Quick Heal Technologies Limited (QUICKHEAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Quick Heal Technologies Limited Q4 and FY 2021 Earnings Conference Call. We have with us from the management Mr. Kailash Katkar, Managing Director and CEO; Mr. Sanjay Katkar, Joint Managing Director and CTO; and Mr. Nitin Kulkarni, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Kulkarni from Quick Heal Technologies Limited Thank you, and over to you, sir.

Thank you, Lisan. Hello, and good evening, everyone. I hope all of you and your families are safe during these pandemic times. I'm pleased to welcome you all to our earnings call to discuss our Q4 and financial year 2021 results. Please note, a copy of all our disclosures are available on the Investors section of our website as well as stock exchanges.

Sorry to interrupt Mr. Kulkarni, we are not able to hear you.

Okay. Please -- I'm pleased to welcome you all to our earnings call to discuss our Q4 and financial year 2021 results. Please note, a copy of all our disclosures are available on the Investors section of our website as well as stock exchanges. Please note anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Let me now hand over the floor to our MD and CEO, Mr. Kailash Katkar, to talk about major developments and key initiatives. Over to you, Kailash.

Thank you, Nitin. Good evening to all of you. Thanks for joining us today to discuss Quick Heal Technologies Limited financial result for Q4 and entire year financial year 2021 results. I would like to take this opportunity to update you about the major development and initiatives for the quarter as well as some highlights for the year. Before I begin, I hope you and your family are safe and taking proper care while dealing with this pandemic. I would like to take this opportunity to thank all the frontline staffs and public authorities for their continuous effort in containing this pandemic and keeping us safe. Before starting with a brief update on business performance, I would like to inform you that share buyback program was approved by the Board of Directors as well as the shareholders of the company. CFO, Nitin Kulkarni, will give you more update on it. We have delivered a strong finance performance during the quarter despite this disturbance caused by the pandemic. Nitin will cover our financial performance in detail in his commentary. During the year, we have strengthened the leadership team with the appointment of Mr. Bibhuti Kar, R&D and Engineering Head; Mr. Sanjay Agarwal, Chief Product Officer; and Mr. [indiscernible], Strategy Head; and at the same time, focus on building new capabilities. These initiatives have accelerated new product development efforts. And in fact, we have recently launched Seqrite Hawkeye. The first in the series of new product launch plan, Seqrite Hawkeye empower enterprise to enhance their security visibility and manage multiple points products from the single console. Now I would like to hand over the floor to Mr. Sanjay Katkar, our Joint Managing Director and CTO, to discuss the latest cybersecurity threat. Over to you, Sanjay.

Thanks, Kailash, and good evening, everyone. During lockdown, the online sales jumped up as physical delivery wasn't available. And as you all know, Quick Heal has 25,000 retail partners across India [ who were hit with the ] pandemic. The increase in our business coming from increased laptop sales during pandemic got reflected in the second half of the year. We are seeing more confidence from most of the retail partners with respect to the demand. However, we are cautious due to liquidity issues in the retail dealers ecosystem and hence, does not want to increase exposure. Approximately 80% of our business is retail and 20% is enterprise. Within enterprise, government business, which constitutes 15% to 17% of enterprise business was regrowing and will be growing as they were not spending enough on the cybersecurity due to COVID pandemic. Many of the decisions in government sector has been kept pending, meaning to say, delayed because of the current situation. So SMEs are a high percent of enterprise, which were hit the most during lockdown and recovered during the later part of the year when restrictions were lifted. We are focusing on the SME segment, in which we have 6% to 7% market share, and we plan to enter into large enterprise segments soon. So as we [indiscernible] we gradually started [indiscernible] certain aspects of cybersecurity in the enterprise market segment. The focus is to increase the enterprise revenue share over the next few years. The retail business, which grew at low single digits during the initial part of the year picked up in quarter 4. The run rate in retail reached closer to pre-COVID levels during quarter 4. Coming to the trends in cybersecurity market, most of the 2020 infiltration attempts see a noticeable shift on a newer [ attack ] [indiscernible] from the remote working model and changing mode of the operations of business worldwide. At Seqrite, we observed that the total number of malware attacks dropped by almost 35 million compared to 2019. But this mainly -- this was mainly due to the reduction in the threats like adware and potentially unwanted applications or PUAs.

Sorry to interrupt, sir. Sir, this is the operator. Sir, we are not able to hear you clearly. Your voice is breaking up.

Okay. Just a minute. So is this clear now?

No, sir. It's still the same.

Okay. I have put on the earphones now. I think this should be okay, yes? Hello?

Yes. Please proceed.

Yes. So I was saying that coming to the trends in cybersecurity market, most of the 2020 infiltration attempts see a noticeable shift on a newer [ attack ] [indiscernible] from the remote working model, and the changing mode of the operations of the business worldwide. So at Seqrite, we observed that the total number of malware attacks dropped by 35 million compared to 2019. But this mainly was due to reduction in threats like adware and PUAs that are the least harmful in nature. Simultaneously, the dangerous threats like Trojans, ransomware and [indiscernible] primarily because of the new vulnerabilities that have popped up due to the [indiscernible] in virtual learning culture because we believe that the rate of [indiscernible] is higher targeted [indiscernible] and these attacks will continue in 2021. Now I would like to conclude my remarks by stating that demand will continue to remain strong for cybersecurity products and solutions as they become more and more reliable on digital infrastructure to solve our day-to-day needs such as being connected to work remotely or digital learning and digital payments. And this is definitely going to help cybersecurity market. So I would like to hand over the floor to our CFO, Mr. Nitin Kulkarni, to discuss our financial performance with you.

Sorry to interrupt, sir. Sir, hello?

Hello?

Yes.

Yes, sir. We missed the last part.

Okay. Okay. I'll repeat. I think there's some connectivity issue. Is this okay? Am I audible now?

Yes, sir.

