Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quick Heal Technologies Ltd (BOM:539678, Financial) reported a 5% growth in revenue for FY24.
- EBITDA increased significantly, reaching 9 times the previous year's figure.
- The company onboarded over 200 enterprise clients for new products in FY24.
- Quick Heal Technologies Ltd (BOM:539678) has a strong balance sheet with zero debt and cash equivalents of INR 226 crores.
- Strategic partnerships with IIM Nagpur, National Forensic Science University, and the US NIST Cybersecurity center for excellence were announced.
Negative Points
- Headwinds in the consumer business persist, affecting overall growth.
- Operating expenses increased from INR 12 crores to INR 14 crores quarter-on-quarter due to provisions for bad debts.
- Some government deals were deferred to Q2 FY25 due to the general elections code of conduct.
- The company is in an investment phase, making it difficult to provide specific margin guidance for FY25.
- The enterprise business growth is slower than expected, with uncertainties around government deal closures.
Q & A Highlights
Q: My first question was on the enterprise business, where you mentioned it was a bit slow. What gives us the confidence that the government deals will come in the next two quarters? Also, what's the traction in the private SMEs?
A: The deal cycles for government deals typically range from six to nine months. Due to the general elections, some deals were deferred but are still in play. We are confident they will be finalized post the code of conduct period. Regarding SMB traction, we are market leaders in the SMB cybersecurity market, leveraging a strong network of partners.
Q: On the higher operating expenses this quarter, what rate do you see this sustaining at going forward?
A: Overall expenses are in line, but general and administration expenses increased by INR1.5 crores due to accounting standard provisions for bad debts. There are no actual bad debts, but provisions were made as per the ECL methodology.
Q: Given the good growth across government and SME sectors, where do you see your margins for FY25?
A: We are in an investment phase, so it’s difficult to give a specific number. However, as revenue grows, expenses will grow proportionally, leading to significant improvement in margins.
Q: Regarding the increase in addressable market from INR1,800 crores to INR4,000 crores by FY27, is this due to new product development?
A: Yes, Board approval for new product investments is one lever for expanding our SOM. Other factors include market segmentation, organic growth, and regulatory pushes like the Data Protection Act.
Q: What is the TAM for the DPDP Act, and is it included in the INR1,800 crores?
A: The DPDP Act is not included in the INR1,800 crores as it is yet to be enforceable. It will create a new TAM, applicable to every organization in the country, with severe penalties for non-compliance.
Q: Can you provide a broad outline of R&D expenses for the coming quarters and FY26?
A: We have been increasing R&D investments over the years. With recent Board approval for new products, this number will go up significantly, though we cannot provide a specific figure.
Q: What kind of scale are you looking at with the M. tech partnership?
A: M. tech is a leading national distributor with multiple cybersecurity products. We have agreed on a joint go-to-market strategy, enabling M. tech to use Seqrite solutions for their customers, targeting mid-market and large enterprises.
Q: What is the commercial relevance of the partnership with the US AI Safety Consortium?
A: This partnership allows us to share our experience with large-scale threat signals and AI/ML models, enhancing our products through collaborative research and innovation.
Q: What is the future revenue contribution from the enterprise segment in the next two to three years?
A: The enterprise segment currently accounts for 37% of our revenue, up from 20% a few years ago. We expect this to continue growing, eventually surpassing the consumer business.
Q: Are there any inorganic growth opportunities you are considering in the next three to five years?
A: We are open to inorganic opportunities, particularly in areas like cloud security and DLP engines, which would complement our existing portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
