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

Greetings, and welcome, everyone. Thank you for joining us today on Zoom to discuss the Intellect Design Arena Limited financial results for the third quarter of the fiscal year 2020/'21 ending December 31, 2020. The investor presentation and press release have been sent to all of you and is also available on our website. Our leadership team is present today 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, Director on the Corporate Board. He's also our next CFO of Polaris Group; Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO, iGCB; Mr. Banesh Prabhu, CEO of Intellect SEEC; and there are other senior members of the Intellect management team who are present in the call. Mr. Arun Jain will brief you on the result. And then the respective CEO, that is Mr. Manish Maakan, Mr. Rajesh Saxena and Mr. Banesh Prabhu, will comment on their line of business. Then we'll have a summary of the same. This would be followed by a Q&A, which would be replied with the senior members of the management team. On safe harbor. I would like to remind you that anything which we see, we refer to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risk the company faces. With this, I request Arun to give his briefing on the results. Over to you, Arun.

Thank you very much, Praveen, and thank you all the investor who have trusted the company over the last 5 years in this journey. Some of the investors may be new. So I'll just take you through a few slides on the company overview, company, like, journey, what is that business model, what is the industry overview and key competitive strengths and quarter under review and annexures. If I look at it, just to repeat, this space that Intellect Design Arena has the world's largest cloud-native API led microservices based multiproduct fintech platform powered by AI/ML for global leaders in banking, insurance and capital markets. So we are the only company on the same architecture, which offers a full spectrum of banking and insurance technology product through its 4 lines of business, which we call Global Consumer Banking, GCB, Global Transaction Banking, GTB, Risk, Treasury and Markets, and Insurance. Corporate Banking consists of 5 product lines: digital transaction banking, which is a comprehensive suite, which we call DTB suite; contextual banking experience is ability at front end, making the digital front end for the large banks globally, which is CBX; third product line is trade and supply chain finance, high-growth line in the current line of business on global; and third (sic) [ fourth ] is liquidity management solution; and fourth -- fifth is the payments. So there 5 different products, which GTB, led by Manish's desk. There are 5 products which are -- 6 products, which is in the GCB lines: digital core, which is IDC; digital lending; digital cards. So there are 3 platforms, which are there; then CBXR on retail banking suite; digital wealth, which is Wealth Qube and central banking. In RTM business, we have a brokerage solution or Capital Alpha; treasury and ALM; and then asset servicing, which is Capital Sigma. Then we have underwriting solutions, Xponent, which is completely first time in the industry, which is built on artificial intelligence, Big Data, one of the best rated products in Americas; then risk analyst; and magic submission is about reimagine submission with the magic of AI. Besides this, we have a digital solution through our government, the GeM software, the entire back-office of GeM. And then we have 2 technology platforms, which is the foundational framework on which many products are built. One is called I-Turmeric. It's a platform, which connects, which integrates, builds APIs and cloud native architecture. So it's integrate integration, workflow, APIs in a seamless manner in a drag and drop model. It's a technology which is helping us out to accelerate our deliveries. And second is IDX. IDX is a platform, which is data platform, which is built on AI, ML on intelligent data extraction and contextual synthesis. So these are the 2 fundamental platforms. I-Turmeric gives you composable banking and IDX gives you contextual synthesis are the 2 platforms, which is underlying platform, which is being deployed to build up the entire product technology landscape of Intellect. We always keep on saying there are 5 steps to drive the sustainable and scalable product business. So what you are seeing in this quarter because at least from step one, which is around building a product around an identified market need. Step 2 is winning first reference. Step 3 is designing, branding and marketing, acquiring first 10 customers. Then we come to selling in step 4, and then step 5 is partnerships and strategic alliances and mining. So this is a complete model, which we work on. So typically, it takes 3 years to move from step 2 to step 4, and some of the products are moving to step 4 that is driving the current revenues and profits what we are experiencing in the books. So -- just a minute. This is our fundamental model of phase of growth, Intellect 1.0. Our focus was creating a brand, recognition as category leaders, winning key deals. While Intellect 2.0, which is going to end in April -- March 2021. We started in 2018 to '21. It was focused on industrialization of product, monetization and customer centricity. This I described you multiple times. But for the new investor, that was a focus for Intellect 2.0. 3.0 will come to you next time when we have Investor Day. We have a very smart Board with Anil from Australia; Arun Shekhar is an Independent Director, who was running IT company; Andrew England with an extensive experience in running the banks and operations; Vijaya Sampath is a leader in entire legal side; and Abhay Gupte, who was the leader for the last CGI and EDS before joining Manipal Group right now. This is our management team. Our winning digital strategy, since company has focused on digital strategy way back in 2013, 2014, and that is also playing to our advantage. On the left side, we have a customer list and right side, what kind of problems do we solve. This is our competitive landscape, the market opportunity. There's big tailwinds, which is there, where buy replaces build. So a lot of customers are now looking for buying the solutions to accelerate their digital life cycle. The growth in the product business is moving from almost $20 billion to the $30 billion market size, and technology change is becoming imminent. COVID has accelerated this journey. Our competition in Consumer Banking is Temenos, Finastra, TCS, Finacle and Oracle. In Transaction Banking, Finastra is the key competition, ACI Worldwide, CGI and Bottomline. Treasury is Sungard, Finastra and Calypso. And Insurance is Carpe Data and Planck. These are 4 areas in which we are creating MOAT for the company. First is around technology. Our technology is contemporary technology, which is cloud native, API ready, microservices based open architecture powered technology. And then which is build based using design thinking, digital 360, very highly functional products with the largest number of user journeys, accelerated deliveries and API ready and contextual products. These are 5 pillars of the technology. On teams, we have a great global talent. Across the world, we have talent; it's not just India based. We have built up a lot of AI technologies from New York and a lot of GTB technology out of U.K. office. And then a lot of wealth business out of Singapore office. So we leveraged the best talent and best market places where we harness the talent there. Stability of the leaders is very, very important. 