Yes. So I was saying that I would like to conclude my remarks by stating that demand will continue to remain strong for cybersecurity products and solutions as we become more and more reliable on digital infrastructure to solve our day-to-day needs, such as being connected to work remotely or digital learning and digital payments. And this will definitely help cybersecurity market. And I'm like more bullish towards it. So I would like to hand over the floor to our CFO, Mr. Nitin Kulkarni, to discuss our financial performance with you.

Thank you, Sanjay, and again, good evening to all of you. I'm informed by Kailash in his opening commentary, I also would like to brief you on the share buyback program, which has been approved by the Board of Directors as well as shareholders of the company. The company had proposed to buyback up to 63,26,530 equity shares at a price of INR 245 per share, payable for an aggregate -- amount aggregating up to INR 1,550 million, INR 155 crores. The buyback shall be undertaken on a proportionate basis from the eligible shareholders through the tender offer process and as per the stock exchange mechanism as specified in the SEBI Circular. Buyback is being undertaken by the company after taking into account the operational and strategic cash requirements of the company in the medium-term and for returning surplus funds to shareholders in effective and efficient manner. Before moving on to financials, I'm happy to share that Board of Directors has also recommended a final dividend of INR 4 per equity share with a face value of INR 10 per share for financial year 2021. This is, of course, subject to shareholders' approval in ensuing Annual General Meeting. With this dividend of INR 4 per share, the total payout ratio will be around 24% on the existing equity base. Now let me take you through the financial highlights for the fourth quarter and full year ended March 31, 2021. As Kailash mentioned earlier, we were able to deliver good growth during the quarter and closed the year on a very positive note. I will now take you through the consolidated financial performance of the company for the quarter ended March 31, 2021. We delivered strong earnings with robust EBITDA and PAT growth for the quarter despite the impact of pandemic. In Q4, our consolidated revenue from operations grew by 64% to Y-o-Y INR 1,053 million compared to INR 643 million in Q4 of last year with retail segment revenue growing by 75%, driven by mainly higher renewal rate on consumer side, along with improvement in enterprise segment. 83% of our revenue for the quarter came from the retail segment and balance 17% came from enterprise and government. Enterprise grew by 42% due to strong growth in SME segment, with Indian economy slowly recovering from the pandemic. I would also like to highlight the fact that in Q4 of last year, due to lockdown and nonavailability of transport facilities, revenue in our retail segment was significantly impacted and revenue worth INR 280 million was pushed to the next financial year, which is being considered in 2020/'21. This is the important factor to note. EBITDA for the quarter jumped by 609% Y-o-Y at INR 538 million as compared to INR 76 million in Q4 of last year. EBITDA margin increased to 51.07% from 11.8% in Q4 of last year. In line with our continuous focus on R&D innovation, we increased our investment in R&D by 35% Y-o-Y at INR 173 million compared to INR 128 million in Q4 of last year. While employee benefit cost was up due to mix of increased headcount change in pyramid structure and marginally higher due to an increase in outsourcing costs, coupled with annual impairments, which we have given from 1st October 2020. Coming to sales and marketing expenses. Sales and marketing expenses declined by 29% to INR 170 million from INR 239 million in Q4 of last year. This is mainly on account of some of the BTL ground activities were not possible in the current year due to pandemic situation. However, we have slowly started other marketing events from H2 of this year. Our G&A cost remains lower by 24% Y-o-Y at INR 127 million from INR 166 million last year. This reduction is mainly on account of doubtful debt provision, which we had made for a few dealers in our retail segment in the last year Q4 and which was partly recovered in the current year. Other income during the quarter was lower by 30% to INR 57 million versus INR 82 million in Q4 of last year. This is primarily on account of reduction in treasury yields. PAT for the quarter rose by 397% Y-o-Y and stood at INR 397 million compared to INR 80 million in Q4 of last year. PAT margin increased to 37.73% from 12.44% in Q4 of last year. Now coming to the full financial year. For the full financial year, consolidated revenue was at INR 3,330 million, up 16% compared to INR 2,861 million for the last year. The recovery is commendable as during the initial part of the year, business was severely impacted by lockdown. As the restrictions in economy was uplifted, business continued to recover sequentially during the year. Recovery in retail segment was stronger with 24% increase in revenue, while enterprise grew by 9%. In case of enterprise segment, in first 2 quarters of the year, government spending was less and SME segment also faced some liquidity pressures, liquidity prices. For the year -- whole year, 82% revenue came from retail and balance 18% came from enterprise. EBITDA for the full year grew by 55% Y-o-Y to INR 1,415 million versus INR 914 million in last year. This is mainly on account of top line growth. Other income during the year was lower by 24% at INR 242 million versus INR 316 million. Again, this is primarily on account of reduction in treasury rates, treasury yields for the whole year compared to last year. PAT grew by 44% to INR 1,070 million versus INR 744 million during the previous year. PAT margin for the year increased to 32.1% versus 26% in the last year. Licenses sold -- now coming to licenses sold in retail segment, during the year, were up by 34% compared to last year, while the revenue was up only 24%. So this is -- this [ mix rate ] is primarily on account of change in the product mix and higher demand for lower-priced products observed during the last few months. On enterprise side, licenses sold during the year was up by 8% Y-o-Y and revenue was up by 9%. We noticed sequential demand recovery on the enterprise side starting from Q2 till end of the year. Now I will come to a few of the balance sheet items, mainly on net working capital. So overall net working capital days increased to 104 days versus 97 days in March 2020. The increase in working capital days was a result of increase in receivables from 136 in March '20 to 150 in March 2021. The rise in receivable days was mainly due to strong sales booking in Q4 as well as liquidity issues with few of our retail dealers, where collections are delayed. We will continue to maintain our financial discipline and focus, and expect the later days to remain about in the range of 130 to 145 days. This is what the level which we have been maintaining so far. On cash and cash equivalents, our current cash and cash equivalents is at INR 4,809 million compared to INR 3,877 million in March 2020. This is including investment in mutual funds, tax-free bonds and fixed deposits. I will again like to highlight that we were cautiously looking for opportunity to better utilize the cash on our balance sheet. On M&A, we again remain very cautious and calibrated in our investments, and we are looking at smaller and medium-sized investments. Our current investment in L7 is a testament of the same. We continue to monitor the progress of our investee companies and so far, we are satisfied with it. I would also like to give you an update on service tax. So the Commission of Service Tax Delhi has preferred an appeal against a favorable order passed by [indiscernible] amounting to INR 561 million, covering a period of 2011 to 2014. Now hearing for condonation of delay as well as the admission of appeal on merit basis is still awaited. Now to sum up, the demand environment was good during the last quarter with enterprise side supported by higher business activity and sharp recovery on economy. Demand for the consumer segment was aided by a strong demand for PCs and laptops, mainly due to work-from-home and virtual learning trade. Overall business activity has started coming back to pre-COVID levels. However, with second and more devastating wave impacting our lives, economic activities and business activity may take a hit in near future. With vaccination gaining pace, hopefully, we expect businesses to remain -- business to regain momentum in due course of time. This is all on finance side. With this, now we will open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [indiscernible] from Goodwill.

