Intense Technologies Limited (532326) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Intense Technologies Limited Q3 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, Rayo. Good afternoon, and thank you for joining us on Intense Technologies' Third Quarter FY '24 earnings conference call. Today, we have with us Mr. C.K. Shastri, Managing Director; Mr. Jayant Dwarkanath, Director; Ms. Anisha Shastri, Director; and Mr. Nitin Sarda, CFO of the company. We are also joined by Mr. Lokesh bhai from the management 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 to that effect has been included in the earnings release of the company, which is also available on the stock exchange and the company website. I would now like to invite Mr. Shastri to give us a brief introduction, followed by Ms. Shastri and then we'll open the call for Q&A. May I hand it over to Mr. Shastri now. Over to you, sir.

Thank you. Good afternoon, everyone. Welcome to our Q3 FY '24 earnings call. As always, we look forward to this earnings calls to hear your critical inputs. Just to make a beginning. I have with me our CFO, Nitin, Nitin Sarda. Anisha who is handling our operations. Jayant Dwarkanath, who is looking after our international alliance relationships, and Lokesh who is helping with the finance department, and Pratyusha, the company secretary is with us. We are pleased to inform you all that on a consolidated basis, we are -- we have grown 46% year-on-year in terms of revenues. In terms of PAT, 37%. We had a revenue of INR 27.7 crores compared to INR 21.15 crores last year, which is a growth of 31%. And on a consolidated basis for 9 months, it is INR 84 crores and INR 57.97 crores. Again, a growth of 46%. EBITDA also, we've seen a decent growth, INR 6.29 crores vis-a-vis INR 4.65 crores, that is a 35% growth. Same goes with the consolidated basis, INR 17.96 crores and INR 13.14 crores. The net profit has also grown by 25% and 27% on a consolidated basis. The strategy and the planning, which we did in the last quarter of last year, and we are just implementing those, and we are quite encouraged with the results and improvements what we are seeing, we are definitely seeing green shoots in all the areas, which we have made investments in and we continue to invest in sales and marketing and growth areas. I will ask Anisha to take you through the details of the Project Butterfly, and how the implementation and the details of the operations are before we take your question answers. Anisha, over to you.

