Aurionpro Solutions Limited (AURIONPRO) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Aurionpro Solutions Limited Q3 and 9 Months FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Paresh Zaveri, Chairman and Managing Director of Aurionpro Solutions. Thank you and over to you, sir.

Good morning, ladies and gentlemen. We have had a subpar quarter. And this morning, we saw some panic in the stock price. Let me assure all of you that notwithstanding the tough few months, Aurionpro business is fundamentally strong and resilient. Amid the economic slowdown, we are beginning to see green shoots for our business over last 1 month and are witnessing higher level of activities in all the business areas. We are awaiting purchase orders from BEL, NMMC and Metro collectively worth about INR 60 crore in next 10 days or so. Additionally, we have participated in tenders worth over INR 250 crores in last month. Our stalled projects with SBI and BoB also have started moving, and we are starting to get on a stronger footing. And as the backlog orders as well as new deals wins start executing, we should get back the business momentum in the year FY of '21. Let me emphasize the quality and continuity of our business. As a business, we have a successful track record of creating value by building truly world-class businesses. In the past, we had built globally competitive securities business, which was sold to KPMG Consulting, a feat a few Indian companies can emulate. Our current product businesses, Transaction Banking and loan products, are well-established in their respective categories, used by some of the largest banks in Asia and have become sustainably profitable, competing with the best global players in this market. Similarly, our investment last year in the Smart Cities and Smart Mobility as well as Isla is starting to move in a planned direction. Over the last few months, we have won deals in Smart Mobility against global players in Peru, Mexico, Russia and Nigeria and have recently participated in globally competitive bids in Australia, Jordan, Finland and USA. Our products are second to none globally, and we are getting general acceptance worldwide for this product. Our implementation of Noida Metro is an example of our quality, delivery capabilities. On cybersecurity side, we are aggressively hitting the market which will -- expected to show great momentum in coming quarters. We also launched our Isla Isolation Platform version 5.0 in this quarter and are seeing increased and wide demand of our products from the customer across the industry. I will request Samir Shah, CEO of Cyberinc, who is with us today to give us updates on the cybersecurity business. And after that, we will start the Q&A. Samir?

Yes. Thank you, Paresh. Hello, everyone. Good morning. So I will take this opportunity to give everyone a little bit of deeper insight into Cyberinc and the value creation we are executing on at Cyberinc. We are on a mission to execute on a goal, on a stated goal of 3x value creation in 18 months. And this breaks down primarily on three-pronged strategy. One of the things we need to execute on is expanding on existing handful customers who are primarily anchor customers. Then I'll give specific details on that. Second, we need to execute on acquiring new logos, establishing the fact that product has broader market traction. And third, we need to execute on establishing a few strategic partnerships that could potentially mean an exclusive growth or exclusive go to market in coming quarters. Now with respect to the current state of the union, where Cyberinc business stands today, I would like to take you through a few key areas on how the Cyberinc business is doing. Let me walk you first through customers because we spoke about the first part of the three-pronged strategy on the organic growth. Now in light of any start-up initial anchor customers really mean the whole world. And we are very lucky to have quite a few anchor customers, particularly 2 very large anchor customers, 1 in the U.S. and 1 in Asia, who are scaling very nicely. One of the customer who is a large retailer in U.S. has scaled from about 50 retail store to about 450 retail stores in terms of Isla rollout and is now counting in thousands of active users on a daily basis. They are subsequently planning to expand this into other countries where the retail chain exist, including Canada and Mexico. Similarly, the large Asia anchor customer is already rolling out thousands of users. And we are also expecting a large, sustained cash flow coming in from this customer, providing the very necessary impetus in the early stage start-up. Secondly, let me walk you through some aspects of sales traction. Over past few quarters and particularly in last quarter, we have built quite a few new opportunities who are both inbound inquiries as well as coming to on the efforts late in the previous quarters for building a channel-driven pipeline strategy. As a result, we have several large POCs going on, including with one of the Fortune 5 companies, and we are quite hopeful that if this trend is any indicator, we have a very strong market momentum shifting towards adopting the Remote Browser Isolation, or RBI, as a very successful category looking ahead. We also have a very successful new partnership being launched in the U.S., which you'll see another press release in a few weeks, but it's a large distribution partner now focused on developing North American market. And we have very high expectations on driving additional channel revenues from that. Finally, on the product and engineering front, we have -- as Paresh mentioned earlier, we've completed the launch of Isla 5.0, which is a completely game-changing product, particularly driven by a ultramodern architecture, which is cloud-first and API-first architecture that supports multiple partnerships on very easy deployment scales. Secondly, we have launched virtual appliances, meaning we are not dependent anymore on any hardware vendor for our product deployments and that's coming in -- coming handy in a big way. And finally, we have now a very successful engineering team rolling out all these changes out of our India center, which is much more scalable than if it was to be executed from U.S. So overall, I believe we are in a completely strong momentum on a path to executing very, very successfully with a positive cash flow for Cyberinc by March 2021. And Paresh, I think at this point, if you'd like to add anything, otherwise?

