Humansoft Holding Company K.S.C.P. (HUMANSOFT) Earnings Call Transcript & Summary

Hello, everyone. This is Mirna Maher from EFG Hermes, and welcome to Humansoft's Full Year 2024 Results Conference Call. I'm pleased to be joined today by Mr. Mayank Baxi, Board Member; and Mr. Anup Dhand, CFO. We will first start the call with a presentation from management, and then we'll open the floor for the Q&A session. Gentlemen, please go ahead.

Hello, everybody. Welcome to the Humansoft Financial Year 2024 Results Conference Call. I hope you and your loved ones are keeping safe. Thank you team at EFG for facilitating this call. I'm Mayank Baxi, Board member at Humansoft, and along with our CFO, Mr. Anup Dhand, together we would like to briefly mention some of the key highlights and then run through the financial year 2024 financial highlights. And at the end, we will leave the floor open for questions and answers. At the outset, I would like to mention that any forward-looking statements or views discussed during this call are subject to risks and uncertainties that may cause the actual results to differ. Humansoft does not assume any obligation to update such views or statements nor make any announcements regarding any revised circumstances. The Board of Directors have recommended a cash dividend of KWD 0.35 per share, and this will be subject to the approval of the Annual General Meeting of the shareholders. Humansoft continues to focus on preserving its academic achievements and leadership in the market. Subsequent to Q3 2024 call, several key events and achievements were made, such as AUM has maintained its #1 ranking and advanced from 25 to 23 in the Arab region as per the QS Arab region rankings 2025. AUM ranked #1 in Kuwait and among top 400 best universities in the world in subjects offered by the College of Business Administration and College of Engineering and Technology. AUM continues to be ranked as most sustainable and green university in Kuwait, advancing to #204 worldwide and sustaining its rank as top 4 in the Gulf region. Over a period of one week, AUM and ACM communities gathered to celebrate the success of their 2024 graduates at the AUM Cultural Center. The management, faculty, staff and parents attended the graduation ceremonies. In November 2024, AUM hosted the inaugural Kuwait robotics competition for high school students. This event provided a unique platform for young innovators to showcase their engineering and programming skills in a competitive environment. AUM and ACM continue to remain as the institutions of first choice and top rankings enable them to be robust and strengthen its position in the higher education sector. Now I would like to invite Mr. Anup Dhand, CFO of Humansoft, to give a brief about financial year 2024 financial highlights.

Thank you, Mr. Baxi, and a good afternoon to all the attendees. I'm Anup Dhand, CFO of Humansoft, and I would like to present the financial highlights for FY 2024. Humansoft's FY 2024 revenue was KWD 79.2 million as compared with FY 2023 revenue of KWD 79 million, mainly due to the similar number of enrolled students. FY 2024 EBITDA of KWD 43.1 million was lower by 3% in comparison with FY 2023 EBITDA of KWD 44.6 million. FY 2024 net profit of KWD 40 million was 4% lower than KWD 41.8 million for FY 2023. Net profit margin for FY 2024 was 51% and EBITDA margin for FY 2024 was 54%. The earnings per share was KWD 0.298 during FY 2024 as compared to KWD 0.311 during FY 2023. Humansoft had a net cash position of KWD 74.3 million as at 31st December 2024. Total equity was KWD 122.1 million as at 31st December 2024 and the return on average equity for FY 2024 amounted to 32% Total assets was KWD 143.8 million as at 31 December 2024, and the return on average assets for FY 2024 amounted to 28%. Humansoft's fortress balance sheet, high return on average assets and high return on average equity provides protection and resilience and enables Humansoft to remain robust. With this, we now open the floor for questions and answers. [Operator Instructions] Thank you. Over to you, Mirna.

[Operator Instructions] We will take the first question from [ Hasel Aneeri ].

It's about the contract that you have for the land.

Yes. Can you repeat your question?

Yes. I want to know about the land that AUM is on right now. I know that the contract is ending in probably like, I think, 3 or 4 years, and you should be renewing soon. And I want to know if there's an update on when you guys will renew your contract?

This is a normal practice. It's all the universities in Kuwait are on the government leased land and we still have the lease validity until 2027. And I think around that time, the renewal process will begin maybe somewhere in the beginning of '27.

Okay. So it will be probably in 2027, the renewal?

Thank you. We have a couple of questions in the chat from [ Abdul Ramuseef ]. What is the CapEx going forward? And is there any growth expected going forward, more majors?

For the CapEx, as of now, we have not committed any further CapEx. It's a maintenance CapEx. And for the requirements of additional capacity for the operations, we will continue to watch the growth in the enrollments and accordingly take an appropriate decision in terms of adding further CapEx and capacity. In terms of growth plans, as we have been mentioning in the past, our approach has been twofold. We try to preserve the current level of achievements and then try to make it more and more stronger and this has been through the various initiatives that we have done in the past, namely, getting all our majors accredited, adding more tie-ups with the foreign institutions like Berkeley, Babson College, HEC Montreal and that is making AUM, ACM maintaining their leadership positions in the market. And as and when opportunity arises, we definitely look for studying for the new majors that will be required as was done for the artificial intelligence and we signed up with Berkeley for that. And we'll continue to reflect on the opportunities in the same field. Other than that, right now, there is no specific growth plan.