Could you just explain the -- the top line segregation between retail and enterprise. What's the bottom line segregation? What are the difference in the margins of the enterprise business versus the retail business? So we'll get an understanding. How to go ahead once we reach our [ 60/40 ] target?

Okay. So yes, so this is Nitin. So if you look at our segment revenue breakup, business revenue segment for the quarter, retail was at INR 95 crores. And on an annual basis, we were at INR 299 crores. And on enterprise side, it is INR 201 million for the quarter and annual run rate was INR 665 million. So this is -- which is broadly about -- converted to percentage, it is 18%. So to answer your question on margin, so yes, we do track this internally on a regular basis. And as we have been saying earlier on all our calls, enterprise segment is where we are making a lot of investments now. So definitely, margin is far better in retail segment compared to enterprise segment.

But like in the future guidance -- retail margins will continue to be better than the enterprise margins in the long term?

So it all depends. In enterprise, since we are making the investment, it really will definitely pick up at some point of time. And then we will get back to a trajectory, which we want enterprise segment to show it on the margin. Firstly, in the near term, yes, retail will have decent margin. And since we are making investment in the enterprise segment, we'll have a lower margin to start with. But slowly, we definitely expect because the focus is more on enterprise segment, so we really expect this to catch up as we move along.

The next question is from the line of Mayank Babla from Dalal & Broacha.

Congratulations on a wonderful quarter. Sir, my question was regarding the margin expansion in this quarter. It was largely led by rationalization in sales and marketing and general and administration costs. So going ahead, what will be the trend in the margins? And will these costs go back to earlier levels? Or are these margins sustainable?

Yes. So yes, this is Nitin. So I think to answer your first question, yes, we mentioned about that spillover from Q4 coming into this year. So it may not be like-to-like compare. But if you see the revenue results, which we reported for last year, Q4 and current year Q4, the revenue is up. So cost [indiscernible] [ INR 5 crores, INR 6 crores ]. And mainly because of pandemic, we had to -- as I mentioned in my opening commentary, because of pandemic, [ certain ] of the sales and marketing events we started in H2, and that is the impact. But overall margin, if you see, it is mainly driven by growth in the [ top ]. And to answer your question on also, we don't give guidance, but we have always been saying that just don't judge us by just this year EBITDA margin, which is at 52% since for revenue growth, we are making a lot of investment in -- on enterprise side. We are working on a lot of new products. And we were -- we will be doing a lot of investments, where revenue will come. So with that, definitely, there will be some impact on EBITDA. And if I have to give you a number, so we are definitely targeting EBITDA range between 30% to 35%. That is what is our current estimate.

Sure, sir. And my second question is regarding -- in the earlier call, you had mentioned that the physical sales or the physical sales component is more for Quick Heal and which is why we were impacted during the lockdown days. Now given that the lockdowns again are imposed in Q1, will our sales be impacted [indiscernible] If you can give some sort of qualitative guidance.

Yes. Yes, so I think if you look at -- see retail is a more of a stock and sale model, where -- and in Q4 last year, Q4 call also, we explained it in detail that unless and until we ship the goods out of factory, unless and until we can control this part, we are not able to recognize the revenue. That is the case with retail. So in case if stricter lockdown is imposed going forward or if it continues for a longer time, then yes, definitely there will be some impact on our retail business. And this is purely because of we will not be able to execute. There will be demand. There will be orders. But then if we are not able to execute it because of lockdown and nonability of transporter, this is definitely going to have an impact. And on enterprise side, today, most of our revenue comes from SME and SMB segment. So definitely, because of lockdown or pandemic impact, there will definitely be a lot of liquidity impact on this SME and SMB [ moves ]. So that will also have some impact. So -- and we are definitely there. We are also seeing a lot of demand. And we -- with work from home, with online training, online classes, we definitely see a lot of demand and there is a potential. But definitely, we have to see what kind of impact pandemic will have in time to come. I think it all depends on that. Hope I addressed your question.

So it's safe to say that H1 will be slightly softer, and then you can expect H2 to be a strong FY '22?

No, I don't want to comment anything on whether H1 will be softer or H2 will be stronger. If there is a lockdown, if there are restrictions, then it will -- I mean definitely, all business who are following this model will get impacted, and we are no exception to it. I think that is what I can comment.

The next question is from the line of Vivek Ganguly from Nine Rivers Capital.

Hello? Can you hear me?

Yes, yes.

My question was regarding the investment and the focus that you'll have on the enterprise segment. So we know that you'll have hired senior people in this to lead this business. Can you give us a little more color as to the layout of the business? Who you're competing against? How sales happens? And on a 3- to 5-year basis, what is the size of the business that you all would -- this business -- or the ballpark figure where [ your multi ] business is?

I think, Sanjay, can you answer this question?

