Intellect Design Arena Limited (INTELLECT) Earnings Call Transcript & Summary

Praveen, sir, over to you.

Thank you. Good evening, and welcome, everyone. Thank you for joining us today to discuss the Intellect Design Arena Limited Financial Results for the Second Quarter of fiscal year 2020/'21 ending September 30, 2020. The investor presentation and the press release has been sent to you and is also available on our website. Our leadership team is present to discuss the results. We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Venkat Saranu CFO; Mr. Prabal Basu Roy, Adviser to the Chairman and Director on the Corporate Board, he's also CFO of the Polaris Group. Mr. Manish Maakan is the CEO of iGTB; Mr. Rajesh Saxena, the CEO of iGCB; Mr. Banesh Prabhu, he's the CEO of Intellect SEEC; Mr. Jaideep Billa, the CEO of iWealth. Besides, there are other senior members of the Intellect management team who are present in the call. Mr. Arun Jain will first brief you on the results, and Mr. Venkat Saranu will take you through our financials. The respective CEOs, that is Mr. Manish Maakan, Mr. Rajesh Saxena, Mr. Banesh Prabhu and Mr. Jaideep Billa will comment on their line of business. Mr. Prabal Basu Roy would summarize the same. This will be followed by Q&A, which will be replied by our management. On safe harbor. I would like to remind you that anything which we say refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risk that company's faces. With this, I hand over the call to Mr. Arun Jain to give his briefing. Over to you, Arun.

Thank you, Praveen. First of all, I must thank everyone of you for participating in this call and showing the interest in Intellect journey from India as a product powerhouse over there. I also like to thank every employee of Intellect, who are working in a difficult situation like COVID, [indiscernible] difficult situation because Intellect is supporting the largest customers of the world and there are mission-critical applications of core bankings or liquidity management or treasury management or FX management or money market management, where trillions of dollars get transacted. And all these applications are managed by -- from home. So first quarter was still an early start, and it was a -- we were learning, and we were excited about how do we solve the problem, but it's now becoming monotony. And over the period of time, to keep the same energy and supporting it remotely is must required, we need to get energy. Teams which are giving a digital solutions to their customers are now those teams are becoming digital by themselves. So the virtual teams are the digital teams, what we call today. In the last quarter, I covered our journey of last 4 quarters -- 4-year journey, how we build step-by-step the entire brand since 2016 when I let go services business and focused on product business. A tough journey of last 4 years from the perspective of investment, where we put -- it's a 5-stage process of product business from building a product is a stage 1, to creating a first few reference sites, stage 2, to create multiple live sites in stage 3. Stage 4 is multiplying those into the new geographies. And stage 5 is where we start getting operating leverage fully. And so I think we are currently at a stage 4 of our business. In some of the businesses, we are getting into stage 5. But as an overall business, I will rate ourselves as the stage 4 business, where our products are industrialized, our products are competing with our global giants who are the established player over the last 30, 40, 50 years like FIS, Finastra, Fiserv, Temenos who are in this journey over the last 30 years plus our products are competing and winning against them because of the superior quality of our technologies and strategic quality of our domain intake because of the global participation. So entire business model today has been abstracted in 900 APIs on all the 12 product lines, which is one of the unique and the largest API marketplace Intellect was able to create. And the beauty of this is, our thesis was that we need to have a complete solution provider to the large bank rather than one single provider, because the efficiency of the banking systems comes from the -- connecting the dots between the multiple system and having a common data models. And that is what is now with the cloud technology in place. We are able to get that benefit of building APIs. And these 900 APIs are one of the largest APIs in the world in fintech space. So that's why it's a multiproduct fintech space. This is helping us for quicker implementation because of our design thinking application. We are able to implement our solution 40% faster than any of our competitors, which is giving us good winning propositions. We are able to do POCs or proof-of-concept of our solutions in 2 to 6 weeks' time to prove to the customer how our solution works at real time on their data, on their systems. And these are driving higher license revenue, which we have grown substantially during this quarter because of the ratio of license to implementation is coming down. And on other side, it is maintaining our implementation revenue almost in the same line as it was last 6 quarters. So the advantage is license revenue has a long tail revenue in terms of AMC. So that's why our focus is to increase our license revenue. So $1 million of license revenue over the 10-year period gives $3 million TCO for the company versus implementation, which is onetime. So that's how we look at the numbers in our system. Our licensing revenue in last 1 year has moved to 57%. So initially, when we started our -- one of the investor presentation I was making, we think what is -- somebody asked a question, what is your vision of the company, I say 60/60, not 20/20. I said 60/60. 60% business would come from license-linked revenues and 60% gross margin. That was our dream in 2017 or 2018 investor conference. And today, we reached 57% is license-linked revenue versus 42% last year same quarter. Our cloud revenue has got 2 components. One is monthly subscription revenue, which are more or less constant, and it constantly grows; and second is a consumption-based business model. So consumption-based business model based on the consumption of the transaction or consumption of the data. And that business keep up and down depending on the volume, which is there. So this quarter, we are seeing this small dip in a consumption-based cloud business model. Now, let me take how do I see business model emerging in financial technology space, how the customers are seeing in the market space in Europe, Americas, Middle East or APAC. I think one pattern we are seeing is customers are now fully accustomed to COVID situation and they realized the reality that this is going to be there. It's not going to go away. And now the actions on digital, all the budget approval on digitals are taking shape. All the approvals are happening, all the evaluations are happening, POCs are happening. So I think that is coming as a business as usual right now. What patterns they are seeing in next 2 to 3 years' window? I think the 2 patterns which I'm observing very, very carefully. The technology is becoming -- in financial sector is becoming like an API economy. We used to have iTunes earlier where we used to buy and sell songs. Now it's becoming an API marketplaces, where solutions can be available on the cloud, and customer can pick up the multiple choices of the APIs to design superior product for its customer, for a specific segment and for a specific customer need much, much faster. And this is almost like a marketplace economy evolving in fintech space. We are -- so against this API marketplace, I want to take you through, where Intellect is playing a game. Intellect has invested 2 things. Last year, we made an additional R&D investment for bringing all the product on the cloud and making it API enabled. Today, we have 900 APIs available. So that's this API one. And these APIs are connected to my 100 horsepower product engines, whether the engine is core banking engine or lending engine or credit card engine or a wealth engine or cash management engine or trade and supply chain finance engine. Those engines are which are rock solid, built over the last 20 years of the domain knowledge. That engine is supported by 900 APIs. That's a first level of outcome we have achieved. Second outcome we achieved is, we created a platform called iTurmeric, which I highlighted during my last call, that iTurmeric platform. This is coming from my R&D shop by the smart engineering team, which is sitting there. And that helps us to do it quicker uses for the customer. iTurmeric has got 5 studios from API studio to integration studio to orchestration studio, to experience studio and that 2 sitting in the AWS cloud. We are able to demonstrate to the customer that our solutions are infinitely scalable. So these 2 technologies, iTurmeric technology and product technology are complementary to each other and creating a -- we are positioned rightly in many deals because of these 2 technologies. Second pattern which is there is where AI and machine learning is impacting the financial sector substantially. AI and machine learning is used in customer prospecting, right kind of prospecting, right kind of a customer acquisition, right kind of underwriting decision, right kind of credit decision, right kind of the risk management decisions. So data is becoming a critical area using AI and machine learning. The investment which we made in Intellect SEEC which is now learned by Banesh Prabhu, where a lot of vocabulary you must have heard, data is a new one. Now Intellect has 10 such customers who pick up this data from my Intellect data stations on AWS cloud, so they can connect APIs on Intellect data stations to pick up the data packets. And each data packets, if he has to pick up 100,000 data packet for the prospective customers, it can be priced at $2, $3, $4, depending upon the number of fields he is accessing under those data limits. So that is a very, very interesting model, which is evolving. And now its proof of pudding is that it's being used in U.S., one of the most difficult market and more -- most advanced market where our data superiority is over 94%, best-in-class from anybody else, and this data is coming from more than 8,000 data sources, which is getting connected onto this platform. So I didn't share this and the statistics with you earlier because of volume and money which is coming in through this channel may not be as significant from a financial perspective. But having a liberty insurance, which I discussed earlier, we are -- the team has established and system has gone live, and they are consuming this data for their underwriting decision is very, very big breakthrough of R&D -- for our R&D teams. And since this has built as a platform, which we will be launching in next few months after getting a right strategy in place, right pricing and strategy in place, that is emerging as a major positive engine, which can be applied on my financial products of core banking, lending, trade finance, wealth as a common frame. So in short, I think -- or in summary, I would say, I think results of this quarter are quite in line with what we have communicated to you last quarter. We have demonstrated that we are in a high operating leverage player right now, and we have multiproduct fintech companies. So these are 2 messages I've given. So operating leverage has moved EBITDA from 20% EBITDA margin last quarter to 24% EBITDA margin. We looked at it over the next 4 quarters, we should be moving towards 30% EBITDA margin. I think our journey is there, and we should look at it -- this EBITDA margin to grow further and business to grow quarter-on-quarter. The financial results data will now -- I will hand over to Venkat Saranu, who will present the financial results, followed by the small business snippets will be presented by business managers, what are they seeing in the market and what are the achievement of this quarter. So over to Venkat Saranu for the financial results. Praveen, can you load it?

