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Good afternoon, everyone. This is Swati from Investor Relations team at Nucleus Software. A very warm welcome to all of you for this Nucleus Software earnings conference call for the quarter ended June 30, 2020. For discussion, we have here from the management team, Mr. Vishnu R. Dusad, our Managing Director; Mr. Parag Bhise, CEO and Executive Director; Mr. Anurag Mantri, CFO and Executive Director; Ms. Ritika Dusad, Executive Director and Chief Innovative Officer; Mr. Brajesh Khandelwal, Vice President, Neo Business; Mr. Ashwani Arora, Senior Vice President, Global Customer Success Team; Mr. Sanjeev Kulshrestha, Senior Vice President, Product Build; Mr. Ashish Khanna, Business Head, Financial Inclusion; and Mr. Tapan Jayaswal, Financial Controller.
As we all are aware, Nucleus Software does not provide any specific revenue earning guidance. Anything which is said during this call, which may reflect our outlook for the future or which may be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company faces. An audio and transcript of this call would be shortly available on the Investor section of our website, www.investornucleussoftware.com.
With this, we are now ready to begin with the opening comments on the performance of the company for the quarters ended June 30, 2022. And post that, we would be available for the question-answer session.
With this, I now pass it over to Vishnu, sir. Over to you, sir.
Thank you, Swati, and a very warm welcome to all of you for this call -- first quarter call, giving you an update about our performance during the quarter. We had a, I would say, another robust quarter where we've built strength all around. So most of them are internal strength building and some of them are external strength also, which we would talk about. We continue to build a strong organization. And with those words, I would now like to invite my colleague, Parag, to give you the update.
Good afternoon, everyone, and welcome you all to this investor call. As Vishnu just mentioned, we had another robust quarter. We are -- in fact, some of our implementations got completed in this quarter, a few of them on cloud, one of them outside India. And we also completed 1 very complex multi-country implementation on our collections in this quarter.
So that's on the implementation side. We had talked about price revisions. So I'm kind of preempting that question because our price revision, discussions with some of our key customers have started. We had not expected to close them in this quarter. Hence, they are not yet reflected in the revenues. We have consciously delayed some of our AMCs, which would have started earlier in this quarter because we wanted to take them on revised pricing. So that impact is expected to come in quarter 2 and quarter 3.
And on the attrition front, while it still continues to be a challenge, but we are kind of seeing some trends in -- some improvements in the trends. It is too early to talk about them because it's just a month of July and August that we have seen some improvements. But we will be watching them closely. So those are some of the few things which we wanted to update. Thank you so much. Yes, Anurag, would you like to comment now?
Hello, Parag, you summarized it. After this, Tapan will be placing the financial update.
Now it is Tapan, sir, please put some light on the financial numbers.
Afternoon, everyone. Key highlights from financials are: Our consolidated revenue for the quarter is at INR 128.8 crore against INR 153 crores quarter-on-quarter and INR 108.4 crores year-on-year. Overall, revenue in foreign currency, including Indian rupee revenue is USD 17 million for the quarter against USD 20.6 million quarter-on-quarter and USD 14.8 million year-on-year. . Product revenue for the quarter is at INR 108 crore against INR 129.6 crore quarter-on-quarter and INR 89.9 crore year-on-year. Revenue from projects and services for the quarter is at INR 20.8 crore against INR 23.4 crore quarter-on-quarter and INR 18.6 crore year-on-year. As for expenses, cost of delivery, including cost of product development for the quarter is 75.6% of revenue against 71.2% of revenue quarter-on-quarter and 81.2% of revenue year-on-year. In absolute terms, this is INR 97.4 crore against INR 108.9 crore quarter-on-quarter and INR 88.1 crore year-on-year.
Marketing and sales expenses for the quarter is 3.3% of revenue against 3.5% of revenue quarter-on-quarter and 5.7% year-on-year. In absolute terms, this is INR 4.2 crore against INR 5.4 crore quarter-on-quarter and INR 6.2 crore year-on-year. G&A expenses for the quarter is 9.9% of revenue against 9.2% of revenue quarter-on-quarter and 11.8% year-on-year. In absolute terms, this is INR 12.7 crore against INR 14 crore quarter-on-quarter and INR 12.8 crore year-on-year. EBITDA for the quarter is at INR 14.5 crore against INR 24.7 crore quarter-on-quarter and INR 1.4 crore year-on-year.