Yes. So if I understand, there are 3 parts of the question. So what is these new products and the kind of business that we are focusing on? And then how is it going to impact? And what is the size based [indiscernible] and how it can impact in the next couple of 2, 3 years? So the products that we are focusing on the Seqrite brand is more particularly targeted towards the larger enterprises. And the products are in the category where the new challenges at trade landscape has been getting developed based on the remote working situation that we have seen now and more particularly, I'll say, the challenges that the new things are creating and the new working environment that is getting adopted. If you see the releases done by Gartner or IDC, it's like more and more zero trust-related approaches for the products will be seen in the market, and that's where we are focused. At the same time here, privacy law, we are expecting to get implemented and that it's going to create more market for a particular kind of product. So currently, I cannot say what will be the competition because many of these are completely new [indiscernible] new approach towards solution. But definitely, it's a very growing -- fast-growing market is what we see based on the data and service data coming out from the Gartner of the world or even IDC. So more and more data is generated, more and more connectivity and remote connections are going to happen. So all this is going to be targeted, these products are targeting the security towards that. So I'd say it's going to be in the high-growth category, these products, it includes service along with the product actually. And we are focused on the cloud-based approach here wherein most of the products and services that will be -- we are planning are focused on the cloud approach, means use anywhere and apply it to the cloud-related workloads actually for all organizations. So it's completely new approach, I'll say. So I cannot name the competitors. But definitely it's very fast growing cybersecurity category that we are targeting in large enterprise.

Okay. And for this to achieve -- this business to achieve the profitability of the overall company, would that be the INR 150-odd crore size where you all would achieve the same profitability? Or would it be more earlier than that?

So currently, we are in the investment mode. It depends on -- like, see, the products that we are releasing -- going to release are multiple products and the investment is going into multiple products. So the profitability thing cannot be said right now. I need to say certain products are at the research stage and certain products are in the beta, I mean to say, early beta stage. So it's like -- it all depends even how the current situation unfolds, I need to say. The spending in cybersecurity is expected to grow faster. But at the same time, it is also -- you got stuck up with the current situation in the market. And only, really -- I mean to say, the solutions which are very critical are getting deployed and most of the spending we see is delayed in a lot. But at the same time, as we see more and more attacks creating big challenges for large enterprises, cybersecurity spending is supposed to increase. So if that happens, I'm assuming a couple of years should be okay to achieve the breakeven. But I can't share right now, actually.

Yes. I would like to add here that we are into the product development. So when it's the product development, Sanjay -- what Sanjay mentioned about -- is all about what is the market demand in coming future and what kind of development things are happening. And of course, there is a cause for that development. But at the time of spending, means investing into the development part of it, you really can't calculate what will be the revenue generation because these kind of products are totally new to the markets, which are going to come not only from buyers, but a lot of other competitors also. And since it is a product, it is not something customized product. It is a general product for all large enterprise customers. So definitely, as a -- like once the products are released and if you get more and more customers on board, automatically, the profit margin will go up. If you have less customers onboard, profit margin will be very less. So that is a different challenge once the product is released. But as of now, today, we are focusing on those development part of it.

Okay. So you'll have not yet released those products in the market?

No, no, no. Not yet, not yet.

Not even beta testing or...

No, no, no. They are under development. It will take still 1.5 years time, actually.

We'll move on to the next question, that is from the line of Parimal Mithani from Credential Investments.

I hope all of you are well. And congratulations on good numbers. Can you hear me?

Yes, yes. I can hear you.

Sir, I just wanted to know the trade receivable part has been more or less same in Q4 or the end of the year. We always see the trade part increasing. Is there any plan in terms of getting it down since, I think, the pandemic has changed the way a lot of [indiscernible] operate? And you being on the digital side of the business, are you implementing the same sales force? And is there any change in terms of sales and marketing going on? And secondly, sir, in the enterprise and government side of the business, I think we're coming close to critical level in terms of revenue right now. Have you reached a breakeven point in terms of what we invested currently? If you can answer that, it will be very helpful.

Yes. So Parimal, this is Nitin. So first point on debtors. So yes, you're right. So if you look at the Q4 number, so whatever sale which we do in Q4, the last 2 months, that goes into debtors. And since we had a strong sales booking in Q4, there's a base, which is 150. That has gone up and even debtors also have gone up in absolute terms. Having said that, as I mentioned earlier, retail [indiscernible] [ stock and sale ] model where we sell and then dealer liquidating [ Q2, Q3 ] and from their movement happens. And especially with this -- [ with the current ] when there is a lot of liquidity pressure with these dealers. So we are expecting debtor days to come down in next 3 to 6 months, but it all depends on what kind of liquidity situation is there in the market. Having said that, so all these debtors, they are -- we do all due diligence. We have regular calls with the sales heads. We talk to these dealers on a regular basis. And we have a proper mechanism in place whereby we don't see anything getting [ out of hand ]. So what I can say is, yes, debtor days are up mainly because of higher revenue and liquidity issues at SME and SMB then. And secondly, [ so we have given ] lot of efforts on this. And -- but debtor days, as I said in my opening comment also, definitely, it will remain in 130, 140 days range, at least for some time.

So I guess if you could give me a breakout between direct and online sales -- and sales. What's the bifurcation?

Yes. So online sales, there are 2 sales, Parimal, online sale is all direct online sale through our website. And today, the e-commerce [ portion ]. [indiscernible] So the -- so if I had to talk about growth since Q1, most of the thing was happening online and due to pandemic, lockdown, transport facilities not available. So on a -- if you compare it with '19/'20, our online sale has gone up by about 24% online [ side sale ]. And if you look at indirect e-commerce sales, which has gone up by 8%. And if you look at the composition, the online sale percentage has almost remained same. It is 22% this year and 23% last year because our distribution revenue has gone up. So that's why percentages remain same. But if you look at -- if you compare it year-on-year, there is a growth of 24% on direct online sales and through e-commerce portal, we have grown by [ 8% ].

And sir, on the corporate side of the enterprise side of the business, how do you see it going forward? Because I think Q4 you're seeing growth. Maybe it's just onetime? Or it's like recurring? I just wanted to know about that.

