Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intellect Design Arena Ltd (BOM:538835, Financial) reported a total revenue of INR605 crores for Q1 2025, with a gross margin of 57%.
- The company achieved an EBITDA of INR121 crores, representing 20% of its revenue.
- Intellect Design Arena Ltd (BOM:538835) won 11 deals and had 12 digital transformation projects go live during the quarter.
- The company has a strong cash position, ending the quarter with INR813 crores.
- The pipeline for new deals is robust, with a total value crossing INR8,500 crores during the quarter.
Negative Points
- The company's DSO (Days Sales Outstanding) is relatively high at 126 days, though it is 101 days excluding GeM.
- A significant deal worth INR30 crores was postponed, impacting the quarter's financial performance.
- The company's SG&A costs have increased due to investments in generative AI and cloud consumption.
- Revenue growth has decelerated to 12% over the last 12 months, excluding GeM.
- The company faces challenges in entering the highly competitive and regulated US market, requiring additional investments.
Q & A Highlights
Q: Rajesh, on the US business, you're trying to foray into the US market. Can you highlight the areas you are targeting and the competitive intensity? When do you expect to see initial progress, and will it require any investment on your part?
A: Rajesh Saxena, CEO of Global Consumer Banking: The US market is highly competitive and regulated, requiring platforms to be certified. However, the market opportunity is significant. We are identifying key segments and products for our go-to-market strategy, which will be in place over the next couple of quarters. We are also investing in building a US team, including transferring some people from India. Our architecture and eMACH.ai can disrupt the market if executed well.
Q: Vasudha, given your strong deal wins, do you hold your guidance on revenue growth despite some deceleration in the last 12 months?
A: Vasudha Subramaniam, CFO: Yes, we still stick to our guidance of 15% growth excluding GeM. Some high-value deals were deferred, but we are hopeful of meeting our guidance due to a strong pipeline.
Q: Can you provide a metric to track the number of GenAI projects you are working on?
A: Banesh Prabhu, CEO of IntellectAI: We have about 35 discussions in progress for our Purple Fabric platform, which includes GenAI. This pipeline has been built over the last four to five months.
Q: Will the investment in the US impact your margin improvement trajectory?
A: Arun Jain, Chairman and Managing Director: We are discussing the extent of additional investment required. More investment will be needed in go-to-market efforts rather than technology. Initially, margins may be lower due to the subscription-based revenue model of Purple Fabric.
Q: Why has the growth in implementation revenue not kept pace with license revenue?
A: Arun Jain, Chairman and Managing Director: With our Codeless platform, we expect implementation revenue to come down as we push more license and SaaS revenue. Implementation is not the most profitable business for us, and we aim to get it done through partners.
Q: Can you provide an update on your partnerships and their impact on distribution?
A: Arun Jain, Chairman and Managing Director: We have all five consulting partners (Accenture, PwC, EY, KPMG, Deloitte) and several global system integrators (HCL, Coforge, Tech Mahindra, Wipro, L&T, Hexaware, Persistent). Our target is for 20% of deals to go through partners. We are building confidence with partners to demonstrate that they can build substantial practices around eMACH.ai.
Q: What is the expected tax rate for this year and next year?
A: Vasudha Subramaniam, CFO: We can take it at 24% for FY25.
Q: Can you provide more details on the BaaS (Banking as a Service) initiative?
A: Manish Maakan, CEO of Global Transaction Banking: We did one deal in the US last quarter with a top 20 US bank. We are finding success in the US market, which is more technology-savvy.
Q: How far are we from achieving higher margins, potentially 30% or more?
A: Arun Jain, Chairman and Managing Director: While we cannot specify a timeframe, our business model has the potential for 40% margins when we reduce investment. The key is whether our partnership network starts delivering results. If successful, we could reach 30% margins within six to eight quarters.
Q: Can you organize a session to explain your technology and products in detail?
A: Arun Jain, Chairman and Managing Director: We will organize two-hour sessions on eMACH and Purple Fabric within the next month to help shareholders understand our technology and products better.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
