Unicommerce eSolutions Limited (UNIECOM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Unicommerce eSolutions Limited Q1 FY '27 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties, which are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Makhija, Managing Director and CEO of Unicommerce eSolutions Limited. Thank you, and over to you, Mr. Makhija.

Thank you. Good morning, everyone, and thank you for joining us for the quarter 1 FY '27 earnings call. I'm a little under the weather today. So please bear with me if I take a few pauses as I go through my remarks. I am joined today byAnurag Mittal, our Chief Financial Officer; along with our investors, relisting the adviser, Strategic Growth Advisors. Before I get into the quarter, let me start with where we stand as a company today. mark 2 years in a listing. In these 2 years, we have doubled both our revenue and adjusted EBITDA. Looking back further, we have grown the business over the last 5 years and our FY '26 adjusted EBITDA alone is now higher than our total revenue from 5 years ago. Our focus now is to build on this performance and we enter the next phase of growth, we will continue to be guided by the 3 core principles that have shaped our journey so far. First is a tech-first mindset. We lead through product innovation to create value for our clients. Today, that increasingly means embedding AI into our platform so customers can receive more with lesser efforts. Second, we invest with discipline. We take selected back and assess investments based on the size of the opportunity, the value created for customers and their priority related to other growth opportunities. For example, over the last 5 years, we invested in building our eCommerce WMS and omnichannel product suite, building these through incremental iterations, both products now operate at a large scale. Third, we built patiently Enterprise software requires sustained product development, customer feedback and validation as well as an evolving go-to-market approach through different stages of scale. Our modules or features often begin with focused use cases and become stronger over time as we add depth of features around workflows for different types and scale of customers. This allows us to serve a larger and more diverse set of flights. In a complex industry like eCommerce, the product maturity titles can extend over 18 to 24 months. These principles have shaped how we have built the business over the years, and they continue to guide how we allocate resources today. As we enter FY '27, we do so with a broader product portfolio, a larger customer base and multiple growth opportunities across our platforms. Against this backdrop, let me turn to our performance in quarter 1 FY '27. We are pleased to begin the financial year with a strong first quarter. Revenue grew 14.3% year-on-year to INR 51.4 crores, supported by continued double-digit growth across both Uniware and Shipway. To capture the opportunity ahead, we have consciously increased our investment during FY '27. These investments will be funded through a portion of the earnings we generate while we're continuing to add cash to our balance sheet. Our investments for the year are focused on 3 areas. The first is AI-led product innovation. Product development has been a critical driver of our revenue growth in the past. We began by building Uniware to address complex operational workflows and when the in development a highly flexible platform that can cater to hundreds of work or variations across clients. Today, our platforms are moving into the next phase of this evolution from being a system of record before AI existed to AI-led systems of intelligence, AI-led systems of intelligence in the first AI generation and now moving to proactive agentic systems back in guide actions. Our aim is to create value for clients and help them focus more on solving business problems and less on managing operational processes. The second area of investment is talent and capability additions. Over the last few quarters, we have selectively strengthened leadership across functions and added talent with AI capability. These investments will support faster execution, stronger customer relationships and more scalable systems and officers. The third area is go-to-market expansion. We are expanding sales capacity and investing in marketing initiatives to accelerate customer acquisition, improve onboarding and continued adoption of new products and volumes. Let me now take you through the performance of our individual businesses. Uniware delivered another strong quarter with revenue growth of 12.8% year-on-year. This was the fourth consecutive quarter of improving growth and demonstrate the traction from the initiatives executed over the last year. The underlying performance was stronger than the reported figure. Excluding the impact of a former top 10 customers that discontinued operations in quarter 3 FY '26, Uniware delivered year-on-year growth of more than 15%. As quarter 4 FY 2017 will be the first full quarter of like-for-like comparison following this client exit. We are confident of delivering growth of 15% from quarter 4 FY '27 onwards in Uniware. We also saw healthy customer acquisition momentum. During the quarter, we added 115 enterprise customers, up 30.7% compared to 88% in the same quarter last year. These additions include both traditional enterprises and digital first brands. Some of the marquee customers added during the quarter include Amul, Aldera, starts Pigeon, Mahindra Logistics and the sleep company in addition to Sunon and Namshi in international markets. Our newer modules continue to see strong traction. 40% to 45% of our Uniware Enterprise customers are now using quick commerce and B2B modules. 6% to 7% have adopted to Uniware to within a year of launch and 3% to 4% have taken up unit capture within 2 quarters of its launch. We are encouraged by the early response, particularly to unit capture as video evidence is becoming increasingly important for claim management while implementation required limited incremental effort. As is typical for B2B enterprise software, these products have longer maturity cycles, and we expect them to become stronger growth contributors over the next 18 to 24 months. Turning to Shipway. Revenue grew 16.8% year-on-year in the quarter. Our confidence in the opportunity continues to strengthen. We believe that accelerating growth at this stage can help Shipway build a larger and more scalable business over time. Accordingly, after operating the business we are breakeven for part of FY '26, we have decided to increase investment in space during FY '27. These investments will be directed primarily towards sales and marketing capacity, platform enhancement and deeper is workflows. Shipway has continued to show 15% plus Y-o-Y growth over the last 2 quarters. This gives us the confidence that as the impact of some of these investments materialize, we would be able to drive 20%-plus growth year-on-year by the end of the year. That is quarter 4 FY '27 onwards. ConvertWay continues to perform steadily as we enhance the product for a wider set of use cases and larger enterprise customers. We plan to invest this year to support our growth initiatives. Most of these investments will be transloaded in H1 FY '21 with benefits expected to build through growth and operating leverage, leading to an improving profitability trajectory in H2 FY '27 and beyond. We have built a strong foundation over the past several years. Our focus now is to build on that foundation by expanding our market opportunity, broadening our platform and increasing the scale and profitability of the business. We are investing for the next phase of growth with a clear focus on creating a larger and more valuable Unicommerce over the years ahead. With that, I'll hand it over to Anurag, who will take you through more details. Thank you.