Thank you, Arun. Good evening to everybody. Yes, we are happy to announce the results for Q2 '21 as well as H1 '21. Yes, just hold on that. Being a product company, it is all based to compare our results within an annual basis. That is the reason for either the Q2 FY '21 as H1 FY '21, we are always comparing with the result of a similar period of the last year. So let us compare with an annual basis. That is how Q2 FY '20 will be compared with the Q2 FY '20 and H1 FY '21 will be compared with FY'20 so that we'll get an annual view in terms of the overall growth as the concerned there. In Q2 FY '21, we have reported total revenue of INR 3,730 million, which results of 14% on year-on-year growth. It is a phenomenal growth as compared to the past, what we achieved in terms of the revenue growth is concerned there. In terms of dollar is concerned, that we have reported a revenue of $50 million growth, which registered at 80% growth on year-on-year. In terms of H1 FY '21, in terms of revenue terms are concerned in INR, we have reported a revenue of INR 7,223 million, registering a growth of 8% on a year-on-year basis. Similarly, in terms of the dollar terms are concerned there, we have reported total revenue of $96 million. Now I'll come back to the license and AMC and SaaS revenue, what we have reported. We have reported license revenue of -- in terms of INR is concerned there, INR 985 million, registering a growth of 131% on a year-on-year basis. In terms of AMC is concerned there, we reported a revenue of INR 748 million, registering a growth of 19% on a year-on-year basis. Cloud and SaaS revenue, we have reported INR 345 million, registering a growth of 25%. As you can see here that our license revenues, 131% is a phenomenal growth as to the license growth is concerned there. And coming back to H1 FY '21, similar factors of the license revenue is concerned there, we have reported a growth of 62%. As far as AMC is concerned there, we have reported 22% year-over-year. As cloud and SaaS is concerned there, we have reported a revenue of INR 734 million, reaching a growth of 44%. So in all trends, like you say that SaaS revenue, I mean, license revenue or AMC revenue, the growth is far, far better as compared to what it was as compared to previous periods. Can you go to the next slide? Yes. Now this is the most important slide is regarding our gross margins and EBITDA and PAT. In Q2 FY '21, our gross margin is INR 2,096 million, resulting to 56% margin, GP margin. So whereas a similar -- whereas in last year, a similar period, we had reported 45% as a GP margin. So that 45%, it moved to 56% in Q2 FY '21. The other important aspect is that as far as EBITDA is concerned there, we have reported INR 904 million as of this quarter, which resulted in 24%, as Arun rightly mentioned. But the important aspect what you have to note is that a similar period of the last year, we had reported an EBITDA of INR 49 million. So from INR 49 million loss, we made a profit of INR 904 million. So it is a huge amount of improvement in terms of EBITDA is concerned there. Our net profit is INR 592 million as against a loss of INR 170 million in a similar period of Q2 of last year. When you come back to H1 FY '21, our gross margin is INR 3,976 million, resulting to 55% of the GP margin. Our EBITDA is INR 1,617 million. Our net profit is one INR 1,018 million, which is -- which -- as compared to last year, which was INR 136 million in terms of the net profit is concerned there. Basically, it is like from INR 136 million loss, make it to a profit of INR 1,018 million profit is a great improvement from INR 136 million to there. Now I'll come back to the cash and debt position. Our effective operating cash flow is INR 385 million in Q2 FY '21 and INR 2,160 million in H1 FY '21. It is a huge amount of improvement as far as operating cash flow as compared to the previous periods are concerned there. Our cash and cash equivalent is INR 1,654 million. Our total debt in Q2 FY '21 is at INR 707 million as against INR 2,302 million in Q2 FY '20. So we are also a reduction of our total debt of INR 1,595 million in terms of debt reduction is concerned there. Our total collection and the investment of product development is concerned there, our total collection for Q2 FY '21 is INR 3,343 million, up by INR 223 million as compared to Q2 FY '20. Our total collection for FY '21 is INR 7,707 million. Our net DSO days is 127 as of this quarter as compared to 126 days in a similar quarter of the last year. Our investment product development is that INR 284 million, a similar amount in the last year and similar period as well. So another aspect is that our order backlog relating license base is at INR 11,940 million as of Q2 FY '21 as against INR 11,000 in Q2 FY '20, so that there's a good improvement in terms of the order backlog as well. Can we go to the next slide? As you can see that in the current quarter, we had deals wins -- 6 deal wins, which includes 4 large deal win as well, and we went 19 cases as a go-live basis. Next slide. This in half year basis. Deal wins at 10, which includes the large deals of 5 and go live is 31. Go to the next slide, next one. In this, we have given a detail in terms of our total collection, which talks about INR 3,343 million in a different regions. Similarly, we've also given our debtor days on the basis of the different regions. But on a total basis, as I mentioned in the previous slide, it was 127 days. We are also giving a calculation of how we have been calculating in terms of debtor days are concerned there, it's easy to calculate from the financials, what has been published. Go to the next slide. As we talked about in the previous slide once again that our -- we are having a strong order book. As I mentioned, the total amount is INR 11,940 million, which was INR 11,560 million in the last quarter. However, I think we have to also look into that as we mentioned that looking on the cloud growth, we decided to give in terms of annual recurring revenue for cloud and subscription-based revenue. And in Q2 FY '21 is INR 1,379 million as compared INR 1,100 million of a similar period of last year. So there is a good improvement in terms of data as well in terms of the ARR is concerned there. And the most important aspect is that our repeated revenue from existing customers to 93%. This is where we get our business, and we're able to do whatever the achievements we did, so far what we have been talking about. Go to the next slide. Yes. This is very, very important aspect actually is that as Arun rightly said that, see, we have 4 streams of revenue; one is the license revenue, second is a SaaS revenue, third is the AMC revenue and the implementation revenue. The major margins come from the 3 streams of revenue, that is license, AMC and the SaaS. So these 3 streams of revenue were 41% in the last quarter, the similar period, which was 41%, now it moved to 56%. This is what actually real -- big growth driving factors apart from the various cost efficiency or the delivery actions what we have taken there. So this is an important factor that, in fact, our competitors are having a better ratio so that we have further -- I mean, more leverages in terms of improving our margins are concerned there. It is an important slide what you are to look into that. Going forward, we'll be presenting that, how this -- I mean, how is moving on a quarter-on-quarter basis. Yes. So now here we are talking about that in terms of the active pursuits as well as the destiny deals. As you can see here that we have total $540 million of -- worth of opportunities in active pursuits. So as a result of that, the average deal size in terms of those pursuits are concerned there, it comes to $2 million per average deal. So it is a good amount of average size in what we have been pursuing there. And similarly, as we mentioned, that destiny deals, we are talking about a total of 41 destiny deals. For our internal calculation is concerned there, any deal, which is more than INR 20 crores is called as a destiny deal. As of today, we are having 41 deals, which I'm going to get back to you in terms of the next slide is that how would we break up of these 41 deals are also happening there. So as you can see here that deals more than INR 50 crores is around 9 deals, between INR 30 crores to INR 50 crores is 12 deals, and INR 20 crores to INR 30 crores is 20 deals. So that means what it talks about that, we have adequate opportunities in order to achieve the numbers, what our Chairman has given a guide -- I mean, a preamble in his speech. Next. So these are the currency-wise data. I think we can skip at that. Next. As you can see that our advanced market share of the business is 57%, whereas in terms of the -- India is concerned is 15%, and the rest of the world is 28%. So we are having a good opportunity, good business growth in terms of advanced market. Advanced market, what we call is that U.S.A., Canada, U.K., Japan, Singapore and Australia, all these countries what we treat as an advanced market. From those countries, we've got a business of 57%. That means really talks about the quality of the business and quality of our products in those countries. Because as you know that in order to get any business from those countries, unless you are really capable and the products are capable, you can't get the business. So hence, 57% is a good number for a company of our size. This are my slides. So I think I'll be handing over to Manish now.