No. So it is definitely not onetime as I and Kailash and Sanjay also mentioned. So definitely -- see with online working -- work from home, there is a lot of changes and there is a lot of demand available. And we are definitely there to take advantage. With this- SMEs, SMBs, we are -- we have infrastructure where we can take advantage. But again, it all depends on the situation. And if this lockdown is extended if -- with pandemic impact coming in the next 3, 4 months, then this SME, SMB will definitely have a larger impact because we will have issues on liquidity. So it all depends on what kind of impact pandemic has. But as far as our -- we are quite positive on outlook.

So Parimal, if I had to answer your question. So when you mentioned about the number of credit days, see, if you compare with [Foreign Language] last 3 to 4 years [Foreign Language] all these number of days part of it, even in this pandemic situation where there is a lot of challenge of cash flow, still we could be able to maintain of 150 days which itself is very challenging for us, but we have maintained that. And as Nitin said that while doing all this transaction with the Tier 1 partners, we make sure that we have right partners on board, and we build the right amount of material to those partners to make sure that we will receive our payment on -- maybe not on time, but at least 100% we will receive the payment because we have to maintain those relations with those channel partners. And in India, without credit, you cannot do business. So when there is a credit, then this credit -- number of days will definitely come into the picture. Sometimes there will be more number of days. But this happens every time in Q4 because Q4 has a bigger amount of sale, okay? And when you say -- your second question about Enterprise sales growth in the coming future? Is there any challenges? Of course, the demand is there in the market. The challenge is cash flow. Now in this -- you have seen that the entire year now, it is more than 1 year, the pandemic is going on. And the most affected people are -- the businesses are the SME businesses. And when it comes to Enterprise sale, our major sale happens in the SMEs and small portion into the large enterprise. And even though having such a big cash flow challenges, still we could be able to grow into our enterprise sale. So we are trying all our level best to make sure that we continue to grow into the enterprise sale. And we definitely wanted to grow by double-digit in enterprise sales. And if this lockdown situation comes out, I feel that business -- all businesses will come on track and even -- which we'll be able to grow in a double-digit, actually.

Okay. I'm sorry, last question, if I can ask...

On your receivables, just to add to what Kailash said, so just to give you -- I will just share 1 data point for your comfort. During the year, we did a sale of INR 430 crores, of course, after including capital, that's why the number is higher. And we have collected INR 402 crores. I think almost equivalent amount is being collected. So not that -- So it's not that there is a lot of stickiness. So we have been collecting the money, but then because of the current situation, there are slight delays.

Okay. Okay. And sir, last question. Sir, regarding current stake of demand, which is there. And the government has -- I think amount is INR 122 crores-odd, which is there, including penalties. Is there a -- have you tried to use any of the government schemes in terms of settling this issue? Or are you confident that you'll win this with the Government of India?

Parimal, this is Nitin. So I think I will give you a little update with this. So in January 2020 -- 2011 to 2014, we are at [ SysTec ], Delhi. So in January 2020, we -- on and off, we had a mock hearing with the Department in November, December and earlier period. And in January 2020, we -- [ SysTec ] has passed its favorable orders on us, staying away -- stating aside this INR 56 crore demand. That was for [indiscernible]. And this case was purely decided on merit.

So we are very much confident that we will definitely come out of this situation.

If there are any adverse effects, it's almost as big in terms of another coming in and...

When Nitin mentioned that we got a favorable order, that itself shows that we are right -- on the right path.

Parimal, the auditors were putting an emphasis of matter to this point earlier -- our earlier folks. So getting the favorable orders from [ SysTec ] Delhi, they are also convinced and they also have removed this injustice off of us. So we also have clean audit report from auditors on this point.

We'll move onto the next question, that is from the line of Milind Karmarkar from the Dalal and Broacha.

Congratulations on a great set of numbers. I had a couple of questions. Of course, one of that was on the Enterprise segment. Part of it has been answered. So I used to track the company long back. So I have met you also a couple of times. So even at that point in time when -- because Enterprise business is a large business, and especially with cybersecurity threats, I think that could be a big business. So even in 2016/'17, if I'm not mistaken, we had discussed this, and you had said that you have gotten some systems which can test simultaneously many nodes, which is a requirement of banks and many other enterprises. And you were reasonably confident of growing your Enterprise business. But when I see, over last 3 -- 4 years, the Enterprise business, as a percentage of overall revenue, has still remained same. So just wanted to understand what are the sort of difficulties, which we are seeing in getting ourselves entranced in this business? That was my first question.

So first and most, I think Sanjay will definitely answer this question. But I just wanted to start by saying that when it comes to the Enterprise business, so when it is a Retail, customers can, any given time, change their existing product. But when it comes to the Enterprise, even if you have a good feature, even if you have a good -- a lot of things which is going to support your enterprise, but the system integrator over there or the IT person will always feel to continue what he is already having, product running into the systems, because changing entire systems endpoint security is a big challenge to those people. So you have to really come with not a small differentiator, but you have to really come with a very big differentiator, which will make and feel him to change the existing product. So that is a big challenge, actually. So -- and Sanjay will definitely explain you about what we are really facing challenges and what we are really developing towards the enterprise solutions?

So along with that, so you rightly pointed, okay, we had been scaling up our products. And for the initial -- almost like the last 3, 4 years, endpoint security product has been our flagship product under the Enterprise segment -- section of our business. And currently, endpoint security has really -- the adoption of endpoint security for large enterprise has really grown for us. Actually, if you see 2 years back, we used to have like less than 10 enterprises as our customers who are having more than 500 computers. But today, if you see every quarter, we are adding more than 20 new customers who are having more than 1,000 endpoints actually. So our products have been scaled up, and we are seeing adaptation of our products. Endpoint security across large enterprise, gradually, it's growing. And we are able to get the -- we are gradually getting on the market share from these large enterprises. But at the same time, as Kailash rightly pointed, it's like we are focusing not only for 1,000, 2,000, we are focusing for more than that, let's say 20,000, 30,000 or...

