Release Date: October 18, 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 its highest quarterly revenue of INR123 crores, with a six-month total of INR240 crores.
- The company has onboarded over 300 new employees, with a net hiring of 133, to strengthen its delivery engine for future growth.
- Onward Technologies Ltd (BOM:517536) has set a revenue target of INR490 crores to INR520 crores for the current financial year, with an expected EBITDA margin between 9% and 11%.
- The company has initiated a new ESOP scheme to align employee incentives with market performance, enhancing accountability and responsibility.
- Onward Technologies Ltd (BOM:517536) plans to consolidate its operations by building a new campus in Pune, which will accommodate over 2,000 employees and include state-of-the-art facilities.
Negative Points
- The company's EBITDA margin took a hit due to a slowdown in the automotive and Tier 1 segments.
- Revenue growth was lower than expected, partly due to geopolitical uncertainties and a slowdown in Europe and the US.
- The number of active customers decreased from 86 to 82, reflecting challenges in maintaining client relationships amid geopolitical tensions.
- Despite hiring efforts, the company faces challenges in execution and scaling up projects, impacting its financial performance.
- The GCC business, which is growing, typically has lower margins compared to direct customer engagements in the US and Europe, potentially affecting overall profitability.
Q & A Highlights
Q: What gives Onward Technologies confidence in achieving the projected growth for FY25 and FY26 despite the slowdown in the automotive sector and tough conditions in Europe?
A: Jigar Mehta, Managing Director, explained that the confidence stems from the existing order book and visibility with clients. The company has been building its delivery engine capabilities across the US, Canada, Europe, and India. They have a conservative approach considering past experiences and believe that the momentum seen in October will continue, allowing them to achieve and potentially exceed their targets.
Q: What is the guidance for margins for the rest of the year and FY26, considering the recent investments in talent and wage hikes?
A: Jigar Mehta stated that they expect to achieve revenues between INR490 crores and INR520 crores for the current financial year, with an EBITDA margin of 9% to 11%. For FY26, they aim for INR600 crores in revenue with a higher EBITDA margin, as no new one-time costs are anticipated.
Q: What is Onward Technologies' long-term vision for 2030, and what strategy will be employed to achieve it?
A: The goal is to become a $100 billion company by focusing on having 10 customers generating $10 million each in revenue. The strategy involves concentrating on three verticals: industrial equipment, transportation and mobility, and healthcare and life sciences. The company aims to maintain a 15% to 20% EBITDA margin and leverage its delivery centers in India.
Q: Will the hiring trend continue in the upcoming quarters, and what is the expected headcount by the end of the fiscal year?
A: Jigar Mehta mentioned that the target is to reach a headcount of 2,700 by March end. The hiring is driven by growth in India and the need to strengthen the delivery engine. The company is prepared to capture opportunities in the growing GCC market.
Q: How does the growth in the GCC (Global Capability Center) business impact Onward Technologies' margins?
A: Jigar Mehta acknowledged that GCC business margins are typically lower than direct customer contracts in the US or Europe. However, the guidance provided has already factored in these considerations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
