Nucleus Software Exports Limited (531209) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. I'm Felicia, the moderator of this call. Thank you for standing by, and welcome to Nucleus Software quarterly earnings conference call. [Operator Instructions] I would now like to hand over the conference to Swati Ahuja. Over to you, Swati.

Thanks, Felicia. Good afternoon, everyone. This is Swati from Investor Relations team at Nucleus Software. A very warm welcome to all of you for this Nucleus Software earnings conference call for the quarter and 9 months ended on December 31, 2022. For discussion, we have here from the management team, Mr. Vishnu R. Dusad, our Managing Director; Mr. Parag Bhise, CEO and Executive Director; Mr. Anurag Mantri, CFO and Executive Director; Dr. Ritika Dusad, Executive Director and Chief Innovative Officer; Mr. Brajesh Khandelwal, Vice President, Neo Business; Mr. Ashwani Arora, Senior Vice President, Global Customer Success Team; Mr. Tapan Jayaswal, Financial Controller. As you all are aware, Nucleus Software does not provide any specific revenue earning guidance. Anything which is said during this call which may be reflect our outlook for the future or which may be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. An audio and transcript of this call would be shortly available on the Investors section of our website www.nucleussoftware.com. With this, we are now ready to begin with the opening comments on the performance of the company. And post that, we would be available for the Q&A session. With this, I now pass over to Vishnu, sir. Over to you, sir.

Thank you, Swati, and a warm welcome to all of you for this investor conference call. As we are celebrating 3 decades of creation of intellectual property on Indian soil this year, allow me to indulge in giving you a perspective on the subject. Three decades back, the banking and financial services industry in India started making bold moves by adopting a completely new business model. This was the business model of retail lending that could give a boost to the lifestyle of middle class of the nation and also make BFSI sector itself robust. Along with these bold moves, BFSI sector made another bold move, that of adopting homegrown information technology solutions. It was these pioneering moves by the BFSI sector that we are [ praising ]. Thanks to BFSI sector's pioneering bold steps, the sector as a whole has grown to the level that today, nearly half of the industry's [ loans ] are retail as compared to less than 5% 3 decades back. Thanks to their confidence in homegrown intellectual property and in the company that created that intellectual property, the retail assets originated and/or service and/or [ collected ] using our platform are in the range of INR 40 lakh crores or equivalent of $0.5 trillion in India alone. The amount of payments and collections made by our transaction banking products are worth $15 trillion per annum on our transaction banking platform. Over 200 reputed institutions in 50 countries are using this intellectual property created on Indian soil within their businesses. We would like to convey our gratitude and thank all of you, investors, from the bottom of our heart for taking all the risks with us. We have been trying to understand and visualize our customers' needs and come up with solutions that would fulfill those needs and, in turn, benefit our investors as well. We would like to assure you that you will continue to find us far ahead when it comes to fulfilling our customers' needs and expectations. Thank you so very much once again for being with us on celebration of this major milestone in our journey and looking forward to continuing to play a role in building the economy together. Thank you.

Thank you so much, Vishnu, sir. This is Parag here. Good afternoon, everyone. I welcome you all to this investor call. As regards this quarter, it has gone more or less as per our expectations both in terms of financials as well as in terms of attrition, a key area that we have been talking about. As we've been updating, a few more AMC contract revisions are closed in this quarter, and that is reflecting in our financials. This has been possible due to the focus and untiring efforts of our leaders and their respective teams [ we have put in ], and I really wish to thank them for that. I do wish to sound out here that there is a onetime retrospective effect in these revenue figures due to the reason I mentioned. The attrition, as expected, has significantly come down, and we do expect that it stays that way. Another quick update I wish to place is that we did complete 5 of our FinnOne Neo implementations in this quarter. We continue our focus on transforming our FinnOne and CASH@Will customers. As you know, FinnOne and CASH@Will are our legacy product platforms through our next-gen technology platforms, FinnOne Neo and FinnAxia, respectively. At the same time and as we have mentioned in the past, we continue to enhance our project management capability by providing sharp, focused trainings to our project and program managers so that they are prepared to take on this transformation much faster. Thank you very much once again, and over to you, Swati.

