Kellton Tech Solutions Limited (519602) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kellton Tech Solutions Limited's Q1 and FY '24 Earnings Conference Call. [Operator Instructions] I would like to thank you all for participating in the company's earnings call for the first quarter of the financial year 2024. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's con-call may be forward-looking in nature, and such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on the management's beliefs as well as assumptions made from the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and the financial quarter under review. Now, I would like to introduce you to the management participating with us in today's earnings call. We have with us Mr. Niranjan Chintam, Chairman and Whole-Time Director; Mr. Karanjit Singh, Chief Executive Officer, India; and Mr. Srinivas Potluri, Chief Executive Officer, U.S. I now hand the conference over to Mr. Niranjan Chintam. Thank you, and over to you, sir.

Thank you, Jobin. Thank you, everyone, for joining the Q1 FY '24 financial earnings call. This quarter, I just want to start off with some of our financial numbers. We'll go through some operational metrics, and then we'll take Q&A as usual. So the financial numbers for the Q1 are about -- we made INR 249 crores as revenue for the last -- for the Q1, which is about 15% year-on-year growth, with an EBITDA of INR 27.9 crores and a PAT of INR 15.4 crores. EPS for this quarter is INR 1.54 per share. Operational highlights: the previous quarter, we did have some analyst ratings on our performance, which is -- [ Zeno ] has rated us very well. And this quarter, we have been featured as a Product Challenger when it comes to ISG in the SAP ecosystem, so we have a position as a Product Challenger there. This is the first foray into ISG, and we have been rated very well, so we are happy and excited about that. In addition to that, Kellton also has got a Gold in Globee Awards when it comes to the IoT platform that we have, the Optima IoT platform. Also, Kellton has been doing a lot of good work when it comes to the generative AI. I know nowadays, that is the buzz word with ChatGPTs, the Bards, [indiscernible] of the world. And we do have some big customers that we are working with multiple use cases with our customers, so very excited to inform you of that. Also, Kellton has developed a holistic healthcare platform when it comes to [indiscernible]. We're also excited that we are able to [ foray ] and help our customers in this holistic [ long care ] services. Those are the big highlights. Like previous quarters, our largest revenue segment has been digital transformation, which gave us -- about 82% of our revenue comes from there. Geography-wise, yes, we are still skewed towards the U.S. markets. And as you are aware, Europe has not been too great to most of the companies in our space because of what's going on in Ukraine. And we are also in a similar spot where we're stagnant when it comes to the European growth for this quarter, too. Those are the revenue highlights that we have. With that, I do want to open up for questions. Last quarter -- one last one. Last quarter, we won 3 new customers, and these are very marquee customers. I'll let Karanjit talk about the 3 new customers that we have acquired last quarter. These come from very different environments, and we are very excited that we are able to help the customers in those spaces. Karanjit, can you talk about the 3 new customers?

Yes, sure. Thank you, and hello, everyone. As Niranjan said, we have acquired these customers. These are marquee customers where we are doing some very leading digital work. One of them is -- we are happy and proud to be associated with the [ India Digital Stack Now ] family, which is one of those companies, where we are helping -- where they're trying to basically create a digital stack for one of these services. And we have been onboarded there to help them with certain parts of building that network, where we are going to help them engage with their network players, onboard them and also streamline interactions. The other one is a leading strategy consulting company globally. They have done the digital consulting, and now they are in the process of implementing and they have chosen us to be the partners for them to implement the digital platform, which has to do with the methane regulation platform. This is a regulatory requirement in the U.S. now. And so, we are helping them build that whole data and reporting platform regarding these whole -- the emissions. Similarly, we are also engaged with a leading pharmaceutical company, which deals in the respiratory drug space. And a lot of them are now building digital platforms where they want to engage with their customers. So, we are building that whole digital side for them to engage with their customers, which help them continuous care and also basically help them know what the diagnosis is, if there's some undiagnosed patients and also predicting things in anticipatory -- on an anticipatory mode rather than just the whole doctor's [ review ] kind of a thing. So, these are some of the leading stuff that we signed up this quarter. Thank you, Niranjan.

Thank you, Karanjit. With that, I want to open up, Jobin, for questions. Jobin?

[Operator Instructions] The first question is from the line of [ PB Ranjith Kumar from Amrita Techs ].

Congrats on steady set of numbers. My question is, what is the reason for decrease in employee expenses quarter-on-quarter? Is it because of voluntary reduction of employees or any other reason?

So, there is a combination of reduction in, if you see, the numbers when it comes to the employees, but the subcontracting has gone up. So what has happened is, yes, there is some reduction, not voluntary, some involuntary. And our voluntary one was probably very less compared to the involuntary. And at the same time, you are seeing that the subcontractors have gone up. That is because of a certain skill set that we didn't have in-house, which is -- which we had to subcontract out. So, while we are hiring people where there is a requirement, so -- and we are also relying on our partners to help us provide as short term when it comes to immediate need for some of the skill sets that we don't have on our payrolls.

Okay. One more question. Also, could you please share on the progress on European business operations?

So, European business operation, I think we have -- for the last 1 year and some change, has not been doing as we wanted it to be, or not meeting our expectations. That is a combination of 2 things: one, the economy. As you are aware, in Europe -- I think I just was reading somewhere that Netherlands has joined Germany when it comes to recession. There is a big recession impact that is going on. Customers are not starting projects, while the pipeline is -- start-up projects is not taking place. So everybody is on a wait-and-watch mode. Whatever we signed up with customers, there's delays in starts that is happening, much more prevalent in Europe, while in U.S. also, we are facing similar -- new starts are getting delayed, while there are some starts that are happening, but some of our customers have signed on the agreements but they're saying, hey, can you delay it by a quarter or a month. It just goes on like that. So there is -- everybody is worried about what is going to happen, so they are hoarding cash, and they're saying, okay, let's just hold off a little bit longer, while immediate priorities, important ones, we are still doing it. People are spending money on trying to figure out what the AI side of -- what they want to do in the AI side. So there are projects that are kicking off either on even -- I'm sorry, on a small scale, they're picking off. While we see some customers spending big money on the AI side, we are seeing many customers are also saying, okay, hey, let me try it. Because there's a buzz going on, let me try it. That's where it's going.

[Operator Instructions] As we have no further questions, I would now like to hand the conference over back to the management for closing comments. Over to you, sir.

Thank you, Jobin. Thank you, everyone, for joining the call. I know today is a busy day. Regret that there are not too many questions, but we would love to answer any questions that you might have at a later date, or reach out to us directly, and we will be happy to answer soon. We do have an AGM coming around and also the next quarter's earnings call. Hopefully, there will be better participation than what we have today. But thank you very much again. Looking forward to seeing you soon. Thank you, Jobin.

Thank you. On behalf of Kellton Tech Solutions Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.