40,000, yes.

Large enterprises. Yes. And for that, we have seen the challenge of changing from a product to a new product. At the same time, we are also seeing the newer challenges and newer trades have really made these enterprises think about the other approach. The approach that we have started seeing is about the bureau trust and network security we have. And that's why we are also enabling our products to integrate with these large other products that are already there into the large enterprise. For example, the SoC operation is for the organization is having with some third parties product should be integrating with that. So all those things have already started. And we have seen good results, and we have scaled up [indiscernible] demonstrate our products actually.

And if you check the PowerPoint presentation, which is there on our website, there is a table where we have mentioned about the large enterprise customers on board on quarterly basis.

Okay. Fine, fine.

Yes. You can definitely go and take that part of it. And it is really, really -- as Sanjay said, that we have our products ready for 20,000 users, 25,000 users. But getting those customers on board is not that easy.

It's difficult.

Because people -- they don't change their existing systems to the newer system actually. Yes. It's a pain for them actually. So that is a different challenge. Our sales and marketing is a big challenge when it comes to changing from existing system to the new systems.

Okay. So do you think that along with your research, your sales and marketing efforts, especially in -- on the Enterprise side, you will have to spend some more?

Yes. You rightly point it out. So when it comes to the sales and marketing part of it -- sales team -- so that's the reason I have got a lot of senior leadership people in, say -- in all departments and functions. And when it comes to the marketing expenditure part of it, yes, the way we are doing it for retail part of it, we wanted to do it for the enterprise part of it also. But for that also, again, we need to have a good -- like a proper agency to, really, that -- because most of the good agencies in India are very much experts to the consumer products compared to the enterprise product. So once I get that good agency, we have -- we are already evaluating a lot of agencies. Once I get such kind of agency, I will open up my budget for enterprise marketing. But it is not something that we are not at all doing any marketing. Now we are definitely doing a lot of enterprise marketing. And recently, we have just launched Seqrite Hawkeye. If you just go to website, you will be able to see that. And also, we are doing a lot of digital marketing for this Seqrite Hawkeye.

Okay. Okay. My second question was on the retail product. As everything is going digital and on demand, why -- because earlier, if I'm not mistaken, we are -- we were -- the way we sold our product was through the consultants or through, let's say, the system integration guys. But with digital and Internet or cloud becoming the main stay now, how -- why are we -- I won't say lagging, but why our sales through the net are -- let's say, not growing as much as they would have because 2 things probably would happen. It would reduce our debtors also on the retail side. And so what is the reason why we are unable to sell or it's a typical mindset of an Indian consumer?

Yes. Yes. Yes. So I got your question. And it is all about business understanding and business -- market-driven business. It is not something that I don't want to go online. If it was not, we would have not earned a single rupee from online sales. See, we have already entire process system in place for the online sale. But that doesn't mean that I have to close down my retail, say -- retail shop sale and shift entirely to the online sale. And if I fail over there, what will happen? So gradually, if you see that at the time of IPO, our online sales revenue generation was close to 8%, 8%, including the e-commerce. That means Flipkart and all those things, okay? Today, it has reached 22%, 23%, okay? So it is not in my hand. It is in markets' hand. So I'm available at both the places. I'm available at retail shops also. I'm available at Flipkart also. I'm available at Amazon also. And I'm available at our own portal also. So it's totally depends upon market. If market is comfortable to go and buy online, we are available there, we are doing marketing there also. And we don't want to leave this retail shop sale also because they are the influencer to the customer. It is something that they influence the customer. See, retail shop sale is always something which customer never thought of going and buying the antivirus software. These people who go for repairing or some other purpose. They force them to buy this product. So I don't want to lose this sale.

So I'd like to say that it is -- the answer is Indian consumer mindset is slowly changing towards online. It's taking time, actually. But at the same time, in this transition, we are making sure that we are having right presence on online sales as well. So our spending on digital marketing has grown. Our presence on all the e-commerce platforms is quite high. And we make sure that collective business of the e-commerce platform for all the antiviruses, we have still the major share in that, actually. And that's what we are making sure, and we don't want to lose that as well. So as we are having grip on offline sales, we are also trying to make sure that we capture the right market share in the online sales. And that's been directive.

The next question is from the line of Amit Doshi from Care PMS.

Sir, this new product launch that you mentioned about the Hawkeye. So what kind of market kind of annual sales that you are targeting from that kind -- that product?

Yes, I think I have answered this question to somebody, just 2 questions back. When -- we are into product development. Once we develop the products, we definitely get margin as I sold more and more number of licenses. Then when the product is new, people getting on board -- getting people on board is not that easy. One, getting first 25 customers or 50 customers is very, very difficult. But once I get around 50 customers on board, then reaching out to the 100th customer is easy. And then after 100 to 1,000 customers, again, it becomes very easy. So initial time it takes a bit long time. But once -- I would say, once I see that 50 customers are on board or 100 customers are on board, then reaching to the 1,000 customers is not at all difficult. But reaching to first 100 customers is very, very difficult.

So I'd like to add to that. So Hawkeye's target security posture market, this is something that is catching up, actually. Most of the enterprises have all the like endpoint securities there and gateway securities that people are now focusing on having a single pan visibility across the enterprise infrastructures. And that single pan visibility is something that we are living with this Hawkeye, which is -- that's why we have named it as Hawkeye. The adaptation of this single-time visibility is gradually growing. And also, it is very important nowadays that to capture larger enterprises, unless we have this kind of products, they don't even entertain. So we are -- with this release, we are making sure that we are there on even the security-questioned markets, and we'll make sure that we are getting representation in most of the enterprises. So this is definitely going to help us, but the market size of this kind of product is yet under evaluation, I'll say, because many times, enterprises expect that to be free with the other product, actually. But it is something completely different than platform approach. And so it's chargeable and most of the vendors are charging for that. So it's like we are gradually evolving in this market. We definitely will be able to talk about this after, say, 2, 3 quarters of -- as we see the customers, how they take it, actually. But it definitely will help us in the large enterprise environment, yes.

