InfoBeans Technologies Limited (INFOBEAN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome, everyone, and thanks for joining this Q1 FY '25 earnings call of InfoBeans Technologies Limited. The results are available on the stock exchange. In case anyone does not have a copy of the same, please do write to us. We'll be happy to send over it to you. To take us through the results of this quarter, we have with us -- we have with us, Co-Founder, Mr. Avinash Sethi. We'll be starting the call with a brief overview of the company's performance, and then we will allow the Q&A session. [Operator Instructions] I would like to remind you all that everything said on this call reflects any outlook for the future, it can be considered as a forward-looking statement and must be used in conjunction with uncertainty and risks that we face. These uncertainties and risks are included, but not limited to what we have mentioned in the prospectus filed with the SEBI and the subsequent annual report. With that said, I turn over the call to Mr. Avinash Sethi. Over to you, Avinash.

Thank you very much, Surbhi. Let's go through the presentation. Thank you, all the investors and shareholders who are joining this call. We always love your patronage and your interest in learning more about the company. For those who don't know who are joining the call for the first time, InfoBeans was founded in the year 2000. We are a 1,500 people company, focused on digital transformation and product engineering. We also have built partnership -- strong partnership with Salesforce, ServiceNow, agineo and Microsoft to offer their services to the companies worldwide. And we're located in 4 geographies, U.S., Middle East, Europe and India. In India, we have 5 cities: Indore, Pune, Chennai, Vadodara and Bengaluru. Indore being the largest center for us. Next, please. This is a quick road map of how we've traveled the journey over the years. From 2000 till 2014, more or less the foundational years. Then we started building the company for the growth mindset. Went public in 2017, acquired first company in 2019 and second in 2021. Revenue has surged to INR 399 crores in 2023. And this year, we have partnered with agineo, and we have also onboarded Mr. Phaneesh Murthy as an adviser to the Board. We'll talk about it in more detail later. Next, please. Some of the glimpses of the numbers in our 14 years of active growth, 1,500 members, 29 large enterprise clients. And these enterprise clients, when I say large, each one of them would have more than couple of billion dollars in revenue and it could be as big as $100 billion of businesses. Financials of last year, we did INR 384 crores and EBITDA of INR 67 crores and PAT of INR 22 crores. We have a significant amount of cash in the books, including the account receivables. So if we remove that, it is need INR 38 crores that we have in the bank. The money is typically parked to look at the acquisition opportunities. Since we acquired 2 companies in the past, and it is a very active strategy for us. We focus on looking for new targets in the market and. That is a continuous report, just like a sales effort that we do. Various awards that we have received in the past. Some of the awards we're proud of is, Best Companies to Work for Women, Dream Companies to Work For, Great Place to Work, and [indiscernible] Best Workplaces in the U.S. Next, please. This is where our offerings are. We focus on enterprise software engineering for our customers. We also have talked about ServiceNow, Salesforce kind of platforms and we'll be focused on those. There is AI-enabled solutions that we are working towards depending on our capability in AI-enabled solutions. We are working with partners like App Orchid, which has AI product, and we are working towards helping build the product as well implement the product to the customers. We have a very unique set of services in terms of user experience and we're [indiscernible] for startup companies. And we also are looking at automation and building CI/CD, DevOps kind of practice as well. So one of the biggest update of the quarter was we onboarded Phaneesh Murthy. Those who know IT industry would definitely know him. He was one of the key people to take Infosys in the early days to a much larger multiproduct. I mean, there is -- what news media suggest is he took the business from $2 million to $750 million. That's the kind of runway he had at Infosys. And then he was the CEO of iGATE, which bought Patni, which was a much larger company than iGATE, and then they sold the entire thing to Capgemini. So Phaneesh is one of that those people in the IT industry who is very, very experienced and very smart, sharp sales guy. So we have got him onboard as an adviser to help us figure out the long-term strategy and how to implement -- where we are seeking his help. We continue to onboard new clients. In the last quarter, we got 6 clients, out of them, 3 are very large enterprises. M&A pipeline continues to make efforts, and this is -- currently, we are evaluating ServiceNow company. We were awarded ServiceNow Partner of the Year award by ServiceNow itself in Knowledge '24, which happened in May -- sorry, in month of June. And this is where we have been named as the winner for the APAC region. And then we have done some good work on the CSR side, where we have tied up -- InfoBeans Foundation runs a full year engineering program for underprivileged students, where we trained them for a year, and we make them employable. So IIT Indore is helping us there and then FICCI FLO Indore is also helping us there. That's a good partnership that we created there. Next, please. So this is a picture of Phaneesh when he visited into InfoBeans this quarter -- last quarter. And yes, so next please. So we are currently -- Phaneesh is currently talking to our teams -- leadership teams, all sites, the salespeople, finance, delivery, customer success and so on. And we are working towards formulating a strategy of how to take this forward for the next -- at least 5 years' plan. These are 3 founders on top and then we have independent directors, Shilpa and