200 leaders in the company have 25-plus experience in this area, and we are diversity and nationality agnostic. On brand side, almost every year, 50 analysts are covering us. We are ranked #1 in retail banking and wholesale banking by IBS Annual League Table. We have a good customer base of 240 customers across 91 countries. So beauty of Intellect is that it's present in 91 countries. So you'll see how the win is there across the world. What will help is that financial industry is very regulated. So when you are to present in multiple countries, you need to modulate your product to a specific country, and that's the strength of Intellect. And our 58% revenues come from advanced markets, where the margins are much higher than the emerging markets. This is our brand chart, which we -- I call it the complete brand chart, which is happening. We are #1 rated for the retail banking and wholesale banking. Then we have Novarica, which has rated our IDX platform, which I mentioned, best in the world in underwriting space among all the 15 players they rated. So Novarica's report you can access to. IDC has named Intellect Design as a leader in IDC MarketScape. Celent, a contextual ALM, we have an IT report. So every -- Forrester, Celent, Gartner, so every analyst today is covering Intellect from a various award positioning and the product rating perspective, and that's a great brand building. Besides this brand building, which I have not put on the slide, is our iGTB Oxford School of Transaction Banking, which is another brand; and Cambridge School for Core Banking. So these 2 schools, Cambridge University tie-ups and Oxford University, is helping us out to create a great brand story for Intellect. This quarter, once coming back to this quarter, this quarter, I think our monetization trajectory is on, and all the principles of monetization are working perfectly in order. Q3 FY '21, the results: calibrated, predictable and profitable growth. So 3 words are important: calibrated, predictable and profitable growth. First, success for Intellect, which we celebrate for this quarter, is what GCB team has done. Going to the territory called Germany, which is looking for very high-quality architectural products for the market. OTTO GmbH is the largest retailer in Germany, and they've chosen IDC, Intellect Digital Core and Lending product for their next-generation technology need. And that's the biggest validation of our technology strength over any of our competitor that a company in Germany, where we don't have a footprint, no reference, is able to decide based -- purely based on technology of Intellect. Same way, GCB has done a second century hit on this asset, second sixer, is getting an entry into North America. We know -- we told you GTB is the first to get into advanced market. And GCB entered North America by winning its first subscription deal for IDC. Then Novarica rates IDX as an intelligent text ingestion solution for advanced underwriting with the AI and ML playing a larger role. During this -- on financials, these are 3 qualitative celebrations, and quantitative celebrations are, our EBITDA margin has moved to 26% of the revenue. We highlighted to the market that we should be a 13% EBITDA company in next 4 quarters. So the first quarter, we reached from 24% to 26% EBITDA margin. Our SaaS revenue growth of 28% in Q3 and 51% in Q3 FY '20. So it's going very healthily. And we are getting product acceptance in various leadership quadrants. These are our numbers: Total revenue moved to INR 3.82 billion, 19% growth year-on-year in terms of the revenue. In terms of dollar terms, our revenue moved close to $52 million, with 15% year-on-year growth. Our license, AMC and SaaS revenue, all 3 have a growth. License revenue moved to INR 910 million. AMC is INR 745 million, 18% growth; and cloud/SaaS revenue, INR 418 million, 28% year-on-year growth. Gross margin is at 50% (sic) [ 56% ] of revenue from 47%. EBITDA, I mentioned INR 975 million. And this quarter, we were able to get a net profit of INR 804 million, which is 21% of the revenue of Q3 FY '21. So our PAT margin has come to 21% as against a loss of INR 114 million in Q3 last year same time. Cash and cash position. We moved to INR 335 million -- effective operating cash flow moved to INR 335 million. Cash and cash equivalent INR 1837 million versus INR 121 million (sic) [ INR 1212 million ] in Q3 FY '20. Net cash as of now is INR 1.24 billion as against negative of INR 1 billion last year same time. Collection has a regular streamline. It's coming to the INR 3.48 billion. And net days of sales outstanding is 124 days compared to 132 days last time. And investment in product development, which is capitalized INR 283 million versus INR 287 million, so it's stable at the same number. This is the same metrics where comparison is done in graphical manner. Over here -- a few points, which I need to highlight over here, which is not a part of the previous slide, is around annualized EPS of INR 24.23 on INR 80 crore PAT margin. We have 10 deal wins during the quarter. There are 6 large strategic deals, 9 go lives, and we made some CSR contribution of INR 17 million, which is not a part of the previous slide. On YTD basis, our revenue moved to INR 11 billion and license in dollar terms is $148 million. In EBITDA, total EBITDA for the year is INR 2.59 billion, which is 23% for the last 9 quarters compared to 26% of the last quarter, but 23% on annualized basis, EBITDA is 23%. Gross margin is INR 6 billion. License is INR 2.5 billion. SaaS is INR 1.15 billion, which is a significant increase, and it's all built organically, AMC of INR 2.2 billion. PAT of 182 crore or INR 1.82 billion in the last 9 months, and net cash of INR 1.24 billion in the bank. Collection is more than the revenue. So collection is INR 11.19 billion while revenue is INR 11.04 billion. So healthily, the cash is moving better than the revenue. Net DSO 124 days. Investment -- total investment in the product is INR 836 million. So our license revenue is 3x more than the amount of license capitalized, so INR 2.5 billion versus INR 836 million. Annualized EPS for 9 months is INR 18.31, 20 deal wins, 11 large wins, 40 go lives, INR 27 million CSR. This chart shows the sustained revenue growth from December quarter to April quarter to June quarter after COVID, INR 3596 million to INR 3492 million, INR 3730 million and INR 3823 million. This is quite an important slide for you to observe as an investor, when we -- I was talking to you what is the license linked revenue. License linked revenue has 3 components: license, AMC and SaaS revenue. In 2015, our total revenue pool, 33% used to be license revenue. '15, '16, it remained at 33%. '17, it moved to 36%, '17, '18. '19, '20, it moved to 42% and '21, it moved to 53%. Now that's a big shift which happened in this year to move to cross the 50% line on license linked revenue. This license linked revenue is important because this license link revenue comes at a margin of over 70% or 75% based on the various kind of deals, and that gives you the margin upswing of EBITDA 30% when I'm promising or I'm looking for a 30% EBITDA margin is coming because of this license linked revenues. On our financials side, the PAT has -- was negative INR 114 million. It became positive to INR 410 million in March quarter. Q1 FY '21 INR 426 million, then INR 592 million and INR 804 million. So it's almost doubled in last 4 quarters. Similarly, EBITDA for a small number of INR 36 million in Q3 last time, it moved to INR 639 million, INR 713 million, INR 904 million and INR 975 million. It's a healthy growth on EBITDA. Collections is more or less stable. There was a good success in the month of April to June, where we collected highest money INR 4.36 billion. Net cash, it was negative of INR 1 billion to negative of INR 1.21 billion in the month of March. And then we start moving to positive territory, INR 570 million, INR 947 million and INR 1.24 billion. Our order book positions are stable at INR 1.12 billion (sic) [ INR 1.2 billion ]. And ARR for cloud revenues now this quarter is coming out to be INR 1.67 billion, which is quite a good record. Repeat revenue from existing customers stood at 85%. These are details of the numbers. In this detailing of the numbers, what we have done is we simplified the practices of not -- or consolidating number of rows. Below the gross margin, selling and marketing G&A, we combine it. This is a standard world practice where people are comparing the numbers from company to company, based on the input from the global investors. We combine them together under one line, while selling and marketing, SG&A as a one line and R&D as the next line. So that is a change from the last time of presentation. And rest of it is the same, what we are showing it over here. So at this point of time, we look at it to give the task of the quarterly business highlight, I think we just give it to Manish to take over on previous slide. Yes, Manish?

