Nucleus Software Exports Ltd
NSE:NUCLEUS
Nucleus Software Exports Ltd
NSE:NUCLEUS
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Good day, ladies and gentlemen. I'm Pelcia, the moderator of this call. Thank you for standing by, and welcome to Nucleus Software quarterly earnings conference call. [Operator Instructions] I will now hand over the call to Swati Ahuja. Over to you, Swati.
Thanks, [indiscernible]. Good afternoon, everyone. This is Swati from Investor Relations team at Nucleus Software. A very warm welcome to all of you for Nuclear Software Earnings Conference call for the quarter ended on June 30, 2024.
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, COO and Executive Director; Mr. Surya Kanodia, Chief Financial Officer; Mr. Ashwani Arora, Senior Vice President; Mr. Ashish Khanna, Marketing Head; Mr. Mukesh Bangia, Vice President; Mr. [ Abhishek Palle ], Vice President; Mr. Pradeep Malik, Vice President; Ms. Swati Patwardhan, Chief Human Resource Officer; and Mr. Tapan Jayaswal, Financial Controller.
As you 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 the conjunction with the risks that the company faces. An audio and transcript of this call would be shortly available on the Investor section of our website, www.nuclearsoftware.com. With this, we are now ready to begin with the opening comments on the performance of the company. Post that, we would be available for question and answer session.
With this, I now pass over to Vishnu. Over to you.
Thanks, Swati, and wish you all -- a very warm welcome to this conference call. As you would have noticed, we have had a fall in our top line as well as bottom line. I would like to highlight to you that we do not give excessive weightage to quarterly or for that matter, yearly numbers. We are focused on building a long-term enterprise. And hence, we would allow such things to happen to ensure that the talent is -- ensure that our customers get services is retained and with talented -- further attracted.
Because in this period only that we had in the year 2021, '22, we had allowed our bottom line to hit a low of 7%, and then we have bounced back. And in a similar situation, we are confident that we'll bounce back on the financial numbers also in coming quarters. With those words a warm welcome to all of you and over to Parag.
Thank you, Vishnu sir, and welcoming everyone to this investor call for Q1. Apart from what Vishnu sir said, I wanted to specifically talk about a very significant long-term strategic initiatives that we have undertaken. This is called [indiscernible] based on Toyota Production System principles. This is to bring in continuous and long-term improvements in all areas of our work for the ultimate objective of significantly enhancing our end customer experience. So this has been going on for some time now. We are investing heavily into this initiative, and we will share more updates going forward in this very significant initiative. Thank you.
Thank you, Parag, sir. Now I request Tapan sir to put some light on the financial numbers.
Good afternoon, everyone. Key highlights from financials are consolidated revenue for the quarter is at INR 195.4 crores against INR 210.3 crores quarter-on-quarter. Overall revenue in foreign currency, including India rupee revenue is [ $35.3 million ] quarter-on-quarter and $25.3 million on a year. Product Revenue for the quarter is at INR 168 crores against INR 179 crores quarter and [Audio Gap]. Revenue from projects and services for the quarter is at INR 27.4crores against INR 30.9 crore quarter-on-quarter, [Audio Gap] expenses cost of delivery, including cost of product development for the quarter is 75.5% of revenue, 5% of revenue quarter on quarter and 60.5% of revenue year-on-year.
Absolute terms, this is INR 147.5 crores, against INR 133.5 crores quarter-on-quarter and INR 125.1 crores year-on-year. Marketing and sales expenses for the quarter is 2.2% of revenue, [indiscernible] quarter, percent of revenue 1 year. Terms, this is INR 4.2 crores against INR 6.9 crores quarter-on-quarter to INR 7 crores year-on-year. For the quarter is 7.6% of revenue 5.7% of revenue and [indiscernible] of revenue. True terms INR 10.9 crores, INR 7.9 crores quarter-on-quarter, [indiscernible] year-on-year. for the quarter is at INR 28.8 crores against INR 55 crores quarter-on-quarter.
Yes. The income from investments and deposits is at INR 14.8 crores against INR 14 crores quarter-on-quarter I [indiscernible] year-on-year. So other income for the quarter is at INR 15.1 crores against INR 14.2 crores quarter-on-quarter and in [indiscernible]. Total taxes are at INR 9.7 crores, INR 2.3 crores quarter-on-quarter and INR 18 crores year-on-year. Profit is at [indiscernible] quarter on quarter, INR 2.6 crores year-on-year. Well, comprehensive income, which includes net profit and other comprehensive income is at INR 31.2 crores for the quarter against INR 46.1 crores quarter-on-quarter and INR 56.6 crores year-on-year.
