Intense Technologies Limited (532326) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Intense Technologies Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.

Thank you, Zita. Good afternoon, and thank you for joining us on Intense Technology Limited's First Quarter FY '24 Earnings Conference Call for investors and analysts. Today, we have with us Mr. C.K. Shastri, Managing Director; Mr. Jayant Dwarkanath, Director; Ms. Anisha Shastri, Director; Mr. Anil Kumar, Chief Operating Officer of the company; Mr. Nitin Sarda, the CFO; and also Mr. Lokesh from the Finance Team. Before we commence, please note that some of the statements made on today's call could be forward-looking in nature, and a note effect has been included in the earnings release of the company, which is available on the stock exchange website. I would now like to invite Ms. Shastri to brief introduction to the team and take the call forward. Over to you, Anisha.

Thank you so much, Siddha. Good afternoon, ladies and gentlemen. My name is Anisha Shastri. I'm a whole-time Director here at Intense Technologies. With me, I also have Mr. Shastri, Founder and CMD of Intent. I have Mr. Dwarkanath, who is the whole-time Director as well. I have our CFO, Nitin Sarda and then I also have our COO, Mr. Anil Vengayil. For those of you who do not know Intense Technology, I just want to give you a quick interruption of who we are. So, we are an enterprise software products and tech-enabled services company. We initially started off focusing on telco, but over the last 5 years, we have brought in our focus to now primarily focusing on BFSI and government businesses. So apart on telco, we also do business with banks, insurance companies and the government. We have been seeing a lot of traction for our products. And in fact, I'm very proud to tell you that today, we have pretty much all the large private bank insurance companies in the country, typically, think of using our products and services. And we, in some way or the other, touch millions and crores of life in the country through means of binding the by-product. I would also like to introduce you to – if you were following us on our previous call, then you would have known about our project particle initiative and our growth plans for the organization. But for those who are joining us for the first time on this call, I would like to give you a quick and brief interruption to what this Project Butterfly initiative is. The idea here is that now I think we as an organization believe that it's time for us to get out of our cocoon and it's time for us to fly. And that's the line of thought behind Project Butterfly. The idea behind Project Butterfly is to ensure that we vertically expand the kind of revenue-generating lines that we had as an organization. Given the process, we have so many large banks, telcos, insurance companies, et cetera, to our credit, we would like to leverage the kind of products and services that we have as an organization, expand on them, in order to be able to provide more holistic offerings to our customers. And so that we're able to farm them better. We also want to open up the kind of funding line revenue streams that we have for our hunting organization, we have been focusing with that mission. We have been focusing on ensuring that we are able to provide healthy growth from what we used to do to what we do today. Let me now speak about our Q1 earnings. So, you may have already looked at our financial results. This year, Q1, we have closed our top line at about INR 23.95 crores as opposed to the INR 18.25 that we did last year, Q1. We also closed our CBC at INR 3.18 crores this year as opposed to the INR 1.31 crores that we did last year. We are a [ nest ] company. Our cash flows are healthy. And our cash flows give us the ability to be able to take some risks now. This is what we started off on impact a couple of quarters ago last year, and the same trend continues this year. Our idea is to ensure that we, as I said, that we vertically expand on our products and services. We improve our processes so that we are able to control our costs and deliver better results to our customers more efficiently. We invest in the right kind of talent, the right kind of skill sets that are able to take us to the kind of growth levels that we hope to achieve. And we continue to invest in innovation as we always have as a product and services organization. I would now like to hand it over to our COO, Mr. Anil Vengayil. He will speak to you on the details of how we are going about to achieve this growth.

Good afternoon, everyone. Can you hear me?

Yes.