Thanks, Venkat. You can go to the next slide. I think, overall, we had -- thanks, Venkat, for sharing all of that. We had a good quarter as -- and making it consistent, as Arun said. I'll focus on the GTB aspect of the qualitative piece of it. Our biggest product from a market reach perspective and a leadership perspective, DTB, we managed to get our 57th customer for this specific product and taking our overall customers account to 91. This is one of the largest banks in a fairly large Southeast Asia country, which will be named -- we will be announcing very shortly. The formal PRs are working out right now. We also -- third quarter, consequently, another large deal on liquidity was sold in second quarter consequently in U.S. for liquidity. That continues to establish our market leadership in liquidity, where, like I've shared, 23% of global cross-border cash concentration happens through our platforms. And that's driving a traction. And we have -- this is now customer #11 for me in U.S. and overall for Intellect, a 25th customer in North America has been established. For both products, the digital transaction banking and Intellect liquidity, the demand and funnel is looking decent. We have a healthy funnel, which we are working on monetizing in the coming quarters to ensure we remain predictable and consistent growth. From a product leadership journey, like we shared, now 3 of my platforms are completely micro services, cloud native, which is digital liquidity, which is showing the wins consistently, contextual banking experience. This goes along with the liquidity platform, and then we take it across the entire corporate banking channels. Our first customer go live in Australia happened in the last quarter is a quite significant from that perspective. And we've got 5 more go live scheduled in the next 2 quarters. We will also be launching our Intellect Payments Hub '21, which is completely cloud-native in the next quarter, which is ready right now, and we're making the market -- go-to-market strategy on that. From an analyst, we continue to be consistently rated #1 in most categories from a corporate banking perspective. The Forrester Wave called us as a strong performer. Aite came out with a report on virtual accounts, which is the new trend, where banks are, how they're managing the accounts, where we were rated as one of the leaders over there. And consistent analysts and colleagues, like I said, building up on the last quarter, IBS #1 in the sales league in the wholesale banking. So good buildup from analysts, the product journey, leadership from a product development as well as market to ensure we have a consistent growth and a consistent performance. So thanks for that. And that was -- I'll hand it over to Rajesh to share about GCB.

