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

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '27 Conference Call of Quick Heal Technologies Limited, hosted by Valorem Advisors. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Purvangi Jain from Valorem Advisors, and we represent the Investor Relations of Quick Heal Technologies Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter and first half of the financial year 2027. Before we begin, let me mention a quick cautionary statement. Some of the statements mentioned in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial performance for the quarter under review. Now without any further delay, let me introduce you to the management participating with us in today's earnings call. We have with us Dr. Sanjay Katkar, Joint Managing Director; Mr. Harish Kumar, Chief Executive Officer; and Mr. Ankit Maheshwari, the Chief Financial Officer. Without any further ado, I request Dr. Sanjay to start with his opening remarks. Thank you, and over to you, sir.

Yes. Thank you. This is Sanjay Katkar. Good evening, everyone, and thank you for joining us. I would like to begin with a perspective on how the cybersecurity environment is evolving and how Quick Heal and Seqrite are responding to that change. The attack surface is expanding, technology environments are becoming more distributed and customers are increasingly considering cybersecurity together with data protection and privacy. For us, this creates both a responsibility and a larger opportunity. Over the years, we have built deep capabilities in threat research, endpoint security and cybersecurity technology. The strategic evolution now underway is to apply those trends to a broader set of customers' problem. In enterprise, this means moving beyond our traditional strength in endpoint protection. Our portfolio is expanding into data privacy, exposure management and ransomware resilience alongside our broader cybersecurity capabilities. These are not isolated product bets. We are building an integrated architecture through which our technology capabilities can increasingly work together, helping customers simplify security operations while enabling Seqrite to address a larger share of their cybersecurity requirements. This evolution is also changing how we think about product development. Customers do not want security technologies that operate in isolation or add future complexity to their environment. They expect better visibility, faster response and solutions that can be adopted without creating additional operational burden. Our product direction is, therefore, guided by 3 principles: deepen protection in the areas where we already have strong capabilities, connect adjacent technologies into a more coherent security architecture and make the resulting solutions simpler for customers to consume and manage. Our threat research at Seqrite Lab remains central to this approach. The telemetry generated across our installed base gives our teams a continued view of how attacks are changing. That insight is applied across detection, response and product design, helping us improve established products while shaping newer capabilities. The opportunity is particularly relevant in India, where organizations across segments are digitizing rapidly while facing increasingly sophisticated threats and more demanding data protection environment. Our local research depth, established customer relationships and expanding portfolio give us a differentiated foundation from which to address this opportunity. During H1 FY '27, we secured strategic wins across defense, BFSI and a large IT services company through our new generation products. We also continued to see momentum in the government business. Beyond the immediate commercial value, such engagements are important learning opportunities. They allow us to validate our products in complex operating environments, sharpen deployment models and build reference use cases that can support wider adoption across similar customer segments. It is about commercializing innovation, packaging our capabilities around specific customer problems, simplifying adoption and achieving scale. That requires close alignment across engineering, product management and go-to-market. And this is where the organization is increasingly focused. We will continue to invest in research and innovation because the threat environment does not stand still. At the same time, we will judge progress by how effectively our technology improves customer relevance and translates into scalable business outcomes. With that perspective, I will hand over to Harish.

Thank you, Sanjay, and good evening, everyone. Q2 is a step in the right direction. More importantly, it gives us greater clarity on where we need to focus to build a more consistent and scalable business. Our immediate priority is commercial execution. Over the last few quarters, we have invested significantly in our product portfolio, technology capabilities and organization. The focus now is to translate these investments into customer acquisition, higher monetization of portfolio and stronger productivity from our go-to-market engine. Let me start with enterprise. We are seeing encouraging traction in the enterprise business, including strategic wins across defense, BFSI and a large IT services company through our new generation products, while government continues to be an important market for us. Next phase for Seqrite is about converting a broader portfolio into a larger share of customer cybersecurity and privacy spend. Our approach is differentiated by product maturity. In established categories, particularly endpoint security, the focus is on protecting the installed base, improving the renewals and increasing cross-sell. For newer offerings, our priority is different. We need to establish stronger customer references, demonstrate the effectiveness of the solutions in real-world environments and create repeatable sales motions. We will scale investment behind these offerings as customer validation strengthens. Internationally, we will remain selective. We would rather build meaningful positions in a smaller number of markets than spread our resources too thin. In consumer, our actions are more conscious. The business has a strong franchise and distribution footprint, but growth cannot come at the expense of business quality. We have, therefore, tightened credit and commercial controls. This may moderate some near-term volume, but we believe it is the right trade-off to improve receivables quality, channel discipline and the economics of the business. We are also bringing to extend the Quick Heal proposition beyond conventional antivirus as consumers face a broader range of digital risks. We will approach these opportunities selectively without diluting our focus on the core business. Across enterprise and consumer, therefore, the agenda is quite clear. In enterprise, we need to monetize the breadth of the portfolio. In consumer, we need to strengthen the quality and productivity of the franchise. And across both the businesses, we need greater conversion, productivity and predictability. We are consequently becoming more selective about where we allocate people, capital and management attention. Innovation will remain fundamental to Quick Heal. But at this stage, our journey, successful innovation must increasingly be visible in customer adoption and commercial outcomes. That is the execution discipline we are bringing to the business. With that, I will hand over to Ankit to take you through the financial performance.