Thank you, Kapil. Good morning, everyone. I will now walk you through our financial performance for the quarter. We opened FY '27 revenue of INR 51.4 crores, up by 14.3% year-on-year from INR 44.9 crores in quarter 1 FY '26. Our growth was supported by continued momentum across the gas force. Adjusted EBITDA for the quarter was INR 8.2 crores, 14.5% lower compared to INR 9.5 in quarter 1 FY '26, primarily due to our client growth investments. Profit after tax increased by 20.2% to INR 4.7 crores compared with INR 3.9 crores in the same quarter last year. The [indiscernible] impact is due to tax benefits driven during the quarter. As Kapil outlined, investments this year are intended to position us for the next phase of growth. Our experience with Uniware as soon how sustained investment in product, technology, being capability, sales and marketing and build larger and more profitable business over time. We had a client the same approach across our forms with investments in 3 areas. One, the AI product development; two, talent capability building; and three, sales and marketing expansion. Uniware continues to stay well adjusted its stand-alone adjusted EBITDA increased from 9% in quarter 1 FY '26 to INR 11 crores in quarter 1 FY '27 despite continued investment in the platform. This reflects the operating ideas that we emerged as our platform growth, particularly for [indiscernible]. As most of these investments will be transloaded in H1 FY 27, with benefits expected to build through growth and operating levels, leading to an improved profitability trajectory in H2 FY '27 and beyond. Further, our capability to generate cash on a continued basis gives us the flexibility to fund these investments. Our cash and bank balances increased from INR 53.8 crores at end of the quarter 1 FY '26 to INR 92.6 crores at the end of quarter 1 FY '27, with the growth of 72.1% Y-o-Y. As we execute our kit, we will continue to be guided by the 3 digital that have kept a focus on the long-term goal. We will see technology first, investment discipline and build icon. With that, I would now like to open the floor for questions. Thank you.

Operator Instructions] The first question comes from the line of [ Ankit Kanodia ] with [ Zen Nivesh ].

Congratulations on [indiscernible] in terms of...

I'm sorry to interrupt, Ankit. You are not audible. Your voice is muffled. Could you please use your phone on the handset more in case if it's answering.