Thanks, Arun. That was a good update from your side. I think from a GTB perspective, we've been growing the digital platform, the CBX platform, liquidity and payments, which we have talked about out of the 4 of the 5 products, which had been consistently growing, our youngest product was traded in supply chain finance. And very happy to share that the 2 largest transformations globally, one in Asia and one in Europe, is being led by us. The European implementation, now we are upgrading to the new SWIFT standards. And this is what most markets will drive demand upon. SWIFT is changing a lot of these standards on trade side, where we are ahead of the curve from a lot of other players. So that's driving that. We won another supply chain deal in Vietnam, and we won another deal for digital transaction banking in Jordan. This is our second deal in Jordan. Like I said earlier, we picked up a country and we go, clean the country, take the biggest bank and then keep bringing every other bank. So we repeated that. Jordan is the next country in the region, we are repeating that. From a go live's perspective, the first deal we are talking about, it's a U.S. bank, very large bank. We announced it. And we've gone live in less than 8 months. So this is a classic story of where the opportunity came during COVID times, we won it during COVID times, we brought it up, and we've gone live also. This shows the trust and the product readiness from a market perspective, which has been demonstrated very well. It's a fairly large-sized U.S. bank from that -- and getting live in 8 months really talks about the team's execution capabilities and the market readiness of the product. We extended our partnership with one of the top 3 Australian banks where we run their liquidity management, and we've now started doing virtual accounts for them to extend their market leadership on cash side. One of the largest African banks we are rolling out to more countries and one of the new upcoming big, large bank in India, we've gone live with digital transaction banking. If you look at all these 4 stories, this is about, again, growing with existing customers and growing in existing market to consolidate the leadership position and establish the brand by execution -- the trust brand by execution, and that's the foundation of growth for us. This is all enabled by our product leadership journey; 3 new products we were able to launch in this quarter: the DTB M 21, which is a market leading product. We've got 53 customers now on it. We brought out a new version on it with very high performance and open banking standards. This will be in the next quarter available on the cloud also, taking our journey over there. On contextual banking, as we are scaling out to more customers, larger customers, like you would see with the likes of Apple and others, consistent upgrades on performance and self-healing capabilities, those kinds of capabilities in the operating system are being built, which forms the foundation for us. And for virtual accounts, for the Australian bank, which we went live, we were able to bring capabilities where they can, for their corporates, help them do collections on their behalf or payments on behalf or manage their liquidity in a virtual account structure. So we have very significant upgrades to the software across 3 different lines of product, helping us drive our market leadership. We've been fortunate, consistently being rated by analysts in the leadership quadrant, and that's kept our journey going very strong. Again, looking to see consistently trade finance, which is our youngest product, being bought by the largest customers as well as being rated amongst the best is a very happy story for us. And the U.S. breakthrough, which we have been showing consistently, the analysts are also rating us very high. So that's stocking up the Aite report. So overall, a comprehensive journey growth for the line of business. I'll pass this on to Rajesh to share even bigger successes of what's been demonstrated. Rajesh?