Right, right, right. No, I understand. I was just trying to understand that if there is a competition already there in that space. So for example, they already have sold around 10,000 licenses of the like product -- similar product. So I was just trying to understand that kind of -- I'm not asking that whether the 25 clients or first 100 clients will get connected in the next 1 quarter.

I got your point. I got your point. But with every new product which we come out, even I cannot dare to put a target on my sales team because people will get frightened. So unless and until -- even the sales team doesn't get confidence with the first 10, 15, 25 customers, even they are not able to commit anything to the management, okay?

Okay. Okay. Okay. Fair. Fair. Q4 results, so while this work from home, there's the importance of the schools, online schooling, working from home, everything has been there for last now and more than 3 quarters. So anything in particular that Q4 numbers were so good and that's showing in the numbers? So anything on that?

It is not that way. I think Nitin has answered this question. If you see, the Q4 numbers are very good because you are comparing with the last year Q4. But then you need to understand what was the last year's Q4 and what were the challenges at the time of last year's Q4. Nitin, can you answer this?

See, basically...

Sequentially, also, no -- so even if you look at last 3 quarters, we have around 70...

This business is, like, seasonal business. You check with -- for the last 4 to 5 years. Q1 is not like a Q2, Q2 is not like a Q1, Q3 is not like a Q2 and Q4 is not like a Q3. It is a seasonal business because it is a stock-and-sell business. It is not something that you have a very large cyberattacks in Q4, it is not that way. It is stock-and-sell. Based on that, this becomes a seasonable business, actually.

No. At the same time, I'll say that the realization on the front of pandemic-related -- actually where it gradually happened and we saw lot of people started, like, coming out of that -- it's back of the mind and -- pandemic is back of the mind and people started spending. So partners started seeing confidence of people coming to their door steps. So partners also were confident in stocking the feed and could -- that's where we felt that, okay, quarter 4, we saw more confidence from the partner side. At the same time, liquidation was a little bit better than the earlier 2 quarters. This has definitely helped. And we were waiting for something to, like, at least go into the market, push the stock wherever there is a chance. Because in earlier quarter, as you see, activations were happening, but we were not able to stock, we were not able to bill the adjusting partners. And on that, vacuum was also created. So we were really able to do that thing in the quarter 4.

Yes. Okay. And that explains a lot because in past, last -- on my second question quarter September has been more generally contributing overall as an annual. So I thought March, at this time, has been...

Yes, yes, yes. And I just wanted to add. As Sanjay rightly mentioned, the activation was on track. But Q1, Q2, Q3, the cash flow in the market was very, very challenging. People were not able to pay what they have purchased 1 year back. And that was the reason we could not be able to stock it. And as Nitin said, that we had -- he had mentioned figures also that how much we have done the sale and how much we have done the collection part of it earlier. So getting -- it is not only a challenge for selling the product. It is equally challenging to collecting the payment. Collect the payment, yes.

Fair enough. Fair enough. And these multiple products that the team is working on R&D for Enterprise business. So you mentioned -- I think, in the conversation, you mentioned that we have a strong lineup, but some time more to go. So -- and I think one of the comments you mentioned about 1.5 years from now. So nothing is kind of on the pipeline or which is going to come out in, say, next -- this -- FY '22?

Product -- See, product development is not something like that. So product development has a bigger cycle. For any product design and architecture and then really developing that product, testing it and after the product is ready, customers are not ready to onboard those products unless and until they don't see you already have multiple customers on board. So again, that is a different challenge. Then that also takes a long time, at least 3 to 4...

So Kailash, let me answer this actually. We are having multiple products under development, but certain of them -- few of them, means multiple, I'd say, 2 or 3, but then a couple of them should be released this financial year. But release doesn't impact revenue of that fiscal year immediately because as soon as the products are released, it takes certain time for the whole ecosystem to -- and the partner ecosystem to understand the products and reach out and grab the right customers' attention for them. So we are definitely going to do beta by, I'll say, at least 2 quarters down the line. So at least third or -- third to fourth quarter, we'll have certain betas ready and mostly the products will be released. At least 1 product will be released in that category by this financial year, actually.

Okay. That helps. And the last one, the service tech demand, you mentioned that there is a INR 56 crore order, which has come in favor of you. So overall demand is INR 122 crore. So is it that some number of years, the relief has been given? Or can you explain a bit more on that?

No. Overall, it's INR 161 crores. Out of that -- so it is starting from 2011 to June 2017. Out of that INR 56 crore order, we got it in our favor.

Yes. No. So that I understood, INR 56 crore is part of the order. But I understand like particular issue of the matter?

No, no, no. It is the same case. Only thing the department has put demand for first 4 years. Then after 2 years, there was a second demand. And then for next 2 years, something, it was third demand. And then the first order, which has come, that had gone to the tribunal. And there, we got a favorable order. So second and third are in pipeline means, they are in tribunal. So the dates are not yet come actually.

So just to add, 11 to 14 was at [ SysTec ] Delhi; 14 to 15, 15 to 16 is at [ SysTec ] Mumbai; and 16 to 17 is at commissioner level in Pnue. So first case, which was, which was 11 to 14, which at [ SysTec ] Delhi, that was decided in our favor. And if you look at subsequent years, the matter is over.. So we are...

Okay. the matter is really soon.

Consuming our matter, okay.

Yes, yes. Same matter.

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

Congratulations for the great set of numbers. Sir, can you give me the retail count that we ended the year with and we had in Q3 and last year?

Q3 in last year? Can you repeat the question?

Total number of retail touch points that we have?

Touch points?

Yes. Like how many retailers we have been selling?

So you're talking about number of license sold or number of retailers that we have?

Yes, number of retailers that we have?

Yes, it is -- we have T1, T2, T3, T4. So it's a long. long distribution chain. And everything put together should be close to -- if I have to give a rough number, it will be about 25,000.

And what was the number in Q3 and the same last year?