Good afternoon. I'm Anil here, COO of Intense Technologies to talk about Project Butterfly final has a few key objectives. It is about enabling the growth of this company, the revenue growth of this company by enabling revenue engines, growth engines, continue to invest in innovation and foster that innovation DNA within this organization. We are investing in people as new and new – as we foray into new and new domains, there is a need for us to upskill and upscale our organization so we are investing in people. And the fourth pillar of that is an overarching governance to govern this initiative. So as part of the objectives that we have laid out for Project Butterfly, we continue to invest in opportunities that are of the future. We are looking at opportunities which are recurring in nature rather than one-off opportunities. We are focused on repairing opportunities. So we are looking at opportunities which are repairing in nature…

So while we get back, Anil, I think what he was trying to convey was the line of business that we have been working on expanding. So, what they've done is when going out of line from what we have done in the past. But what we would do is the past is one product and [Technical Difficulty]

So I will just resume from where I left off. So we are focused on long-term opportunities which span multiple years. We are also focused on opportunities which are recurring in nature, which gives us predictable recurring revenue over multiple years. We have core into the technologies of the future, which is data services. We are seeing a lot of traction when it comes to data services in existing accounts that we have. Large banks are grappling with a lot of data. So, there are a lot of opportunities which we can go after. We are investing in cloud services. We are building partnerships. We are upscaling our organization. Again, the financial institutions are moving towards the cloud. They are adopting cloud in a much significant manner than previous years. We are also having our products put on to the SaaS platform. Our products have been certified by Amazon AWS and our products will be by next quarter, we delivered as a SaaS platform, both on Amazon and in the global marketplace of Amazon. So, the last thing I wanted to talk about from a growth engine perspective was that we are pursuing some good opportunities in the government sector as the government continues to transform and adopt digital ecosystems. We see an opportunity over there. So, there are opportunities which we are pursuing in the public sector. So, with public sector and our focus on the SaaS, our focus on our existing clients, which are all market clients in the industry, we definitely do see a good horizon for this company to grow its revenue over the next few years. So, that's what I had to put on the table briefly. Over to you, Anisha.

Thank you so much, Anil. Government today are really textile and they expect no less than the best available technology in the market. So, a lot of managed services opportunities that we are pursuing are around based on the technology of AI and blockchain, and that has delivered more full to latest cutting-edge deck to government as well. With that, we are more or less done with what we wanted to share. Mr. Shastri, would you have some closing comments?

No, we will take the questions from the investors.

Fantastic. Over to you, Zita.

We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles.

While we wait for questions, I just wanted to correct myself. I said profit before tax was INR 3.18 crores this year is actually INR 4.08 crores, INR 3.1 is after tax.

Our first question is from the line of [ Karan Milani ] from SJ Investments.

First of all, congratulations on a good set of numbers. So I have a couple of questions. First is from what I see from your press release, you have mentioned that the company classifies its client addition [ situation ] annuity engagements and growth engagement. So like can you give a ballpark number of what percentage of our revenues for the latest quarter was from annuity engagement? And also, the EBITDA margin has increased from 12% to 18% correctly. So what kind of steady-state margins are you looking for the next, say, 2 to 3 years?

Thank you so much for your questions. To answer your first question, approximately, I think we are around the ballpark of about 60% annuity number. So that's to answer your first question. The second question was on EBITDA. So yes, we have seen growth in our EBITDA numbers from last year's Q1 to this year's Q1, we have put in a lot of processes internally in place to monitor efficiency, improve productivity, improve well tracking, et cetera. So we're hoping that we are able to sustain and continue to improve on it.

Any number aspects?

I'm giving hard numbers, but I would like to show you that we are doing our best to ensure that we'll focus not just on improving our top line but also on improving our bottom line.

Our next question is from the line of [ John Kumar ] from [ Alpha Capital. ]

Congrats on a good set of numbers. My question is related to the balance sheet given by the company for the end of financial year 31st March '23. So, would you be able to elaborate on the fixed assets of the company, if I recall correctly, it was INR 4.3 crores or something as fixed efforts? So would you be able to elaborate on what's compromised and what's considered in that INR 4.3 odd crores? And also, on the current investments of the company [ interest in cost ].