Thank you, Manish. If we can have the next slide, please. Thank you. So in continuation of my commentary after the first quarter results, wherein, I had mentioned that I'm cautiously optimistic about the second quarter. I'm happy to state that both Intellect and GCB had a good second quarter, FY '21. Let me now walk you through the business highlights for Q2 for GCB. In this quarter, we closed 4 deals, including a large multimillion-dollar upgrade deal for Navarre, who has decided to go again and upgrade themselves to our core banking and lending solution. Last year, we had already established IDC as a market-leading product with critical mass. I'm happy to share that both our lending and central banking product, which we call as Quantum banking are now reaching maturity. They are winning deals and reaching critical mass in revenue. In QCBS, our central banking proposition, we are in the last 2 stages for -- I'm sorry, we are in the last stage for 2 large central banking digital transformation, which will get decided in the next couple of quarters. From a geography perspective, we continue to be bullish in Europe, which, as a market, we all know, has the pricing leverage. We have one destiny deal in Continental Europe that we are chasing, which will get decided in the next couple of quarters. Moving on to product leadership journey perspective. We continue to make rapid strides towards an API-first, micro services and cloud-native architecture for both our core banking and lending products. In a recent POC, proof-of-concept, with a client in Europe, we have been able to demonstrate to the client a TPS, transaction per second, of over 4,500, which gives our product extreme scalability and results in lower cost of hardware. Mind you, these are market-leading numbers. Our client, Santander Bank U.K. has passed over open banking requirement of U.K. by using our IDC core banking product. Despite COVID, from a delivery perspective, we've been able to initiate 7 projects completely remotely during this quarter. From an analyst perspective, we continue to be well covered by all the analysts. Last quarter, we were rated as #1 in the Sales League by IDC. From a retail banking perspective, this quarter, happy to say that we've been rated in the top 5 for modular core banking, especially for digital bank, and this is something specific for digital challenger banks that Intellect has been rated. The important point to note here is that both Infosys Finacle and Oracle FLEXCUBE could not make the cut in the study. In summary, with tailwinds behind us, I continue to be cautiously optimistic for quarter 3 and medium term. Thank you for giving me time to talk to you today. And with that, let me hand it -- hand over to Banesh.