Thank you, Harish, and good evening, everyone. Let me now take you through the financial performance for the quarter. Our financial performance for the quarter demonstrates our resilience in the business as we sail through headwinds in the business, especially consumer. For quarter 2 FY '27, consolidated revenue stood at INR 65 crores, representing quarter-on-quarter growth of 44% over Q1. On a year-on-year basis, revenue declined by 22%. The quarter-on-quarter growth was visible across both businesses. Enterprise revenue was INR 35 crores, increasing 18% quarter-on-quarter and declining 4% year-on-year. Consumer revenue was INR 36 crores, increasing 86% quarter-on-quarter and declining 40% year-on-year. Total expenditure, excluding depreciation, remained flat at INR 63 crores in quarter 2. The combination of higher revenue and a lower operating cost base resulted in EBITDA improving from a loss of INR 17.6 crores in quarter 1 to a positive INR 2.3 crores in quarter 2. PAT was INR 5.8 crores compared with a loss of INR 5.3 crores in quarter 1, resulting in a PAT margin of 9%. Our balance sheet remains strong and debt-free, providing us with the flexibility to continue investing in R&D and market expansion opportunities. Total receivables declined to INR 98 crores from INR 107 crores at the end of quarter 1. The comparable figure in quarter 2 FY '26 was INR 176 crores. This represents a reduction of INR 78 crores in total receivables over the course of 1 year due to our tightened credit control with our partners. Deferred revenue stood at INR 48 crores compared with INR 52 crores in quarter 1 FY '27, while the enterprise order book remained above INR 57 crores. Our financial priorities are to maintain discipline on the cost base, continue improving collections and working capital and translate revenue growth into consistent operating leverage and cash generation. With a strong foundation and a clear strategic road map, we remain committed to deliver consistent and sustainable growth in the future. Thank you. We will now be happy to take your questions.

[Operator Instructions] The first question is from the line of Shital Shah, an Individual Investor.

Last 10 years has been very painful for the company and shareholders in particular. You may agree with me, sir. In spite of cybersecurity has buzzword since long, and our company has a first-mover advantage and preference due to its domestic nature, domestic -- our last 10-year financials are nothing but pathetic. March '15 sales were INR 286 crores. After 10 years, it has become INR 261 crores. Same with profit, INR 54 crores has turned to a loss of INR 11 crores. Market capitalization is less than what it was 10 years ago. Although we investor community has a very hard look to get a concrete answer from the management as what lies ahead. I'm trying my luck again. I wish to ask you is what you aspire from the company in next 3 to 4 years in terms of revenue and margin? This is my first question, sir.

Yes, Shital, this is Sanjay here. And absolutely, you rightly said and gave the history about the 10 years. But I would like to add here or answer that we have been answering this question since long. It's not like we haven't shied away from answering this. If you see when we got listed, we were prominently consumer antivirus company, predominantly dealing with B2C market across India and a leading market player in India. And I'll still say we are still the market leader in consumer segment. But overall, the market dynamics have changed. Consumer antivirus business has been declined not only in India, it's globally due to certain changes from the operating system side. So overall, the market for B2C consumer market globally has dropped and many of the countries, it has dropped to almost negligible. Now in these 10 years, we have invested whatever we have earned through consumer market into building our enterprise security business. That is where this transition we have been going through. So if you see every -- since 2015, if you see our balance sheet, there has been constant investment into building new products that are focused on enterprise segment. And this has given us results by seeing that if you see the contribution from -- revenue contribution from enterprise sales is increasing every year. And the contribution from consumer sales has been decreasing since then. And that is why throughout these 10 years, if you see, we are looking flattish or in some quarters, it is up, some quarters, it is down. But overall, if you see now, our contribution from enterprise revenue is almost 56% to -- yes, it's like almost 50%, and the revenue from consumer has dropped to 50%. And the traction is that if you see for at least in coming 3 years, the contribution from enterprise will grow beyond 80%. So that's what we anticipate. And enterprise cybersecurity market is still, I'll say, in a growing stage, and it's going to be still bigger. And India as a nation is taking cybersecurity seriously, and we do have quite positive hopes that the Indian cybersecurity market is going to grow in a much different direction for enterprise. And we being the early into this market again and having the experience of consumer cybersecurity protection is giving us advantage of advantage that the only Indian player with so many product offerings into cybersecurity, and that is where we are in that direction. And about the outlook and margin, we currently don't disclose that because this is something that we have been following. But I can clearly tell that our focus is enterprise market. We have quite strong offerings with respect to EPP, EDR and XDR product vertical and have started getting good enough market share in small and medium businesses with these offerings. And we are much hopeful with expanding further with the market share as well as new product offering that is data privacy as we have seen that India has come out with this law, and we're having a good enough understanding about data protection and data privacy. So this new offering, which we launched last year itself, is going to add to our revenues along with the security product offerings that we have. I think I've answered your question.

