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

Ladies and gentlemen, good day, and welcome to the Quick Heal Technologies Limited Q3 FY '22 Earnings Conference Call. We have with us today, Mr. Kailash Katkar, Managing Director and CEO; Mr. Sanjay Katkar, Joint Managing Director and CTO; and Mr. Navin Sharma, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Navin Sharma from Quick Heal Technologies Limited. Thank you, and over to you, sir.

Hello, and good evening, everyone. I'm pleased to welcome you all to our earnings call to discuss our Q3 and 9 months FY '22 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 that anything said on this call, which reflects our outlook for the future, which could be construed as a forward-looking statement, must be reviewed in conjunction with the risk 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, Navin. Good evening, ladies and gentlemen. Trust you and your dear ones are well and safe. Thank you for making the time to join us today to discuss the Quick Heal Technologies results for Q3 and 9 months. I would like to take this opportunity to update you about the key developments for the quarter. We had a very successful Q3 with a growth in revenue, earnings and cash flow. Again, despite COVID challenges and considering last year's turnover, 9 months are not comparable. But still, we have achieved at par results. Navin will definitely cover our financial performance in detail in his comments. We have witnessed massive digitalization in the last couple of years. The cybersecurity industry is going to follow the [ out space ] and emerging use cases. We find ourselves into the right place at the right time to cater to and latch on to the opportunities that the world is presenting in front of us. We have been slowly and quietly preparing ourselves for the yield. Today, I will be touching upon 2 elements of our transition along with our way ahead. During the quarter, both our businesses performed well. We are a legacy in the retail antivirus business and command market leadership in the geographies that we mostly operate. The business is strong and constitute about 75% to 80% of our overall business. On the other hand, we have been incubating a new business within the company since past few years to serve enterprise customers at large. Currently, it has become a sizable business for us within a few years of operations. It has been growing at a fast pace and we foresee that to continue in the times to come. We have onboarded industrial experts from across global indie product, sales, R&D, finance, HR domain to lead us to where we intend. We work with attrition rate lower than the industry, owning to our employees' value proposition, a great culture and empowerment. We have continuously upgraded our product offering to our retail customers and launched a new version with a focus on data privacy which is the need of the hour. Talking about our enterprise customers, we have launched new products under the separate Hawkk series and have a very strong pipeline of the next-generation products under development. While our retail business currently is mostly driven by Indian market, we have also started to spread ourselves globally through the enterprise segment. For the 9 months of financial year 2022, roundly 18% of our enterprise business is coming through global markets. We are setting foot in new geographies, and you can expect growth in these numbers going forward. We are into the business of commanding over 95% in gross margin and have a very strong balance sheet and are a debt-free company. We have been funding our R&D, marketing investment -- R&D investment through our internal accruals and charging it into our P&L. While on the inorganic side, we are in a constant lookout for strategic opportunities to fuel our growth momentum. Apart from the road map, we are in for the future. We have been continuously and constantly rewarding our investors through dividend and buyback programs and we'll continue to do so. As a company, we have -- we are working extensively into building a 3-year road map for us and we will -- we will be talking about in the next quarter. Now I would like to hand over the floor to Mr. Sanjay Katkar, Joint Managing Director and CTO. Over to you, Sanjay.