Thank you, sir. Tapan, sir, now I request you to put some light on the financial numbers. Over to you, sir.

Thanks, Swati. [indiscernible] key highlights from financial [indiscernible]...

I'm sorry to interrupt you, sir. Tapan, sir? Sir, your voice is not clear, sir.

Okay. Is it better now?

It's better.

It's better. Please, sir, continue. Please go ahead, sir.

Yes, as for revenue, our consolidated revenue for the quarter is at INR 169.3 crores against INR 130.1 crores quarter-on-quarter and INR 121.6 crores year-on year. Overall, revenue in foreign currency, including India rupees revenue, is USD 21 million for the quarter against USD 16.6 million quarter-on-quarter and USD 16.3 million year-on year. Product revenue for the quarter is at INR 143 crores against INR 106.2 crores quarter-on-quarter and INR 99 crores year-on year. Revenue from projects and services for the quarter is at INR 26.3 crores against INR 23.9 crores quarter-on-quarter and INR 22.6 crores year-on year. Moving on to the expenses part. Cost of delivery, including cost of product development for the quarter, is at 59.9% of revenue against 76.5% of revenue quarter-on-quarter and 79.5% of revenue year-on year. In absolute terms, this is INR 101.4 crores against INR 99.5 crores quarter-on-quarter and INR 96.7 crores year-on year. As for marketing and sales expenses for the quarter is 4.2% of revenue against 4.3% of revenue quarter-on-quarter and 3.8% year-on year. In absolute terms, this is INR 7 crores against INR 5.7 crores quarter-on-quarter and INR 4.6 crores year-on year. As for G&A expenses for the quarter is 7.8% of revenue against 10.6% of revenue quarter-on-quarter and 12.3% year-on year. In absolute terms, this is INR 13.3 crores against INR 13.7 crores quarter-on-quarter and INR 14.9 crores year-on year. EBITDA for the quarter is at INR 47.6 crores, which is 28.1% of revenue, against INR 11.2 crores, which is 8.6% of revenue quarter-on-quarter, and INR 5.4 crores year-on year. Other income from investment and deposits is at INR 8.2 crores against INR 6.9 crores quarter-on-quarter and INR 7.1 crores year-on year. Total other income for the quarter is INR [ 9.3 ] crores against INR [ 8.8 ] crores quarter-on-quarter and INR 8 crores year-on-year. Total [ tax ] is at INR 13.7 crores against INR [ 3.9 ] crores quarter-on-quarter and INR [ 10.4 ] crores year-on-year. As shown, profit stands at INR [ 38.3 ] crores for the quarter against INR [ 11.03 ] crores for the quarter and INR 8.0 crores for the year-on-year. Other comprehensive income is at INR [ 3.4 ] crores for the quarter against INR [ 1.6 ] crores quarter-on-quarter and…

Sorry to interrupt you, sir. Your voice is breaking. Please check...

Should I dial in again [indiscernible]?

Sir, I'm sorry to interrupt you, sir. [Technical Difficulty]

[Operator Instructions]

[ Tapan, are you there? ]

Tapan, sir, have you joined back?

Yes. Am I audible now? Is it clear?

Yes, sir.

Hello? Okay. So total comprehensive income, which includes net profit and other comprehensive income, is at INR 41.8 crores against INR 12.6 crores quarter-on-quarter and INR 7.6 crores year-on-year. As for EPS for the quarter is at INR 14.32 as against INR 4.12 in the previous quarter and INR 2.77 in December 31, 2021 quarter. In terms of foreign currency hedges on 31 December 2022, we had USD 3.7 million of forward contracts at an average rate of INR 82.13. There is a mark-to-market loss of INR 43 lakhs, which is taken to [ hedging reserve ] in the balance sheet. Revenue contribution from the top 5 clients for the quarter is 35.8% against 28.5% in the previous quarter. The order book position is INR 569.3 crores, including INR 548.2 crores of product business and INR 21.1 crores of project and services business. In September 30, 2022, the order book position was INR 572.9 crores, including INR 538.9 crores of product business and INR 34 crores of project and services business. As for total cash and cash equivalents as on 31 December 2022 are INR 533.8 crores against INR 558 crores as on 30 September 2022. This includes balance in current accounts of INR 35.2 crores, various schemes of mutual funds, INR [ 32.8 ] crores, fixed deposits of INR 38.6 crores, investments in tax-free bonds of INR 71.9 crores, INR 5.3 crores in [ preferred ] shares. With regards to receivables, we are at INR 127 crores against INR 73.5 crores in previous quarter. During the quarter, there is a gross addition of fixed assets of INR 1.12 crores, consisting primarily of INR [ 0.58 ] crores on software, INR [ 0.14 ] crores on vehicles, INR [ 0.06 ] crores on plant and equipment and INR 0.34 crores on computers. Now I'll hand over to Swati.