Thank you so much for your question, John. Just one moment.

Yes. John, this is Nitin on this side. Basically, at this point of time, the fixture is comprised of our existing infrastructure that we have and mostly IT infrastructure in terms of laptops and all...

Does it include any fixed assets like property or anything building land initiatives like that?

As the part-time-efficient property, which is owned by us, which was purchased in 1999.

Yes. Okay. And it's all based on the market value of the assets or all those expenses?

No, it will be value of the property. Value of the property would be much, much higher.

Okay. Like in reality, the value of the fixed assets would be higher than what's actually done like, which is the case with almost any company in India because obviously, the value on the books would be less than what the market value is. And would you be able to elaborate on the current asset as well, sir? On the last financial year on 31st March, it says INR 16-odd crores.

Yes. So, pretty much in terms of our current assets, we have a very healthy cash balance of about INR 40 crores, which is sitting and that gives us required impetus to invest in our growing services and to invest in talent. And besides that, we also have about INR 40 crores sitting in our receivables, 50% of which generally as a company, we have a broad line contracted agreement of 90-day credit period. So, our current assets remain healthy and the dislike growing scalability of the company.

And the account receivables tend to be higher than the previous year. Is there any specific reason for the increase in the account receivables?

Yes. So if you've seen, our top line has also increased. That's the primary reason. As a consequence, if you see most of our revenues are bundled in Q4. That is why consequently my accounts receivable has also increased.

[Operator Instructions] Our next question is from the line of [ Sumit Kothari, ] an investor.

This is Sumit and thanks for the opportunity. So in the last conference call, we have spoken about a 30% top-line growth with a minimal margin of 35%. And in the current quarter, our operating margins were a little less than 20%. So, are we saying that we'll be doing a INR 120 crores on the top line with a 40%, 42% EBITDA for the current year, which is FY '24?

Definitely, our ambition is to clot 30% EBITDA and have a healthy growth of 20% to 25%, but I would not really comment. Those are our ambitions. We'll definitely be able to outperform our historical numbers.

On the last call is we had given a guidance for the next 3 years, we'll go at a bare minimum 30% with a 35% EBITDA margin if I recollect it. So, are we standing by the guidance which we have given?

Yes, definitely, that is our aspirations as an organization, that's what we try to achieve. Realistically, we have our target and our strategy aligned in that. But in terms of actual, there only – we believe we should be closer to our guidance.

Okay. Because in the current quarter, the margins were a little less than 20%, and it was communicated that the guidance would show from the Q1 numbers itself. So I was a little curious about it.

So to answer your question, basically, it also depends on the mix of our revenue as we are going into other streams of revenue being transmission and also bundled services. So, we are taking up a lot of contracts there in the receivables is almost immediate, but the margins in terms of percentage would not be as much. But in terms of growth, it would contribute to a 20% to 25% growth year-on-year. On the seal consolidated level, you might not see that 30% to 30%, 30% or 25% that we are referring to. But in our quest to provide one-stop solution provider, we do take a lot of ancillary solutions that would not really add up to 30%, 25% always.

But it improves [indiscernible] with our customers.

Sure, sure. So the current cash on the books is close to INR 140 crores as you just spoke about. And out of the INR 54 crores of receivables, which were there at the end of March, the current number stands at INR 40 crores. Is that right?

Yes.

Okay. Great. So that is one clarity. And second is about the new independent directors with the company has been recently appointed. So my request is why can't we get someone from the industry, like from the IT industry or for telecom industry which is very big contributing percentage to the total revenues. I know we've got someone from the air force background grade, but the company is actually in a reported the board, but it would be really great if you get someone from the industry, it would really help.

Sure, Sumit, we are having some very big names who come on board our advisory board because of their other obligations, we are talking to quite a few of them. And if you have any good ones, we are open to talk into that.