Thanks, Kailash, and good evening, everyone. Before I speak about trends in cybersecurity market, I would like to discuss a couple of points. During the quarter, Seqrite bagged advanced approved endpoint protection 2021 test certification for its EPS range of products and solutions, offering protection from unknown advanced, sophisticated ransomware and APT attacks. Also, Seqrite EPS received AV-TEST's Top Product certificate for stopping the most sophisticated malware with perfect scores on the parameters of protection, performance and usability for the second time in a row. On the product side, to which Kailash referred earlier, we have continuously upgraded our product offerings and have launched a new version of our retail consumers with focus on data privacy. For our enterprise customers, we have launched new products under the Seqrite Hawkk series. And with this launch, we are aiming to redefine enterprise security with comprehensive solutions to secure their digital transformation journey. We will continue to gradually invest and add more products under the Seqrite Hawkk series that we mark our foray into the endpoint detection and response, EDR as we call it, zero trust, data privacy and cloud-based network security products. On the security -- on the cybersecurity trends, Q3 proved unexpectedly fast paced for various software-related attacks. Our records showed several thousand attacks per day on some days. In quarter 3, the new ransomware, Oops, quickly capitalized on some of the most dangerous vulnerabilities in the wild. Our research underscores that ransomware continues to evolve and is becoming more dangerous based on the catastrophic damage it can inflict on the target organization. We continue to see ransomware attacks, coinminer attacks and phishing attacks aggressively increase in sophistication and frequency in Q3. To conclude, I would like to say that as we sail through the pandemic and as we become more and more reliable on digital infrastructure to solve our day-to-day needs such as being connected to work remotely, digital learning and payment, demands for our security products and solutions will continue to remain strong. With this, I would like to hand over the floor to our CFO, Mr. Navin Sharma, to discuss our financial performance with you.

Thank you, Sanjay. Let me now take you through the financial highlights for the third quarter and 9 months ended December '21. Historically, Q3 has always been a weak quarter for us, but still, we were able to deliver good growth in Q3 FY '22. In Q3, our consolidated revenue from operations grew by 13.9% to INR 796 million compared to INR 699 million in quarter 3 of last year, driven by strong growth in the enterprise business and higher renewal rate on consumer segment. 76.4% of the revenue for the quarter came from retail segment, whereas 23.6% from enterprise and government segment. EBITDA for the quarter was up 24.4% Y-o-Y at INR 205 million compared to INR 165 million in Q3 of last year. EPS for the quarter stood at INR 2.45, up by 17% Y-o-Y. The 9 months results are not comparable as the financial numbers of Q1 FY '21 includes revenues spillover of INR 300 million from Q4 FY '20 due to nonavailability of transport facilities due to lockdown. If the revenue spillover of INR 300 million in Q1 FY '21 is left aside, we have registered over 20% growth Y-o-Y during 9 months of FY '22. Even after considering the revenue spillover, we have recorded modest growth of 4.6% in 9 months Y-o-Y. In line with our continued focus on R&D and innovation, we increased our investment in R&D by 25% on Y-o-Y basis, and it stood at INR 213 million compared to INR 170 million in Q3 of last year. Other income during the quarter has gone down by 42% Y-o-Y to INR 36 million from INR 63 million in the last year. This was partly due to reduction in the treasury side due to buybacks and also partly due to fall in the treasury yields. With this, profit after tax for the quarter increased by 6% Y-o-Y to INR 143 million. PAT margin for the quarter stood at 17.9%. Cash profit after tax during the porter stood at INR 188 million. The effective corporate tax rate for the quarter was at 26.99%. Overall, to sum up, we managed to have substantial strong growth, and we are confident to continue this growth trajectory in the coming future while the economy continues to recover. With this, we will now open the floor for questions. Thank you.

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

I just -- I have 2 questions. The first one being, what is your ARPU for retail segment in the current quarter? Has it gone up? Secondly, our working capital days have gone up compared to last year. Can you throw some color on it? And could you provide an outlook for the same?

First, this is with respect to ARPU. So basically what -- currently, you must have seen that we are operating at 96% -- 95%, 96% gross margin. Hence, what we are focusing is on increasing the revenue through multiple ways. And hence, we are not currently much focusing on ARPU. And again, ARPU has a lot of business dependencies. This is part one. With respect to working capital, yes, overall net working capital base increased to 110 days versus 76 days in December 2020. The increased capital days was a result of the increase in receivable days from 127 to 160 days -- 163 days. As you might know, several small- and medium-sized enterprises are currently impacted with lower liquidity due to lockdown restrictions imposed earlier, which has severely impacted their business. We have taken adequate measures regarding collection. I would also like to highlight that almost more than half of the total receivables are with our top 20 distributors with whom we have been doing business for several years. We are keeping a close watch on these receivables, and we are confident of their collection. We will continue to maintain our financial decisions and expect the bitter days to reduce over the next few quarters.