Thank you, Manish. So before I start, let me remind ourselves that GCB has 5 plus 1 lines of businesses. IDC, which is our flagship product, which is open API microservices based cloud native, which has a complete suite of core banking products. Our second product line is lending. The third product line is central banking. And this is something what we call as Quantum Banking, which is what we [indiscernible] basis, our RBI deal. The RBI, we run the core banking system of RBI. So that Central Banking, we have an omnichannel platform for retail banking called CBX Retail, our cards platform and, of course, our wealth platform. IDC has been a well-established product, and I've talked about it in the last couple of investor calls. But I'm happy to share that this year, we are seeing some good growth coming in, both in our lending product as well as in our Central Banking product. And also, before I talk about this quarter, let me talk a little bit about what -- how GCB has done YTD. From a YTD perspective, as I look back on the last 3 quarter's successes, I can see that all our business drivers are firing and doing well. Let me talk about this quarter. I think Arun talked about it. Very happy to share that we have won a very large, let me call it, mega Destiny deal in Europe with OTTO. OTTO, for those of you who may not know, is one of the largest Europe e-commerce player and the second largest e-commerce player in Germany after Amazon. Their turnover in Germany is over EUR 4 billion. So that's the size of this client. And they went through a comprehensive selection process, wherein they looked at both international players and local players. OTTO also has a large in-house technology team. So they also considered a build option before they decided in favor of us. The process also evolved a large 4-month POC that we had to do with OTTO, and this was done on an agile implementation methodology basis, which they awarded this contract to us. So very happy to share that our momentum in Europe continues with a very big win in Continental Germany. The second thing I'm proud of, and I think I am reminded a couple of quarters back, I think one of the investors asked this question saying, when is GCB going to make an entry into North America? Happy to share that we have entered North America with our first cloud subscription deal for a mid-tier bank in Canada. We will be shortly making a press release, a press announcement and more details will come. This deal had 20 competitors, including international competitors like Backbase, Temenos, Kony and Veripark. And this deal we have won against the best of best in Canada. Also happy to share that we have won a multimillion-dollar upgrade deal with a very innovative and a digital bank in Africa. This is a 4-country rollout. And what's interesting for us is that it's not only core banking, but it has core banking lending. And for the first time, for me, cards will be making an entry in Africa. So these are the 3 big deals that I wanted to talk about in this quarter. But more importantly, as I look in future, we continue to be well positioned in destiny deals and our Europe momentum continues. From a product leadership perspective, you would recall that we had done an IDC '19 launch. We are now ready to do our next version of IDC 21 launch, which you will hear from us shortly about this. This product that we have developed, IDC 21, is first of its kind, it's completely open API microservices based and completely cloud native platform. Very interesting to see how the stakes on in the market. We are also -- while we've done this for IDC, we are also working on making our lending and cards platform also completely cloud native. Makeover is going on right now. Also happy to -- though we've had multiple implementations, but I want to really talk about 2 implementations today. Ahli Bank, which is a bank in Qatar; and Utkarsh small finance bank. It's a bank based out of Varanasi in India. Both these banks went live with upgraded CBX-R, our digital platform. And I can say that the customer experience, the user experience and the feedback that we are getting from the customers of this bank is very, very positive. From an analyst perspective, I think that coverage product, coverage continues. And happy to share that this quarter, we received from IBS, the most impactful project in digital lending for our client SVFC in Vietnam. So that's a short summary about how GCB has done in this quarter. Very, very good quarter from a GCB perspective, a good year from a GCB perspective and cautiously optimistic about our future. With that, let me pass it on to my colleague, Banesh.

Thanks, Rajesh. That was an excellent update on GCB. So I'm going to talk to all of you about Intellect SEEC. Now Intellect SEEC is often referred to as an insurance business. But it's actually at the heart of this business is that it's 100% cloud. It's fully 100% subscription. And the data platform is at the heart of this business. And it's used a lot in insurance. We've got -- in this quarter, we had our tenth customer. Most of our customers are in the U.S., but this was a first customer in Australia. And we referred to that customer here as Blue Zebra, which is actually empowers Australian brokers. We also tied up with Credit Watch (sic) [ CreditorWatch ] which is a company that does business calls as well as company checks in Australia. They actually wanted and were really happy with our 8,000 data sources that we have, the capability for us to be able to access and look at data very easily. And they tied up with us to supplement their credit scores for businesses with the data that we have available on our platform and to leverage our platform to do that. This quarter, we also went live with Ameritrust. Ameritrust is a national -- U.S. national commercial insurance underwriter, and it's one of the most successful underwriters for P&C insurance. We went live with our Xponent, which is our underwriting workstation, along with our data platform that integrates together to help them triangulate the data and use the data for better underwriting. We also went live -- actually, Amerisure is another client of ours who actually came back and requested us to extend their contract instead of 3 years to a fresh contract for 5 years, which is again based on cloud and subscription in the U.S. Amerisure is one of the leading commercial insurance companies focusing on construction, manufacturing and health care. And I think they were really happy with the quality of the data that we gave them and how we integrated the data along with their existing underwriting platforms. And then finally, Liberty, which is one of the largest insurance companies worldwide with revenues well over $43 billion. Actually chose for 3 lines of business and went live with our IDX platform. The IDX is an AI platform, for those of you who are not aware, and we call it Magic Submission. Magic Submission was launched for all 3 businesses in Liberty this quarter. And in addition, Novarica, which is an independent analyst, rated this particular platform from an AI perspective as one of the best and therefore, they rated it -- there was nobody else they felt in that category and therefore, put us in the Northeast quadrant of their analysis as one of the best systems in excellence in intelligent ingestion as well as extraction of data. Similarly, we've also been able to launch in Australia on our data platform the ability to access data in a few seconds. It was first done in Australia, and now we are launching it this month in the U.S. There are a lot of customers in our present discussions in progress who would like to access this data on our platforms. Then the other piece I wanted to touch on is the Intellect IDX platform that you see over here, which was rated as the best AI and machine learning provider. It was highly commended in the U.K. in their 2020 Technology Product Awards. We feel really good that our platform is ready from an AI perspective to be able to extract documents of all types, whether it is electronic documents like PDFs, Excel, Word or documents such as paper, fax, et cetera; extract it and then validate some of that data from external and internal sources, and then ingest it into their destination platforms as a seamless process. So it was very well regarded. So I thought I should touch on these key areas. And I think that was what we achieved in this quarter.

