have been focusing more on India. But then as we said in the past, the focus is now more and more on international markets, beginning with including both whether where we are operating already. And we are also looking at developing a couple of developed markets, getting into -- some we are already into like Australia and Japan and one or two developed markets. So yes, our focus will be more international, but domestic is also traction is good even today.
Q: And as you had mentioned -- I think Australia, we have been around for a while and you bought a couple of large second tier banks that are on our FinnOne Neo. But the revenues and profit in Australia doesn't seem to be as consistent as we see in the domestic business? Can you just talk about why that's the case?
A: No. So that's correct. The newer implementations are have to be added. And there are few prospects with whom we are working and it could convert in due course. But yes, so far the implementation that we are doing in this second year customers that you mentioned got over, we are in a BAU mode there. So that's why you don't see a growth, so much of growth in that market right now.
Q: So but the implementations that we are doing there are not like in India it is sort of move to more of a -- trying to make it more of a recurring revenue model. Is that a similar model we are going to try and implement outside of India as well? Or is that more of a onetime or implementation revenue model?
A: So okay, we have actually both models now pricing models now at level. If that is your question, the can go for a CapEx model also, we go for a recurring subscription model also, especially with the product being available now on cloud, a lot of our customers smaller ones prefer to go for the subscription model. So we have both options available.
Q: Are you're talking about domestically, are you talking about in the other markets as well?
A: As well as other markets as well.
Q: So what I was trying to understand is that any specific reason we could attribute that the revenue performance has been pretty stagnant for some time. I can understand this kind of a business can be very volatile on a quarterly basis. But it seems like new revenue momentum has kind of [stagging] for some time, at least from the data that we see, of course, there were a more data in terms of new client win and all which were giving us some a bit of an input there. So I would appreciate if you could share in terms of how has been our new growth momentum in both India and emerging market or any other flavor that you could add on that?
A: Certainly. I'm very happy to let you all know that our conversations with -- from our 50 customers are going, I would say, reasonably strong at, and there is sustained interest. Some of the conversations are taking longer than what we have been hoping, but having said that, we continue to talk to customers in at least 8 countries about rolling out FinnOne Neo or FinnAxia for adding value to their businesses. And simultaneously pipeline is also building relatively well.
Q: Right, right. And also in your media interview, you spoke about two elements. One was about that the repricing is still due in 20% of your customer base by what time you think this should go through? And has any of it happened in this quarter also?
A: So as we have mentioned in the made interview, nothing has happened in this particular quarter on that front. And this is the balance 20%, we are talking to them both in terms of the upgrading to FinnOne Neo platform or continuing with the FinnOne platform. And in that process, it's taking far longer than we had expected. We cannot let you know the time it will take.
Q: So this element of whether they want to move or not and this referring to this repricing? Is this because more people want to take time to think about it? Or is it because they are going for the newer version, which may take time for eventually to migrate, and that's why it would be, a delayed spend?
A: It's a combination of the things. I know sometimes, our customers feel that they will be able to derive benefits from the -- the very sophisticated offerings that we have in FinnOne Neo, including hundreds of APIs and so on and for FinnOne Axia, where we have substantial number of APIs and very sophisticated functionality. At the same time, then they are not exactly ready for the migration. So it is that combination that takes time.
Q: Right, right. And in the cases that has happened already what has been the mix where people have accepted the pricing, but they would have gone for the newer version or they would have stayed with the earlier version any mix number that you could share?
A: Sorry, couldn't get your question, if you could repeat, please?
Q: I mean, what I was trying to understand is that let's assume in the last five, six quarters ever since we have started this exercise, if let's assume 100 customers have moved to a newer pricing out of that 100? What is the mix between clients continuing on the same older version versus the new version?
A: As of now, I think higher percentages on continuing on the whole margin.
Q: Okay. And
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