Thanks, Rajesh. I think you've already had a good view to both Manish and Rajesh's view on the larger businesses of Intellect. I thought I'd step back and talk a little bit about the SEEC business. It's primarily 100% born in the cloud. So directionally, it's in technology area, which is the future. And the other piece that Arun had mentioned earlier about data, I think data is at the heart of the Intellect's SEEC business. So a combination of cloud and data from a technology perspective has been very successfully implemented in the U.S. We've now got some good progress, both in Australia as well as sort of some areas of interest showing up in the U.K. So I think the data platform that we are using right now in Intellect, the users actually -- most of you are aware that data has become so important, and it's going to be critical going forward. And I think what our platform does is it helps our clients take some of the data that they have along with the data that we provide them from external sources that we have put together. You will see on this slide, we have about 8,000 data points in the U.S. that we have put together. So we actually help the client triangulate their external and internal data so that they can use the data for being more personalized, more contextual, more accurate. And we're seeing a lot of interest. For example, a leading insurance company recently in Australia used their data and our data put together to help them do better catastrophic planning for reinsurance. So I think the power of data to be able to put -- be put together on our platform is showing enormous interest. I think while we started with insurance, we are seeing a lot of interest in risk management, in business development, in even compliance management in a couple of different business lines. So we're very bullish with using data and having the ability to implement quickly on the cloud an ideal model. The business is fully subscription-based. So I think, again, customers can scale up very easily from a subscription pricing perspective. So that's one area. The other one, which is very encouraging is a -- we've mentioned over here a term IDX, which is intelligent data extraction. Actually, this is a hyper automation deep learning platform. And we've actually implemented it for a large client. And they were so happy with it that they actually -- their first comment was that, "Hey, this is like magic." And actually, it is a bit like that when you look at it. It extracts data, both structured and unstructured data, and then enriches the data. We've seen in our runs with them 42% improvement in enrichment submission quality. And then it, of course, updates whatever platforms, whether it's underwriting or any other legacy platforms very easily through our ability to -- through APIs to connect. We've seen speed improvement of almost 87%. As a matter of fact, the recent 3 analysts in the U.S. who looked at it were really impressed with the enrichment capability that our data intelligence brings. So we are in the process of putting together a launch that will go out into the market starting next week in the U.S., and we are very encouraged with the potential that this brings. Finally, I wanted to touch on one of the largest wealth providers in the U.K. that we do work for. We actually support them in just a variety of areas over the years. I think what I've seen is lately, they've been doing excessive amount of work. By the way, they're fully on the cloud. All the platforms we manage for them are on the cloud. But we recently started using best-of-class platforms, both for Salesforce as well as Snowflake for them so that we can actually help them implement in this new digital sort of COVID times, the ability to connect to customers seamlessly using the best of technologies. So very encouraging that we continue to scale up very well, and we are looking at other customers within the U.K. market who can quickly enable these same capabilities for them. And I think Arun touched on the fact that we are doing a lot of good work with Australia and India. We've already got three clients, but a lot of interest showing up in India. One of our leading clients that uses -- and it's the largest insurance company, arguably one of the largest in the world, but largest in India, that uses some of our platform capabilities. They've seen actually 117% increase in remote premium collections during this period. So very encouraged by the scale of cloud native, born in the cloud architecture with a strong set of data and data intelligence scale capability that we built and seem very encouraging for us to scale up going forward. So that was some of a little bit of input that I wanted to give. I'll just pass it on to Jaideep.

Thank you, Banesh. I'll keep it very small. I'm sensitive to the fact that we also have to take the questions, and we will rush the time a little bit. While the purpose of the GTB and the GCB business is to secure our immediate future, and they're doing a pretty good job of it, and the focus of our SEEC business is to secure our near future, whereas the purpose of these 3 businesses, the RTM, the Wealth and the iGov is to secure a slightly far out future there. And I'm happy to share that they are -- all these 3 businesses are on track. The leading indicators that we look for in these businesses that we've built for the future are whether we are getting invited to the table, and how often are we getting invited to the table, are we winning a deal against revenue leaders out there and what the analysts are saying about us. So on all of these parameters, happy to share that we are in a pretty good position. In the -- we've got a fairly active engagement going on in India and in Southeast Asia. Wealth RM office has gone live in Singapore, and it has won a large upgrade deal in India. Within treasury, we are making a mark specifically in the FX and ALM. I think that's standing out. We experimented in the market and figured out that, that's where we will have winners in the future. They are making an impact. The iGovernment business has done reasonably well in this month. The post-COVID effects are over and done with that, which the business is looking reasonably healthy for the next H2. It did well in October as well. On the product leadership journey, we've -- as we got into the newer markets, we learned from them. And as we said, in the treasury, we have found that the FX product and ALM product are the ones where we made the greatest impact, and that's where you will see the greatest deals coming from in the future, and we are launching a new set of -- the next upgrades on those 2 products as well as the next-gen treasury. As far as analyst is concerned, which is again a very leading indicator for us, Wealth won award sponsored by IDC. There were 5 companies. This is a global award. And only 5 companies are awarded and Wealth was one of these. These awards are important because they tell you as to how well are you competing against the best. We are also the best against the revenue leaders out there. So we're definitely among the 5 top folks over there. Similarly, in the iRTM, we've been rated the 75th percentile category and which again means that we are amongst the top 3. So in brief, we remain on track for the slightly far out future. And so we initially secured here as well. So with this, I pass it on to Praveen. Who goes next?

Hello. Prabal-ji, please brief.