Thanks a lot. So just I want to highlight on SEEC data platform. The beauty of the data platform is contextual, able to do intelligent decoding of the text while the companies like Kofax and ABBYY. So Kofax is our key competitor in this space. They have a coordinate based extraction. So to explain all these technologies from GTB, GCB and iSEEC, we'll have a technology day maybe next month, and we'll invite you all who are more interested in technology because it's a technology company, and we cannot spend too much time on explaining the technology in these investor calls. So in this -- on a final -- other businesses, which are smaller-sized businesses, which are there for next quarter, we are looking for -- we have one -- Intellect Wealth is emerging as a very, very solid platform, which is completely API based. It's been launched in Singapore, APIX, the open platform. And it has got more than 50 APIs on wealth side. So this platform has won the large deal in Indonesia. Capital Sigma, which is our asset servicing platform, this has been chosen by a top private bank. They upgraded to the new platform and the new technology. And one important point is, GeM portal has crossed 10,000 crore of GMV in last quarter. There's analyst which are rated Treasury in Best Implementation (sic) [ Best Implementation in Treasury ] category, Improving Automation in innovative categories and Intellect Wealth announced winner in 2020 IDC Fintech Rankings Real Results Award for Digital Wealth Transformation at CIMB Thai Bank, so it's a very, very important thing, CIMB is the largest Malaysian bank. And product leadership journey of brokerage is continuing on the cloud platform. So it has been transferred fully on cloud. So brokerage platforms are very old platforms. So this platform is a new platform on the broker side. This is just a highlight of how various deals are there, which has been described. So I'll skip this slide. Over here, same 6 deals, which I'm talking about in various geography areas. There are 9 implementation, which is being talked about, which are completed new customers live sites. Why live sites are important from a context is because when you create a live site in a country, you have a new prospectus generated, and new sales funnel gets created. So this live site is a very good indicator for ensuring that your company product footprint is going to a larger community and implementing in 8 months' time, it is amazing time for any large project like this. This is just showing the world that how Intellect is differentiated from our competition. Finastra, some companies are Europe focused; some companies are America focus. We have advantage of similar advantage like Indian IT services are there. We don't have a choice. We have to go out for making our money. India is not the strongest market for us to make money. So we are present from Australia to on the lowest most corner of the slide, right corner and top most left is Europe. We are present in all the continents, very, very effectively. And that's where we are seeing the black pins described as going lives and blue pins described where we win the deal in a quarter. We will do it on annual basis also. This gives a good understanding of how our penetration is going step-by-step in these countries. And once we build up all the payment networks, we build up bill payment systems, we build up regulatory frameworks, it becomes much, much easier for us to quote the deal, win the deal because of reference, and our implementation cycle time becomes much lower and profitability substantially improves in those countries. The market share is similar to last quarters at 60/40. It's become 58/42 in this quarter. It was 62 -- last year, 62/38 last quarter. But more than 60% market share is advanced market. Again, first lever is license linked revenue for the profitability. Second is advanced market share of 60%. So these are the 2 core strategic levers, which I described to you in 2015 Investor Day. It's almost 5.5 years back when we described the company's strategy. We look at that we need to make 2 things 60%: advanced market and license revenue to be 60%. We are still at 53%, 54% level. We need to make it to 60%. And advanced market, 60%. 60:60 is a good recipe for the good growth margins and EBITDA margins of crossing 30% plus. If you look at the collections and DSO, advanced market, DSOs are just 67 days versus emerging market is 218 days. India is 171 days. Effective is 124. So our 58% business comes in a very good cash market, while other businesses are great -- but other businesses presence is important to get a global texture. So we are not saying that we should go out of the emerging market out of India, but it's a kind of a nature of business, by balancing the portfolio, we are able to manage this portfolio. The pipeline is healthy. It's moving -- our nature, we are not increasing the substantial pipeline because we need to do it more qualified. So once we enter the deal, we look at it more aggressively on the deal, and it's growing from INR 36 billion to INR 41 billion in last 1 year, and we are careful in choosing what deals are right for us. Our Destiny deals has a capacity, around 40 Destiny deals we are able to run with our current management team. And this, we further will enhance it. As of now, it remains at 41 deals in spite of winning 6 deals in this quarter. So -- and then 8 new deals have been added. This is a trajectory of how the deal movement is happening. This is a product assurance of what will happen in the quarter. This is around currency. All the various currencies are stacked up. 19% is GBP and 15% is euro, and 35% is U.S. So U.S. is 1/3 of the total revenue. So with this, I'll open the platform for question answers.

Thanks, Arun. Now the quorum is open for the Q&A. [Operator Instructions] So first in the line is Mr. Baidik Sarkar. Rohan, please take him to the panel. Baidik, you can ask your question.

Arun, congrats on a very strong quarter. What explains this momentum in license wins? The whole of FY '20 saw muted traction in licenses. So is this the result of that pent-up activity? Or is it the new environment that is reducing evaluation and adoption cycles?

I would say you have answered both the questions. First is the healthy pipeline, what we are looking at is qualification criteria, the way we pin down the deals like OTTO deal or North America deal, the amount of intensity we go through. So our win rate has been much, much higher than last year. And secondly, I would not say that's because of the quicker evaluation. Nobody wants to do quicker evaluation. I'm saying the evolution has become much more intense. They are going on functional richness as well as technology quality of the products. Our advantage of technology quality of the product and technology architecture, what we invested in, in last 3 years. So we are -- our platform is a contemporary platform, which many other competitors have not invested into it. So when we are investing in last 4, 5 years, and we had bad times from the result perspective; not bad times from the internal perspective, but results perspective. Outcome is now getting more visible because now cloud has become very, very intense, AI machine learning is intense and all those investments are paying off.