Thank you, C.K., and thank you, everybody, for joining us on this call today. For those of you who has been following us, I'm sure you know what Project Butterfly is. But for those of you who haven't, I'll just give you a quick overview. The intention of adding -- of going on this journey of Project Butterfly was to ensure we add additional revenue stream, so that we're able to cross sell better to our existing logos. Many of you who have been following us already know that we sell solutions and products to some of the largest logos in the country, in the BFSI sector and in the telecom sector. And so the intention of adding Project Butterfly was to see how can we add additional revenue streams to be able to increase our wallet share from each of these customers. Apart from that, intention was also to see how we can optimize our processes internally to ensure that we are able to seek better margins overall. To that effect, over the last 1 year, we have added new revenue streams in terms of managed services, both to the private sector as well as to government and public sector organizations. We've added data services. Data has always been in our blood, in our DNA. In fact, all the work that we did in the past, we had a lot of data services integrations, quality, standardization, all of these services we used to do, but we need to sell them as a part of our product offering. Now that we have repositioned ourselves as a tech-enabled services company, we have realized the value of being able to sell each of these as separate services as opposed to just bundling them into the single price that we used to get for our flagship product. So we have data services with cloud services, where we do managed services in terms of migration of cloud from one cloud to another, from on-prem to cloud, or just also advisory around what cloud options are better for organizations, et cetera. And then we tied all ends with respect to our communication governance services. So for those of you who know us, you know that we have been very, very strong in the enterprise communications space. What we did over the last 1 year was tie-up the entire offering, so that it is one end-to-end offering. So today, we do the communication design. We do the communication dissemination at scale. And by scale, I'm talking sending, say, 500 million, 600 million communications every single day. Generating 60 million, 70 million statements every single day, right? So operating at that scale. And then we also closed it with the transmission services, erstwhile we were just handing over all of these communications to a transmission partner. Now our platform is also able to give the customer a holistic view of what communications are going across which of their communication gateways, and we are also doing the transmission with it. This way, we are tieing the end-to-end communication, enterprise communication. In fact, what we also do now is advisory services, having been in this industry for the last 30 years, now we are also able to advise our customers as to how they can optimize on their communication spend. A result of this is a number of our customers are saving millions of dollars annually in their communications spend. And this is happening because we are able to give them a holistic view, and we are also able to advise them on how within the regulatory guideline to optimize their communication spend. Another thing that we added was in the data quality and the data governance space. Like I told you in the past, we were always strong with data integration. We integrate with all major core banking, CRM, ERP, all of these products, we anyway used to integrate it. So now we've extended that capability of ours and using our IP assets, we are able to provide strong data services to our customers. In fact, in this quarter, we also closed a large data services deal around data quality assurance and data governance with one of our existing customers. So we help our customers basically leverage their data so that they are able to leverage it actually to its true potential. They're able to cross-sell and upsell to their existing customers as well based on the kind of data that they are ready to mine. You all know how important today data is, and no organization makes any decisions without the help of data. But I know your analysis is only as strong as the data that you're feeding into it. And unfortunately, given that our customers are such large size organizations with hundreds of products in the background, that data is always in silos. So we help them bring it all together, create a golden record. We help them standardize the quality of their data so that they are able to cross-sell and upsell to their existing customers better. So that's one revenue stream that we added. We also started focusing on the public sector over the last 1 year. And in fact, last quarter, you saw that we added a few public sector logos also to our kitty. And this -- now also the government pipeline actually is looking pretty strong. We've added 2 logos in the BFSI sector in this last quarter. Again, very well-known names in the country. And our hope is to see that we start small and then grow business with them also subsequently. You already know that once we enter an organization, we are a very, very committed partner, we're a very committed vendor. And we've always ensured that we keep our customers happy and satisfied so that they stay with us for longer durations and we're able to see more business opportunities with them. And that's what is happening at the moment as well. So this quarter, we added 2 new logos. One was in Sri Lanka and one was in India. We also added 2 new partners in this quarter, product company partners, whose products we're able to cross-sell to our existing customers and which are good, healthy extensions to the business that we're already in, like in the data analytics space, in the data spaces, basically. So we're in advanced stages of commercial conversations with existing customers, a couple of opportunities using these products as well. So I think partners is again a key part of our Project Butterfly strategy so that we're able to cross-sell more and better to our existing customers. This quarter, we're also proud to tell you that we hosted our flagship product on the AWS marketplace as a SaaS offering. So intention is to work with the AWS sales force and their connect to see how we are able to hunt new opportunities together. We've also added a few small SaaS offerings on the Chrome extension store. So for those of you tracking the IT industry at large, you know that today, it is the world of generative AI and it is the world of generated AI-based extensions on your stores like Chrome, et cetera, which make it more seamless and easy for customers to use. We have done this on the Chrome Store in this quarter, and we have slowly seen healthy traction. Intention is to create small monetization from these. Basically, these are IT assets that were part of larger IT assets in our organization, and we have basically broken them down and put them on the Chrome Store so that we're able to also offer smaller offerings, but will create these recurring transaction-based revenue streams for us in the future. So with that intention, we also set foot in that direction. This is on the revenue side. On the bottom line side, we have been taking sincere measures to reduce our operational expenses. We are investing in tools and processes internally to ensure that we are able to track our budget by project, our receivables, et cetera, better. By means of that, you can see that our receivables is starting to show a receivable numbers as well. So this is overall what we have been doing so far. Intention of Project Butterfly is to ensure that we add top line and equally focus on our bottom line as well. And I'm happy to tell you that our strategy has been paying off. You are seeing it in terms of our quarter on -- every quarter's performance as well. It has definitely shown the fruits in the right direction. And I request you to please look at us from a year-on-year basis. Don't look at us from a quarter-on-quarter basis. The -- while we are adding revenue streams, which hopefully will not be as long sales cycles as our products used to be erstwhile. Even then, enterprise business as such is long sale cycles. And so I request you to please look at us from a year-on-year basis. And we are putting in all our energies and efforts to ensure that we see the right value that this organization deserves. That's about it. And I think with this, we can move on to questions, Siddharth. Thank you so much, everybody.

[Operator Instructions] The first question is from the line of [ Sumit Kothari ], who's an Individual Investor.

Firstly, congratulations for a great set of numbers. And Anisha, you spoke about 2 logos, which was added in this current quarter one in the BFSI space in Sri Lanka and one in India. Can you please quantify this in terms of numbers, like what kind of revenues we can expect in FY '25 from this orders?

Sure, thank you so much, [ Mr. Sumit ]. So typically, what we do is we enter logos with a certain number and then we find ways to be able to provide more value to them and then in turn we improve our wallet shares. When we start, typically, these engagements are more to the tune of, say, $300,000, $200,000, that kind of initial spend. Yes, dollars, yes. And then post that, we grow within those organizations.

So typically, how much time does it take like from the initial phase to the growth phase how much time does it take in any of your orders?