Thank you, sir. With this, we are now open for question-and-answer session. I will now hand it over to you, Felicia. Over to you, Felicia.

[Operator Instructions] First question comes from [ Gun Singh from Counter Finance ].

Congratulations on the great set of numbers for this quarter. I see that our revenues are amongst the highest we have achieved in any of our previous quarters. And also, in terms of margins, we see that the margin for this quarter is around 28%, operating margin; whereas it was about, say, 7% for financial year [ 2020 and around ], say, on an average 15% to 20% previously. So sir, my question is regarding whether this is a one-off quarter in terms of revenues as well as margin. Or can we say that this is the run rate going forward and we can expect this to be a sustainable number in terms of revenues as well as the margins? So can you please help me understand whether this is one-off or a sustainable kind of a thing?

Thanks for asking this. This is Anurag. We have been updating and informing you all about various initiatives being taken at our end. And certainly, we are not seeing this as one-odd, one-off quarter. This is the trend we are expecting to continue way forward.

Both in terms of top line as well as margins?

That's true.

So is it fair to assume that we can do, say, about INR 700 crores to INR 800 crores of top line for financial year 2024 looking at the current run rate?

So while my earlier response was that we have been talking about the measures and those measures are showing results, but I would like to also mention that we do not give any guidance at all, any inferences at all.

Sir, not in terms of, say, revenues but in terms of the operating margins that we are looking at right now, can -- I mean, was there some initiatives taken during this quarter where some fall in the, say, operational cost that we saw only during this quarter that led to this? Or I mean, can we say that 28% is a sustainable kind of a margin going forward? Because, I mean, this is one of the highest margins that we have ever achieved in this year, I would say.

As Parag mentioned that this is also due to some cumulative effect. We have been talking about the AMC-related discussions in the past. So that has led to this particular thing, and you are talking about the other aspects. So we continue to take a lot of optimization and improvement initiatives, and that is something which we like to continue as well. But again, as I mentioned that any indicative aspect on this thing, we are not going to provide.

Got it. So if we remove the AMC effect of the cumulative that you mentioned, can [ we get margins of ], say, about 25% going forward because of the initiatives that...

So I have answered this already a few times. You are talking about various -- in fact, the guidance aspect or indications, we will not definitely provide that. Hope you appreciate this particular thing. But as I mentioned that we continue to take multiple initiatives, and that is what I would like to update you at this point [ in time ].

Next question comes from Rahul Jain from Dolat Capital.

Is my line audible?

Yes, sir.

Yes, just to expand the thought on the [indiscernible] revenue guidance like [indiscernible]...

Rahul, your voice is not clear. Please repeat again.

[indiscernible] [ one moment ].

He's withdrawn his question, ma'am. Next question comes from [ Harish Toshniwal from BottomUp Research ].

Am I audible? Hello?

Yes, sir.

Yes. Yes. Sir, I think, sir, a few questions. One is that if we look at the last Q1 and Q2, on calls you mentioned that the price hike is going to be affected for most of our clients over a period of next 1 years to 2 years, basically, H2 of FY '23 and obviously some part of '24. The entire [ city ] is going to see a series of price hikes across different clients for us to reach the expected levels. So just want to understand that when we look at this quarter's revenue, you think that all the price hikes are now there in the number, or are there more price hikes down the line? And this is my first question. I have one more question. And if you want, I can ask now or I can ask later, sir. [Technical Difficulty]

[Operator Instructions] Welcome back sir.

