Intense Technologies Limited (532326) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Intense Technologies Limited Annual Conference Call for FY '24. [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, Ziko. Good afternoon, and thank you for joining us on Intense Technologies Annual Conference Call FY '24. Today, we have with us Mr. C.K. Shastri, Managing Director; Mr. Jayant Dwarkanath, Director; Ms. Anisha Chidella, Director; and Mr. Nitin Sarda, CFO of the company. We are also joined by Mr. Lokesh from the management team and Ms. Pratyusha from the secretarial 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 conference call invite, which has been uploaded on the stock exchanges. I would now like to invite Mr. Shastri to give us a brief introduction, followed by Anisha and following which we will open the session for question and answers. I would now like to invite Mr. Shastri to make his opening comments. Over to you, Mr. Shastri.

Thanks, Siddharth. Good afternoon, ladies and gentlemen, and welcome to this Earnings Call for Financial Year FY '24. This year has been a transitioning year, I would say, for Intense Technologies, as we -- there is a growth of 26% in the top line. We have done INR 116.51 crores compared to INR 91.83 crores last year. Similarly, the EBITDA has gone up from INR 18.63 crores to INR 22.71 crores and the PAT, there's been a marginal increase in PAT. That is about 14%. And compared -- the good thing is that cash balance has been commendably, it increased from INR 37.99 crores to INR 64.62 crores. And the -- even the [indiscernible] has come down from INR 53.66 crores to INR 44.99 crores. And the EPS has grown from INR 5.86 to INR 6.66. Well, the new young generation has taken over and they will give you a detailed presentation of the operations by Anisha Shastri, followed by question -- Q&A, and we have the entire team here, we welcome all your questions. All I would like to say is don't look at us, look at the company from a year-on-year investments which we have made last year, which is completed 12 months, is showing good, very encouraging results for us as a company from a long-term perspective, from a 3-year perspective. And I would like to hand over the [Technical Difficulty]

Ladies and gentlemen, please stay connected while we reconnect the management line. Ladies and gentlemen, we have the management line reconnected.

Yes. So all in all, I would like to say that the future is looking good. The investments which we are making are showing promising -- promise. And I would like to hand it over to Anisha to give you a detailed update right from operations, technology, markets, sales and the Project Butterfly which we have invested in, a detailed update for you all, and then followed by question and answers.