No. So say, the first 6 months you spend in implementing the existing requirements. And then once you've build the relationship, then you are able to cross-sell, upsell better. And also there are regulatory requirements, so CRTs coming in, et cetera. So after that, we start seeing a healthy addition.

Nothing substantially in the current financial year or the next financial year? Is that the right assessment?

Sorry, can you repeat that, please?

So I'm saying since we're already done like with the 9 months of the year, can we not expect anything substantial from these 2 orders in the current financial year?

Yes. From the current financial year, it will be only license values and initial implementation.

Sure. Got it. And we also spoke about expanding our collaborations with existing clients, which would give us guaranteed streams of revenue. Can you please quantify this also in terms of revenues? Because this is something which you are -- like, expanding our collaboration. So I'm sure you have a existing relationship with them and it's like providing some value added services. So can you please quantify it in terms of numbers for this?

Existing numbers, if you really look at it from revenues from our existing clients, 75% to 80% of our revenue comes from our existing clients, [ Sumit ]. And we intend to grow that as we go along. For example, the first data services deal we got was from an existing customer. A lot of transformation services, which we are looking into are from -- we are starting to see some great encouragement from our existing customers. So like in the enterprise business, it's always known that acquiring a new customer is a long selling cycle. Cross-selling, upselling to an existing customer is the easiest thing, provided you are doing a great job with what you have already engaged with. So in our -- we are very good in keeping our customers happy. We run every quarter feedback programs and everything and run a center of excellence in our delivery.

Okay, sure. One more thing, which I'm noticing the operating expenditure is the software cost. So the software cost in the current quarter was negligible just INR 5 lakhs I think, when compared to INR 5 crores and INR 2 crores quarter-on-quarter and year-on-year. So can you please elaborate like if we have to make any modeling in our numbers, what kind of a cost -- software costs we should be having in our model? Because this is a very fluctuating number. So have we made some investment initially and the software cost will be much lower going forward? Or how was it? Can you give some -- throw some guidance on this?

Yes, [ Sumit ], Nitin here. When you talk about the software cost, I'm assuming that you're talking about IT infrastructure cost, which is about INR 5 lakhs in the current quarter and which was about INR 5.6 crores in the last quarter, right? So this is not software cost. Actually, like we said we had a government contract in last quarter, which also involved besides supply of software and services, included supply of some hardware cost. So this is where we had put up a distinction. And like you mentioned, this is highly volatile, depends on deal to deal, wherein we had closed 1 deal for the last quarter. We had this expense. In the current quarter, we're in process of implementing, and we'll be billing them in the next quarter probably. So which is why you don't see any cost. This is not a software cost. This is more of the servers and another equipment that we'll have to also supply to being a preferred partner for one-stop shop sort of services.

So you mean to say that this cost would vary depending on the orders we get in and [ it will move your ] estimate in this, correct?

That cost will directly have an impact on the revenue. If you have a INR 5 crore there, you will have a INR 5.3 crores on the top line also growing.

Perfect. Perfect. Nitin, my next question is regarding the receivables. So what is the current receivables now if you compare it with Q2? And what is the cash on books currently?

Yes. So from a receivable standpoint, Yes, so from a receivables standpoint, [ Sumit ], we have improved considerably there. The current position as of December, our receivables on a consolidated basis stands at around INR 49 crores. And we have also -- because the focused management attention and persistent follow-up in systems and process that we have put in place, we have also been able to reduce our DSO from 197 days, which was for the financial year ended March 2023, we brought it down to 160 days for the December -- for the quarter ended December 2023. And we expect this to further optimize and bring it down to a manageable level.

[ Sumit ], except for a couple of our customers, one public sector customer and a couple of customers from Nigeria, if not for them, our collections DSO is well with -- less than even 60 days. If you take 70% of our collections. There is some perennial problem with some of the customers, which we have taken corrective measures and if you really look at the last year's accruals, cash accruals, Nitin will share with you.

Yes. For the year ended last quarter, [ Sumit ], we had a cash balance of about INR 38 crores. But because of these improvements in collections, our cash balance -- when I talk about cash balance, again, it also includes other investments that is part of the noncurrent investments, which stands around INR 55 crores. So we have added actually INR 17 crores to the -- we have been able to optimize our receivables positions, and we have added INR 17 crores to our kitty during this quarter. And it will continue to improve. And this is where we also have a lot of the platforms to invest in our new green shoots as part of Project Butterfly.

Sure, sure, sure. So one thing regarding the investment, like the shareholding side. What happened is a couple of weeks back, we had some large trade, and almost 5% of the equity changed hands. So is it the strategic investor in the company or something because it was a very large trade, more than 5%?