I would just like to make 2 points. I think beyond what you have just heard, I think, to wrap it up, essentially, I think the first point is last quarter, I think, we stressed on the fact that the company was at an inflection point and that we are transitioning the company to what is a fundamentally more stable and profitable path. And as you can see from the results, I think we have principally stayed the course and consolidated further. So steady revenue growth, EBITDA margin expansion of 400 basis points, et cetera. But the important thing is we achieved this by maintaining a sharp focus on costs and the revenue mix. I think these are the 2 big levers which we have and which was managed this quarter. And we hope to continue on this guided path of steady margin expansion in the future as well using the various levers at our disposal from time to time. Not surprisingly though, for the investor community, this is important is that the annualized EPS is at INR 18 now, annualized, which is amongst the highest levels we have achieved in many years. So that is one. And on the second part -- the second point, which I would like to leave you with is that on the bigger picture, which is what we are seeing unfold in front of us. Effectively, I think we believe we are building a company with a significant competitive advantage, which is IP-led and primarily differentiated in the marketplace as an innovation engine. I think that is what differentiates us from most, if not all, other companies. And this has been recognized both by customers in terms of loyalty, which Venkat talked about, 93% repeat business, et cetera. So customers, on one hand, and independent analysts like Gartner, Forrester, IDC, IBS, amongst the others. I think it is this dual interplay of customer loyalty and technology leadership, which will essentially help us in building a sustainable long-term shareholder returns for our investors. I think that is where I would like to leave it. Thanks.

Thank you, Prabal-ji. Now we open the forum for the questions.

The first question comes from Baidik Sarkar.

Congrats on a great quarter. My question is, how should we read the run rate in your license wins for this quarter? Is it a reflection of faster decision times given the environment? Or is it just a reflection of the organic effort we've put in over the last few quarters and it's probably showing up as spectacular growth, given how weak Q2 and Q3 of the previous fiscal were? I'll appreciate your thoughts on that.

Thank you, Baidik. I think you answered it. The sustained effort and the focus over the last 4 quarters is driving this change. So our focus on pipeline and destiny deal, which we started putting to almost 8 quarters back. There where we have just focused on this 41 destiny deal, and everybody is focused 24/7 on this is driving this change and behavior. And our technology suite, which got upgraded on macro services architecture, still, we are winning against Finastra and Temenos because our architecture is far more superior to their architecture. For iTurmeric and our product intersection, on one side, it's a cloud-native architecture and data architecture and other side, the domain architecture. This, we are able to bring the best of two worlds. They are players which are called Mambu and Monzo, which are good cloud players but without a depth there. On the other side, there are players which are legacy player, I would call, a 30-year-old, 40-year-old companies, they come with a good depth in the product, but they don't have a finance scalability and lower cost of delivery on the cloud. So these are the 2 intersections we are winning the deal. And now we are getting a good reference site as Manish was putting his 11th customer in North America. Now we are getting a good reference site and second deal in second quarter in the U.S. I think it's one of the very big positive traction because U.S., we were struggling from last 4 years. Now we started winning in the U.S. and North America.

Arun, that's very comforting. That's a very comforting validation, especially given the peer group of Finastra and Temenos. So is it fair to expect this license win momentum to continue for the next couple of quarters? Or should we kind of get back into a little lull before we get back to the same level again?

No, we are expecting this should continue. But the signing deals in the last signature sometimes get impacted on the quarter 1 to quarter 2. Those slips maybe we can't predict in license, as I mentioned to you earlier. But overall, we are looking at positive funnel and positive destiny deals.

My last question, in terms of the endeavored 30% EBITDA margin that you have kind of predicated for the next few quarters, how would you split that margin march towards cost savings vis-à-vis headline growth? How do you see that evolving towards 30%?

30% EBITDA will come with a 60% gross margin, if you look at it from that perspective. My SG&A costs are, as of now comes close -- becoming more like constant at INR 86 crores, INR 87 crore per quarter. So they may go up when the travel starts by INR 5 crores, INR 6 crores per quarter. But overall, if I look at it, as we move forward, my SG&A cost, which should be around 40%, some 3 -- 2% is my ESOP cost, 1% is my provisions and 5% to 6% is R&D cost. So that's how the composition from 60% metrics, 60% of gross margin coming down to 30% EBITDA margin.

Next we have Mohit Jain from Anand Rathi.

Sir, one is on the advanced market share. Now that we are getting some foothold in the U.S., what would be your outlook from a 12, 18-month perspective on the advanced market share? That is one. And second was on margins. Did I hear it right that you guys are now targeting like 30% EBITDA margins at the current revenue level?

That's right. 30% margin in next 4 quarters.

And sir, on the U.S. side?

So U.S. and North American market, I think we should grow the revenues. Manish, you can speak on it.

Advanced markets, like we have said, consistently be at a 60% plus overall, there will be a quarter here or there some -- while if you do a larger licensing, another geography, it shows up. But I would say at a consistent level, we would be greater than 60% consistently on the advanced markets. The good news, I think, is it was insurance and GTB as before, which was in the advanced markets. Since the last 3, 4 quarters, GCB has also been doing very good, and we have building a good funnel in Europe on GCB. I think that will add up to the advanced market revenue for us.

Sir, last year, we were at 62%, right?

Yes. Last quarter also, we were 61%. It's a -- don't look at...

Last year.

I think we consistently grow from that perspective.

Sir, shouldn't be more like 65%, 66% kind of a number from a 12, 18-month perspective?

I think that's a fair expectation, Mohit. But I would say 60%, 60-40 is a good model. We are seeing all the 60-60 metrics, 60% advance market, 60% gross margin. So we are just keeping that as a mandate. It could come to 62%, 63% because all the markets are growing.