Mayuri and Sumer sir. This is where we are very proud of, very, very highly experienced core team; Emerson, he is on the sales or the design and innovation practice; Amit is handling the entire delivery team now; Shreyas is looking at Salesforce factors; Denise is heading the Design & Innovation delivery side of it; Kanan has been doing the Transformation and Technology deployment with the automation itself; Kanupriya is head of People in the automation. Very, very long tenured members who have grown with InfoBeans and who have been leading the effort overall. So again, many, many senior folks here. Next, please. Next. So some of the clients, ALM is the longest standing client for us, over 22 -- 21, 22 years in making. IQVIA is another 14, 15 years in making. Co-Advantage is another 8, 10 years. Then there are so many Fortune 500 companies that we work with, which are again tenured of 8 to 10 years. And I think there's one more company, a storage company, which is -- 2008, 16 years in the tenure with that client. So very many long-term clients, and I think that is where the USP of InfoBeans is, and we're able to strike those long-term relationships on all directions, including customers. Next please. Coming to the financial updates, which is what you must be looking at. So the left most column is June 2024 number. The second is the June '23. So we have a Y-o-Y change from INR 94 crores to INR 100 crores; INR 15 crores to INR 19 crores EBITDA; and INR 3 crores to INR 8 crores in PAT. So decent amount of growth as compared to yearly numbers, more or less flattish as compared to Q-on-Q. So when you look at March, we had the same revenue. There is a dip in -- slight dip in EBITDA numbers, and there's a slight dip in PAT numbers, March '24 quarter. A little bit more detail here. The revenue has improved slightly on a Y-o-Y basis, about INR 5 crores of improvement in the revenue numbers. The EBITDA has increased by about INR 4 crores, which has increased the margin by about 4% and -- actually 3% on EBITDA. And PAT has grown from 4% to 8% Y-o-Y. So -- interestingly, we have been making investment in sales and marketing side. So we've been attending global events. We've been hiring sales people, and we are also investing in it. That is why the EBITDA is showing the impact, but then there's a lot of investment we need to make. And PAT, we have multiple subsidiaries. So -- and even in India, we have SEZ and non-SEZ businesses. So we have shown we're having higher taxes -- higher profits in tax zones where the tax incidence is a little bit higher. So therefore, the tax amount is going to be increasing by the day, which is because we have also had SEZ sunset for 2 units out of 3. So that is also causing the tax incidence -- increase in tax incidence. Next, please. So interesting breakup here. I think it is the first time about that U.S. sales is showing below 70%. We have Europe increasing its pie to 20% and UAE to 10%, quite a significant jump. India has reduced to 6%. Our Digital Transformation and Product Engineering, more or less head-to-head. InfoBeans CloudTech has shown a little decline in terms of the revenue, which is used to be 18% -- 19%, 20% of the total size, now it is 16%. But yes, so this is where the breakup is. Some activities on the ground. We talked about being a winner at ServiceNow Conference, became the Partner of the Year award, which is visible award and helps in generating more credibility and sales in the event. Here is, we partnered with agineo, Agineo is our German counterpart, but we jointly set up an event in Knowledge, which is hosted this year in Las Vegas. The blue ball that you see in the building, actual building in Las Vegas, where we invited our key customers, both for agineo and for InfoBeans, and we hosted this event. Next, please. Other events we attended was Insurance Innovators. We have a couple of insurance clients. So this was a unique, very focused event. International Yoga Day was celebrated across all offices in InfoBeans. We did that sitting on the chair, so you don't have to come out of your comfort zone. CSR, I'm very proud to say that we have partnered with IIT Indore to help offer advanced technologies to our students so that they become employable quickly. And this is a multiyear arrangement where IIT would be partnering with us year-over-year. So with the help of IIT, we could expand our batch size across multiple locations. In Indore, we have 5 batches; in Pune, we have 1, so 6 batches, 40 students each, about 240-plus students in these batches are being trained simultaneously. I'm happy to say that one company in Indore actually hired 40 students yesterday from the outgoing -- 2 outgoing batches of 80 students. Out of those 80, they bulk hired 40 in a single shot, which was quite a phenomenal achievement for us. And these are all underprivileged kids, nontechnical background, BCom, BBA kind of students, who get trained on software programming for free for the entire year. And then here the result where we are getting them placed for the various originations. So put together, about in last 5 years, we have -- we started with 20 students and in 5 years, we have trained about 170-odd students. Out of that, 150 got placed already, which is quite a significant achievement and we're proud of that. So we have tied up with FICCI FLO Indore, which is a ladies organization to sponsor and focus and dedicate -- dedicated support to a girls-only batch. There is a batch of 44 girls, which is run in Indore under the support of FICCI FLO. We'll be training them for the entire year and then we'll place them by end of March next year. We opened our newest center in Pune. So we have 3 centers in Indore and now the 4 center comes in Pune. So very, very strong work on the CSR side that we're doing, which is changing lives of people, and we are very bullish on this new center, which will open up a new job market for our students in this location. So this is the market data from 30th June. Market price was INR 454 and the market cap is about INR 1,100 crores. Thank you very much. I think we can now open for question and answers.