We are not aware about those things. But definitely, we are always open to looking at strategic investments, strategic investors.

So as to speak, [ Sumit ], this is again trading between individual shareholders. Shareholding is quite fragmented. If there is any strategic investors who is joining our captive shareholding, we'll be happy to announce. And that really adds a lot of credibility to what we do.

Absolutely. Absolutely. My last question from my end. Normally, Q4 has been a lumpy quarter wherein we get almost like 40% of the revenues. I know the management has been trying to correct it and have a more uniform kind of a quarterly number. So -- but anyway, going into the Q4, can we expect Q4 to be a little lumpier and slightly better and the overall numbers to be on a higher side, I mean, that is for Q4 and next year, please?

[ Sumit ], you're putting words into my mouth. But Q4 is definitely a good year for -- a good quarter for us, and we hope it is a good quarter.

[Operator Instructions] The next question is from the line of [ Pratik Bedia ], who's an individual investor.

Yes. So I think my question is from a sequential basis, I know you mentioned that we should be tracking you on a sequential basis. But on the last quarter, you had mentioned that you will see growth coming in. So just wanted to understand what happened this quarter where if I look at sequentially, things were a bit lower, but I also see that margins have improved. So on the top line, what happened? And what things changed on the margin side as well sequentially?

See, like you mentioned, [ Sandip ] -- like you correctly mentioned, Pratik, on a year-to-date basis, although you've seen our top line has increased -- there's significant increase in our revenue. But the -- we have been able to provide those output services within the same bandwidth that we have in as an organization. From a green shoot standpoint, this is -- as a company, we are in transition process of -- under the Project Butterfly. And then subsequently in some time during the next financial year, we'll switch on to growth phase of our Project Butterfly. So at this point of transition phase, we were able to crack some deals on the data services. We have been able to crack into low-code, no-code platform. We'll see a lot of -- we are seeing a lot of traction in cloud services. So that will start to come in as we go forward. But from a margin standpoint, yes, we will -- it was a conscious effort from the organization to -- despite the increase in our top line, we wanted to provide those from the same bandwidth that we have.

But really request you to not look at us from a quarter-on-quarter basis. The business as such is not very predictable quarter-on-quarter just yet. And while we are adding a lot of opportunities to our side, it really depends on when we're able to close those opportunities. So request you to not look at us on a quarter-on-quarter basis. Look at us from a yearly standpoint, and we hope to continue to give you good results year-on-year.

Okay. Sure. All right. Yes. 1 -- 2 other questions from my end. One, on the new deal wins that you mentioned. Can you provide a sense on how many years of -- if you've signed any contracts for existing value? I'm not taking on the cross-selling or probably higher selling opportunities, but just a sense of how long the contracts are, the new logo wins that you mentioned?

See typically on the large -- when we add new logos on our IP side, once we implement, this is a year-on-year thing. It's a sticky solution, so it's difficult for customers to kind of move on. So once we add a customer, it's about how well you can keep a customer satisfied and continue growing. And as such, we're proud to say that till today, we've never lost a customer because of poor performance. There may have been situations where companies shut down or companies who have been acquired, merged, et cetera, those kind of things may have happened. But we have never lost on poor performance. So once we add a customer, it's about continuing the relationship over a larger -- longer lifetime.

Okay. And rough margin profile for these 2 logo wins?

This will only increase, sir, as Anisha mentioned in her opening statement, the point is that an enterprise customer is almost a lifetime customer now with our added -- new added services the upsell, cross-sell opportunities being higher, the profitability and the margins and the opportunities only increase. Getting the first breakthrough is what is important. And from here onwards, we look forward to growing the wallet. It's one of the largest banks in Sri Lanka. And the second one is also one of the very fast-growing banks in India.

Got it. All right. Okay. And in terms of your tie-ups that you mentioned, where you are getting an opportunity to sell products from other companies. Again, is that a cost plus kind of arrangement on the margin side? Or are you looking at a higher margin given the sophistication of the product that you have developed?

So we're charging a decent margin, otherwise if -- we have negotiated very well, and we are looking at a decent margin, sir.

And we do like cost plus. Cost plus as well as services. So Services is on us.

Okay. So you're bundling your services plus the product that you're selling for someone else?

Yes, yes, yes.

The next question is from Sanjeevkumar Damani from SKD Consulting.

Sir, as such I do not understand all these technology businesses. But my humble request would be that when you say logo, means client only?

Right, right. Yes. Yes.

Okay. Okay. Secondly, out of -- firstly, I have to also congratulate you for very fine performance, operating as well as financial. So revenues have gone up, your presentations are very good. And this, sir, how much is the export out of our total turnover of approximately INR 28 crores in this quarter?