Great. Thank you so much, C.K. Thank you, ladies and gentlemen, for joining us today, pleasure to have you here. For those of you who are joining us for the first time with Intense Technologies Limited, we are a platform services company. We specialize in the BFSI segment. And over the last year, we have significantly made investments to move into government as well. So while our platforms are very core to enterprises, these are mission-critical platforms, which are vertical agnostic, but we brought in a focus of BFSI -- our focus of BFSI and government, so that we are able to take a more focused approach to the market and expand better. Before I get started on my update, I am very, very happy to let you know that this is the first time in our history that we've crossed the INR 100 crores. It was a milestone for us. It happened early on in the quarter. It was a milestone for us. And in general, it is a testament for the strategic initiatives that we have taken over the last 1 year and how they are bearing fruit. As Mr. Shastri said, our top line grew by 27% over last year, and this was only possible because of the Project Butterfly initiative that we have taken over the last 1 year. Now for those of you who are not familiar with what Project Butterfly is, at the beginning of last year, we introduced a strategy to see how we can add additional revenue streams so that we are able to cross-sell, upsell to our customers better, and in general, increase our wallet share from our existing customers. We have marquee names across the BFSI segment. And erstwhile we were only doing the INR 80 crores, INR 90 crores revenue. So our strategy was, one, how do we farm our existing accounts better. And for that, we horizontally and vertically expanded services, complementing our platform. So using our IP assets, we delivered additional services today. And I'm happy to let you know that our existing business grew to INR 92.98 crores from INR 79.08 crores. Our additional tech-enabled services business grew to INR 21.5 crores from INR 11.5 crores, that's almost 87% growth. So significant improvements in our top line you're seeing because of the strategies that we have implemented over the last 1 year. We added green shoots in the form of data services, transmission services, talent services and managed services for government. Now all of these services are complementing our existing platform. Our flagship platform is a communications platform, which today, a leading bank in the country saves about INR 100 crores using this platform, right? So that's the kind of scale that we operate at, and that's the kind of benefit that we provide to our customers. So the data services that we have added help improve the quality of data in an organization so that they're able to leverage it better, to make more intelligent decisions. And you've also seen what has happened recently in the regulatory landscape with the likes of the Paytms and Kotaks, et cetera. Our platform and services help our customers improve on their data quality so that they're able to leverage it better to cross-sell as well as they are [ regulatorily ] also complying to what is required. Second is, erstwhile we used to design the entire communication and then hand it over to a transmission services provider for them to send out the last-mile SMS, e-mail, WhatsApp, et cetera. This year, we have added that capability also. We partnered with telecom and other SMS providers. And we have extended this functionality in our own scope, meaning that today now we do end-to-end from data ingestion, cleansing it, designing the entire communication, we have a marketing automation platform that enables our customers to send communications on the right channel at the right time, so that they're able to engage with their customers better. And we also are able to send out the last-mile SMS and e-mail. So we have completely switched this from end to end as opposed to a license sale that used to happen in the past. In addition, we've also added talent services, managed services, so we provide a Build-Operate-Transfer kind of model. We have done significant work in managed services even in the government. And in fact, the pipe for government this year is also looking very healthy. We have a very, very promising lineup for government as well. We've added a lot of big logos from the BFSI and the government industries last year, and we hope to continue to do so this year as well. So our focus overall has been a very disciplined focus about ensuring that we focus on our top line growth. It may be a little premature at this point to look at margin percentages growth per se because we are in a transition phase, we have to continue to invest in sales. We have to continue to invest in AI ML in order to keep up with the customers' dynamically changing needs, right? And that's what will get us the kind of growth percentages that we are looking at. So overall, that top line focus, a big part of Project Butterfly was to see how do we move the current culture, the DNA of the organization also from being a tech-driven organization to a more sales-driven organization. And I'm happy to inform you that all of those efforts are slowly paying off, and you're seeing it in the results this year. Erstwhile we used to deliver about 8% to 12% growth. This year, we have delivered a 27% growth. We've also tried to ensure that we streamline our revenues across our quarters so it's not a lumpy quarter here or there. I mean it may still happen, given the unknown nature of our business, specifically because we have now also opened up government. Government will have CapEx and OpEx both as part of a managed services deal. So there will be -- you may expect a little bit, but we are as much as possible trying to see that we get rid of at least that fourth quarter lumpiness. And that was a concern from all of you, and we have tried very, very honestly to fix that for last year and we hope to continue to do so going forward. Last year, we used to depend on a license and AMC kind of a model. Now the definition of our core offerings has expanded. So now we're not just doing licenses of our one communication platform alone, we have our communication -- end-to-end communication governance platform. We have our data platform and a local platform to deliver managed services. So using these 3, we have added complementary services vertically, expanding this overall offering, right? So the definition of our core offering as such has vastly expanded from what it was earlier. And this is what is helping us cross-sell better. Hence, you see the INR 92 crores as opposed to the INR 70 crores in the past, right? This year, in terms of sales, what we have done is, one, on the farming side, we have