Am I audible, sir?

Yes. Please, go ahead.

Yes. So I had 2 questions. One is that in the last call, we mentioned that the price hike is going to continue over the next few quarters because it will take some time for negotiating the price hikes across most of our customers. So one, I wanted to check that when we look at this quarter's revenue, is it just a partial price -- a part of the price hike that for few of the customers we have taken but we are yet to see more price hikes in the coming quarters? That's question number one. And sir, the second question is on the growth part. Now we have seen a lot of NBFCs, et cetera, who have been growing even within India. Now going forward, how do we plan to tap that volume growth? Because last call, you mentioned that we are also tying up with system integrators to improve our growth health in Europe, Southeast Asia, et cetera. Because when we look at our margin profile also, I think being a product company, our margins in India, et cetera, is more than 40%, 50%. It's the global business which is putting the overall margins down. So wanted to get your sense as to what is the plan to improve the operating leverage [ of that ] and how should we look at it? So these 2 questions.

Sure. Sure. This is Brajesh Khandelwal. Your first question is regarding continued AMC price hike. So that effort is going to continue. Other precise details will not be shared, but that effort will be continued. Your second question...

Just one thing, Brajesh -- sorry, sir. Just one thing on that part. I would not need any specific details, but just want to understand that. For example, if we have around 200 clients, then what percentage of clients we would have initiated the price hikes with? Some sense, because the only thing which becomes confusing is that when we look at this particular quarter's revenue, I'm not asking for any guidance, but wanting some sense about the sustainability of this number. Are there any one-off fees or...

I can only say that we have been pursuing with our customers to get the right value for our offering, and that effort will continue. I don't think I will be able to share details beyond that. So that is response to your first question. Your second question is on the increased potential on NBFC market in India. Yes, we are working with various prospects to engage them with our new product offering, and that's a continuous effort, in fact. And so that's how it's going to continue.

And as regards -- I think you also wanted to mention about outside India. So 2 parts to it. One is the transformation that I had mentioned. This is Parag here. So the FinnOne customers and the CASH@Will customers, many of them are outside India. So that's one part. And yes, we are making a conscious effort to now move outside India. The past 2 years, because of COVID, we were largely centered in India. And also, most of the growth we saw was from India, the traction, I would say. So on both these fronts, whether it is our legacy customers outside India, efforts are on to convert them onto the new platforms, as well as our reach. We are now trying to make into regions outside India. So I hope that completes the 3 parts of your query.

Next question comes from [ Jatin K from Alpha Capital ].

Congrats on a good set of numbers. Sir, my question is in your opening commentary, you said that there is one-time retrospective effect in the AMC. Can you please elaborate more on this item? What -- how much is the retrospective effect, and what was this amount -- why was this amount?

Okay. So we will not be able to really give the split or the details that how much has been contributed by retrofit and how much had been contributed by nonretrofit-related business. We will just like to reiterate that there has been an impact because of these retrofit cases, which is part -- which is just one part of this particular increase.

No, sir. Some -- even if I look at your revenue, it is now INR 170 crores versus it was INR 130 crores last quarter. So it's like INR 40 crores increase. Can you give some idea how much is because of AMC, how much is because of retrospective and how much is our growth from new clients? So maybe some idea, even rough idea would be helpful, sir.

I'm afraid that we will not be able to give you even an indication about that.

But then, sir, that will keep investors in the dark as we have no -- basically no idea how is the company being able to grow so well in this quarter, so maybe some indication. Because if you look at all of the previous participants, all were trying to get some indications on that front also, sir. I'm just requesting you to give some indication.

So what I will like to say is that as far as the total growth is concerned, close to 50% had come from retrofit. I hope that, that gives you...

Yes. So -- and that retrospect is like one-time only? That will not continue?

That's right. But as we indicated that this is an ongoing process. So few of the business exchanges and discussions with the customers have been concluded, which has led to this. Few of the business discussions with the customers are continuing.

And even if we take more AMC increase, that will also have this retrospective benefit even for more?

So the ones which, I will say, discussion in-progress will definitely have some retrofit impact.

And would you like to comment as in, let's say, if I have 100 clients, how much we have taken the AMC increase and how much are still pending?