Other income from investments and deposit is at INR 3.9 crore against INR 5.7 crore quarter-on-quarter and INR 8.8 crore year-on-year. Total taxes are at INR 4.7 crore against INR 7.7 crore quarter-on-quarter and INR 3.1 crore year-on-year. Net profit is at INR 10.8 crore for the quarter, 8.4% of revenue against INR 18.3 crore for the quarter, which is 12% of revenue quarter-on-quarter and INR 6 crore, which is 5.5% of total revenue year-on-year.
Other comprehensive income is at INR 0.2 crore for the quarter against negative INR 5.7 crore quarter-on-quarter and negative INR 3.2 crore year-on-year. Total comprehensive income, which includes net profit and other comprehensive income is at INR 11 crore for the quarter against INR 12.6 crore quarter-on-quarter and INR 2.8 crore year-on-year. EPS for the quarter is at INR 4.02 as against INR 6.67 in the previous quarter and INR 2.07 in June 30, 2021 quarter.
In terms of foreign currency hedges on June 30, 2022, we had USD 3 million of forward contracts at an average rate of 77.8%. There is a mark-to-market loss of INR 52.9 lakhs, which is taken to the hedging reserve and balance sheet. Revenue contribution from the top 5 clients for the quarter is 26% against 29% in the previous quarter. The order book position is INR 562.5 crore, including INR 527.7 crore of product businesses and INR 34.8 crore of project and services businesses.
In March 31, 2022, the order book position was INR 562.1 crore, including INR 515.3 crore of product business and INR 46.8 crore project and services business. Total cash and cash spent as on June 30, 2022 are INR 551.1 crore against INR 542.9 crore as on March 31, 2022. This includes balances in current accounts of INR 39.5 crore, various schemes of mutual fund INR 398.5 crore, fixed deposits of INR 30.4 crore, investments in tax re-bonds of INR 77.5 crore, INR 5.1 crore in present shares.
With regards to receivables, we are at INR 68.2 crore against INR 83.2 crore previous quarter. During the quarter, there is a gross addition of fixed [ assets ] of INR 0.53 crore, consisting primarily of INR 0.18 crore on computers, 0.25 crores on vehicle, INR 0.9 crore on software and INR 0.01 crore on plant and equipment.
Now I'll hand it over to Swati.
With this, we are now ready to open the question-answer session. I will now hand it over to Ganesh. Over to you, Ganesh.
[Operator Instructions] So we have the first question from Mr. Vaibhav Badjatya from Honestly and Integrity Investment.
So just wanted to know what is the number of employees for the June ending here. Is there a substantial change compared to last quarter?
Vaibhav, thanks for asking this question. On [ revenue ] side, the associates count as of 30th of June stands at 1-7-5-6, 1,756.
1-7-5-6?
1,756, 1-7-5-6.
Okay. Okay. Got it. I understand. So if I compare your employee cost, what was there in June 2020 last -- the same quarter last year, in this quarter? So on a per employee basis, if I take the kind of average employees and then -- so it has not -- on a per employee basis, the cost has gone up just by 7%, while we always keep highlighting about the bold steps that we are taking. So just wanted to understand what -- price cost doesn't seem to have risen -- increased a lot on a per employee basis. So if you can explain that, that would be helpful.
Sure. So as we have updated in a few last calls, we have taken significant and very significant measures with respect to taking good care of our human assets. And those increments have been quite high. The percentage overall you are referring to that is coming out because in this year, we have also onboarded a very, very high number of young talents, young minds, the freshers. So on one side, we are taking those calls to take care of our talents. On other side, we are also inducting a good number of freshers with both the objectives to actually increase our delivery capacity and also to keep the balancing act with respect to our personnel costs. So that's -- I hope this answers.
Yes. I mean that was expected, but 20%, 25% salary increase going down to 7%, is quite a huge change. So I was just wondering if something else can explain that. But...
So, the induction of -- yes, sorry, please go ahead.
Yes. Yes, yes, please go ahead, yes.
So induction of the freshers and actually -- and back to in a good number in totality, we have onboarded close to 400 associates, and that's a big percentage. So that has helped us to keep the overall percentage increase under check, while we could still offer or increase the personnel costs for our experienced professionals. So that's been balanced.
Got it. Understand. And so I missed out on the introductory comment on AMC that you mentioned because my network makes me to wait. If you can just explain that in detail. I think you said that you dealt some of the AMC contracts, which will have reflected going ahead. So just wanted to understand what was that.
This is Parag here, Vaibhav. What I had mentioned is that we've been talking about it, I think, at least the last 2 quarters that we would be working on AMC revisions with many of our customers. So what I was saying is that those discussions are going on since these are like significant revisions, they are taking time.