Sure. So which brings me to the question, in guiding for earnings growth of over 30% over the next 2 fiscals, what are the lead indicators that you've assumed on license traction? And what additional levers do you expect to contribute at an OpEx level to meet your margin [indiscernible] whereas the level is 434?

So Baidik, if I -- we discussed -- in the June quarter, we mentioned to you that our cost has now stabilized at $40 million a quarter. We are still maintaining around $40 million pre EBITDA cost of INR 284 crore is at $40 million level. So these numbers are not going up. So if you just plot the numbers of growth based on even 10% growth, will give you 30% EPS growth in coming years.

Thanks, Baidik. Next is Mr. Rohit -- Rahul Jain. Rahul, please ask the question.

Can you guys hear me?

Yes.

Yes. Congratulations on great execution. First question, you shared about this 5 steps, which you have also articulated in the past. And you also shared that geographical map with winning around in terms of go-lives as well as some of the large deal wins. So -- and this also -- this quarter also saw the German deal coming up. So with all this thing -- point in mind, which are the new region, products, anything incremental that you've seen because, of course, in all the business slide, those informations are coming up in terms of the variety of products clicking the right spot, the insurance going into the Australian market. So a lot of these things are happening across the business segment. So which area you think you are pretty confident because looking at all of this, a 10% outlook looked like a very, very conservative thought. So is it more about that it's difficult to predict kind of a business, which is leading you to be so conservative? Or it is more about not getting the real large deal, which you've been doing in the past, which is stopping you to call it out much more aggressive on the growth?

Rahul, I think the market uncertainty are -- still some of it is there. And a lot of things are -- license revenue getting translated to cloud revenue. So SaaS revenue growth is much higher, which has a higher realization going forward. So I'm saying if you are pinning it for EPS guidance, which Baidik has asked a question, and same thing, if I want to do it, then how the 30% EBITDA margin growth will happen or PAT margin growth will happen, that is what I was answering to. And definitely, we are looking for growth at least. We have designed the company for 20% growth. It may be anything, double-digit can be, good for the next coming years. Last quarter, we did almost close to 20% growth in rupee terms, 15% growth in dollar terms. So I think that momentum is there. So -- but I think we burned our fingers so much that we don't want to guide anything. We want to build trust with you.

Right, right. It's coming back big time. So this year has been very great. Great leaders find opportunity in tough times. So Manish, the next question for you. Of course, you shared the kind of deal that you won during the quarter. But the real big ones, which we used to hear more often earlier, how are those shaping up? Are those still kind of an old kind of a zone, given the market we are in? Or any other flavor you want to share there?

Rahul, both the things, the big deals are there. But like Arun said, one of the things is there's a very significant pressure to move towards a subscription cloud. So that's shaping a lot of it. In short term, it doesn't sound very right from that perspective. But building a business on a medium term, long term, I think that's the natural trajectory we will go through. Like I said before, we started with the insurance business, we went with the consumer business. The pressure to move the transaction bank business also to that is there. So I hope to announce some of those very, very shortly.

Right. So that impact on your deal announcement value, what should be the shrinkage you see, at least on the announcement side? And, of course, we know the total lifetime value would not change. But...

Actually, lifetime values are growing, Rahul.

It's the opposite one.

Yes, that's the whole idea, right?

Yes. Correct.

From a pure announcement point of view, if you were to announce a deal in format A versus format B, what is the contraction, at least from an announcement date point of view we may see?

So Rahul, we'll -- I'm trying to keep the portfolio still balanced between the license piece and the subscription. We don't want to immediately move 100% to that. So you will see both the announcements.

Right, right, right. So that will be much more smoother.

Yes. I think one thing we have all, as a team, learned is to become predictable and to become consistent growth versus showing spikes. I think that's what you guys are rewarding us back with. Consistency is most important, and part of our business management is to manage the portfolio.

Thanks, Rahul. Next, we have Mr. Mohit Jain.

Okay. Sir, one -- just one question on your operating metrics. This advanced market share. Now in the last 3 years, it is just falling from, let's say, 65% to 62% to now 58%. And this is one thing which deviates us in terms of our revenue contribution and also, the receivable contribution versus the rest of the industry. So what is your outlook? And this is not from a quarterly perspective. But let's say, 2 years, 1 year, whatever timeframe you guys are comfortable with. Do you intentionally make it converge with the industry number? Or do you think this advanced market may remain very different from where the rest of the industry is?

Service industry is different. Service industry is not -- our global presence is there. So 1/3 business from emerging markets will always be there because this ratio will be 40%, 42%, 38%. Those are depending on the deal to deal on a quarter-to-quarter basis. I think 2/3, 1/3 business, which is in the ratio of IT spend on the fintech industry, if you are in line with that, that's okay. But for IT industry, what you are referring to Indian IT service industry, that's not the right relevance because the outsourcing deals are around that area.

So 65%, 70% from advanced market is not something that we are even targeting?

We are not -- 65% is a good number to look at for the advanced market. And if you sustain it, our global presence will be there. Then we can go into the -- some of the deals, which are more -- we can use our products for getting into the fintechs -- real fintech spaces, once we get a market share of Vietnam or a Thailand or a Jordan, or there is a much bigger potential emerging in 4.0 of Intellect. 3.0 will start, but 4.0 can be a very different looking business because in developing market, one can lead the business very differently than what we're leading today. We are selling licenses right now. That time, we can sell the payment services or the trade finance services or supply chain services. That is the kind of overall 10-year perspective in which we are looking at. So Mohit, that's where emerging market is important and 1/3 business is quite good balanced portfolio for us.

Next, we have Mr. [ Nandan Mariwala ].

Congratulations. So I wanted to understand the funnel that we have given, which is around INR 41 billion. It has jumped from around INR 36 billion. So does this include -- is this only license revenue? Or it includes other revenues as well? And correlated to that, I guess, if more business is evolving towards SaaS revenue, is it understating this funnel in some way?