made significant investments in having dedicated account managers for each account so that we are able to identify opportunities better and address the need of the customer also better. This is what will help us get our farming group. On the hunting front, we added people in the BFSI experience -- with BFSI experience and government experience. We brought in a capable talent that has spent 15 years upwards in these industries to help us see that growth in BFSI and government specifically. And on the receivables front, also, I know that a lot of you have spoken about this in the past, I'm very happy to inform you that our receivables position today, our DSO is down by 20%. It is because of a lot of discipline with which we are looking at and reviewing our collections on a weekly basis especially when you go into the government sector, it's even more important that you have such stringent processes within your organization to help see that you are able to churn cash on a regular basis. That discipline is also reflecting in our cash numbers. You have seen that our cash situation has gone up to INR 60-plus crores, which is a significant up from last year. On the people front, we are -- our COO, Mr. Anil Vengayil had to move on for personal reasons to take care of his family, and we wish him the best for that. However, we've also had an addition of Mr. Appa Rao Varre who has joined us as a strategic advisor. Now Mr. Appa Rao Varre comes with fantastic experience in BFSI and overall in the tech industry. He was just -- before joining us, he was managing strategic initiatives for HCL. He, at one point, played the role of CHRO, which -- reporting directly to the CEO as well for HCL. And before that, he was managing their BFSI practice. So his experience and his connections come in a very strong way as complementing our aspirations of growing in the BFSI industry. So we welcome Mr. Appa Rao Varre to the Intense family. In addition, we added these green shoots of data, talent, et cetera. So what we did was we brought in industry experts, sales experts in these core domains. And they will work hand-in-hand with our farmers and our hunters to see how we can cross-sell these green shoots into our existing organizations. On the overall head count front, we put in a lot of effort to see how we could optimize our strength. And then invest all of that money back into sales, and that's reflected in our numbers as well. Last year when we had this conversation, we have almost 600 people. This year, we have 540, that 60 people left. And we've invested all of this money into bringing in more sales personnel and investing in AI ML. So again, continuing to focus on the strategic objectives that we've laid out for ourselves as part of Project Butterfly. On the product front, the 3 platforms have matured quite a bit. We have invested significantly in bringing AI and ML capabilities into these products. The idea behind it is twofold. One is we keep up with the market dynamically changing need. Two, we are able to deliver faster, which means the customer goes live faster, and we are able to then see an uptick in revenues from there onwards with our customers. Three, we optimize on how much it takes for us to deliver our platforms as well with customers. So by bringing in machine learning capabilities, et cetera, we are significantly cutting down the time it takes to delivery and improving the value that it provides to our customers. We are also leveraging large language models, LLMs as they call it in the IT world to migrate from other platforms to us. So we see a good opportunity for replacement markets especially internationally. It's an area where we definitely want to focus on this year, we hadn't been able to invest much on international expansion last year, but that's a strong focus for us this year. So we brought in LLM based capabilities to see how we can migrate from some of the other large monolithic platforms to our platform, giving our customers the kind of flexibility to get to latest technology without having to be worried about BAU being the problem. BAU meaning business as usual. We also added code generation capabilities in our low-code platform. Typically, there is a certain inertia that comes with adopting low-code platforms because they feel like code control is not there. But we have added the capability of being able to export code, generate an export code as well. We used to anyway export front-end code web code. Now we've also generated capabilities of exporting back-end code. And this helps remove the inertia of adopting a low-code platform. So we hope to see an uptick in how we deliver our managed services using our low-code platform so that we are able to deliver more efficiently as well as the customer is adopting it with open arms. Overall, the objective with our product also was to see how we complement this horizontal expansion of our overall offering. And today, on the communications front, we cover end-to-end from ingestion to designing to marketing automation to transmission, we cover end-to-end, and this will continue overall. So I think just to sum it up, our Project Butterfly was brought in with the intention of expanding revenue streams so we can improve on top line growth and then seeing how we optimize, how we deliver internally to see that we are also able to impact our bottom line growth. And while you would have seen in our results that all of these initiatives are paying off and it is reflecting in our numbers. And we will continue to strive with the same enthusiasm to see how we can go into next year as well, while you may -- your top line growth -- we are trying to see as much as possible that we remove the lumpiness across quarters, it may happen though by virtue of being in the kind of businesses that we are in. But I would urge you, like Mr. Shastri said to focus on us as an annual script, look at us on annual growth numbers and don't focus on a quarter-on-quarter comparison with us. We are working very, very hard to ensure that we deliver the kind of top line growth numbers that we've set for us as well as our absolute margins as well. Margin percentages, given the nature of businesses, it may be premature -- too early be able to settle on margin percentages, but core absolute margin values, we will definitely focus on increasing and adding cash to the bank. And I would also just like to close this conversation by saying as part of our initiatives and as part of our budgeting this year, we have increased our dividend payout as well. Thank you so much for your patience with us, and we continue to remain positive about that business. Now we have increased our dividend payout to 50% as opposed to 25% last year. And with that, I would like to...