[Operator Instructions]

No questions?

Can you hear me?

Yes.

My first question is, I think in Q4, also, I think we hired around 100 people. And I think in Q1 also, we have hired around 100 people. So if you can talk about attrition and give me a net number, what is the net addition? I think this might be the gross addition, so to say. And what is the kind of like capacity utilization as of today? That is number one. Number two is, if you can give some amount of total contract value or total order book and some view on the environment and how this year will pan out? That is number two. And then third is Europe and UAE, I think we're seeing very, very strong growth. So would they be -- I mean, would they be -- grow at, let's say, much faster than company average? Is that a fair assumption to make? And lastly, maybe you can talk a little bit about this pipeline with agineo and how it is helping us to win deals?

Sure. So you have many questions, [ Rupesh ], but I'll try to address each one of those. The first thing is the net headcount is in negative. There is a 16% attrition rate, which is a healthy attritional rate for an IT company. We are not really bothered about it. We're also reoptimizing in the sense that -- or rebalancing in a sense that we are hiring the skills that we need, and we are letting people go on the skills that we don't need. So that balancing is happening, and it's pretty effective because our utilization rate is closing to 80% now. It's about 76% to 77% right now. We want to cross 82% at least from here. So there's still some scope. On the demand scene, I can't really have a list of contracted revenue number. We don't publish that. But usually, the contracts are between 6 to 12 months. And the renewal happens just over an email or a phone call. So that is how it happens. And traditionally, as I told you, so many clients which are with us over 10 years, 15 years, 20 years. So traditionally, that is on their work. We do have certain clients where we have multiyear arrangements. But I would say they're just 4 or 5, but not everybody in that space. But it's difficult to have contracted list published out there. But having said that, it's a great amount of repeat business that we generate every year from these clients. Now the third question that you had was on UAE and U.K. Obviously, their small base effect will allow them to show faster growth than the company average, which is, I would say, given. Thankfully, they are growing well because of the partnerships like agineo, which is also -- the road map, I think I mentioned last time also. The road map is that we have to have a team of 50 people on ServiceNow on this particular client, which is going in the right direction. So we started with them, I think, 3, 4 months ago. So we already have 20-plus working with them jointly. So -- and we are also going in the market pitching the projects jointly. So it's not that InfoBeans is shadowed under the name of agineo, but we are partners and we're going to the market together. We have a good pipeline coming in from them, and there is a plan that we have to continue to deliver -- for the next 20 to 24 months. What was the fourth question?