Yes and no. But I think this funnel, which is growing, is a combination of license plus implementation charges, plus some other cloud deals, but we don't take a full 10-year cloud deal. We take only 2 years of the cloud deal as a value in the funnel. So that's also -- if I start taking 10 years of the cloud deal, then the funnel will look very large. So it will be disproportionate. So if the $2 million -- if I am signing a $2 million annual deal, $2 million annual deal will become $20 million on the funnel. That study will create anxiety in the system.

Okay. I understand. And one more question regarding the license revenue recognition. So is -- when we win a deal, how do we recognize the license?

We recognize on the same quarter when we win the license.

It would be recognized in the same quarter. So again, correlated to that. So when we show the large deals, which are 20 to 30 or 30 to 50, and 50 and more, those numbers are again sort of license plus implementation kind of the number?

That's right.

Next, we have Mr. Varun Arora. Varun, can you ask your question, please?

Can you hear me?

Yes.

Yes.

Yes. Congratulations, team. Great results. My question is regarding the U.S. market. So in the past, you've spoken that U.S. market is one of the toughest markets to crack and for cracking U.S. market, one needs to challenge the status quo. You've spoken about the AI and machine learning as a focus area for the U.S. market. So I just wanted to understand, and we've also spoken about a broad range of revenue potential that we could get from the U.S. market if a few things click for us. So I just wanted some clarity in terms of the drivers for U.S. market growth. Are we close in terms of getting the traction as far as our SEEC product is concerned? So how is the traction there? I noticed that for GTB, we did win a deal in U.S. So that's good to see. So if you can just give some sense of the opportunity that is there in the U.S. market and the traction that we are seeing.

So thank you, Varun. I think you're tracking all the conversations of Intellect. So I appreciate that you are tracking what I said 4 quarters or 6 quarters back about U.S., and that's how I think important investor is that who can understand the whole journey. So I said that it's important that technology becomes a differentiation. Because if you are to crack the U.S. market, they can only love the technology. They cannot love anything else to crack. And many European companies have not been able to crack U.S. market. It's the most difficult market. So AI machine learning was the only way to get into the U.S. market, and Banesh and SEEC has done a great job in putting that on the road map where all the analysts are loving our data platform because data was new to them. Our data platform is similar to Palantir. Last time I mentioned to some of the players, Palantir has gone public. So if you want to track what Palantir does, Palantir has a valuation of $60 billion as of last week. It went public 4 months back. That is a platform we built. We have taken -- Pranav has taken a huge bet on building this platform, Varun. And with that platform, if it's of that quality, and then we apply domain specialization on it. So we build up a data platform and then apply insurance vertical onto it. It becomes a unique platform for America markets, which they cannot refuse. Now we have got 2 senior hires in America. We have 1 senior hire, Jim, who has joined us as a leading insurance business leader in America, who comes from Liberty Insurance. He is a customer joining us and telling the story to another 20 customers. And then we have Kyle, has joined as Senior Sales Director in America. He comes from a data company called Verisk to expand our capacity in America. On GTB side, our platform of cloud native ingestion based technology is first of its kind of a contextual reference. When you place a cursor on the screen, you can get the analytics on it. There are hardly anybody in the world who can have a corporate banking, contextual experience available on the movement of the cursor, and that's a technology which is built in the Americas, and we invested a huge money by setting up a team in Americas. And we have a team from Portugal. We have a team members from U.K. -- team member. So multiple country has designed those technologies, and now those technologies are playing the game. Similarly, GCB has built up similar technologies, which they got a deal win on a subscription basis in North America. So I think all these efforts, which we put in, in the last 5 years to get entry because we knew Americas, we can't ignore. How difficult it may be? You need to go there. And that's how it is paying off. It's still very early in America. America can give us a huge traction if we succeed well.

Arun, just adding. We won 2 liquidity deals last year. Very, very large U.S. institutions.

Yes, yes. Sure. My second question is regarding -- I just wanted to understand the broad difference, nothing specifics on financial, but broad difference that could be there between the Intellect 3.0 journey versus the 2.0 journey that we are currently in.

So 3.0 will be more of a monetization. So if you look at it, there are 3 elements -- 3 levers, which is industrialization, monetization and customer centricity. So first, Intellect 2.0, first 2 years, we spent on only industrialization of the product implementation. The 8-month implementation which Manish is talking in America, it's unheard of implementation cycle time. And somebody asked a question, how do you measure the quality, this is the way we measure the quality, that how is -- what is cycle time of implementation. Because customer, as soon as we get a predictable implementation for the customer, he gains a huge amount of dollars over the years. So our win ratio goes up substantially. On the -- sorry, I just skipped the second question.

The question was regarding the broad difference between the Intellect 3.0 and 2.0 journey. The question is in this regard, that a lot of our products, actually, currently, if we look, are in the monetization phase. So how...

So more and more will be -- 3.0 will be monetization, more and more monetization and more and more customer centricity.

Sure, sure. And if I may...

So the 240 customers that we have, how do we expand the cross-sell in those customers and monetize it.

I think how we cross sell more -- how do we sell more into the markets we are present, how do we sell more closer to the adjacent markets, how do we get on to cloud. And I think we may have been cross-selling individual lines of business, but how do we cross-sell the entire Intellect. So there's -- it's distribution, marketing growing all of that is the focus. I think, like Arun said, in the next -- post next quarter, we will share more details on it.

Sure. And if I may squeeze a quick one. I wanted to know the revenue contribution from the GeM product. I saw the GMV of 10,000 crores. I wanted to know the revenue contribution this quarter and if you have last quarter's number.

We don't announce separate numbers as of now. So just we need to...

Next, we have Mr. Vivek Choraria. Vivek, you can ask your question, please.