The next question is from the line of Rahul Talwar from Sharekhan.

Congratulations to you all for a great set of numbers. So my first question is your Enterprise Security segment, Seqrite, is growing at a very fast rate. And it already constitutes almost say, 25% of your total revenue. Where do you see that in the, say, next coming 3 to 5 years?

So actually, as I have already answered this question in past investor calls also that we are aiming to have 50%, 50% in next 3 years' time, where we see that enterprise revenue should grow up. And we are very much confident about it even if we don't touch to 50%, 50%, but we will be very close to 50%, 50%.

Okay, sir. That answers my question. Sir, my second question is, so we have been developing products that is targeted towards SME and large enterprises in the last couple of years. Any concrete deal which has happened in this quarter, if you could provide any insights on that?

Not specifically in this quarter because those products are like about to release. Some of the beta version has come out, and we have started doing a beta testing with some few of our customers. And we are getting very positive response from the customers. So revenue is yet to start for those new products. Yes. And that is the reason it is giving me confidence that my Enterprise ratio will go to 50%,50%.

The next question is from the line of Nishant Khandelwal from Globe Capital.

Yes. Congratulations to the whole team on a great set of numbers. We can see the revenue has grown around 14% on a Y-o-Y basis. I just have a couple of questions on the R&D side. First of all, what was our R&D spend during the quarter as a percentage of total revenue? Can you please give us a light on that?

Nishant, in current quarter, our total R&D spend was 27% of revenue. And on 9 months, our R&D spend is close to -- is slightly higher than 25% of our 9 months' revenue.

Okay, okay. No, your investment in R&D has gone up significantly. It is somewhere around INR 213-plus million in the consolidated basis. I mean, is it targeted towards the Enterprise segment only or the Retail segment also? The reason I'm asking this question is you are already a legacy in the retail segment, so I'm just wondering where this whole stand is on.

Yes, Nishant, our R&D spend is a mix of retail and enterprise, but you rightly said that majority of this new spend -- or this majority of the increase is on account of R&D investment on enterprise side of the business.

So you are still focused more on the Enterprise segment for this R&D spend, right?

Yes. Yes, because on retail side, the investment, we already had made those investments in past and which -- and those investments are yielding result. So as of now, there is no much fresh investment is required on retail side other than regular maintenance spend for R&D.

The next question is from the line of Kanika Sud from NVS Research.

Congratulations to the management on the good set of numbers. My question is on the product development side. Can you please give us some flavor on the planned launches and the time lines by which we can expect them to be out in the market?

So this new product is like currently, we are in the process of launching a couple of products actually. But at the same time, we have planned a detailed discussion on future road map in our next quarter discussion actually. With this, I'll say, okay, we have already launched endpoint detection and response product in this quarter, which we assume that it's going to -- we are going to enter the EDR market with the launch of this product, which is purely for large enterprises. And we'll be soon launching a privacy data protection product, again, for large enterprises.

Okay, that is helpful. Do you mind sharing how many new products we planning in total? And these products that we are planning, are they focused on the Enterprise segment only or are we seeing anything on the Retail side?

Major products are focused on enterprise side. And as I already mentioned in my speech about we are building a 3-year road map, and that we will definitely like to talk to all the investors in coming next quarter about it.

And Kanika, just to add, see, retail business is -- our currently retail business or legacy business is quite a mature business. There, whatever investment or, let's say, sort of larger products, those are very much there. And the market is not changing very drastically. And majority of new product development, majority of spend on R&D or investment on R&D would be happening on enterprise side. And as Kailash said in his initial commentary, next quarter, we are -- next quarter, we will be there out with a detailed 3-year road map, where we'll be discussing about all aspects of the business, right from team to product to our M&A strategy, everything we'll be discussing about that at length and in detail in the next quarter.

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

So this one's on the Enterprise business, a quick question. Historically, even in the retail front, you all were very India-bound company kind of. And now we are seeing a significant portion of -- a respectable portion of your enterprise business coming from global non-India markets. So can you just give us a flavor of what the thought process is? How would you all be selling? Would you all be having a partner there? Who would be doing it? And which regions you are targeting near India regions? Some sense, because we see there's a lot of opportunity. And if you are all also taking -- are taking our enterprise global, would it also be possible for you to also turn your retail model around into a more India-plus model?