So it's more or less similar numbers. So there has been some churn, plus we also have added a few of the new dealers. But more or less, number stays in this range.

But if you check the PowerPoint presentation of respective quarter, the sooner you will get all these answers in those presentation.

The next question is from the line of Swechha Jain from ANS Wealth.

Sir, I have a couple of questions. Sir, the first question is actually a follow-up on an earlier participant who asked a question about the percentage of sales that we have through our online portal, the company and indirectly that we sell on online. Sir, can you have -- do we have a breakup in that? How much is towards Retail and how much is towards the enterprise?

So Enterprise online sale doesn't happen.

Okay, so everything is Retail?

It is only Retail. Yes, yes, it is only Retail.

Okay. Okay. Sir, and my second question is, sir, in terms of licenses sold, so do we track in such a way where we know the licenses that we have sold, and can we have a split between how much licenses are sold to like a first-time user? How much of it is sold to a user who was using an earlier some other software and then it has moved to our portal? And how much of these licenses are renewed? Like should we track on these parameters?

Yes, yes. We track. We track. We track.

Okay. Perfect. Sir, can you share those numbers for FY '21?

Those numbers are, like, for the internal purpose. Nitin, can you answer this question?

Yes. So see, basically, we track these numbers, and there is a complete mechanism of tracking customer movement, whether it is 1 year, 3 year, 5 year and what is -- so if I have to talk about renewal, in case of Retail, the renewal ratio would be about 40% to 45%. And all other numbers also, we track it, but that is more of internal consumption.

Okay. Okay. Okay. And sir, we made a lot of -- we've onboarded a couple of people at a senior level. So do we have any ESOP policy? Or have you given them any such kind of ESOP policy and...

Yes, yes, yes.

Okay. Okay. So you've given ESOP to all of them, sir, the senior management?

Yes.

Yes. You go ahead?

Carry on.

Okay. Sir. And then, sir, just a couple of a few more quick questions. Can I just squeeze them in?

Yes. Yes, yes. No problem.

Okay. So can you share the yield that we got in our investments in FY '21?

So yes. So we are talking about mutual fund investments?

Yes, yes. Overall, on mutual fund bonds, everything. So what was the yield that we...

Current year, if you look at, pretax wheel, it was about 4.2% compared to 6.6% last year.

Okay. Okay. Sir, and can you give us the EBITDA percentage separately for Retail and Enterprise that we make?

That we track it internally. And as I said in the beginning that Retail is having a better margin compared to Enterprise because we are making investments in Enterprise, but that is more for internal tracking.

Okay. Okay. Okay. And sir, just wanted to confirm, I think when one of the participants was asking about selling and marketing and general expenses, which has gone down this year. Sir, I just wanted to confirm you said that these expenses would come back, right, in FY '22? Have I got that correct?

See, it is not that way. It is it is not something that marketing expenditure is done on percentage basis. No, it is not at all. It is done on a need basis. If the need is there, we will do the marketing part of it. We will do that spending part of it. Then we are not going to look at what is a percentage it is going to happen. So with this pandemic situation, there are a lot of marketing activities, which got hampered, but then we have tried to do some other activities part of it and all this thing. Based on that, the percentage will keep on varying. And with this year, '21/'22, even today, we all don't know what is going to happen in this -- about this lockdown period part of it. So we can say that what kind of marketing will be doing it, but we have to continue doing marketing activities. And if the lockdown is there, maybe the expenditure on marketing will be a bit less if the lockdown is open.

Right, sir. Right, sir. Sir, my one last question. In our investor presentation, we've written that we are evaluating certain strategic inorganic opportunities. So just wanted to know, are we actively pursuing something? Can we see something in FY '22?

Yes, we have an internal sell and we are actively looking at right fit opportunities for us. And we have closed almost 3 transactions in the last 2 years. But then as you know, maintenance has got a lot of variables and it takes time because you should get a target, which aligns to your line of business. So we are continuously on lookout for inorganic activities. So Lisa, it is already 5:16. Maybe if you can just take the last question.

Sure, sir. We'll take the next question from the line of Mayank Babla from Dalal & Brocha.

Sir, just looking at the different angles for the sales bifurcation, sir, how much percent of the sales come from our partnerships, let's say, laptop OEMs or PC OEMs? And what is the strategy over there?

Nitin?

So basically, we don't have any OEMs tie-up. So it is -- more it is coming through. For Retail, it is more through dealers. And for the Enterprise, it is more through system integrators.

Okay. And sir, so it means system integrator where you -- that comes to my next question. So these Tier 1 companies like TCS, Infosys, even they provide Security-as-a-Service, you mean to say these are sighting, yes?

Yes, yes. But there are -- see, TCS, Infosys are very large in size. For our size of business, when we talk about SMB, SMEs, these are mainly Tier 2, Tier 3 kind of SI, system integrators.

Okay, sir. We look at them more as partners than enablers, stand-and-check to us, So Security-as-a-Service is an enabler for us?

Yes.

That's all on my -- and sir, sorry, one last, if I could squeeze in. Sir, you said that online sales is 22% of revenue and it looks optically similar to last year because of the distribution. Revenues from that side [indiscernible].

So it is -- in terms volume -- value, it is much higher because our distributor -- distribution sale has gone up. So if I have to give you the exact number, this year online sales is INR 45 crore on our site sales against INR 36 crore of last year. And indirect, which is e-commerce is INR 20 crore this year against INR 18 crore of last year. So there is a growth, but percentage remains same because our distributor sale has gone up.

Ladies and gentlemen, due to time constraint, that was our last question. I now hand the conference over to Mr. Nitin Kulkarni for his closing comments.

I thank everyone for joining the call. I hope we have been able to address all your queries. If you need any further information, you can kindly get in touch with, Earnest & Young, our IR advisers. Thank you very much. Stay safe. Thank you.

Thank you.

Thank you. Thank you all of you.

Thank you. Ladies and gentlemen, on behalf of Quick Heal Technologies Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.