Overall, sir, as a company, our exports have dropped because our increase in market strikes in the domestic market. We are very strong in India and other exports are only in the Middle East and U.K., we are not having much presence in the U.S.

Okay. Okay. Okay. So I mean, how do you see the prospects in the UAE? Because a lot of Indian companies are taking place and a lot of developments are taking place there in UAE, so do we see...?

Yes, UAE is showing a good promise, sir. But Africa, it's very difficult to do business, especially in countries like Nigeria, where the currency devaluation is very high.

Right. Right, sir. But UAE, you see some prospects and are...?

Yes, in UAE, we have strengthened our teams in UAE, and we are seeing some good promise there, sir.

Okay. So on the prospect you are...?

In fact, last quarter also we closed -- sorry. Last quarter also we closed a couple of logos in UAE.

Okay. So more are likely to come from UAE as well, right?

Yes.

Right.

More business, more clients will be possible in days to come. Now coming to another aspect is when you say annuity in your media release, annuity engagement. So what I understand out of this is that it is a recurring business that will go on with us, is it something like that, can you...

You are absolutely right, sir.

And when you say growth engagement. So I mean what do we mean by growth engagement, sir, here?

Growth engagements are like, for example, you start with a small engagement and start adding other added services or other products, complementary products into that account. For example, let's take a big bank, their IT budgets are in $1 billion. So they are all very big multinational companies where we are already engaged and how we can grow our pie in that. Those are the growth accounts.

Okay, sir. Okay. And one more thing, sir. The data services when we say, so I mean, the -- our machines are analyzing the data or our people are also required for analyzing this data, then compiling or reproducing them?

Both sir, you need tools and people. There, we have IP assets and plus, the required people skills to understand and use these tools and deploy those tools and use them for extraction, transformation, loading and writing business rules based on the requirements.

Okay. Sir, regarding the employee retention. Because these days, I come to understand that in technology sector, the employee turnover is very high. So I mean what is our experience about it? And how do we retain the talent with us?

Sir, we've been having a great work culture in our organization. We more or less take care of all our employees. And we are a very bonded company. We keep motivation of our employees very high. We reward the performance, and we recognize everybody's contribution. And we -- our attrition is much below the industry standard also.

Okay. Sir, can you also give names of your client for whom you are working within India or outside?

Sir, the names are almost all the top banks in India and UAE and top insurance companies, top telecom companies. Some of those are there in our website collaterals. We have NDA, sir, nondisclosure.

Yes. And then there also, you can't disclose much, I agree, sir. And sir, most of the time, we are a subcontractor or we are having always direct business with the end user?

We were -- for a long period, we were subcontracting through IBM, TCS, Infosys and all that. But now with a good branding and the good credibility in the market, we are able to directly engage with customers. Except 1 or 2 engagements, most of them are all direct.

The next question is from Namit Arora from Indgrowth Capital.

My question was around the company's positioning in the target employee base, given that your areas are very cutting edge and in some of them training tools may not be available. So if you could talk us through your efforts in terms of building the positioning of the company so that you are a preferred sort of a place to work for the target employee community. That was one. And secondly, your efforts on internal training and development of your employees, given that some of the areas that you're working on are fairly cutting edge and they may need internal training initiatives as well.

Thanks for your questions, Namit. So our hiring -- you would be surprised actually as to the kind of talent that you can find in the Tier 2s and Tier 3s. So our strength has been around hiring some Tier 2, Tier 3s, giving them opportunities to come to the city and giving them a lot of cutting-edge engineering opportunities, which otherwise they don't get by working for traditional services organizations. So that's the sense that we've been operating in. And touch wood, it's also word of mouth. So once we hire from a college, the word spreads on how happy an existing batch is and then we're able to hire subsequently from that college as well. So that way we're able to hire talent from there. And in terms of upskilling and cross-skilling, in fact, last quarter, we also signed on with Coursera to provide a platform for everybody in our organization to be able to leverage Coursera's entire content to be able to upskill, cross-skill and upskill across different technologies, different skills, et cetera. And so, we are making slow and steady investments to ensure that we provide enough opportunities for learning also within the organization.

We're very serious about talent, sir, and we make the -- in the first 6 months to once an employ joins, we goes through a drill a lot of training programs, a lot of best practices. And then before we take him onto any live projects or any one of them. Plus, as Anisha mentioned, we have -- we invest in a lot of training materials and training courses for our people. That is one of the reasons of also low attrition for us.

The next question is from the line of [ Amaan from Amaan Investments ].