No, I'm using my phone on music. Is it better now?

Yes, it's better now. You may go ahead.

Yes. So on good set of numbers. Sir, my first question is related to the shipper accretion related aortization and synergy roughly, can you give us any timing as to by when the synergies will start playing out in terms of margins and the amortization cost will be completely absorbed?

Ankit, I couldn't understand the question. Could you please repeat that? And what sort of synergies are you asking about?

Whether the kind of initiatives which we are taking in terms of you are adding more in, we are going to -- we are expanding on our go-to-market strategy. We have acquired Shipway in the last year and then there would be some integrated ship in our company. There would be some amortization related to that actuation, which would still be picking the P&L [indiscernible]. I just wanted to understand from you how the -- from a financial perspective, when do you see these numbers helping us improve our EBITDA margin going forward. So right now, even though we are growing well, even though we are cash flow positive. Our reported EBITDA is going down. I'm asking especially from that perspective. I hope I could clarify my question.

Yes, it's clear enough. So as you mentioned that the adjusted EBITDA decline is largely because of thoughtful investments that we are doing in the business to be able to accelerate the growth. The results of these investments should be visible from H2 of this year itself because we are translating the investment in the first half of the year. This should also translate into higher growth in the business. As we mentioned, Uniware, we're anticipating to grow at 15% plus from quarter and Shipway operating at 15% plus growth today. We anticipate the investments playing out and materializing. We anticipate Shipway to grow at 20% plus from quarter. So we are hopeful that some of these investments that we are making will start demonstrating results in FY -- in the second half of FY '27. And the growth improvement will start be visible from quarter 4 of FY '27. You will definitely see an improvement in profitability from the second half of the -- in the second half of the financial year.

Great. That was very fine. My second and the last question is related to the Mahindra Logistics. If you can just throw some more color as to how we -- but I mean what is our relationship with them in this space. And a broader view of how do you see the logistics space in a -- do we see any more customer on bedding on the I'm not asking from the point that you are giving the local. But in general, how do you see this logistic space for us as an area of that?

Yes. So the partnership of Mahindra Logistics is the Uniware business. They have onward in the Typically, the logistics players offer eCommerce fulfillment, which is eCommerce warehousing as they offer e-commerce-related warehousing they need an end-to-end eCommerce stat, which is to do an OMS, which connects to multiple marketplaces, Marel management system to manage inventory within the warehouse and other solutions like in capture for recording videos reconciliation for doing payment reconciliation. So the partnership logistics players with Uniware ecosystem is largely when they are offering eCommerce fulfillment to their brands with Shipway, the relationship is more about partnership wherein they integrate deeply into the Shipway and we offer an end-to-end product suite as far as logistics management is concerned with Shipway.

So we are offering both Uniware and Shipway to Mahindra Logistics, right?

It's the Uniware, Mahindra Logistics partnership. Shipway largely deals with the logistics partners such as leader delivery, et cetera, where they are offering last mile delivery for brands.

[Operator Instructions] The next question comes from the line of [ Siva ] with [ iTot PMS ].

Firstly, on the EBITDA margin side. Our adjusted EBITDA was around 15.8% from this quarter, and our EBITDA margin was 10.6%, mailings of 5% of sales. So the other way, ESOP used to be less than 5% of our total atrasentan, but now it is 12% to 15% of that expense. And this has been the case for the past 4 quarters now. So when do we expect this to normalize?

So Siva, in fact, the brand ethos to be a high-performing employees of the company. based on our regular additions like what we had in the organization plus the management to be issue theo. The ethos we granted last year, that is the reason we would be able to see the expense in the BPL. In this quarter, we have seen near about INR 2.5 crores of expense in this quarter. As per the amortization cycle of the ethos, we expect the not to get amortized over a period of 4 years from the date of grant. We granted this ethos some time last year. So for the period of next year, the spend would be trending in the similar age of the half quarter 2.5% for the -- per quarter.

Okay, sir. And sir, with regards to Shipway sales, we've been started around INR 20 crores per in the past 4 to 5 quarters now. So just [indiscernible] are we expecting this wrap-up and how soon can we can EBITDA base there?