That, certainly, I will not be able to share.

Next question comes from [ Chirag Kacharia from Ashika Institutional Equities ].

First time I have looked at your company and I have a couple of questions. We are into the business since '90s, and the industry has grown really well in India, particularly IT sector, even BFSI. Then why we aren't participating in that growth? Second, a lot of outsourcing opportunities have also come in this last 3 decades. But still, we not meaningfully participating in it? Third, I request you to share investor presentation or something so investment community and even analyst community can have some better idea [ exactly ] in which domain or which expertise we have in IT sector. So yes, sir, just this [ from my side ].

So just to reiterate that we are in product organization. So we handpicked outsourcing opportunity, and that we have been doing for some time and we continue to do the same thing.

Okay. And who are our peers? If you can name any global or local...

We do not share the competitor information in these forums.

Okay, sir. And what is the size of opportunity in which we are right now -- in the services in which we are right now?

I would just like to mention that with the product capabilities we have both in retail lending and transaction banking space, we are definitely approaching some very exciting opportunities. But besides that, the quantum or any indication, we'll not be able to share.

Next question comes from Arun Malhotra from CapGrow Capital.

Congratulations on a fantastic set of numbers. Just wanted to find out the use of excess cash which is lying on the balance sheet. Because if this quarter is any indication, we are going to generate large amounts of cash in the future also, plus the commentary which you have given. So any indications on the use of cash which is lying on the balance sheet?

Thanks for raising this question. This is Vishnu Dusad. Our Board keeps looking at the most appropriate uses of the cash that our business generates. And from time-to-time, we have been doing buybacks and so on to make sure that there is right balancing between the cash that is kept with the company and the cash that is distributed to the shareholders. So our Board will continue to apply its mind to the subject, and we'll come back with the results.

Sure. Because I just want to reiterate that the cash which is lying on our balance sheet is earning only 5%, 6% kind of return, and it's also bringing down the ROE and hence, the valuations. So if there is no acquisition or use of cash which can lead to growth for the company, I think it would be more prudent for the management and the Board to distribute it to the shareholders. That would be my suggestion, which should be considered by the Board.

We will certainly take your suggestion to the Board.

Next question comes from Imran Contractor, Quantum Investments.

Yes, my question is also regarding the one-time renegotiation of AMC which came into this quarter. So I think they have given an indication that the 50% of the growth has taken place because of that. Is my understanding right?

That's right. You have the right understanding.

Next question comes from Vaibhav Badjatya from Honesty and Integrity Investments.

So on the AMC again. So I don't want to know any numbers or any details which you would not like to share. But sir, this revision is -- this retrospective effect is for the revenue from 1st of April? Or it is also some revisions for last year as well, which has come into this quarter? I just wanted to know that.

This is from this with this financial year itself.

So that's for this financial year only. Okay. And secondly, obviously, last year, we faced severe margin pressure because of this employee cost [ increment ]. And that's why we have to initiate this AMC renegotiation, which is very good, and it's heartening that we have been successfully doing this. But in your assessment, have you been able to fully pass on that cost that we -- which we saw very sharp increase in FY '22 in terms of per employee costs? Have we been able to fully transfer it? Or you think that still, there is a long way to go in terms of whether our AMC contract will come back to the similar profitability as they were before March '22?

So just wanted to clarify that these 2 things had happened together but did -- they are not linked. Our initiatives to increase the CMV for our associates was in response to appreciate their knowledge and contribution. And at the same time, our discussions with our customers for increasing the pricing is related to -- we are asking our customers for value-based pricing. So they have been -- in fact, most -- many of our customers or, in fact, all of our customers are growing tremendously on our platform. And our discussions with them had been happening for some time [ over a period of time Again, this was a result ] of that.

So yes, I understand that those 2 might be unrelated or unrelated things completely. But on a net basis, one is a cost and one is price. So on a net basis, do you think -- on the AMC contract on the profitability front -- again, I don't want to know the numbers that what is the margin that we are earning on the AMC contract and all of those things. But do you think that we will be back to similar kind of profitability in the AMC contract as we were before 2022 financial year? Or there is still some time to achieve that?