So I got your question. If I have to talk about the retail part of it, yes. When it comes to India the brand popularity is very strong, so it becomes easy for us to build up business for retail from India and neighboring countries, post-India. And when it comes to the global market, part of it I see it is more comfortable to take enterprise products to the international market. It is just because we directly reach out to the customers to sell the enterprise product. And because for the retail, it happens mostly through online. And we are present -- at present, we are available online in India and as well as we are working with some of the other international country online platforms also. And for enterprise, we are working through the partners. And we have a good number of partners in some of the countries like Italy, Spain, African countries, Middle East, even Asia-specific countries. And through that, we are trying to reach out to the enterprise customers, and we could be able to generate close to 18% of our revenue from total enterprise part of it.

So just as a follow-on to that, in the markets where you're all be taking your enterprise product, so your partner, they would be IT consultant firms or they would be security, innovation-specific, security consultant firm who, as a part of their entire offering from service products, they would also -- they have the option to include Seqrite enterprise as a part of the solution that they provide to their customers?

They are mostly system integrators, actually.

Selling security products.

Selling security products. Specifically, they are -- their specifications are more into security products.

The next question is from the line of Keshav Garg from CCIPL.

Sir, many congratulations for good numbers. Sir, I had some doubts. So like now our retail business is around 75% of our total revenue. And so this enterprise business, we started 3 years back. So basically, if we take out the enterprise revenue, basically a quarter of the revenue, so then basically, on a trailing 12-month basis, our retail business is around INR 250 crores. And sir, if we see then even 5, 6 years back, we were doing around INR 250 crore revenue only when enterprise business was not there. So basically, our retail business is either stagnant or declining. So is there -- is my thinking correct or you would like to correct me somewhere?

Yes. Keshav, See, there are 2 aspects to it. Aspect number one, we all understand and appreciate that there has not been the expected growth from the organization in the last 2 years, but if I -- and that's the reason that we are discussing that in next quarter. We will be coming with a full road map -- a 3-year road map as to how we will be growing our -- growing the company with the right set of revenue that is Part 1. B, if I compare it with last year, on absolute terms, if you see compared to last year's, retail segment, there is a degrowth of 2.5%. But at the moment you adjust last year's number, you are aware that there was a spillover revenue of INR 300 million. If you adjust it, then even in retail side, on 9 months, there is a growth of -- good growth of 15%. So this is what -- in summary, we haven't grown in past few years, but this right set of leadership team, the right set of product development, which is there, and with the right set of channel partners or, let's say, sales line, what we are looking for, with right set of -- having a different -- the enterprise business which literally was not there earlier and we are clear that retail business growth would be very modest growth even in future. That's the reason why we are incubating a fast-pace, a fast-growth business. And Enterprise segment, which was not -- which was a single-digit contributor for some time. Until this quarter, we have reached a 25% level. And as Kailash already said that in the next 3 years, we want this business to be a 50-50 business. 50 -- half of the revenue will be coming from enterprise without a degrowth in retail segment.

Sir, I wanted to understand that, sir, the last year, '21 calendar year, sir, the PC sales went, in the domestic market, around 40%, 50%. In that case, since our antivirus is being used in PC, so then, shouldn't our revenue also should have grown somewhere in the same range?

Keshav, there are 2 aspects. In fact, one of -- in earlier one of question was with respect to ARPU. One part that revenue -- the PC sales growth is there in the market, but at the same time, probably because of pandemic, people have -- people at this point in time are opting for antivirus products, which is in their budget. And probably that is the reason you can see the -- and that's the reason that ARPU on the retail segment is comparatively lesser. But this is a temporary phenomenon, and we expect -- but we expect that ARPU should start increasing the way Sanjay has explained in his commentary that sophisticated attacks are -- or cyber attacks are happening. So probably, we expect this phenomena of lower ARPU to correct it in commensurate.