The next question is from [ Mirimil Berthi ]. With reference to the library, Internet subscription and students' activity schemes, can you please provide us with an update on the revenue recognition method?

As of now, we continue to recognize the revenue on full charge basis and we are taking 100% provision for the same. So in terms of the net profit, we have fully provided for it and we are pursuing the matter for resolution. As of now, there is no further update on that.

We'll take the next question from Ankur Agarwal. We can't hear you.

Am I audible now?

Yes.

So my question is really around capital allocation. It's a question that obviously you face every time around this year after paying a very strong dividend, right? So I think the question is really, was there room to pay more dividends, especially since there's no M&A activity or no major plans of a CapEx, right, is really the question -- first question.

Yes. See, Ankur, you will notice one thing that the dividend, which is announced will absorb almost KWD 40 million, KWD 50 million. And after that, as you know, our working capital cycle is a longer cycle because our collection from the [ BOC ] takes 4 to 5 months after the semester begins. So keeping all these things into account and also allowing for a smooth operation, I think the recommendation is fair and it works out to almost 117% of the profit for the year.

All right. I think that's clear. But in terms of M&A, is there room to leverage up the balance sheet, right? So I think there is cash, but you now obviously...

Yes. The balance sheet is very strong, you have observed that. The balance sheet is strong and we don't have debt now. So we have all the opportunities available, but all things depend on right time and right opportunity. So you have to keep that kind of long-term vision in mind when you provide for the dividend payout.

[Operator Instructions] We'll take the next question from [ Usman Siddiqui ].

So historically, we have seen, I mean, pre-COVID student enrollment average around 12,300, 12,400 number. But then there was an increase because of higher graduates during COVID. So moving forward, what level of enrollment -- average enrollment or average number of student, you are expecting at least for the next 2 years? Is there any impact from higher graduates, K-12 graduates, still there in your current student body? Or that increase has already been graduated, the increase that we saw in 2020?

We try to reach out to diverse students for the enrollments and that is the reason why we have been able to reach up to 13,000 students and above. Sure, in between -- after COVID, there was a period where the high school graduates were much more than the normal and that has also had the impact on the enrollments. And this phenomenon is now getting settled because the graduation cycle for those students who were enrolled at that point of time is now getting over. So our endeavor will be to ensure that we try to reach out to more diverse students and try to maintain our new enrollment as has been done in the past years.

That's very clear. And in terms of scholarships from the government, how has the share of human stock evolved over the past 2, 3 years?

See, when you look at the scholarship allocations to the universities, you also look at that the students who pass out from Class 12 will have an option to look for the majors that they would prefer for. As far as the majors that we are offering, we are getting the highest allocation of our scholarship students. And these students apply to AUM as [ post site ] and we are maintaining our brand and our qualitative aspect, and we try to reach out to students keeping the qualitative and quantitative balance.

We have another question in the chat from [ Elander Rashid ]. It's also on the lower number of students enrolled. Should we expect continued decline going forward?

See, the total enrolled students decline that you have seen, as I mentioned in the previous question, that part of the impact is because during the 2020 year, there was a one-off additional enrollments due to the higher pass rate on account of COVID as the exams were online and not paper-based. Now this phenomenon is getting over now. Those students who had enrolled during those years are getting graduated. And the new students who are now coming out of K-12, we ensure that we try to reach out to them and we try to also ensure that they fit the right profile and right quality as has been always the case for our AUM, ACM enrollments. Our approach will be to reach out to more and more students and also look for opportunities where we can diversify the reach.

The next question is from Christine Kalindjian. What is the latest on the nursing school?

As of now, we are still pursuing. We have a status quo right now. Still, we will keep pursuing. And if any update comes, we will definitely come back to you.

[Operator Instructions] Mr. Baxi, I think we've covered all the questions. We have one more question from [ Usman Siddiqui ]. Is the current level of operating margin sustainable?

As we have been saying in the past and we continue to position ourselves that eventually we see that 2019 will be the base case where the margins will eventually reach to that level, which is around maybe this time we are at 51%, it will be coming closer to, say, 49% to 50%, depends on the year-to-year basis. But we'll try to ensure and work towards achieving and maintaining that.

There are no more questions in the chat. So back to you, Mr. Baxi, if you have any concluding remarks.

Thank you very much for all the participants, and have a good day.

Thank you, everyone.

Thank you. Thank you, everyone, for joining, and thank you, Humansoft's management, for your time. This concludes today's call.