All right, sir. And congratulations on your cash collection and the improvement in balance sheet, sir. Please keep it up.

Yes. Thank you.

Next, we have [ Mr. Suraj Manandhar ].

Congrats on a great set of numbers. Sir, I wanted to ask about the cloud revenue. I think from this quarter, you've shown -- started showing ARR. Could you also give the cloud backlog that we used to give, cloud revenue backlog?

Yes. So cloud revenue, I think multiply this by 5 or 10 depending upon what you want to do the multipliers because cloud revenue, if you are in U.S., they will multiply by 10. In India, then you will multiply by 5, so I didn't want to give those numbers. It's INR 135 or plus.

Okay. Okay. And sir, on the Intellect SEEC platform, is it a platform that competes against the likes of Snowflake? Or do we work with them? Any understanding of that? If you can give any color on that.

We do work with Snowflake. We use Snowflake for faster processing of the data layer. So Snowflake, we are a partner of Snowflake. We are early partner of Snowflake 2 years back, we stand up with Snowflake. And second thing is that entire platform is comparable to Palantir. So if you look at there's a company which went public in IPO in U.S. called Palantir, which is a AI platform-based company. So you can compare our platform to be Palantir equivalent platform.

I can just add a little bit to what Arun says, this is Banesh Prabhu. Palantir is using, obviously, data, consolidating data and using it for various people, including for the government, which is their biggest customer. But we would say that we actually are using a combination of data along with the domain expertise of financial services right now for clients so that they can take better data decisions than before and more remotely and easier than before. So I would say, Snowflake is a platform where the data is hosted. It's a great platform. We do a lot of work with them. And they -- as you know, it was a very successful platform as well as a very successful IPO, I guess, in the last quarter. Having said that, I think we are good partners of both Snowflake as well as Salesforce, which is -- which we use for a client of ours. But the platform that we have would be a little bit closer to a smaller version of Palantir in different markets, but with a very strong focus on [ FS here ].

Then we have [ Mr. Suraj Navandar ].

Sir, do we have any non-compete clause done with Polaris where we safeguarded our business?

Sorry, just repeat that question again.

Do we have any non-compete clause with Polaris when we safeguarded our services and the product business 4, 5 years back?

No, there is no non-compete. Two are independent public listed companies. So there's no non-compete clause between the 2 companies.

Okay. Okay. And sir, how can we look at H1 versus H2 revenue split? Like is it 50/50 or 45/55? Is there any seasonality in the revenue?

No, your question is whether we'll grow in a next half or not? I think we're likely to grow in next quarter, yes.

Next, we have Mr. Nishid Shah.

First of all, congratulations for an excellent set of numbers to the entire team of Intellect. And my question is slightly on a medium term. Arun, when do we see us reaching $500 million in revenue size now that we started winning orders and getting traction into the U.S. When do we see the $200 million on GTB, $200 million on GCB and $100 million on insurance practice?

Yes. So Nishid, that's a good question. You have that we also have aspiration to get it $0.5 billion franchise of the company. I think the big learning is we learned from HDFC model that grow consistently 20% plus and run the engine for 20% operating engine. And I think that will be, Nishid, so that we -- by 20% top line growth, we can grow 40% on EBITDA growth. And that's a phenomenal return to the investors, and this will not have any accidents. If we turn around 30% some year, it may be possible. But as of now, we designed the company not too aspirational, but we want to grow sustained way, step-by-step and consistently. Robust growth is important, which we've taken a decision 4 quarters back, which is driving the results of current quarter.

So at 20%, we will be 6x in 10 years. So from $200 million, I think it will take us somewhat like 4 or 5 years to reach $500 million, am I right?

Yes. It will be something like $400 million in 5 years, so something of that nature we are looking at it. But let's go step best. I don't want to -- I think quarter-on-quarter, year-on-year, we look at it.

Yes, it will be 2.5x in 5 years. So you will reach -- at 20%, you will reach $500 million in 5 years. But that would be a meaningful size, isn't it? Or you think...

Well, at $400 million, we can generate INR 1,000 crores EBITDA. That's, Nishid, is the kind of a calculation if you want to look at it.

Yes. But are we preparing ourselves for that? Are we gearing up the organization for that kind of a size? Are we preparing us for that?

That's right. That's right, and that's why we designed it here. So that's -- why did I sell service business because that's the end of the tunnel for service business. All the service companies are sold. After we sold the company, most of the other companies sold their businesses. So...

I think Arun, you made a very valid point. You had a vision a couple of years back that the product business will take off. And what we see actions in the U.S. market and international arena is product companies are coming of age, and we're seeing deals happening between 8 and 15x sales. So yes, we have a lot of way to cover.

Yes, a lot of way to cover. Indian market has to understand product business and the value of the product business because it's a long-term prospects. A 20-year, 30-year-old business, once you start building AMC, and AMC is growing 20% year-on-year on a base of INR 300 crores, that's a net cash coming into the company. So your EBITDA growth is -- a lot of it is assured growth.

True. So there's a lot of annuity revenue, which is coming in. So predictability is much more, and hence, the multiple should be much higher in the future.

Next, we have Mr. Rahul Jain from Dolat Capital.

Can we say that the demand scenario now is more like what it was pre-COVID? Or we see some sense of acceleration as well? Any urgency that banks are seeing true tech adoption, given what they have faced in the lockdown period?

I would say that the digital acceleration and some of the things is coming back to the same pre-COVID levels for the demand side. Few cases are still not as good as few markets may not be as good as that. But overall, demand scenario seems to be okay.