No. So I think some of the projects that Samir is talking about, I had spoken in the past quarter. So the great thing is they've gone live, they are scaling up. For the largest project we have, we are starting to see additional opportunities. And going ahead, maybe we'll elaborate more. Thank you.

[Operator Instructions] Our first question is from the line of Umesh Matkar from Sushil Finance.

I just have few questions. Regarding on the -- first on the cybersecurity, again there was a lackluster performance in this quarter. So when do you expect this segment to pick up? That is first. And also in last quarter you had mentioned there was a large deal, which was under implementation. So what is the progress on the same?

So that was the deal in Asia that Samir was talking about. So that deal, as Samir mentioned earlier, right, they have started going live with thousands of customers. They are looking to scale-up, right? And that deal, as I had mentioned earlier, is over $10 million and the payments have started to flow. So you'll start to see the scalability of this from this quarter on.

And how many users would be on live -- would be live right now? And how many more can be expected going forward?

Samir?

So one quick comment on first part of your question. We don't believe performance is lackluster performance. We believe we are completely on track to the expected performance. And we are, in fact, doing really well in building annual recurring revenues or ARR. At this point, we are already looking at $1.7 million, $1.8 million of ARR. And in another 2 quarters, that number will double. So in terms of the value creation, we believe we have a very strong performance with respect to where we stand. Now as to the number of users, we have total users up to 60,000 users that are -- or 70 -- actually 70,000, 75,000 users that are under contract at this point in time. How many are live at any point really depends on how customers are scaling up and from some of the anchor customers that I spoke about earlier, we expect that number to also double in next 2 quarters.

Okay. And on Smart Mobility, you had won deals in Nigeria, Mexico and Peru?

Yes.

But if I see this quarter numbers, the revenues were actually down Q-on-Q and Y-o-Y. So can you throw some light on this?

So these deals are recently won and they will get under implementation.

So will it be in next year or from -- can you give us a time frame for that?

So these deals will be implemented from our Singapore office where SC Soft is headquartered. And these are -- keep in mind, these are the deals basically which are pilot deals, right? So going ahead, as this businesses grow, they will start to grow. So Mexico deal is for about 210 validators and about 15 buses for Mexico City. The project value is about $200,000 and the implementation has started, and it will be completed by end of this month. Project for Peru is in partnership with MPESO, which is the largest -- basically South American player in payment side and they are our partners now. So this again is a trial project for about $150,000, which is to be rolled out across 150 buses in Lima. The project for Nigeria will be close to about $700,000 plus. And this is again the first phase which will -- probably we are expecting second phase to come in next 1 month. The implementation for this will start from next month and it will complete by end of May.

Okay. And on Smart City, are you seeing traction in new orders which was completely a standstill in the last 6 to 9 months. So are you seeing a pickup in orders as well as any -- also, one more question, any old projects where you are seeing that the work has been halted maybe because of payment issues or something? So just a update on Smart City projects.