Siva, your first part was not audible. Could you please repeat the question?

Sir, I was just saying that on Shipway, our sales has been stuck at around INR 20 crores for the past 4 to 5 quarters now. So I was asking why this is? And then are we expecting this around that?

Sorry, still not clear, Siva. I could hear the INR 20 crore figure, I'm not able to understand the context of the quarter.

So sir, I was asking for Shipway, we've started around INR 20 crore revenue mark for the last 3 to 4 quarters now. So I was asking when can we see like a significant improvement from this INR 20 crore revenue mark?

Sure. So like I mentioned that we are investing in the business. The business has grown 15% plus for the last 2 quarters. We've demonstrated that already with the investments that we're making, we are anticipating that this growth will improve to 20% plus from quarter 4 FY '27. And progressively, you should see improving the revenue trajectory as well. I think the second part of the question was when do we see it back to breakeven again. Like I mentioned, we are frontloading the investments in the first half of the year. Second half of the year, we should be able to see Shipway becoming breakeven. And the idea is to continue to grow the business at a breakeven mode where we'll continue to reinvest the profits whatever we need in the business, reinvest those profits back for growth.

Understood, sir. That was clear. And one last question. So one of Shipway competitor is now getting listed next week. And I noticed that there were a few big clients coinciding with Uniware and them. And what do you think is the reason for those claims to prefer the other player over Shipway? Like what are we lacking?

I think the other players to get listed is a market leader. They have been in the ecosystem for a long time by virtue of being the largest car they by much of them in the largest in the aggregation space and Uniware being the largest player in the order of citation OMS that limit space. it's natural that we'll have an overlap between the 2 organizations. Having said that, we see that as a large opportunity for us, and that's one of the reasons we acquired Shipway to be able to offer an end-to-end eCommerce enablement solution. And slowly and steadily, we will see more and more customers of eCommerce being onboarded on Shipway. Like I mentioned, enterprise software have a long evolution cycle. The ecosystem also needs to be comfortable with a solution like being used by large other player is the market leader with a natural due today. but we are given the strong trajectory that we have demonstrated over the last few quarters and are hopeful of hopeful of improving it further, you will see more and more overlap of large names across both Unicommerce and Shipway.

Right. All right. And I say in our top 10 clients who are using Uniway. Has anyone started using our Shipway yet?

See, the Shipway service is relevant for brands, which has a meaningful presence on the on their website. because the marketplace volumes do not require logistics to manage presenters. It is estimated by the marketplace itself. Top 10 customers of Unicommerce may or may not have a strong beta presence because it could be a larger budget selling on marketplaces alone. Today, the overlap is, as you have mentioned before as well is 10% plus. We continue to see an improvement in the number of customers of brands which are using ship a number of brands eCommerce which are using ship as a base of both eCommerce and ship age expanding. The relative share continues to be 10% plus. But in absolute terms, the number continues to increase.

[Operator Instructions] The next question comes from the line of [ Vivek Kumar ] with [ Bestpals Advisory ].

Sir, can you go deeper on shipper growth or market share? And what kind of investments and why are you content that the second half will return to growth? And if you can talk about the opportunity in Shipway?

Shipway, as we mentioned several times before, Shipway is a large operation in courier aggregation, which is a large market opportunity. As per our estimates, it's INR 4,000 crore plus market, where we are relatively early-stage player with single-digit market share today with a significant room for growth. And that's why last year, when we had acquired the business, the first year, we were focused on integrating the business well. And if you recall, when we acquired the business, the business was loss making, to return the business profitable. But after operating the business at a breakeven more first few quarters. in that there is a large opportunity ahead. And we decided it would be prudent to invest in the business to be able to accelerate the growth and improve our share in the INR 4,000 crore market. The investments are mentioned, are largely threefold. One is sales and marketing capacity addition. Second is taken part of the development, largely making it enterprise grade. And third is additional critical talent at senior and middle management level to be able to debut faster. So we have demonstrated 15 percentage growth already for 2 quarters. With these investments, we are hopeful that we're able to improve this further. We are also aware of the quantum of investments we are making, which gives us the confidence that we will be needed only for the first 6 months. We had [indiscernible] those investments in H1 of FY '27. And as these investments materialize as the growth increases, we are considered that the business will again become breakeven. We're targeting to make Shipway breakeven in quarter 3 itself. And with the investments playing out, we are confident of delivering a 20% plus growth from quarter 4 FY '27 onwards.