Most of the initially -- I mean most of the new PCs that are sold come with some kind of protection for initial 6 months or -- so after that, the people start reviewing or buying -- putting a security, which is a paid security, actually. So yes, definitely, our team is making sure that we are trying to grab the sales -- in the PC sales market by addressing that.

Okay, sir. So do we have any partnership with PC OEMs like Dell, HP, et cetera, wherein we can install -- pre-install our antivirus software with them? I mean, rather than the customer buying -- after buying a PC, can we preinstall it in partnership with the OEM?

No, we are -- as partners, we are not doing that.

Most of these vendors have partnership assigned globally actually. And our experience also sees that bundling OEM, it's not -- it's very -- having a cleaner margin, I mean to say. Actually, its impact investment business, actually. We have to we invest into the per copy that they distribute along with the laptops, actually, apart from the PC. Only thing is we have to grab the market as the people start using it and as they start facing the challenges of trade side.

Okay, sir. And lastly, sir, I wanted to understand, sir, that since you are saying that from a quarter of our business is enterprise government business becomes half of our business 3 years down the line. So then what will be the impact on our margins? Because margins in retail segment would be definitely higher than the enterprise segment. So then what happens to our margins 3 years down the line?

Okay. So as we said earlier that our gross margin is 96% and that since we are a product company and our -- and we charge off all our R&D investment to P&L, gross margin or at the margin level, regardless whether it is retail or enterprise, we command that 95%, 96% gross margin, which means an increase in revenue, either on retail or enterprise, would be -- will help us improving our operational margin.

[Operator Instructions] The next question is from the line of Aishwarya Suresh from Situs Finance.

Congratulations on the good set of numbers. So I have 2 questions. The first one is that what is the size of Indian retail cybersecurity segment? And how well are you placed?

So I think I have -- we have answered this question in past investor calls. So that there is no confirmed figures from any vendor because it used to happen, 10 to 15 years, back that some of the media company used to do this survey, but for the last so many years, no one has done a particular survey for the consumer part of it. But whatever we gather the information where we meet the channel partner and retail partners which we have already across India, what we see is around between INR 650 crores to INR 800 crores of market is there -- consumer market is there. And we are opening up to 35% part of it, actually.

But this is all paid protection.

This is all paid well, actually. This is what I'm talking about.

Okay. And my second question is that how do you plan to gain market share? Do you have any number in mind which we'll be able to achieve in the next 3 to 5 years?

So we see -- we have a lot of strategies when it comes to gain more market share part of it, but that keeps on changing on a regular basis. It totally depends upon market -- or market driven. Because entire thing is driven by the market, channel partners and the e-commerce partners, actually. So that we are moving based on the consumer, actually. So see, there is a market for a different segment of custom planning to say is that every -- there's a little price point and each price point has a different market size, actually. And we are making sure that we are present in each of these markets with our offering and pushing our products across our channel partner network as well as online sales partners. At the same time, what we also see a lot of international MLP products that come and disturb the market with dumping the products at a very low cost. For them, India is a very small market, actually, and to grab it. Or maybe the partners are doing that. But many times, certain areas or certain pockets of the market are disturbed because of the products there are sold at a very low cost. There, we have to play well, and we've been very well positioned in this market. We are able to come on these situations by pushing the right mix of products. So when there is such a -- when we come out with lower-range products, lower-cost products, which we have, and that's how we try to make sure that we at least maintain the market share. And wherever there is a gap, we try to get the market share from the competition, actually. So that's always -- I mean to say, day in, day out will work for us still.

The next question is from the line of [ Reyna Litalwal ] from [ Mountain Trough ] Finance.

Firstly, I'd like to congratulate you on a great set of numbers. I have a couple of questions. Sir, what is your view on the antivirus in upstream retail space, like how is it growing? What are your views? How do you think it will pan out in the future?

