Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CMS Info Systems Ltd (BOM:543441, Financial) reported a strong 16% revenue growth in H1 FY25 despite challenging conditions.
- The company expanded its cash logistics network by 11%, reaching 143,000 touchpoints, demonstrating successful investment in capacity and coverage.
- Managed services and technology solutions business saw a robust 28% year-on-year growth in Q2.
- CMS Info Systems Ltd secured new orders worth 400 crores in H1, indicating strong demand and future revenue potential.
- The company is actively pursuing M&A opportunities with a robust pipeline, aiming to expand its offerings and market presence.
Negative Points
- Execution delays in managed services orders, primarily due to bank-dependent technical testing, have impacted revenue realization.
- The cash logistics business experienced slower growth at 8% in Q2, affected by prolonged monsoons and election cycles.
- EBITDA margins were pressured due to upfront costs for delayed order execution and a shift in product mix.
- The company's working capital increased significantly in H1, with a notable rise in debtors due to delayed payments from a large bank project.
- Competitive pressures in the BLA sector have led to aggressive pricing, impacting revenue and margin growth.
Q & A Highlights
Q: How do you see the next two quarters pan out for your cash management services given the recent slowdown in growth?
A: Mr. Rajeev Kaul, Executive Vice Chairman and CEO, explained that despite the slower growth, the cash logistics business is expected to grow at around 10% over the next five years. The growth in H1 was about 9%, which is decent given the economic conditions. The business is still expanding, with a 10% growth in touchpoints.
Q: Can you explain the pressure on EBITDA margins and whether this is due to operating leverage or other factors?
A: Mr. Rajeev Kaul noted that the margin pressure is partly due to the mix of business, with a higher contribution from lower-margin product businesses. Additionally, there were investments in capacity and people, and some revenue was delayed due to order execution issues.
Q: Are there any updates on potential M&A activities, and what areas are you focusing on?
A: Mr. Rajeev Kaul stated that while M&A timing is unpredictable, the company is actively evaluating opportunities. The focus is on expanding service offerings and scaling existing businesses. The competitive intensity is moderating, which may facilitate synergistic M&A deals.
Q: What is causing the delay in order execution, and how is it impacting your business?
A: Mr. Rajeev Kaul explained that delays are due to integration and testing issues with multiple OEMs and banks, affecting the entire industry. This has pushed some expected H1 revenue to H2, but the overall contract value remains unchanged.
Q: How is the managed services business performing, and what are the challenges?
A: Mr. Rajeev Kaul highlighted that the managed services business saw a shift in revenue mix towards lower-margin product sales. The delay in order execution also impacted revenue accrual. However, the company expects improvement as order execution picks up in H2.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
