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 Second Quarter 2025 Results Conference Call. I'm pleased to be joined today by Mr. Mayank Baxi, Vice Chairman; 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. Mr. Baxi, please go ahead.

Hello, everybody. Welcome to the Humansoft Holding Q2 2025 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, Vice Chairman at Humansoft, along with our CFO, Mr. Anup Dhand. And together, we would like to briefly mention some of the key highlights and then run through the Q2 2025 financial highlights. And at the end, we'll 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. Both our institutions, AUM and ACM continue to focus on enhancing students' overall development, preserving its academic achievements and leadership in the market. Subsequent to our Q1 2025 results call, several key events and achievements were made. And I would like to briefly highlight some of them. At the Humansoft, we believe that education and sustainability go hand in hand. In line with the same, Humansoft published its sustainability report for the year 2024 titled Roots of Impact for a Sustainable Future. This report is now available on our website. AUM continues to be a market leader and has maintained its #1 position for the fifth consecutive year. It has been ranked as the top university in Kuwait by QS World University rankings 2026. In this new addition, AUM advanced to the rank #563 globally, up from the #611 to 620 band in the previous year. This achievement places AUM among the top 600 universities worldwide. AUM has maintained #1 position in Times Higher Education rankings as well. It's ranked #201 to 300 globally and maintained its position as #1 University in Kuwait according to the Impact Rankings 2025. AUM achieved recognition in 8 sustainable development goals within the world's top 400 universities, including 4 sustainable development goals ranked in the top 100 universities globally. In line with AUM's vision to contribute to the AI transformation agenda in Kuwait and the region. AUM partnered with UC Berkeley as an initiative to integrate artificial intelligence into education and research. AUM celebrated the completion of the 2024/'25 cohort of the artificial intelligence and entrepreneurship certificate program in collaboration with UC Berkeley, marking the ongoing success of this distinguished partnership. AUM remains committed towards boosting its students employability skills and helping them gain insights into internships and potential career paths. In May 2025, AUM organized its 11th career empowering talent, creating opportunities, powered by the Tawteen Career Center. Students and alumni offered invaluable opportunities to network with more than 60 leading local and international companies, attend inspirational speeches and participate in specialized workshops. To celebrate the corporate world as its partner in success and to thank them for their trust in AUM graduates, the Career Expo concluded with AUM Corporate Awards Ceremony 2025 in its fourth addition to honor an outstanding selection of leaders and leading local and international companies from private and public sectors in Kuwait. AUM and ACM continue to remain as the institutions of first choice, and the top rankings enable them to be robust and strengthen its leadership position in the higher education sector. Now I would like to invite Mr. Anup Dhand, CFO of Humansoft to give a brief about the Q2 2025 financial highlights.

Thank you, Mr. Baxi, and a good afternoon to all the attendees. I am Anup Dhand, CFO of Humansoft, and I would like to present the financial highlights for H1 2025. Humansoft's H1 2025 revenue was KWD 39.8 million as compared with H1 2024 revenue of KWD 40 million, mainly due to the similar number of enrolled students. H1 2025 EBITDA was KWD 19.9 million in comparison with H1 2024 EBITDA of KWD 21.3 million. H1 2025 net profit was KWD 18.3 million in comparison with H1 2024 net profit of KWD 19.9 million. Net profit margin for H1 2025 was 46%, and EBITDA margin for H1 2025 was 50%. The earnings per share was KWD 0.136 during H1 2025 as compared to KWD 0.149 during H1 2024. Humansoft had a net cash position of KWD 50.1 million as at June 30, 2025. Total equity was KWD [ 93.1 ] million as at 30th June 2025, and the annualized return on average equity for H1 2025 amounted to 34%. Total assets was KWD 119.3 million as at 30th June 2025, and the annualized return on average assets for H1 2025 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. Thank you. Over to you, Mirna.

[Operator Instructions] We will take the first question from Ahmed AlDoseri.

This is Ahmed AlDoseri from SICO. A couple of questions from my end. The first one is regarding the scholarships, if you have received any recent communication or guidance from the Ministry of Higher Education regarding the scholarship allocation?

See, still, the PUC scholarship students enrollment will begin for the private universities only on 4th of August. It's going to be from 4th August until 14th of August. And thereafter, only, they will announce the scholarship numbers for the universities in private sector.

Okay. And regarding the fees, considering the last tuition fee increase was around 2014. Are there any plans to revise the fees in the near term?

As of now, as we speak, we have no specific plans to submit any revision application.

Okay. And the nursing schooling approval, is there any updates on that? Have you received the regulatory approval?

No. Unfortunately, it is still hanging and we will not have the offering starting this semester.

Okay. And I have a couple of questions as well. Would you like me to wait in line or just...

Go ahead. I have no issues.

Yes. Regarding the dividends, if you could provide some clarity on the sustainability of the dividends at the payout of KWD 0.350. So should we expect this level to be maintained going forward?

See, dividend decision. Usually, we take after the year-end results are out, wherein we try to reflect the requirements of cash flow for both CapEx, working capital and any specific plans. So as we speak now, we will not be able to guide you specifically on what kind of dividends to expect. But as you have seen in the past that if there is no specific commitments, we have been wanting to -- whatever maximum payout is feasible, we try to recommend to the board. As of now, there is no other change in the dividend policy as such.

Okay. And just a last question regarding the Internet and library fees. Is there any updates on the treatment of the subscription fees? And like how long do you expect to continue to recognize them in the same manner?