So antivirus, as we have been observing a single-digit growth over the last at least 3, 4 years. And it had earlier impacted -- got impacted by PC sales, but as -- during the pandemic, PC sales has went up. It has given a smaller boost to this consumer retail part of the antivirus products. At the same time, what we are also observing is there is a lot of things that are evolving in this market. I mean to say, OS is evolving and the kind of threat that we are seeing is also evolving. Like as people are focusing more towards protecting the privacy nowadays, rather than -- in fact, just to trend some barriers, I think we detected bigger challenge, too. And we think still the market dynamics are going to change. So we are making sure that we invest into these newer features of the retail product and stay on top of the game. And for that, according to U.S., retail market will grow in single digits, but there will be certain push which can give it a bigger -- a little bit of push. And we are more focused on getting -- or I mean to say, hopeful for mobile getting pushed in this segment -- retail segment. Because mobile has now become a key aspect of doing all kinds of transactions online, digital. Everything is moving on mobile and created on the mobile front and are also doing on that space. But it's -- comparable to PC, they are at a very low rate right now. But this will change, and that's what we hope on the retail front. Mobile can be the one of the future growth segments.

Okay. Okay. Sir, also, last quarter, you mentioned that L7 is almost ready with the product. Just wanted to understand how long would it be before we start seeing the benefits.

We now -- basically, L7 has -- from a stage where L7 was more into finalizing or, let's say, completing its product development or testing it, they have already started generating revenue. The revenue generation or it's a type of customers where L7 has ventured into, is very impressive. And we expect this trend to improve in the future.

The next question is from the line of [ Aryan ] Sharma from Monarch Networth.

Congratulations for the satisfying numbers. My first question is like we are sitting on a good amount of cash. So what is the kind of average yield we'd get on these cash and cash equivalents?

Yes. With current market condition 3.83% is average yield, what we are getting from cash, which is there in balance sheet.

Okay. And you also mentioned that you have a road map for the future 3 years or so. So is there any road map to utilize this cash for like a better purpose or any plans for that?

Yes. And of course, I mean, when we are talking about growth, growth has to be comprehensive that covers product, that covers both organic as well as inorganic growth. So that is -- that goes without saying. And along with that, we have rewarded investors in the past to dividends and buyback, and we will continue the trend there. A comprehensive growth for business is there, but at the same time, shareholders have also got right share of it.

Okay, okay. No. And then coming to the marketing side, like as we say, we have around 30% market share, if I'm not wrong. So is it correct?

Yes. 30% to 35%. Right. You're right. Retail.

Okay, retail, sir. But generally, when we do, for example, like top 10 antiviruses in India, we don't feature in any of the side segment, tech radar or PC, MAC, which are being used by a lot of individuals. So are we not concerned for that kind of marketing or...

See, we are operating in a different market. See, in India, when you say these magazines and all, they have been looked by certain segment of users. But if you see on if you see on ground, on sales -- if you see, for example, sales through Amazon, sales through partners, we are having the largest share of the sales that we -- that happens in India, actually. And if you see the rating of the products our there, these magazines are biased -- I mean to say, are driven by a lot of marketing efforts. But at the same time, there are a lot of certifications that happen through independent testing organizations like AV-TEST. If you go to the AV-TEST website, which is a German-based lab, and that is referred by Gartner. That is deferred by all the large enterprises, where they look for the technical quality and performance of the product for taking the sales. And these organizations test products every couple of months, actually. And with the latest rates which are there effective in real life to the larger organization. And that's why in my speech today, often which I said, Seqrite was figured in top products in that test, actually. We've compared to all the global players directly. Global players, when I say are Symantec, Avira or even the so called. And if you can go to that website you'll, we're in the top products, which is for the continuous second time in the -- in this year period, actually. And that really helps our sales and marketing team to go and reach to the large enterprises or even government segment, and that's where it is considered actually. That's why we are seeing good-enough traction on the enterprise transaction. And that is the reason we have a maximum share in India.

Right. So we have more kind of an organic growth, you mean to say, if I'm correct, yes. Okay.

The next question is from the line of Aditi Gupta from [indiscernible] Consultant.

I have a question regarding your trade receivables. You have a very high level of trade receivables. Have you provided for them? And in future, do you expect a portion of the same to go bad?