It about agineo.

Yes, we talked about agineo, right? I hope I addressed your question, Rupesh.

Yes, yes. So maybe one more maybe. Can you talk about the environment in U.S.? I think you and some others people in industry have said that there are green shoots. So maybe if you can just give some color around that.

Yes, it is a mixed feeling, Rupesh. I think we are still a micro company. For us, one client -- a few clients, let's say, 2, 3 clients will make or break the growth momentum for us, right? So in general, we get a mixed feeling there. When there is demand, there is a positivity out there. But then at the same time, it has to happen in the clients that we are working with, right? So having said that, we are still seeing green shoots. We're still seeing positivity. We're seeing demand coming back from the customers who withdrew earlier. So from that perspective, yes, but I would say we're still a very small company to have any relevance to the macro trends.

We have a few questions in the Q&A box.

So I can read out the question here from [ Tejas Modi ]. Any plan to increase presence in Japan? We have zero presence in Japan and we have no plans. What is the percent of repeat business in the result? I think the repeat business usually is 90% plus, all the time. I mean, this has not changed. Which region is the biggest exposure for the company? U.S. is the biggest exposure for us. If we are looking at the customer individually, then I'd say we have 2 customers which are running neck to neck, one is from Germany, one is from U.S. in the race to become the top customer for InfoBeans. On which technology, the company is having their focus? So we work on all the custom technologies like Java, open source, Microsoft .NET, and React, Angular or React kind of technologies. Then we have focused on ServiceNow and Salesforce, which is a lot of customization and a lot of configuration within the tools. So we need to learn ServiceNow and Salesforce as well. And we can create apps on top of it. So -- and we do have apps generating revenue for us. So that way, it's a big mix bag. But having said that, the simple answer is we have all the tools and technologies that are required to build custom software. And what is the mix of project support and new developments? Most of our projects are new developments. I would say, 80-plus percentage is new development, and about 20% will be support work. Can we expect top line to grow from here? So do we have any scope to increase the margins? I wish, I had the answer here. Yes, we want to grow the top line from here. We -- on a Y-o-Y basis, we have shown a growth. We're continuously working towards that direction. Do we have any scope to increase the margin? Yes, yes, yes. We always have the scope to increase the margins. We always have the scope to be more efficient. And constantly working towards it. We have -- I think in the previous calls also, we talked about it, that we want to increase the margins, we want to focus on staying profitable business and we also want to grow the business. So that's a challenge that we are taking up right now. What is the prediction for growth over the next 5 years? That's a good question, [ Ansh ]. We like to, and we want to double every few years. And usually, I told in the past that we want to grow double every 3 years. With the current stagnancy, I cannot really tell you the time line. But it doesn't make us happy. It doesn't make us comfortable if we are not growing faster. So yes, the intent is to grow faster, the intent to grow as fast as we can, at least 35% year-on-year is what we want to do with a combination of organic and inorganic growth. Now if you notice, we have not been able to acquire a company in the last 3 years, and that is hurting the growth momentum for us. So again, it is unpredictable. We don't know whether we'll be able to acquire a company tomorrow or not. But Yes, we are working towards it, and we want to grow at a faster pace. Next question again from Tejas is, any strategic relationship with captives or Fortune 500 companies? We are working towards it. We have spoken to a couple of captives. And by the way, if we look at some of the names that we are working with -- we are working with among, let's say, top 20 clients that we have, I would say, at least 5 or 6 of them already have their businesses in India. And technically, we are working with both the parent company as well as the captive in India as well. So we are collaborating with them simultaneously. So that way we're already having relationships with captives, at least the 6 of top 20 companies will be captives or Fortune 500 companies. So yes, we have that. We want to do more, and we are working toward it. How much investment in GenAI, any successful implementation for customers? Now so we -- so App Orchid is a product, and I encourage you to look at their website. It is an AI product. And we have explored the demo to at least 4 or 5 of our customers at this point in time. I think one of the bigger challenges that the AI companies are facing is, where does the data reside, right? If a client wants to implement AI tool, either they have to deploy the entire or offer their entire data to that AI engine to be able to do some meaningful outcome. Otherwise, we have to deploy the entire AI engine on to the company premises. Both of these are technically difficult. I mean one is technically difficult. And the other one is security concerns are there, where companies are not willing to share their data to AI engine because they're worried that what happens to their data secrecy. So the debate was they've issues at this point in time. How much investment we made in GenAI? I would say we have 3 or 4 people working on that, and we're not making any investment or say, in terms of building anything. We are making investment in terms of creating an ability to deploy these AI tools and apply it into -- implement it into the organizations for our clients. But that is what we're doing right now. Okay. The next question is you have exposure to 2 clients, one from the U.S. and one from Germany. Can you share the revenue percentage of these 2 clients of the total revenue? This would be about 8% to 10% -- each, right? Yes, about 8% to 10% each. This is what I would say. If the IT industry traditionally reverted to the [ main ], are you seeing opportunities for acquisition? We're seeing a lot of opportunities of acquisition. The only challenge is the valuation demand from those founders is still not moderated. Do you serve any financial institutions in the U.S.? Yes, we do. We have many. Any guidance on the company current FY in with regards to top line? We are a 0-debt company, [ Dhiraj ]. There's no guidance that we can offer. We have no practice to offer that guidance. But if you look at it, we are doing good in the last quarter, in this quarter, previous quarter, Y-o-Y. We are trying to bring the company back on track in terms of the top line and the -- top line growth as well as margins. That's a constant effort. So we continue to work in that direction. But yes, we cannot give any guidance. Any plans to raise funds? We don't need funds right now, but if there is an opportunity, we'll -- because we have enough cash in the bank, but if there is an opportunity, which is bigger than that, we will certainly explore possibilities of raising debt, raising funds, all of that. I mean, we are open to do that. I think that's pretty much it in terms of the questions.

