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

Good afternoon, everyone. This is Akash. A very warm welcome to all of you for this Nucleus Software Earnings Conference Call for the Quarter and Year Ended on June 30, 2026. For discussions, we have here from the management team, Mr. Vishnu R. Dusad, our Managing Director; Mr. Parag Bhise, CEO and Executive Director; Mr. Ashok Kumar Bhura, Chief Financial Officer; Mr. Apurva Chamaria, Chief Business Officer; Mr. Anurag Mantri, Chief Operating Officer; Mr. Mukesh Bangia, Vice President; Mr. Abhishek Pallav, Vice President; Mr. Swati Patwardhan, Chief Human Resource Officer; Mr. Bhavit, Chief Customer Success Officer; and Mr. Tapan Jayaswal, Financial Controller. As you all are aware, Nucleus Software does not provide any specific revenue earnings guidance. Anything which is said during this call, which may reflect company's outlook for the future or which may be construed as forward-looking statement must be reviewed in conjunction with the risk that the company faces. An audio and transcript of this call would be shortly available on the Investors section of the company's website, www.nucleussoftware.com. With this, we are now ready to begin the opening comments on the performance of the company. And post that, we would be available for the question-and-answer session. With this, I now pass it over to Mr. Vishnu. Thank you, and over to you, sir.

Good afternoon, and a very warm welcome to all of you, and thank you very much for your continued interest in Nucleus Software. I would request Parag to give you a perspective.

Good afternoon, everyone, and thank you so much for joining this call. So while we talk about our financial performance, but I also wanted to share a couple of important updates. We've been talking about our AI strategy and there have been some questions also. So I wanted to inform that the groundwork taken over the past few quarters is beginning to translate into tangible progress now. Our enterprise AI foundation is now in place. Alongside this, we are also undertaking an organization wide learning and upskilling initiative to equip our associates with the capabilities that are required in adopting this AI framework. Secondly, recently, we launched our FinnOne Neo GA release, it's a full-blown release 9.0, which among other things also brings embedded AI capabilities across the lending life cycle. That's the other thing I wanted to talk about. Another important thing, of course, we've already shared it in our press release, but I wish to welcome Mr. Bhavit Godiwala as Chief Customer Success Officer. He brings nearly 3 decades of experience across banking, technology in digital transform, core banking, transaction banking domains and he'll be looking after -- leading the initiative of customer success organization. Finally, we recently completed 5 years of our journey with 1 important partner in Sri Lanka, which is Hatton National Bank. They are our FinnAxia customers. We completed 5 years journey with them. And we just did a small celebration with them in Ceylon. So these are the few updates we want to give. And over for the financial updates.

I now request Mr. Tapan to present the financial numbers. Over to you, Mr. Tapan.

Hello, good afternoon. Am I audible?

Yes, sir. You're audible.