We did not expect them to materialize in Q1, many of them. And had we -- we've taken these AMCs on the existing run rate. Maybe we could have seen some more revenue in this quarter. But since we have consciously not accepted those AMCs on the current rate, we expect them to materialize in Q2 and Q3. That's what I've said.
Okay. Okay. Got it. So this rate thing is only related to AMC or on the kind of sale that we do on the product sales, license sale and an implementation revenue. Are we changing rates there as well?
Yes, yes, everything actually. But the impact -- because since we have a large customer base already, the impact we are expecting -- the positive impact we are expecting is primarily because of AMCs because rest is all -- your question is right. So we are revising everywhere. But the impact primarily we expect from AMC this year.
Next you have Mr. Amit [indiscernible] Capital.
Sir, is it possible to segregate or quantify the AMC revenues as a percentage of total sales or a figure?
Hello. Am I audible?
Yes.
Yes, sir.
Yes, Amit, no that kind of segregation we don't provide, sorry for that level of segregation.
Okay. Another question that I had was related to the -- on the IT product business per se, and Nucleus Software has this product, which is quite a mature product and has been selling this product for a long time. Generally, how it works is, as I've seen that for most of the IT product companies, as product matures, the margins do expand considerably maybe to 30%, 40% of the revenues.
But that kind of expansion has never been seen for our company. So is it fair to say that it depends probably on the plans. I mean, we majorly served within Asia and maybe I think 40% of the revenues come from India. So is it something because of the geographical presence? Or is it something that you haven't gained scale as yet? Can you put some color on that?
Yes. This is Vishnu. Thank you for raising this very meaningful question. There seems to be -- in Asia, there is seem to be, I have to say this, unfortunately, bias against Asian products. So what happens is if it is a product from developed part of world, it can end up getting 10x -- at least 10x more attention. So there is a challenge, which we are attempting to address.
And hopefully, with the quality of the product, with the quality of the value delivery that our products do, our customers would be able to get over this centuries old bias also. And we will -- one of our core objectives of the company is to create these products from this very soil. And hopefully, we'll be able to fulfill this objective of us or in the near future.
Next, we have Mr. Vaibhav Badjatya from Honesty and Integrity Investment.
So just on the AMC front again. So we have not renewed the contract. So what does it mean? So how the customers are currently being serviced? Because if we have not renewed the contract, then the old contract is no longer imposed. So then as the customer has been losing a scene for they have contacted [indiscernible].
Thanks for asking that question. So there is no -- absolutely no impact on the service level. We continue to support them. So we've given them those renewal proposals with an extended debt because the rates revisions are significant. So we -- it's like an extension given with -- so on one side, there's no impact on our support. It is just that we have given them the extended date, and -- but there is a date so we will revise them by date. I hope that answers your question.
Sir but just to understand it better. So we continue to provide support services, which is already in our cost, right? On the revenue front, are we recognizing revenue at the old rate or we are not recognizing at all?
No, no, we are not. That's why you'll kind of -- that's reflecting in that in our Q1 revenues. Our Q1 revenues could have been better -- would have been better had we recognized them at the old rates. That was the part of my...
Okay. So we are not recognizing it at all, okay. Okay. Got it. So the costs -- but the costs are already there.
Yes, that's also we have taken that call -- we've taken that temporary call. Yes.
Okay. Got it. Understand. And sorry to just keep repeating this point on a very con call. But this cash accumulation is something that Board has to think seriously about. And I think there has to be some mechanism as cash moves out from the company. Otherwise, all the cash generated just because of the 4%, 6% yield per shareholders as well. So company also and for shareholders as well. So practically, everything is getting reinvested at 4%, 6%. Eventually, our company will become a 4%, 6% yield company, which is not a good outcome.
So there has to be some way to kind of -- so that the cash has to regularly go out from the company. And given the fact that promoters are already close to 75%, there's no other way per dividend. So I would request again to think about the dividend payout policy as a percentage of profit and just pay out regularly. That's again a request, and that's it from my side.
Thank you very much. I think we have answered this question unless you have anything additional to say. We have answered this question earlier as you have mentioned already. So unless you have anything additional to ask, we'll just register what you have said. That's all.
Yes. That's -- I just wanted to bring that point again that there is no question here involved. So you can move on to the next [indiscernible].
So maybe I can just add additionally because we've talked about it during this call. Apart from the financial returns that an investor does look for, there is a concept of, what is it that -- where is that you are investing. So -- and that is how there is a concept of green investment, right? So we will also request you to look at this investment from the financial -- from -- apart from the financial returns. This investment has investment in intellectual property -- in creation of intellectual property from this soil. So if that appeals your investment philosophy, then it is good. Otherwise, the buybacks have been happening.