Yes, sir. But -- okay, sir, you are again refraining from giving any revenue or margin guidance. No worries, sir. I will try my luck other way. Sir, what is the biggest challenge in our business, be it a consumer or an enterprise, number one. And number two, sir, what is the external environment you aspire so that our company can grow at a consistent rate for quarters and years to come? These are my 2 questions, sir. The other...

Can you repeat your first question?

Sir, what is the biggest challenge in our business, be it a consumer or an enterprise? Sir, I agree with you that our preference has changed from consumer to business enterprise. I agree with you, sir. But sir, it is not reflecting in the either volume or profit, sir. So what challenges are you facing? I'm reframing the first -- I'm transferring the first question the second way, sir. What are the challenges you are facing since long, sir? And why are we not able to overcome this? We are product development, we are doing R&D, we are spending. We are doing everything. And we are the only Indian cybersecurity company and cybersecurity is such a buzzword now, every day and now in the newspaper, we are reading this. But some way, what is -- what are the -- actually where we are going wrong, sir, we are not able to show anything in the financials, sir. So in consumer or be it an enterprise? And what are the external environment you aspire so that we can grow in a consistent way, consistent and a profitable way. So can you give me an idea about this? So we, as a shareholder, will come to know actually what you want and where we are lagging, sir?

So yes, I think I've already answered certain question, but I'll try to add more data to this. If you see, as I said, we have moved our focus from consumer to enterprise. So challenges on the consumer side is that the dominance by Microsoft, which is a prominent operating system across the PCs, their policies about deploying free version by default, pulling out the expired version by default is the biggest challenge that not only Quick Heal, but across globe, all the antivirus vendors faced. And that is the biggest challenge, and I cannot deny that, and that is there. So that is causing a major decline into protection -- I mean B2C business. Now on the enterprise front, of course, enterprise is a bigger market, but enterprise cybersecurity market is much more fragmented. The market that we are targeting is endpoint security, EDR, XDR, which are our flagship products, and that is where the strength lies with us. And if you see in that as well, the market is segmented in small, medium and large enterprises. The one that we are targeting is small, medium and micro businesses. In India, the kind of cybersecurity spending by these organizations is much, much lesser than any across the globe. So that is the market that is building in India as well. So the spending habits, the awareness, the kind of budget allocation for cybersecurity is happening in these segments. Very large enterprises are not our customers because their policies are completely different. It's like the market segment is like driven by MNCs where Gartner and all these things play a major role in selection. So that is something that we are trying to avoid. We don't enter large enterprises, but mid-market and small segment is growing and that I'm seeing very good traction there, and I'm confident that we will be capturing major share of market in this coming years.

Okay, sir. This gives an idea because the time we were expecting that the total addressable market is so huge. But now we got something that it is compressed for us because we are catering to only selected enterprise.

We are prominently into endpoint security, EDR, XDR. And with the new offerings of data privacy, which is a new market that is getting created due to DPDP law, that is something that we are now additionally adding as a vertical for us because we have started -- I mean we have launched our offerings, and we have started seeing good traction in that as well. So that is more particularly a new vertical, I'll say. And in cybersecurity vertical, so there are a lot many verticals. You can see endpoint is there. There is a firewall, networking, SSE, all these different verticals, we are not into those markets. We are more prominently into endpoint, EDR, XDR and DLP.

Okay. Okay. So sir, in DPDP, can you give us some insight as our product can generate how much revenue, sir? That insight is possible, sir, over a period of time?

Yes. So this is Harish Kumar, CEO. See, we do not comment on individual products projected revenue, neither do we comment on the future revenue. But just to give you an idea, we are actively engaging with enterprise and a lot of public sector clients to support their data protection and compliance requirements, right? Our focus is also on converting these opportunities into businesses through our expanding portfolio also. While it is early to quantify the exact revenue opportunity, we see DPDP as a significant medium- to long-term growth driver for our enterprise -- in fact, we do believe that this should be matching our endpoint security business very soon.

Okay, sir. Last 2 questions from my side. The employee cost has dipped INR 17 crores year-on-year. Any specific reason for this, sir?

Shital, this is Ankit. We have been continuously optimizing our cost. So while we'll keep our investments in R&D and sales, at the same time, we are also optimizing our cost, and you are seeing that reduction in cost.