Okay. And AMC revenue traction was muted in this quarter despite 19 go-lives. Sir, is it -- there is a gap between going live and start-up in AMC? And when we see this picking up?

Yes. So AMC has the 3 elements. Basically, go live is the first element. Second is some warranty 90-day warranty or 180-day warranty, which is there. So that delays the growth of the AMC. So your question is very valid, that there's a delay cycle between the going live and the AMC start-up. But 20% is a good guideline for supporting AMC year-on-year.

Right. And on the amortization side, any scale-up we expect here since our amortizing run rate is still well short of over $1 million kind of a capitalization we've been adding? So when we see that bump-up happening?

It's a regular when we keep on generating products, CWIPs keep on going into the capitalized product when we launch a product, that goes to that. So as soon as it goes to the life product, we start amortizing it. So amortization, if you observe, there is a pattern that every quarter, some numbers we capitalize. So each time we can capitalize -- some INR 20 crores or INR 30 crores number, depending upon which product cost how much. So it's not a straight line metrics because each product cost is very different in the CWIP method. So whichever the product gets capitalized on that quarter, then 20 quarters, it will get amortized.

Right. But to put the maths simple, eventually, this INR 30 crores number will go to INR 100 crores, INR 120 crores as all this WIP will eventually go into...

That's right. Both will match to each other. But I think, don't look at the single mindset of looking at capitalization is capitalization. It's R&D, product valuation, which we are generating a license-linked revenue of -- in thousands of -- in hundreds of crores. So that capitalization is a very small amount for that R&D effort for any product company. So we are subtracting in our mindset that capitalization is overhead on the EBITDA. It's not an overhead on EBITDA. We don't have a real estate building or anything, which is CapEx. This is our CapEx. So for a product company, R&D is my CapEx. And investors, all of you look at it, that as an intangible asset, not a tangible asset. CapEx -- for me, the CapEx -- the product is my CapEx. That's my most tangible asset more than a building. Building cost me $3 million, $4 million. This can generate me $20 million revenue. Building cannot generate me $20 million output here.

Right. Right. And just a clarification. You mentioned that our license plus AMC plus SaaS accounts for 56%. Is the SaaS run rate not subset of license plus AMC?

No, it's not a subset. It's a separate line item.

So when we are saying this SaaS is the pure SaaS, which is not counted in any of the license of the AMC?

That's right. Either we classify into SaaS or license, both are mutually exclusive.

Arun, can we take 1 or 2 more questions?

Yes, there are some questions on a window. So chat box, there are a lot of questions there, so we can respond to some of the questions also from there, and we can take 1 or 2 questions also. So Saranu, if you can respond some questions or might as well I can. Otherwise, I'll response to a few questions, which is when do we expect company debt-free? I think we have a term loan of -- today, we have mainly is term loan. So almost we are debt-free. From a net positive cash, we have 90 -- close to INR 94 crore net positive cash in the company. But term loan is a low-cost element. So it can be next 4 quarters to 6 quarters, we should be debt-free as a company, if we prepay those term loan. It's just a question of taking a call when should you want to pre-close or if it's a low-cost, why shouldn't you keep it for better leverage available in the company. About the valuation, about 7, 8x, we all love it. The -- you are the aspiration of [ story ] and our aspirations are seen. When Indian market will understand product business, then they will recognize it. DSO is high in APAC region. We have 3 clients in the APAC region, which are about to go live in next 2 quarters. So this is -- in our agreements are such that their payments are due only after going live, some portion of the payments, and that is increasing the APAC DSOs very high compared to any other region, and that will bring down the DSO better going forward. About LIBOR, I think [ Praveen ] will answer on chat bot -- chat box because we are working on that area. So any other question? Win is led by the cost sector or a client or quality of innovation. Deal wins are in the advanced market, cost is not a consideration. We don't win the deal just because of lower cost or lower pricing of Intellect. We win the deal mainly on quality of the product and technology, which is there. So a person who is investing into a product is not bothered about it. For a bank, $1 million, $2 million, maybe a big number for Intellect, but it's not a big number for the bank to make a decision. And he doesn't make a decision based on saying, if somebody is selling $0.8 million, that will be -- he will purchase it. I don't think that is we are seeing any of this thing in advanced markets. Some other, it is -- there is a few markets. And those are the places we are not participating anymore. Our product basket. I think product basket is complete. So that's where [ Gautam Gupta ], you asked this question. Some details on GeM and how is the revenue overall in the business. So GeM, I think, is going -- now after COVID, there was slowdown in quarter 1 on GeM. Quarter 2 was start picking up to some extent. Quarter 3, we expect -- quarter 3 and quarter 4, we expect healthy quarter, which is there as we go forward on this, GeM. So these are the questions from the window. And just one more question or...

Last question Arun can take is Mayan from [indiscernible].

Sir, if you could just give me the split between the term borrowings and short-term loans from the INR 707 million, please?

So it's around INR 60 crore is the term borrowing and INR 10 crore is the overdraft globally.

Okay. And sir, second was, sir, do we do any form -- any sort of bill discounting on our receivables?

No, we don't do right now.

Arun, can we take some more questions or we can close it now?

Just take 1 or 2, 1 question more.

[ Vivek Roy ], can you ask your question?

Praveen, Vivek is not there.

Not there?

Okay. Then we'll just...

Then we can close it. Thank you, everybody. Thanks for joining us. In case any more questions are there, please do write to us. And in case any more meetings are required, please do let me know. Thank you so much.

Thank you, everybody, for joining.