So we are back there and we will be continuing like this. That's going to be my response.

Next question comes [ Arishit from DU Research ].

Sir, my question was that -- you mentioned 2 statements. One, you said that this quarter is a sustainable one at some point of time, that the revenue -- and it's going to be a recurring event of price hikes and maintaining this margin, what you said. And at the same point of time, you said that 50% of this quarter's incremental revenue was because of renegotiation. So my question is that if I adjust that renegotiation, then our sales would be more around INR 155 crores and profit around INR 30 crores to INR 35 crores of operating profit. So should we take that as a sustainable base and build for -- and basically look at it? Or do you think that there are further price hikes which will help us support even the current year's -- current business momentum? I just wanted to clear because your statements were slightly different in terms of what it can mean.

My response would be that we will -- we are putting and we will be putting all the efforts to ensure the sustained growth. That is what I would like to tell you, but we're not able to give any indicative references [indiscernible] as well.

No, but when you say sustained growth, do you mean pricing or do you mean volume? Because -- is a sustained growth in terms of this quarter had a renegotiation advantage. Ex of that advantage or on the base of this quarter itself?

So first thing is that this is going to be both on the pricing as well as the volume. The second thing is that I just mentioned that we are having this discussion -- there's a disturbance from your side, I think. Hello?

Sorry.

Yes, so what I'm saying is that it's on both accounts. It's basically on the pricing as well as on the volume as well. And I would like to also add that we -- as I've mentioned that we have concluded few discussions with customers, and we will be having some more discussions further on the same pricing-related discussions. So that's going to continue and then of course, we are going to different geographies. So that impact will also be there in quarters to come.

Understood, sir. And sir, when you look at this quarter, our India business has done very well. We have grown from INR 60 crores to INR 85 crores top line in India business. But most of those geographies have been largely flat, and probably margins have also been flat. So this price increase part and the volume growth, if you can throw some color on what is happening in the global geographies and some color on our strategy to tie-up with system integrators to penetrate that. Or how do you look at that piece of business?

So you are very right that the current quarter's growth is predominantly because of India market-linked growth. But we were putting down -- we are laying down various strategies to expand into -- expand our presence in other geographies as well. And we are hopeful that we should be able to really expand the business in those geographies also in quarters to come.

Okay. And one last question, sir, from my side. We completed the buyback, the last one, on 22 February '22 -- around February '22, if I'm not wrong. So I think one year is the -- I just wanted to check that what is the SEBI restriction of the time gap between 2 buybacks. I mean what is the time line before which we can't think of the buyback?

Sir, this is Poonam. Actually, the restriction is 12 months. So before 12 months, we cannot initiate a second buyback.

Okay. And that 12 months will end on February 2023 itself?

Yes. Yes.

Understood. So just one thing. So I think this buyback was actually very helpful, and I am not saying -- obviously, we need to keep some cash on our balance sheet because of the nature of the work and at the same time, for any inorganic opportunities. But this INR 150 crores, INR 200 crores of annual buyback, which at least -- which is going to keep our balance sheet healthy, would suggest that the Board can consider that because that is a very healthy indication of the management and company wanting to share the benefits with all the shareholders.

Certainly, we will take this suggestion to the Board.

Next question comes from Samarth Singh from TPF.

My first question is, again, about the AMC pricing revision. I think we were looking to get 8 large customers onboarded with the new AMC pricing. And I think as of second quarter, 3 of them had been -- had come onboard. Could you just tell me as of the end of the third quarter how many customers have come onboard out of the 7 or 8 that we were trying to get revised pricing from?

Yes, so we will not [ be able to really ] give this insight as well about the number of customers.

Okay. But [indiscernible] for the revenue for 9 months, is it reflecting all the price hikes that we wanted to get done this year? Or we will expect some sort of one-time revenue in quarter 4 as well?

So as I shared that there are some discussions going on with our customers. Some have been concluded. Some are still going on. So definitely, we will be -- we are hopeful to conclude those discussions in the next quarter. And if that happens, then definitely, there will be a retrofit impact coming from those discussions as well, those conclusions as well.

Sir, just to clarify, the next quarter being the current quarter, quarter 4? Or you are talking about quarter 1 of next year?