See, till the time we are fully convinced that this is not feasible to be recovered. It's better that we continue with the present practice. And we'll take a call only once it is absolutely clear that this is now not going to be received.

Is it fair to assume maybe a year from now or?

We don't know. I don't want to make a guideline on that because you know how it works, slow process is there. But our pursuance is there. So let's keep our fingers crossed, but hope for the best.

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

This is Usman from SICO Bank, Bahrain. I just have one question on the increase in cost that happened this quarter. If you could elaborate, I mean, what led to the higher cost in terms of staff salaries and student activities cost? And is the increase going to continue in the next 2 quarters as well on a year-on-year basis? Or there was any element of one-offs?

So thank you, Usman. So as we have been mentioning in the previous calls also, our cost structure and margins will tend to gravitate towards 2019 levels. And if you compare the quarter 4 of 2024, last quarter of 2024, there is a marginal increase from that level to the Q1 and Q2 in the cost of sales and also similarly, the other G&A costs. Now this is in line with what we were expecting. And it is a normal cost in terms of the manpower costs as we are getting back into the total normalization with offerings of all the wages and also the staff that was getting filled up in the nonteaching side also. So these are all were expected, and it will continue at this level.

For the comparison purposes, if I compare the first half 2019 versus first half 2025, there is still a compression in margins, operating and EBITDA margin. So I was just wondering whether the guidance of going back to 2019 still holds or we could expect margins to be...

See, yes, if you compare the first half margin of 2019, we'll be close to the same level, right, first half year to half year...

4%, 5% lower.

No, no 4%, 5% cannot be -- if you will talk of 2019. You are talking 2019 or 2024?

2019.

So 2019, if you check, my net profit in quarter 1 was 47.4% and in quarter 2 was 46.5%, whereas in current year, we are at 49.2% in quarter 1 and 42.5% in quarter 2, averaging to 46% closely. So we are close to that. And I think this is where we will maybe move because quarter 3 and quarter 4 usually is the improvement quarter. If you have seen the cycle in our quarterly tabulations, always Q3 and Q4 start to improve from the levels which we have achieved in the first half. So we are hopeful that we'll be able to maintain at that levels.

All right. And my last question is on the overall revenue growth. I mean, you have mentioned like as of now, there is no plan of price increase or tuition fee increase. So on the enrollment side, what is your view? I mean, will you be able to grow your enrollment from the current levels or we could see further decline and the student enrollment number also going back to the pre-COVID level or what levels you expected to go with the increase in competition in scholarships?

Sure. See, there are 2 aspects to this. One, as you know already that our graduation cycle is 5 years at AUM and about 3 years at ACM. And during the post-COVID years of 2020, 2021, the higher output from K-12. And as a result, also our enrollments of fresh graduates during that year were higher than the normal average, which we had also mentioned that those years were one-off years. Now the effect of that is that these students graduate in the years starting last year, this year and depending on their academic study plan. And therefore, you have seen that the graduation level has been 3,000 or 3,000 plus around that. And our intake remained around 2,600 to 2,800 range. Now in order to grow this intake, we have to definitely look at options to reach out to the more high school graduates coming out of K-12. And to achieve this, we have definitely to ensure that how we remain ahead of the competition in the measures that we offer and also look for new opportunities of new measures. Now as you have been also witnessing that in last several years, we have invested heavily into intangibles, I would say, which has, yes, not shown into conversion into student numbers. But all these relationships in artificial intelligence and robotics, green energy are the requirements of the future. And we are hopeful that this will be the requirements going ahead and for the students who graduate from K-12 should also be looking for these kind of measures. And we will continue to be trying ways and means to even consider additional measures within the engineering arena.

All right. That's pretty much clear. One last question. I mean, in 2020, we saw a significantly higher number of enrollment, as you mentioned, because of highest number of school graduates. So is 2025, the year where we will see a significantly higher number of graduates as well because as you mentioned, AUM is a 5-year cycle. So will this time...

So graduates, yes, I understand. See, the summer semester is still not over. The annual graduates consists of 3 semesters, fall, spring and summer, and consolidated number goes to around 3,000, 3,100. Now this year, the final number will be only out after the summer semester is over, which will be getting over maybe in the first week of August. But as we speak, we estimate that it will be around 3,000 plus something, but I cannot give you an exact number because the semester is going on, and it will only -- the students who pass or fail or finish their graduation will be only known around -- after completion of the semester.

We have a couple of [indiscernible]. What is the reason why you stopped giving stock dividends since 2023? And under what circumstances will you resume stock dividends going forward?

There was no specific reason for issuing stock dividend or not using stock dividends. We looked at several parameters for the capital within the company. And last year, when the decision for dividend was being considered, the recommendation was to have a higher component of cash dividend and not consider the share dividend or bonus share because at that point, we felt that we, as a company, did not need additional capital. And therefore, if the profit is maintained in the retained earnings and used as cash payout, it might be good for the shareholders' interest and also the options are still available if that is a need. So there is no other specific reason for continuing or discontinuing.

We have a question from [ Abdulaziz Sabir ]. I think you've already covered part of it, but can you share the outgoing student numbers for both AUM and ACM this year?

I think in the previous question, I mentioned that the summer semester is yet to get over. And as we speak, we expect this year the total graduation outgoing students to be around 3,000 plus something. But final number will be only after the semester is over.

[Operator Instructions] Mr. Baxi, I think we've covered all the questions. So back to you if you have any concluding remarks.

Yes. Thank you very much to all the participants, and once again, Mirna and your team. We look forward to continuing this engagement on a quarterly basis, and we can end the call now. Thank you.

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