The next question comes from the line of V.P. Rajesh.

Avinash, a couple of questions. So one is -- I think you said we have a lot of -- so we have a lot of cash in the bank. What is that number at the end of June without the receivables?

Let me just check. Do we have a number at...

Yes. INR 214 crores minus receivables.

INR 141 crores, Rajesh, minus -- I mean there is no account receivables here.

Right. And there is no more payouts for the -- or earnouts payment pending in this number, right? INR 141 crores is [indiscernible] number?

Yes, it doesn't look like.

Okay. And then second question, you talked about the U.S. proportion is coming down. So since we quarter-on-quarter, did INR 100 crores to INR 100 crores, which means that the U.S. business has come down a little bit. So if you can provide a little more color as to what's going on in the U.S. because some of the larger peers that are seeing much better growth from what it was. And for our business, I would expect that we would be growing. So if you can just give some more color on that, that would be helpful.

Yes. see, in general -- I told Rupesh also, in general, the market sentiment is positive. We're seeing decent demand there. There's a long pipeline, but it's taking time to convert. Again, another factor is the macros are too large for a company of our size. So usually, it is 1 or 2 clients that just disturbs the whole momentum. So we had a client, which was running very well and it was a funded startup. And all of a sudden, they put breaks on to the business, right? So that 1 or 2 clients will suddenly reduce your business from that particular geography. So it's -- I would say, circumstantial at this point in time. I mean it is difficult to draw a general trend. But I would tend to think general trend is positive in the U.S. market. And what happened was the other geographies have grown on the back of the partnerships and on back of certain clients that we secured 2 quarters ago, they are growing well. So there is some momentum building again, of the past that is now showing results.

Got it. That's quite helpful. And then the last question was how should one think about your order book? Has it grown meaningfully since the March quarter? Like if you can just give some indication of what has been the growth in the order book?