Yes, the current -- Q4.

Q4. Okay. And is our order book reflecting the new pricing, the revised AMC rate? Because the order book does not seem to have moved that much.

The order book is -- includes the new AMC increase. It includes.

Okay. So are we -- I mean, are we losing orders from some of the other geographies? I think there was [ total increase of INR 110 ] crores in the order book, if I am not mistaken.

So basically, order booking number is inclusive of both AMC as well as non-AMC-related new orders being booked.

Right. Okay. And how many of our top 10 customers are now on FinnOne Neo?

We actually do not provide product-wise customer details. We will not be able to share these inputs as well.

Okay. Okay. Let me ask the question in a different way. We are working on 2 objectives mainly for this year and next year. One was getting the price revision so that our pricing correctly reflects the value we provide to our customers. And the second one was changing the composition of the product, which is sort of moving our customers from the legacy product to FinnOne Neo. And in the last quarter, I think, Vishnu, sir, had mentioned that 2 or 3 customers were [indiscernible] FinnOne Neo and that there will be a big push this year. So if not quantitatively, could you talk about it qualitatively in terms of how we are doing in the second aspect of converting our customers to FinnOne Neo?

The FinnOne customers' movement to FinnOne Neo customer, which we call transformation initiatives, are progressing well. They are progressing well, and they are as per the plans.

Okay. And last question from my side, I think in the other geographies, which is Southeast Asia, Far East, Middle East, we have seen some recovery, but it's still trending below pre-pandemic levels. And I think the issue we had was relating to immigration and [ inclusion ]. I think both...

Your voice is cracking. I couldn't really hear you.

Am I audible now?

A little better.

Yes, so I was saying, apart -- I'm talking about the other geographies, Southeast Asia, Far East, Middle East, we can see some recovery, but we're still trending below pre-pandemic levels. And I think the issue we had highlighted the last of calls was issue of immigration and attrition. I think both issues have been sorted now. So is there a reason why we are not back up to historical revenue and profit levels in these geographies?

So while both the constraints have been -- they are settled now. Immigration is also -- has completely opened up, and attrition-related challenges also got settled. So what we are currently doing is that there had been -- because of these 2 factors, the implementation, progression and all these [ similar are ] definitely impacted. They are being brought to the control now. And with these 2 enablers being there, we expect for things to move much faster in the current quarter as well as next quarter. There is always a cascading impact. So the immigration has been tackled. The attrition-related things had happened, those things. But the transformation projects are getting in shape now. And once these are settled next quarter -- this quarter onwards, the things will start showing the reflections.

And as part of this also, I think in the Far East, we have done multiple FinnOne cloud -- FinnOne Neo cloud implementations. So is a part of that also that on the cloud platform, the implementation fee is lower but we are on a higher recurring revenue? Is that a part of this lower revenue in the Far East as well?

In the Far East, we have -- predominantly, we have our services customers, not -- and yes, few of them are on the cloud, but definitely not all of them. It's not related to that. It's basically related to some of the local business developments there. And of course, as I mentioned that it takes some time for customers also to restart the engine. Far East has been blocked by immigration perspective for close to 2 years. So things have started opening up, and it's going to take its own [ group ] and time before the things start becoming to the normal. So the trends are reversing. And as I mentioned that you will be getting -- you will be seeing a different type of improvement coming up being reflected in the current and next quarter is what I mentioned.

Next question comes from Rahul Jain from Dolat Capital.

Firstly, 2 bookkeeping numbers. One, what is the USD revenue you said for the quarter? And what was the employee count?

Hello. Am I audible?

Yes.

Okay. So revenue number was USD 21 million for the quarter and USD 16.6 million quarter-on-quarter and USD 16.3 million year-on year. This was the revenue number.

Right. Employee?

As for the headcount, the headcount was 1,731.

Okay. Now my question is that even if we see the outside the AMC revenue, the jump is quite significant, close to 15%. So was it led by a faster ramp-up of some past deals that were affected by attrition, things -- which we still have? Or this is general business traction that we have?

The general business traction, that's the thing.