Fees for the quarter is at INR 11.28 as against INR 19.48% quarter-on-quarter year-on-year. So foreign currency hedges on June 30, 2024, we had $3 million over contract at an average rate of [Audio Gap] to market gain in INR 0.4 crores. [indiscernible] Any contribution from the top five clients for the quarter is 28.8%, 1.5% in the previous quarter. Order book position is INR 813.4 crores, INR 752.2 crores of product business and INR 61.2 crores of project and services business.
First March 2024, order book position INR 107.7 crores of product business, INR 22.3 crores of project and services business. So cash and cash equate as on 30th June 2024 are INR 920.8 crores against INR 808 crores as on March 31, 2024. This includes balances in current accounts of [indiscernible] schemes of mutual funds of INR 653 crores, fixed deposit of INR 191.3 crores, investments in tax-free bonds of INR 34.5 crores regard to receivables, we are at INR 175.4 crores against [indiscernible]. In the quarter, there is a gross addition of fixed assets of INR 3.02 crores consisting primarily of INR 2.6 crores on computer and servers and INR 3 crores on financial fixtures, [indiscernible] this equipment INR 2 crores on software.
Now Pelcia I request to start the question-and-answer session.
[Operator Instructions] The first question comes from Samarth Singh from TPF.
Just a question on our growth prospect. Going forward in the domestic market. You mentioned before that in one new account for 60% to 70% of all retail loans that are given out by Indian finance companies. So I'm just wondering, would you say that you are more or less saturated as part still new one is concerned in the domestic market? Or the customers that we could possibly convert to our product?
Thank you for your question. This is Parag here. No, we -- there's no indication or belief that we have that the market is saturated. In fact, as we have been maintaining, we are getting good traction, both from domestic market as outside markets. So there is actively no saturation. We don't believe that.
So I'm trying to understand like when we are thinking of our top line growth in the future, would that come from selling more fine domestically, selling more of our other products in Axia domestically? Or would it come from selling FinnOne Neo to other geographies?
So I think you mentioned in the past, look, when we -- I think thanks to the COVID when we -- the product really started moving more in the domestic market, so last couple of years, we have been focusing more on India. But then as we said in the past, the focus is now more and more on international markets, beginning with including both whether where we are operating already. And we are also looking at developing a couple of developed markets, getting into -- some we are already into like Australia and Japan and one or two developed markets. So yes, our focus will be more international, but domestic is also traction is good even today.
And as you had mentioned -- I think Australia, we have been around for a while and you bought a couple of large second tier banks that are on our FinnOne Neo. But the revenues and profit in Australia doesn't seem to be as consistent as we see in the domestic business? Can you just talk about why that's the case?
No. So that's correct. The newer implementations are have to be added. And there are few prospects with whom we are working and it could convert in due course. But yes, so far the implementation that we are doing in this second year customers that you mentioned got over, we are in a BAU mode there. So that's why you don't see a growth, so much of growth in that market right now.
So but the implementations that we are doing there are not like in India it is sort of move to more of a -- trying to make it more of a recurring revenue model. Is that a similar model we are going to try and implement outside of India as well? Or is that more of a onetime or implementation revenue model?
So okay, we have actually both models now pricing models now at level. If that is your question, the can go for a CapEx model also, we go for a recurring subscription model also, especially with the product being available now on cloud, a lot of our customers smaller ones prefer to go for the subscription model. So we have both options available.
Are you're talking about domestically, are you talking about in the other markets as well?
As well as other markets as well.
Next question comes from Rahul Jain from Dolat Capital.
Yes. Yes. Just trying to figure out the revenue performance in...
Sorry, sorry, your voice is not clear. Yes, need to adjust your microphone.
Hello. Is it any better?
Yes, yes. Certainly.
Yes. So what I was trying to understand is that any specific reason we could attribute that the revenue performance has been pretty stagnant for some time. I can understand this kind of a business can be very volatile on a quarterly basis. But it seems like new revenue momentum has kind of stagging for some time, at least from the data that we see, of course, there were a more data in terms of new client win and all which were giving us some a bit of an input there.
So I would appreciate if you could share in terms of how has been our new growth momentum in both India and emerging market or any other flavor that you could add on that?
Certainly. I'm very happy to let you all know that our conversations with -- from our 50 customers are going, I would say, reasonably strong at, and there is sustained interest. Some of the conversations are taking longer than what we have been hoping, but having said that, we continue to talk to customers in at least 8 countries about rolling out FinnOne Neo or FinnAxia for adding value to their businesses. And simultaneously pipeline is also building relatively well.