Our consol revenue for the quarter is at INR 210.4 crores, the growth was 6.4% quarter-on-quarter and 3.4% year-on-year. Product revenue during the quarter is INR 176.6 crores at 83.9% as against 84.1% during previous quarter. India region constitutes 56% of revenue followed by 12% from Middle East, 11% from South Asia, 5% from Europe and rest others. During previous quarter, India constituted 58% of revenue, followed by 13% from Middle East, 11% from South Asia, 4% from Europe and rest others. Revenue from top 5 clients contributed 28.1% of revenue in the quarter as against 29.3% during previous quarter. Cost of delivery, including cost of product development for the quarter is [ INR 160.4 ] crores, an increase of 1.9% quarter-on-quarter and 5.1% year-on-year. It constitutes 76.2% of revenue against 70% quarter-on-quarter and 70.1% year-on-year. Marketing and sales expenses for the quarter is 10% of revenue against 7.1% quarter-on-quarter and 6% Y-on-Y. General and administrative expenses for the quarter is 10.1% of revenue against 7.5% quarter-on-quarter and 8.3% year-on-year. EBITDA for the quarter is at INR 7.6 crores as against INR 34.6 crores quarter-on-quarter and INR 33.7 crores year-on-year. Margins during the quarter is 3.6% as compared to 15.4% quarter-on-quarter and 15.5% year-on-year. Other income during the quarter is INR 17.8 crores, growth of 19.5% quarter-on-quarter and degrowth of 0.7% year-on-year. Income from investment and deposit is INR 18.9 crores and ForEx loss is INR 1.1 crores. This growth is driven by mark-to-market gains on debt mutual funds resulting from falling interest rate in Q1. Forward covers as on 30th June 2026 are USD 2 million at an average rate of [ INR 94.692 USD ]. Profit after tax during the quarter is INR 23.9 crores, degrowth of 30.9% quarter-on-quarter and 32.2% year-on-year. The order book position as on 30th June 2026 is INR 1,244 crores, out of which 88% that is INR 1,096 crores is from products. On 31st March 2026, the order book position was INR 1,044 crores, out of which 86% that is INR 899 crores is from products. Total cash and cash equivalents as on 30th June are at INR 977.9 crores as against INR 972.4 crores on 31st March 2026. Receivable is at INR 174.7 crores as on 30th June 2026 as against INR 121.1 crores as on 31st March 2026. DSO increased to 63 days as compared to 42 days during previous quarter. Total headcount as on 30th June 2026 is 2,059 -- sorry, 2,059 as compared to 2,028 as on 31st March 2026. Attrition during the quarter is 3% as compared to 2% during previous quarter. During the quarter, pursuant to a revision in remuneration structure, the company recognized a reduction in its gratuity liability of INR 6.99 crores and compensated absence liability of INR 2.83 crores. The resultant impact has been disclosed as an exceptional item in the financial statements. To reward exceptional talent, the company during the quarter has granted restricted stock units to eligible employees under the Nucleus Software RSU Scheme 2026. Now I hand it over to Swati.

Thank you. With this, we are now open for Q&A session. I will pass over to you, Mr. Akash. Over to you.

[Operator Instructions] The first question is from the line of Mr. Rushabh Shah from Buglerock.

In the last call you mentioned that we have lost one of the top NBFC as a client. And obviously, they would have been our top 5 customers. And because they had invested in a company who is competitor of Nucleus, they shifted to that invested company. So is it possible to let us know that you feel that this is risk for...

Could you be a bit louder. Your last part is not clear. Though we got the context. But what is your precise question.

Sir, my question is, so is it possible to let us know that isn't this a risk for every of our top customer to begin invest in a company who will be like a competitor of Nucleus and give them resist to the competitor?

I would say theoretically speaking it is a risk, but how many clients who want to do that is a question. So theoretically, yes, that has happened once. But the cyclicality of it is -- because company also want to do business like so many other competitors, other customers.

No. [indiscernible]

Your voice is not very clear. Could you be a bit louder, so it will be helpful.

Okay. I'm saying that, that client was one of the major NBFCs in the country. So just wanted to know what are you thinking on those part?

So we are thinking only about our whatever we can do best. So we are -- our investments in our product and our NDA running high. We can do what we can do better and we are confident of our positioning in the market. We are getting traction. So this is a one-off case, that's what.

So my second question is in the last 2, 3 years, we are focused on to strengthen the sales and marketing team. But we are not seeing that conversion into business. So one factor could be the loss of customers, but what could be the other reasons, like what are the gaps we are not able to fulfill?

So yes, I'll let our CFO answer that part.

So with respect to the question you are asking in terms of not expecting in the business, so just to share. Last quarter, we have clocked our biggest order book of INR 600-plus crores in a quarter. That is a reflection of the work marketing team is putting together along with hugely supported by our delivery function and other support functions. And continuing on that trend this quarter also, we have clocked order book in excess of INR 300 crores. So I think that is a reflection of the work, great work this team is doing in terms of tendering and building on the foundation that has been laid during all these years, it is paying off.

Okay. So just a question about customization. If a small NBFC -- obviously a customer of Nucleus comes to Nucleus for customization, will you be open to it or you have some criteria for customization of the software for different level of customers?

So I think when we talk about customization, we generally encourage configuration at design. Fundamentally, we look forward into opportunities how we can make those business elements implemented through configuration. Having said that, when it comes to the regulatory part, then certainly we have provisioned the way of delivery to our customers. Customizations are minimal and to an extent of some integration changes, which comes sometimes to our table, and that has been managed through the power of expanded.