We would like -- we would further like to state that we continue to invest in growth. We are looking at a 3-year view for this company to [indiscernible] to the recovery stage. And we'll continue to invest in the international markets and also domestic markets, primarily to see that will scale up better.

Absolutely. With that, we would like to open it up for questions.

[Operator Instructions] The first question is from the line of Pratik Dedhia who is an investor.

So my question is more from Q4 perspective, I see an uptick in other expenses. So can you throw some light on that? And also on a year-over-year comparison, what -- how -- why did the numbers look? So I think the numbers will not look healthy on a year-over-year comparison, so can you throw light on that?

Sure, Pratik. This is Nitin here. I think to your year-on-year view, the numbers are very healthy in absolute terms. Like we've mentioned, our revenue has jumped by 27%. The EBITDA has also gone up by 20%. And then there's increase in PAT by 15%. So from a year-on-year and considering the strategy that we have put in place that's panning out in the way we would like it to be. And from a quarter perspective, like you have pointed out, yes, there has been an increase in our expenses. Again, there are certain element of onetime hits that we had to take it to a P&L account. There was a write-off on a -- to the extent of INR 6,000,000 on account of bad debts, because of some receivables, which was stuck for a very long time from hyperinflationary country like Nigeria. So we've provided that. And then since as Anisha has pointed out, we had Mr. Anil who was our CFO who has left the company for personal reasons. So there's another provision that we had to create -- had to on account for towards the settlement that's in the range of about [ INR 6,500,000 ]. And then there's also for this particular quarter since -- in particular in Q4, we -- a lot of our sales for whom we have been investing for a very long time, had achieved their target in terms of the revenue that we had set for them. So there's onetime variable payout that happened in this quarter, that's around INR 6,000,000. So all of these for the reasons, which is why you'll see uptick in expenses for this quarter.

Okay. Got it. And how do you see forward at least if you could provide some sense on -- sorry, H1 for '25, do you see in terms of business uptick and any new initiatives that could spring up during -- sorry, first half?

It's looking positive for us, Pratik. The same investments that we made last year continue to pay off. We also have a very healthy pipe on the government front, which hopefully will bear fruit in the next 2 quarters. So overall looks good.

Just to add, Pratik from an absolute margin standpoint, we don't see any challenges. But from a margin standpoint, that will also depend on the composition of revenue, because each of the segments that we are trying to -- which -- is gaining traction. And it also depends on the opportunities we are trying to materialize. So the margins will vary in line with the composition of revenue that we are accounting for that particular quarter. But yes, from a revenue standpoint, we are very confident, again, the quarter -- the financial year gone by is a reinforcement of the strategy.

We will see going up, but not coming down.

Sorry, I've lost you in the last part.

We'll only see growth is what we are saying. [Technical Difficulty] investment, we will only see growth.

All right. And one last question from my end on -- if you can provide an update on Project Butterfly, where do we stand on that? And what -- how does it look going ahead?

Sure. So what I was trying to convey with Project Butterfly is that the green shoots that we invested in, we hired dedicated sales persons to head each of those green shoots. We have seen that paying off in terms of our farming as well as in new initiatives. So for example, in farming, we saw an increase of almost 18% from last year to this year, and that happened because of all these additional green shoots that we've added. And a few of these -- so out of the 4 green shoots that we added, I say 3 of them are starting to bear fruit at this point. One we are continuing to calibrate, but overall, direction still remains the same, strategy remains the same, and it's just continuing to execute it with the same force that we were last year.

[Operator Instructions] The next question is from the line of Chirag Jain from Yogya Capital.

My question was more from the broader perspective. So we have expanded it more towards the back end and integrating for our products. So why -- I couldn't understand the reason behind fall in the margins from 30% to 18% at the EBITDA level, even though we are integrating. So have we seen some competition or are we into something -- can you give us some color on that?

Sure. So Chirag, there is no fall in the margins. It continues to remain at around 20%. So there is no fall in EBITDA. In fact, absolute terms, we have increased by about 22% from last year to this year. So investments continue to happen.

Ma'am, I was trying to see from more a broader perspective. So when we compare versus FY '22, when we hadn't started the Project Butterfly, we were at 30% around margins and INR 25 crores of EBITDA, okay? So we -- however, we have integrated further post that after starting Project Butterfly. So that was my question on.

Sorry. Got it. Got it. So 2 years back, I think that was because of a big licensing number that had come in at that point, which is why those numbers reflected. And this year -- since last year, since maybe Q4 of FY '22, onwards is when we have been significantly investing in quality sales talent. So in terms of other expenses per se, we have not been investing on expanding on other headcount, only on sales and AI ML resources. That's about it. So I think that's the difference. However, when you compare it to FY '22 to '23 to FY '24, we continue to remain similar.

Okay. So margins would be in the similar range of 20% around odd levels?

Yes. We're in the transitioning -- as I mentioned, we are in the transitioning stage because we are investing in growth. We would want to maintain that margin and over a long-term period, improve the margins.

Yes. Got that. Secondly, on the AI and ML that you are mentioning, can you further go deep on that because you mentioned that it was only for a few clients to migrate to our platforms. So that's only your AI or -- AI ML platform or there are other users also, which have been developed by us.