Right, right. And also in your media interview, you spoke about two elements. One was about that the repricing is still due in 20% of your customer base by what time you think this should go through? And has any of it happened in this quarter also?
So as we have mentioned in the made interview, nothing has happened in this particular quarter on that front. And this is the balance 20%, we are talking to them both in terms of the upgrading to FinnOne Neo platform or continuing with the FinnOne platform. And in that process, it's taking far longer than we had expected. We cannot let you know the time it will take.
So this element of whether they want to move or not and this referring to this repricing? Is this because more people want to take time to think about it? Or is it because they are going for the newer version, which may take time for eventually to migrate, and that's why it would be, a delayed spend?
It's a combination of the things. I know sometimes, our customers feel that they will be able to derive benefits from the -- the very sophisticated offerings that we have in FinnOne Neo, including hundreds of APIs and so on and for FinnOne Axia, where we have substantial number of APIs and very sophisticated functionality. At the same time, then they are not exactly ready for the migration. So it is that combination that takes time.
Right, right. And in the cases that has happened already what has been the mix where people have accepted the pricing, but they would have gone for the newer version or they would have stayed with the earlier version any mix number that you could share?
Sorry, couldn't get your question, if you could repeat, please?
I mean, what I was trying to understand is that let's assume in the last 5, 6 quarters ever since we have started this exercise, if let's assume 100 customers have moved to a newer pricing out of that 100? What is the mix between clients continuing on the same older version versus the new version?
As of now, I think higher percentages on continuing on the whole margin.
Okay. And is it more about inhibition around for the change? Or is it like the recurring costs related to new versus the older version could be a constraint for them to do the migration?
So I think it has more to do with what I mentioned earlier, has more to do with their internal sort of trade-off whether they want to start leveraging the new functionality today or they want to do it a year later or 2 years later and then so on.
Right. Right Understood. And on the wage side, you said there is a more than usual thing that we have done to retain talent. So any specific reason you would highlight in terms of what were challenges that you observed at this point? And secondly, does this mean there is some excess provisioning for some incentive or any other reason, which is in the quarter and may eventually normalize as the year progress? Or this is the run rate that we have based into employee cost?
As that is concerned, it is a normal run rate. And we have done -- what I mentioned in the media interview was, we have done more than the industry hike. And that is consistent with our policy of retaining the best industry-based talent that we have and attracting equally good talent on the market.
Right. And just last one and then I follow back in the queue is that it seems that our investment both in terms of people and in terms of sales and marketing effort has been affluent in last several quarters while any meaningful advantage in terms of revenue acceleration is kind of missing or at least behind the curve.
So is it on your expected lines? And you see that to benefit us in the subsequent quarter? Or you think it's lower than what you thought and it's more a function of macro which is causing the impact to be slightly slower than what you might have liked?
So lower than what we had expected. That much we can certainly say the exact reasons, maybe we'll come back to you next quarter.
Next question comes from Kevin Gandhi from Capgrow Capital.
So just wanted to understand the reason for the top line decline across regions like Southeast Asia, Middle East and like Australia. So basically, our focus has been on the international markets as we just mentioned. Still, we have not seen that growth traction. In fact, we are seeing a dip in the top line [indiscernible] solutions. So I just want to understand that. And like when can we expect growth from these regions?
Second one is how much of the staff or employees have we added this quarter? Yes, these are the two questions.
Yes. We have added 62 [ Nucleus ] to our team. And talking about growth in Southeast Asia, Australia, et cetera. Yes, we -- our conversations with the customers in those geographies, they are continuing. And we're quite confident that the growth will start happening in coming quarters.
Next question comes from Vinay Nadkarni from Hathway Investments Private Limited.
Thanks. Just wanted to check out, did you looser any customers because of repricing of your products?
No, we have not lost any customers because of the repricing.
Okay. And second, on your current quarter revenues, how much of it come from new customers and how much of it goes from continuing more customers?
Yes, the -- this quarter entire revenue is from existing customers
Okay. And lastly, if you can just give us a break up of your business in terms of selling licenses and selling services. So it's the total ratings that you are seeing on the [ INR 395 crores ], how much of it would be from CapEx and most of it would be from software as a service, both domestic and as well as overseas.
Yes. So INR 168 crores from product and INR 210 crores [indiscernible] from services out of INR 195 crores.