Sir, and how should we think about the market penetration in general, not just but market penetration Uniware and how do you -- what is the probably that small businesses can wipe code this software? Because I do not know how to think about it, but please, if you can explain what is upping small businesses from doing writing their own newer the software with low LLM becoming advanced by the day. So if you can talk about the market penetration at what levels of market penetration universe in general for the whole market?

Sure. So our experience, AI typically disrupts shallow sat, which is generic or to replicate tools. But for a software like ours, which is a system of record, and productivity improvements for brands. It actually strengthens. There are 3 modes that we have, which are difficult for anybody to come in by First is that it's hard to replicate the relationships or automate the relationships. We have decade plus relationships with the ecosystem players, marketplaces, logistics players, et cetera. for someone to come in and replicate those relationships we had. Switching costs for our brand is extremely high. it's today a backbone for any brand eCommerce operations for them to trust a bicode software for something that is mission-critical for them is extremely hard. So by code software may work for a certain scale. But for an enterprise-grade offering that branded particularly in a complex eCommerce industry that a brand operates today where they have to deal with tens of marketplaces, logistics players, they're selling on quick commerce, B2B tender take margin grade. There are multiple sales to point for them to be able to do this or over again. And it's also not static. It keeps volume on a regular basis, new use cases, keep emerging in eCommerce very frequently. So it's a very high maintenance cost well even if some were to hit quoted. More importantly, as I mentioned, this is a machine critical software so much so that many brands tell us that today, auditors are for Unicommerce later to audit the books of a brand. That's the level of credibility that Unicommerce system carries for a coded software to carry that level of sophistication and credibility will take a long time. Having said that, we are also in a single AI. We have been making the platform now AI first. There is a lot of effort that the brands we are putting in, in running the operational processes. We're taking away that effort and helping them make better decisions and focus on growing the business rather than focusing on these mundane operational processes. And the market penetration of Uniware in general, how do you think that See, we are a market leader already by net margin. But we feel that eCommerce is still fairly underpenetrated. A large portion of the eCommerce growth within eCommerce and drop ship model and growth has started to happen post pandemic. It's only been 5 years of this market going. A lot of brands still use Excel to manage their eCommerce operations as some of these brands grew as the complexity in the operations increase, they would want to use the software. And that's when we become an actual choice because we are a market leader. When they look a look around 7 out of 10 of their peers would be using due to commerce. And that's when we become a natural choice. So while we are a market leader, but there is still a lot of headroom for growth because more and more brands are looking to move from Excel to software, and which is evident in the quantum of the number of new clients that we are onboarding. We continue to see a healthy improvement in the number of clients. when we listed, we were acquiring 85 to 19 flights a quarter. This quarter, we added 115 customers. Quarter 4, we added nearly 139 customers. So we continue to see an improvement in the customer addition. On top of that, for our growth, we have now added newer product modules such as UniReco. Have got 1,100-plus enterprise base today. who will need the solutions to be able to further strengthen their management of eCommerce operations. As more and more of such enterprise brands take new solutions, we will see even more growth coming in. So the growth levers for Uniware are threefold. One is obviously the market growth on which we have limited control. The other 2 are addition of new customers. And upselling or cross-selling of our new modules to the existing enterprise base.

Your next question comes from the line of Sumeet Jain with CLSA.

So firstly, I wanted to understand in terms of the competitive intensity on both Uniware and Shipway, how are you seeing, particularly on the pricing side? Are you able to maintain your pricing or are you able to take it up? So can you give some color? I mean, it's heartening to see that the Y-o-Y growth in your stand-alone entity has been improving for the last 4 quarters. So I wanted to understand, apart from the investment in the senior folks and then increase in enterprise customers, what are other reasons behind this improvement in growth?