So we also brought in Mr. Gopa because he comes with a very strong finance background. And as we look to improve on both top and bottom line, he provide very strategic inputs in terms of how we can achieve that.

That's nice, that's true. And my last question is regarding maybe fund base we might plan to do because the company is looking to grow in many verticals and made geographies also, and we are still a little smaller company if you were to have a global footprint. So, are we looking at some kind of a [ unit immediate ] future?

So if we find a good company to acquire and grow in orderly, that's why we'll be thinking about that. But other than that, at this point in time, we don't have any such plans. If or not, there is an opportunity, especially we are looking at very small companies in the U.S., where it's going to make sense for mutually a stacked cash deal or something like that, we'll have to work out. It's too early for us to comment on that. But those thoughts are definitely there at the back of our mind because we need to break into U.S. And the only way we somehow feel fast track that is through acquiring a company in the U.S., a small company with niche clients.

Okay. Because I see that we have a lot of cash in our books and we are able to receive the receivables latest INR 40 crores of cashless, INR 40 crores of receivables because we don't have too much of payables, it's still a significant cash that we might be having by the end of the year. So we have INR 70 crores, INR 80 crores of cash if we receive the receivables. So how do we plan to use the cash risk wanted to do base?

Yes, absolutely. We agree that the whole -- from the inception of our company until now, we never had this opportunity of investing and taking some risk to follow the company. We always were struggling to do that, and this is the cushion which we have got to invest in growth.

Our next question is from the line of [ Mr. Rama Krishnan, ] an investor.

This is Rama Krishnan. So first of all, congratulations on the Q1 numbers. I have a question with respect to Project Butterfly. I understand that multiple investments were made during the last fiscal year, and operating costs were a little higher, all that. However, I still observe that the operating expenses are comparatively higher year-on-year compared to the last similar quarter end on that. So, the operating expenses are still slightly higher. So, will the trend continue to have higher operating expenses or how is it? I just want to know on this.

Thank you so much for your question. So, in terms of operating expenses, what we have done is, as supposed to earlier that we only to sell our products. Now we have also started taking on a lot of large managed services opportunities with government and with private organizations or so, but with governments as well. So that involves us to do everything end-to-end, from setting up their infrastructure to providing software to operations and maintenance of that process. So sometimes, when we see a [ CV purse ] operating expenses, it may be to do with the fact that we would have started deploying or executing on a government project. That's the reason for this Butterfly Project.

Yes. Also with respect to current quarter, if you see the jump of about INR 4 crores in operating expenses, that is because like I mentioned earlier, we are providing booking services. And as part of solution provider, we also have to undertake certain hardware transactions to support our customers, wherein the margins would not be as much as in case of services or software, but the realization is almost immediate. And the increase, almost 80% of my current increase in operating expenses can be attributed to those transactions.

And transmission services.

Our next question is from the line of Mr. [ Raj ] from [ Tarun and VG Limited. ]

Thanks for the opportunity to interact with you all because last quarter as we have opportunity to interact with you people. My main question is from the previous con call. We have started investing on the international market, mainly on end-to-end systems. I just want to mainly know that you got any new clients from the international market?

We are still continuing to pursue those markets. So, in fact, we also added a couple of additional sales and in the Middle East, Africa region. We are still working on it.

We hope to add this year in the pipeline, it looks like we had 12 new clients in the international markets. But it is definitely an aspiration. As I said, we've been definitely struggling to break into the United States. But with this new approach of [ Intense Technologies ], we see some traction. And what we are doing is that we are going on the partner model for the international markets to see because they already have relationship and engagement with some customers, giving us the compelling value proportion through then makes sense. We just are at the advance stage of signing up with a very big partner for the U.S.

Okay. That's my first question. Second question is on the recruitment. Like in the previous meeting, we have been investing in the sets on the sales side [ test ], are you going with the recruitment? Are you still looking for liquidity people in the next few quarters or like recruitment at all?