Sure. So that is one core usage, which will help us in our replacement market. But we've added many other functionalities, such as send time optimization. We identify whether Chirag prefers WhatsApp or Chirag prefers e-mail or SMS while communicating. And if we know that Chirag usually checks his e-mail at 7:00 p.m. in the night. So then we help our brands engage with you at 7:00 p.m. in the night so that they are able to cross-sell to you better. So that kind of capability we've added and all of this is based on machine learning itself. So that's one feature. So the code generation also happens using AI. We've added automation testing services using AI.

Okay. Understood. So out of 540 people, how many people are involved in the AI ML platform development part?

Probably, I'd say maybe to the tune of 10 to 15 people.

Okay. So we are having a core team, which develops -- yes. Understood. The language learning model, which you mentioned, it was only for some specific customers or we would be cross-selling to other customers also?

It's a generic. Everything that we add is to enhance the platform, platform such as is generic and vertical agnostic. So it's not customer specific.

Understood. So do we -- how do you plan to use the INR 60 crores of cash that you have on balance sheet? That was my next question on.

Sure. So we will continue to invest in high-quality talent. We will continue to see how we -- another focus for this year, apart from government will be international presence. So we want to invest in the U.S. and U.K. markets as well. So that will also be one area of interest. So overall, we will focus on growth. Yes, and then...

How much -- hello.

Sorry. Yes, go ahead.

So how much cost are we expecting for -- hello?

Yes. go ahead.

Okay. So the U.S. and U.K. market, how much costs are we expecting to put in, out of the INR 60 crores that we have on the balance sheet?

See, we will look to add at least 1, 2 people, and we are also looking at partnership models, you've joined the previous call, I mentioned our focus is around partnership models in the U.S. So we will have to probably make some expense towards supporting partners as well, and we will deploy people, I guess, 10 people from here. So -- it should be around the range of INR 6 crores, INR 7 crores maybe overall across the year.

So we still have INR 50 crores remaining out of that?

Yes. See, now that we've opened up government, government tenders always require you to give performance bank guarantees. So you need a healthy cash base to have that appetite to take that risk. Otherwise, you can't bid for these tenders. So we'll require some cash also in for that purpose.

Because these are large projects and the payment terms with the government are -- requires the investment.

Yes. Fair enough. So we would be dealing with multiple governments or only Indian?

For now focus is India.

We have -- through partners, we'll do the government.

International if at all, yes.

Okay. For -- can you kind of give some guidance for the FY '25 on the revenues and margin. Margin you gave it, for revenue, do you have any guidance in mind?

We will continue to invest in the same kind of growth story that we are delivering today and hoping for it to pay off.

Okay. Understood. Last -- my last question was on the international market. So the international markets you were getting on is very competitive in their nature. So how do you plan to compete in such market where the giants have been taking the place and also many start-ups have been taking it. So how do you plan to compete over there? So you mentioned about partnerships.

Yes. It's a good question. In fact, the good thing is that almost all the system integrators, for example, if you take the -- one of the largest tax filing system in India. Infosys is working with us. Similarly, we have IBM with whom we work with TCS, who we will work with. Because of our IT capabilities in niche areas, what we are working on, a lot of the large payers look forward to partnering with us and taking our solutions ahead. And our U.S. strategy is to partner with a lot of these companies and work through them because we don't have direct relationships with this and the sales cost and the nature of sales in the U.S. are different from what it is in other parts of the world.

Fair enough. Another one, if I squeeze in. We have appointed separate account manager for each account. So is there -- we have -- do we have any limits specified in mind for which about -- if a certain threshold is crossed. So we would be appointing a manager for him.

Yes. So it's not based on limits that we've crossed, but it's based on earnings potential that we have defined from our accounts. So what we've done is we have segregated all our accounts into five categories. Strategic, so key accounts where there are dedicated teams doing managed services. Strategic accounts, growth accounts and active accounts, dominant account. So this is how we have segregated our account. So dedicated account managers, we give two key and strategic accounts. And then we have maybe two, three accounts shared between by one group by one account manager with growth accounts and multiple nodes in active and so on. So it's based on earnings potential from these organizations, what their IT budgets are and what they are able to spend with us.

Okay. So what is the headcount for sales person of these managers?

Accounts managers alone?

Yes.

Is about 12.

12 managers. And in total, how much do we -- is the salesperson size?