I just wanted to get some more color on the top line growth. I know -- I mean, I'm quite -- I quite understand when you said that you've burned your fingers in the past. But if you could share more color as to for the next 2 to 3 years, it was -- I mean, the range is quite wide from like double-digit and with 10% to 20%. Can you just give me a color on what sort of a top line growth rate can we expect? And on the margin side, once we do hit the 30% margin in the next 2 to 3 quarters, do we have more levers to expand further? I'm just trying to understand a more broader 2 to 3 to 4-year outlook for that.

Vivek, at the Investor Day, we said that we designed the business for 20% growth year-on-year. But for purpose of Investor Day, we would say, between -- anything between 10% or double-digit number. So that is -- we are not able to predict as uniquely as we would like -- love to have. On margin levers, I-FLEX makes a margin of 40% or 45%. So our EBITDA margin going up to 40%, the levers are available. It may be one by one. First, let's cross the bridge of 30%, and then we move the lever next level because subscription deals on one side will not grow on the top line, but it will help to grow the bottom line.

If I could just keep squeezing 1 book keeping question. For the next year, I'm guessing we've used most of the losses on the P&L. What sort of a tax rate should we expect on a consol basis for the next year -- for the next few years?

Right now, still quite a lot. Venkar sir, no, we have still tax losses of around 4 -- tax at INR 300 crores, INR 400 crores is available?

No, Arun, INR 450 crores loss are there.

Arun, we can.

Yes, just 1 more.

2 more questions, I think?

2 more questions you can take, yes.

Next, we have Mr. [ Mayank Babla ] . Mayank, you can ask your question.

Sir, what was the provision for the doubtful debts this quarter? Because it's clubbed under the operating expenses?

Based on international practices, what we look at is that doubtful debts are not published as a number from all our competitors because that's been misused in some scenarios. So we stopped -- we are merging with our sales and marketing expenses and provisions.

Sir, just one, if I could squeeze in. Earlier, you had said, just clarifying, sir, between 10% to 20% growth is safe closing, right, for the next 2 to 3 years?

Yes, yes. Sure, sure. That's right.

Thanks, Mayank. Next, we have Vaibhav. Vaibhav, you can ask your question, please?

So just kind of a quick follow-up to one of the earlier participant discussion on the U.S. market. So the -- you said that even a lot of European companies had trouble entering U.S. market. But if you look at companies like Temenos, which has entered U.S. aggressively from 2012, '13, they've been able to build their business quite well in U.S. and if I'm not wrong, they have been giving a very tough time to recall in the financial services business. So just wanted to understand that what they have done so uniquely that they've been able to gain substantial ground and what we have learned from their journey because going forward, we have to compete with both of them, Oracle and Temenos from a longer-term perspective, 5 to 10 years down the line.

Vaibhav, the U.S. business is very different now for us. We are looking at U.S. business not in terms of Temenos and Finastras of the -- to us, that is not a contemporary player. If you're looking for OFSS, Palantir, those are the companies we're talking about in U.S. to compete against. We're talking about local U.S. players, Manish, local, Q2 and other players in U.S. business. So the European player like Temenos have grown by acquiring the company there. So there, it's not an organic growth.

They have done 2 acquisitions in U.S. till now. And if you look at all of them are targeted towards bottom of the pile, to get the community banks. They're definitely eating into what is called FIS, Fiserv or a Hogan territory. But look at what's been the success on midsize and large-sized banks? And where are they headed? I think if you ask inside, you will hear a very different news of the investment made in this acquisition. Is it paying off truly or not?

If I can just add, Vaibhav. I think what Manish said is absolutely right. If you really look at Temenos and Oracle and you look at the business segments that they've been able to make a dent into U.S., the story is very different, right? They are -- really whatever they have done is basically based on a couple of acquisitions and bottom of the pipe. They haven't been able to crack mid-tier and large tier banks in U.S.

There was...

We can close the call, Arun?

Yes. Prabal, If you want to mention any summary, Prabal?

Yes, sure. I think we have covered most of it. But essentially, I think for the investing community, the high level message, which I think will be useful as far as this quarter is concerned, is essentially that we are still on our path of calibrated, predictable and profitable growth, which is what we had promised you about more than a year back. So we are steadily on that path. And the beauty of our product model per se is that once the -- there are 3 distinct phases: investment, industrialization and then monetization. So once we arrive at the monetization phase for specific products, it is clearly an operating leverage play, which is what I've always talked to you about, and it's the operating leverage play of steady revenue growth, but disproportionate growth in EPS. That's the model, and that is the model which is playing out for a few of our products. And to answer an earlier question, what happens in Intellect 3.0, it will be more of the same with the other products. So far, we have just touched 2 to 3 products at best. So there are many more products in the pipeline, which will play on this. And remember, we are a technology IP company. So with IP, when you control the IP, there are many, many models which are possible. So Intellect 3.0 will see some of that, I'm sure.

Thank you, Prabal. There are 2 questions which are there around peers are getting high valuation. Valuation is not in our control, but yes, to list in NASDAQ, some components, some parts. As of now, we don't have a plan, but the opportunity will be available as we move forward because of IP company, as Prabal mentioned. Update on IBM alliance and other partnerships. I think those are going healthily. Some of the deals we are now working with Jio, some deals we are working with AWS, some deals we are working with IBM. So it's -- all the players are working healthily on the partnerships. So any acquisition plan, no acquisition plan. And that's what I told clearly, we are an IP company. We will be looking at acquisition maybe after we are organic growth plans are stopped doing organically. We have sufficient opportunity on the product landscape to grow organically and to remain the culture of design thinking intact. So product companies need to have a strong culture. Apple culture or a Google culture doesn't come with acquisition. So we need to select very carefully. So we don't want to look at acquisition as of now. When we reach certain size, we may think about it. Okay? Thank you very much.

Thank you, all of you.

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