As mentioned in my earlier part, yes, receivables have increased. Our provision -- on a conservative basis, we have made some provisions, like for the entire year, the provision is to the tune of INR 3 crores. But these are more of aging-based provision. And as I said in earlier part of commentary as well that more than 50% of receivables are from our top 28 distributors with whom we are in touch with -- in and out, we understand their financial condition. So first is, even the provision which has been made, this is more of a conservative. We don't foresee any major surprise coming on collection front. The collection has largely been slowed down because of cash availability. Once the cash starts coming in circulation, we expect our receivables to go down. And in the next 2 quarters, you will see this happening with our receivables also.

Perfect. And one more question I have, like do we plan to increase the sales and marketing expense?

For sales and marketing expenses, usually -- see, as I have already told in past so that our sales is seasonable. So when I say that Q1 is always a bit down, but Q2 is on the upper side, and then again Q3 is down because of the festival time. And again, Q4 is always up. So we have to really plan our sales and marketing expenses based on this buying seasonality. And based on that, we have to spend more into the marketing part of it whenever this buying happens actually. Especially the year-end is more budgeting time for corporate and most of the time -- most of the organizations and buyers, they buy product majorly in quarter 4 part of it. And quarter 2 part of it. So based on that, the advertisement expenses and marketing expenses take place.

And just to add that, even if you see for 9 months of our total sales and marketing expenses are to the tune of 24% of revenue. So we always maintain a fair balance within and we also try to see -- want to try to see that, how the sales -- F&D cost is helping to increase the revenue. So based on that, we'll keep increasing the expenses whenever needed.

Actually, I would say that our expenditure, when it comes to the product development cost part of it, it is stable all 12 months. Marketing -- sales and marketing, like advertising cost will vary as a seasonal basis. And our sales will also vary based on seasonal business. So usually, if you have to really compare anything, you should do it year-on-year -- will be much better than compared to quarter-on-quarter because we will not be able to give the right kind of justification for quarter-to-quarter explanation part of it.

The next question is from the line of Nidhi Singh from [ Neil ] Investments.

My question was mainly in terms of attrition rate. Sir, I just wanted to point out that attrition has been a major concern for most of the IT companies in the IT sector as whole. So like how has that impacted Quickly at large, given that you did mention this in your opening remarks also? But just I would like you to throw some light on it. Like what is the current attrition rate, if you can provide, for Quick Heal? Like has it gone up from the past, had it come down? Is that you can give? And also, what are the steps that we are taking, which would be helpful in those terms? Like you have mentioned that we are comparatively lower. So what is it that we are doing differently or something that has been helpful for us in that? And it's like I've got it right in my part.

So yes, Nidhi. Actually, your question is right. And the entire industry is facing a lot of challenges about the attrition part of it when it comes to the software development companies. But if I have to tell about Quick Heal, if I have to talk about the software developers, developing engineers and the customer support engineers, which is close to 50% of our employees, actually. And definitely, the attrition rate, if I have to compare this past of Quick Heal, it has gone up. And the entire industry is facing same problem. But whatever the industry is facing today's problem, the attrition rate is close to 40% in the industry and 3Q attrition rate to close to 24% to 25%. So entire industry is taking a lot of effort, and we have also taken a lot of efforts to balance this attrition part of it and retain those employees and try to get more and more employees on board. Now those efforts, I will not able to put it here because I really don't remember that part of it because HR people really work on this part of it. But I just wanted to say that we have taken a lot of effort to make sure that we retain our employees and get more and more talent on board, actually.

The next question will follow from the line of Keshav Garg from CCIPL.

Sir, conscious to know that how much is mobile antivirus contributing to our top line?

Keshav, as you are aware that in India, still the mobile -- I mean the awareness of using antivirus type -- antivirus on mobile is not there. So we are using right strategy, a mix of strategies with free and paid version actually, that's the case. So this is something which we are also evaluating that how -- in India, you know that more than 600 million smartphone devices are there, and it has a huge market. But just we need to understand the customer behavior, and we need to see that how this segment can be catered through antivirus. So industry -- as of now, it's not that we are not selling much product. As of now, awareness in the industry is still not there, and we are just trying to develop that awareness.