So there were a few projects, actually. So if you really see in terms of performance, issues we had was related to a few of the projects. So let me just -- I had earlier mentioned in my opening remarks relating to some of these issues. So for example, we had a project with Bank of Baroda, which we had announced last April, right, that we were expecting to roll out for the passbook printers across 750 branches, right? And because of the merger of Bank of Baroda with 2 other banks, Dena Bank and Vijaya Bank, that project had got delayed. And as of today, we have delivered first 10 machines and now bank has said that they were going to start to roll out. So we expect this 750, which we were expecting by September, to now be done by June and probably then have a follow-up order on that. Similarly, our order on State Bank of India, which was won last to last year, and then it got delayed because of, again, their merger with subsidiary and subsequently internal IT change. We finished that project in December, and we have now gotten a follow-up order from that, which will probably be done again by June. So the cycle, which was basically going really slow, has started to move again. Similarly, with the Smart Cities, for example, some of the projects that had gotten delayed, we had won the deal from Navi Mumbai which I mentioned that we are expecting the order to come by next week. That deal was won by us almost 10 months back. But because of the internal delay and fund issues and other things, the implementation and the PO release never happened. So again, as we said now, things have started to move. Another example would be our 3D City project, which should have gotten completed by June. But again, because of the change of government and funds issue, we now expect that project to get done by June this year. So again, there was a long delay in that project. But again -- so after almost 4 or 5 months, we again got the funding, project has started. We have moved into commercial center for team which is their center. They have purchased the new hardware. The case studies have started and we expect formal launch in next few months as well, which is going to be one of the largest projects for the state of Rajasthan. So it was just an unfortunate set of circumstances where a lot of these projects continuously just got -- kept getting pushed back.

Okay. Can you...

Also the second question, so tenders have started. So some of the -- even in the last quarter, there was hardly any tenders that had come out. In fact, all the projects that we were working on for a few months, the tender came out in this quarter, so mostly in January and early February. So as I said, we have bidded for 3 tenders. And in fact, next 2 weeks, we'll be bidding for 2 more. So the current value of the project that we have bidded is over INR 250 crore. And 2 more that we will be bidding will be close to about INR 200 crores.

Okay. Just on the projects that were stuck because of any -- some issues. Can you quantify how much was the -- what's the value for this?

So the value for the Bank of Baroda project was INR 18 crores. And if we had expected -- gotten the follow-up order as we would have expected, the revenue from that would have been about INR 30 crore to INR 35 crore for the year, right? So that got pushed back. The NMMC project value loss was about INR 20 crores. The value for the 3D City will be close to about INR 40 crores.

And for SBI?

SBI, if we had completed and if we had gotten -- I mean the follow-up order is around INR 6 crores. Because now we have completed the first phase of the project. So we didn't lose that, but the additional order, which we would have gotten probably we lost another INR 10 crores from SBI.

INR 15 crore AMC.

And also there was another issue where there was a delay in signing of the AMC for our projects of the queue management, which was almost a year and which should have come. And then because of that, we lost about INR 15 crores which was just a loss. But that order is also -- so that new order for 3-year support is about INR 54 crores which has been issued in late October, but it was about a year late in coming.

Okay. And recently, have you won any orders in Smart City?

So this order that we won that I said that we have already won and -- POs with some. So this is just a normal operating lag. So the project with BEL is about INR 25 crores. Project with Nagpur Metro is about INR 16 crores. NMMC, as I said, is about INR 20 crores. And there are couple of other projects that -- because we have not officially got permission, but that should be another at least INR 50 crores that we should win.

Okay. And so your total order book as of now would be how much?

Order book would be for the year will be -- I mean, as of today, will be close to about INR 400 crores.

Okay. And do you expect increase going forward in next year?

Definitely. As I said, right, some of these orders, right, I mean, if you really see last year, this time, our order book was probably more than INR 550 crores, INR 600 crores, right? So -- and as of now, this bidding will continue. So as bidding starts across all the areas. So even in banking, we are expecting one order from Corporation Bank, which was long held which should come also probably in next 1 month. We are expecting another order from Malaysia, which should also come through in next 2 weeks. So in terms of, again, order value, Corporation Bank will be a small one, about INR 2 crores. Malaysia order will be about $1.1 million.