And my last question is, as you say you are trying to engage more customers in the Japanese market, but you are already present there since last 20, 25 years. And in the previous conference call, you are mentioning that you were trying to tap...

Sorry, to interrupt Rushabh Shah. I would request you to join back the queue for more questions. The next question comes from the line of Mr. Vinay Nadkarni from Hathway Investments.

Just wanted to check out if you can just give us some broad, what are the other expenses that have increased so much in this quarter as compared to previous quarters, if breakup can be given?

Breakup, I will not be able to share, but it is largely on account of personnel cost. So since this is the first quarter, salary revision has been factored into this that will also reflect in subsequent quarters. In addition to that, we have also given RSUs that has also impacted in a certain way our OpEx.

Yes. But employee expenses have grown by 3.8% quarter-on-quarter, whereas your other expenses have grown by 18% quarter-on-quarter. So I just want to know the other expenses. Have we incurred more on sales and administration? Or what is it that has caused this bigger jump when your revenue has actually degrown?

So it is a little bit on marketing expenses, which has increased since we are investing heavily in global markets. So in terms of that, some expenses has increased on that side. Little impact in terms of admin is because of increase in some diesel and power expenses because of this war situation in the diesel price has fluctuated a lot. And that has also impacted a bit and that's it.

[Operator Instructions] The next question is from the line of Mr. Hardick Bora from Vireya Capital.

So first question is on the -- just some color on the order book. It seems that in this June quarter and in the March quarter, put together, we would have won close to INR 900 crores to INR 1,000 crores of orders. What I wanted to understand is that is the execution cycle of these orders meaningfully longer than, let's say, what our historical experience has been? Or would it be in line with our past track record?

So more or less, it would be in line of our existing track record. While yes, efforts are being made to speed it up, bring in more efficiencies. But largely, it will remain as our existing.

Okay. Actually, just a follow-up on this. We attended the AGM on Monday, and I think there was a comment about some AMC-related aspect also being part of the order book and hence, the execution cycle could be longer. I'm trying to clarify your understanding here. So despite the sharp jump that we've seen in the order book, thanks to the marketing efforts that we put in, the execution cycle doesn't necessarily become longer due to some AMC aspect in it, right?

So the thing is with respect to AMC, this order book includes the AMC contracts also. And these contracts are long-term contracts. And that is how it cannot be exactly compared to implementation of a particular order, which will entail a shorter period rather than an AMC.

That would be the case for our orders in the past as well.

That would have been the case for past as well. Yes.

Okay. Second question I had was on the marketing cost.

Hardick sir, I'm sorry to interrupt you. I would request you to join back the queue for more questions. The next question comes from the line of Mr. Mahak Singhvi from MAK7INVESTMENTS.

Yes. What are the logo deletions in these 3 months?

Sorry.

Logos. Yes. So you all have not performed in India. Why is the revenue so down and so is the segment result in India. As far as India is concerned, how many logos have left?

So none of the logos have left and in fact, we have added 3 new logos.

So if none of the logos have left, then how come the India performance is so down?

So it depends on some onetime event which has occurred in the last quarter with respect to one of our biggest customer where we have got some part of the revenue as a special capitalization issue delivered for them.

And right now, employee expenses are about 74.5% of sales, almost 75%. So are we going to...

Sorry, to interrupt your connection.

Just 1 question.

I understand, sir. [Operator Instructions] The next question comes from the line of Mr. Samarth Singh from TPF Capital.

I think the main question I have is our sales and marketing expenses, which have gone up a lot, have finally shown results in our order book. But there seems to be some sort of a mismatch between that converting into P&L. So could you just explain to us why -- what is the reason why our order book has literally doubled from last year, but our revenues are down 3% Y-o-Y.

So our order book is a composition of certain contracts which are a little long range, maybe extending up to 5 years also. And there are certain orders which get fructified within shorter period of time also. And that is why you might not be seeing exactly culminating into a shorter revenue cycle. And in addition to that, sales and marketing expenses which you talked about is yielding definitely the results in terms of healthy order book. While yes, there are certain markets in which we are setting our foot and in those markets, there will be certain expenditure, which will yield result in maybe subsequent quarters.