Percentage is less than 1% right now.

It is 1% less, and it is not only Quick Heal that is facing this problem. The entire antivirus cybersecurity industry is facing the same problem. People are not ready to buy security software for their smartphones. I don't know why, but this is happening everywhere globally.

Sir, a few months back in [indiscernible] on the FM radio, I heard your advertisement of Quick Heal for mobile antivirus or some mobile products. So that means that we are basically in the market and we are selling that products.

Yes, of course. Of course, the product is already available on website. In shops also, the product is ready. And we have to do this kind of activity for awareness part of it because we cannot spend too much money on that part because we knew that it is not generating revenue. But wherever we get these opportunities or wherever we get opportunity to speak on media, we definitely speak about mobile security part also, along with other security parts.

Sir, so why can't we get into a partnership with the OEMs who are selling mobile like OPPO and et cetera. Samsung?

So we have already tried all those things, but we got -- I mean, failed in that actually.

Actually, I'll add the OEM business is not at all revenue-generating business. It has to be investment business. Phone owners -- phone vendors ask for money to distribute their product -- any product on their handsets actually. And it is not giving results because after the expiry of the trial version, people don't renew it, actually. So we have done that earlier, and we're already doing that, again, even important profits of Indian market, with certain vendors like, Eye-ball, even. Indian vendors are bundling our software. But if you compare revenue-wise, it's not giving that decrease, actually. So our current revenues are less than 1% of our total revenue. The mobile contributed less than 1%.

And sir, what about the IT distributors like Redington and Ingram Micro? Is there a possibility of getting into partnership with them since they are basically selling their wares and they have the distribution and everything, marketing setup?

We are already doing that, actually. That is the reason we could be able to generate at least 1% operating revenue.

No, no. We are bundle are working with the large retail like Ingram Micro and all. They are working with our retail products for PCs as well as for mobile also. Yes, both. One part goes, it cannot be a push model. It has to be pull model. Aware -- so enroot awareness amongst users need to be there. And today, that awareness is not there. Hence, we are addressing it from root. Just pushing it through vendor sector, as Sanjay also said, what it requires, it means on you need to spend money because these distributors or OEMs expect money to install software a key on their phone. And once that software validity is over, no one -- again, the renewal is not there. Hence, they are addressing it from root. And in case of pushing, we are trying to generate awareness, a full model.

[Operator Instructions] The next question is a follow-up from the line of [indiscernible] from [indiscernible].

Just if you could share how much sales is coming from the online platform. Do we still have liquidity pressure on the traditional dealer ecosystem?

So current in this quarter, total online sales force has 23% of revenue. And last 9 months, online sales has converted 26% of revenue -- of product revenue. This is in line with how we performed last year. But yes, this is one of the channels which we are working aggressively to expand our business, that is part one. With respect to liquidity, yes, liquidity crunch is there. And in fact, it is reflecting in our total receivables also. But a confirmation what we are -- so liquidity pressure is there and it's reflecting in our receivables. But yes, all of our channel partners are acknowledging the money that they owe to us. And we are working to get this fully corrected in due course.

So that was very helpful. But also, could you please tell me how much of your revenue is coming from exports? Do you have any plans of entering into any new geographies?

So export, our enterprise segment, 18% of our enterprise revenue is coming from exports. And overall total portfolio revenue, which is coming from export, if you take into [indiscernible]. Second, to increase the export revenue because this is one part, which is not -- we have not kept it appropriately or -- in part. So what we are saying that in next 2 to 3 years, we want our enterprise revenue to grow to 50% of our total revenue. And a significant part of enterprise revenue will be coming from export markets. So that -- in the coming future, the export -- we expect export revenue to grow upfront.

As there are no further questions, I now hand the conference over to Mr. Navin Sharma for closing comments. Over to you, sir.

Thank you all for joining the call. I hope we have been able to answer the questions raised by you. In case -- if you need any clarification or any additional inputs, you can get in touch with [ E-val ], our Investor Relations adviser. Thank you once again, and happy Republic Day as well. Thank you.

Thank you.

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