And this headcount number is still significantly lower than what we used to have, let's say, 8, 10 quarters back. So is there a reason why we would like to operate at this level? Or this is a net outcome while we want to have a much higher headcount number?

Actually, last year, we have invested significantly by -- in onboarding young talent, young minds. We continue to do the same this time. In addition to that, we are also working on the productivity improvements at our end. So these 2 things going hand-in-hand. We are talking about onboarding young talent in addition to the productivity measures.

Right. Right. But -- so you're trying to say this 1,730 number is an ideal number for the current business level, and as the business grows, we may have some headcount growth?

That is right. That is right.

Yes. And just to clarify on the retrospective effect on the numbers, so are we trying to say that there is a retrospective quantum which is taken as a lump sum for the past period? Or the current AMC revenue that we might have booked during the quarter is the normalized run rate from a go-forward basis?

There is a cumulative impact for sure.

Okay. So you mean to say if somebody was revised from INR 5 to INR 10, that additional INR 5 for one full year is also accounted in this quarter and now going forward, he would be booked as INR 2.5 on a run rate basis?

Yes. That's right. That's right.

Okay. So half of the quantum of growth, give or take, is coming from this factor. So the number -- the quarterly run rate should be seen by adjusting that INR 20-odd crores from the current revenue?

Yes, that will be the case. That's right.

And accordingly, the profit -- the PBT aspect should also be reduced by that quantum because there may not be any associated cost attached to it as well?

Yes. That's right. Your understanding is right.

Right. I understand that you're not going to say about the number of [ such pursuit ]. But since you already have -- I think last quarter, you mentioned that there are 2 to 3 clients which are in this process of acceptance, and they might have gone through this process during this quarter, maybe few more. But now since you have people accepting it, how it changes in terms of your convertibility aspect going forward because now you have reference, people who have adopted to the new run rate? Does that increase your ability to convert on this factor significantly?

That is right. But more than the -- having some customers being converted on a different price is not the major driver. The major driver is that we are leveraging the referenceability of the business value being delivered to the customers. I hope that answered it.

Yes, I'm sure. So that was the case earlier also before you were pushing this aspect much more strongly. It's just that people are happy to get more for less, and that was the case in the past. And just to -- if you could share 1 or 2 comment that might have come from these successful cases where they accepted for the revised pricing, what they have to say on this. Are they -- they just realized that, okay, yes, it's worth more and that's why they are giving it? Or any incidents worth sharing on this front?

There had been a mixed response. Few customers response is already there in your question itself when you mentioned that they were getting more in less. So few of them have responded in that fashion. Few of them, the response was much, much more pragmatic. But overall, all of them had understood the rationale and the approach. Depending upon their outlook, in few cases, we could progress much faster. In few cases, it has taken longer time. But eventually, every one of them had appreciated this and got themselves aligned with this.

And last bit from my side, just to understand who would qualify for this kind of revision. Is it the entire client base, or we can say that client with a material history? Let's say, any client who would have come to us, let's say, 5 years or prior or 10 years or prior would have been at the very [ lower base ] and those are the cases where we see a hope of a big revision, while it may not be relevant for clients with 5 years, 6 years vintage?

So of course, we are not going to the customers whom we have signed up or rather, whom we have onboarded very recently. In addition to that, we have a very comprehensive assessment process, and we run our customer portfolio through that comprehensive assessment process. And that gives us the customers with whom we should be taking it forward. Of course, the longevity of the customer, the time at which the initial contract was signed, their growth, all these things are part and parcel of that comprehensive assessment process. But the overall process is much, much beyond that.

Right. And have we seen case of client attrition also?

Not really. Not really.

Okay. So either they are negotiating -- they are delaying or accepting, but there is no let go.

That's right.

That would be the last question for the day. Now I hand over the floor to Swati for final remarks.

Thank you, Felicia. Now we would like to thank all the investors for joining us today for this call. I now pass over to Vishnu, sir, for his closing comments. Over to you, sir.

I would like to take this opportunity to thank you all for your continued interest in Nucleus Software, and we reiterate our commitment to deliver value to all our stakeholders in decades to come. Thank you so very much.

Thank you. That concludes our conference for today. Thank you for your participation. You may all disconnect now.