Got it. Yes. I understand Vishnu, this point. And in fact, I would like to see investment into intellectual property. And it should come into P&L. It should come into balance sheet. But as of now, it's all cash. So if you invest in sales, if you invest in form of expenses on intellectual property, it will come in the P&L, and I would really appreciate it. There's no doubt about it. And I'm a very strong believer in your company in the honesty and transparency of your whole team at all and that's why I'm continuously on the con call.
What -- I don't have any issues if you invest there, either in sales or in intellectual property, the issue is that it is sitting on the balance sheet. And it is sitting in form of cash only and it keeps increasing. It has been more than 10 years now. 10 years earlier, we had INR 200 crores to INR 250 crores of cash, now and after doing all these buybacks and everything, it has now increased to INR 550 crores. So it just keeps accumulating and that's where the -- my problem is.
And if you invest in intellectual property, I will be the first one to praise you or if you invest in sales. That was the small point. I think that's it from my side, I will not raise this again from the next quarter.
Thank you very much for those very kind words, which we really appreciate, you're recognizing. And only additional point I would like to say is certain things, they really take time like this intellectual property, it takes really a long, long time. So thanks for bearing the pressure, bearing with us. Thanks for your patience. As I mentioned, we are fighting some slightly different kind of battles fear in terms of, as we mentioned, branding of intellectual property coming from 1 geography versus branding of intellectual property coming from another geography and so on. So yes, you -- hopefully, you'll get to see the results soon enough.
[Operator Instructions] We have Mr. Samarth Singh from TPF Capital.
First question is regarding the pricing. Glad that we're finally having these pricing discussions with our clients. Historically, our aim do they have an inbuilt price escalation, like year-on-year price escalation in them or they not?
Yes. The agencies are -- have that in the launch, but that's primarily to cover the inflationary costs. We are now essentially talking about repositioning because of the value that we deliver and also because of the significant increases in the expenses that have happened. So it's essentially repositioning, that's why it is significant. Yes.
And these are -- the AMC, the price escalation is this only for our new products? Is this FinnOne Neo or is this for the old legacy FinnOne product as well?
No, no, old as well, old as well.
And will you be able to give a breakup of what percentage of our revenues today come from FinnOne Neo versus the legacy product?
Tapan, do we provide that backup or we don't? I don't think we provide.
No, we don't provide those type of breakups.
Okay. Let me -- I guess, I'll ask a question in a different way. The opportunity of converting clients from legacy to FinnOne Neo, is that opportunity still there? Or have most of our old clients already converted?
No, no. Most of -- we have a large client base. So not -- most of our clients have not got converted yet. It's part -- it's a core part of our strategy this year and the next year to migrate clients from old product to new product.
Okay. And that would automatically see a increase in pricing, if I'm not taking, is that right?
That would also see an increase in pricing, for sure.
Okay. Okay. So if you could just explain to me. I mean, we launched FinnOne Neo quite a while back. And sitting on the outside, I can't tell, but I'm assuming it was a much superior product. So why is it that there has been a sort of a lethargy in terms of our clients moving from the legacy product to FinnOne Neo, especially during the last 2 years, where a lot of investments have been made in to digitalization, et cetera.
Okay. I'll have to go back a little, and we would have talked about it in our calls maybe a few quarters back. Our earlier model of product was that we would encourage and end up doing a lot of customizations. So the -- while the product -- new product is superior, there's no doubt about it, but especially the old customers who have that mindset that they will get things done exactly the way they want is where we sometimes face challenges. And there are customers who have got a huge number of -- huge amount of customized done in the last many years.
And for them to expect everything to come in on the new product, exactly the way they got it done in the old one is something which we don't encourage and agree to. So that is one place where we face some challenges. But otherwise, conceptually, I would say most of our customers would want to move to the new product.
Okay. That's very helpful. And one last question for Vishnu, sir. You talked about the issue of being able to sell a product coming from basically our geography. But one of your ex colleagues, his business has been able to break that barrier. So what do you think they have done that has been successful, that perhaps you can just scan [ loan ] for and apply in August.
I'm not very sure. Thanks for raising this point, but I'm not very sure whom are you referring to. And in any case, we keep a close eye on the market and that is how we are learning. So yes, thank you. Thank you for highlighting these developments.
[Operator Instructions] So that does conclude the conference for today. Thank you participants and speakers for joining this session. On the behalf of Nucleus Software, I wish you all a great day. Thank you. You all may disconnect now.