Okay. And can you give a breakup in [ domestic ] bonuses? Are there more CapEx driven in it on an overseas?
No, we will not be able to give that data.
And so the whole idea of converting this into a Software as a Service business that has, I mean, migrating people into that has been not worked or is it still negotiations going on with your customers?
This question is not clear. The last one.
I'm just saying the idea was to move more business into annuity base so that there will be a visibility growth from annuity revenue. So does that at [indiscernible]
So as I said some time back, it's not that you're expecting growth only from annuity. That is something that we get good traction, especially from smaller customers. But as I said, we are open to both. Both options are there.
Okay. But sir, we have the [indiscernible] comes from the Software as a Service. The [indiscernible] we are still very heavy on serving licenses.
Vinay, Adjust your microphone because we're having difficulty understanding your question.
Yes. This was asking you in case for going forward also, your focus would be more towards selling of licenses in India as well as overseas. Or would it be also including more people in the cloud-based services.
We continue to focus on both the and services as well as the products. So there is no decision as far as we are concerned.
Next question comes from Jiten Parmar from Aurum Capital.
Yes. Good afternoon I have a couple of questions. First one is, would you be able to give the revenue mix India versus international for last quarter for the concluded quarter?
Yes. So the India Revenue. Domestic revenue is 15% of total revenue, international; 42%.
58% and 42% and what was the number in the corresponding quarter of last year, Q1 of FY '24?
So domestic revenue was 48%, regarding international 52%.
Okay. Okay. So my next question is what is the price differential between the old version and the new version and the second part is when customers continue with older pricing on older version. Is that option which is available to the customer?
Okay. Let me attempt answering this question in the following manner. The pricing of both our products older product as well as newer product is directly dependent on the value that these products are able to deliver to our customers. And we are in the process of -- on an ongoing basis, we have in the process of communicating that value to our customers.
And that is how the prices we arrive at -- so there's no formula as such that we can talk about.
For transaction base or the value of the targeted -- I mean, how does it work?
It can be a loan there. It can be per transaction based in get of transaction banking products in case of lending products can be loan based or size of the portfolio was so on.
Coming digging a bit deeper into this. So let's take an example of, let's say, transaction-based pricing. So in the older version, and the new -- is there a change in what we will be charging to the customer, what is the corresponding hike? Just to understand, I will get to where why I'm coming to this.
Yes. So again, it will depend on which features of the new product, the customer wants to use. So depending upon the features that they want to use, they will be charged. It did not want to use any specific feature, they will not be charged. That is how the pricing. It is we have made available in a manner that whatever our customers want to use, they need to pay only for that and not obtaining beyond that.
Question as to -- I mean, obviously, you would have received feedback from your customers. Could this be a bit confusing for the customer where so much of differentiated pricing and all that. Is it something which you are hearing from your customers that there is too much of variables and too much of pricing difference or something.
No, no, -- absolutely not because we do make it clear to our customers that the value that they will be able to derive is multiple times of the return on the returns on investments are multiple times, and they are able to appreciate it. Would it is taking time. That's all.
Yes. Okay. So because that's my -- that was the reason I was asking because over the last many con-calls, we were seeing that customers will move and obviously, there is some push bear or something probably it could be that it is taking time or there is the instance or what. So the next question is basically exactly what is the percentage number of clients which have moved to the newer version? And how many customers have we lost that they are no longer using either our old or the new product?
There are single-digit number of customers who have moved out of our older version, that is there. but we may not be able to give you the breakup of how many are on the old and how many are on the new.
Okay. Now in one of the previous questions, maybe I got it wrong or something, is that -- I think it was mentioned that we got no revenue from new customers. Is that right for the last quarter?
No, you got it wrong. Yes, yes.
So, okay. So basically, we have new customer acquisition is what you have to say?
You heard it right. We got no revenue from a new customer in last quarter. Yes, you're right, in validating.
So the next question is we have been spending significantly on higher employee costs and I think sales and marketing and all that. So what could be the reason why we are not being able to -- is it that the lead times are far higher than what we think or bets how the industry is you can throw some light on that?
Yes. So lead times are higher and part of the lead time being part of the lead time are higher is also -- this is a bit of complexity and in pricing and so on. So we are working on everything to complexity that -- and then minimizing those lead times and that's how we hope that we'll be to start adding any to more and more new customers.
Okay. Okay. My last and final question is we have substantial cash on our books. Are we planning a big dividend payout or buyback or something like that, I think that should be something which should be there on the board's agenda. And I would strongly urge for that. Can you throw some light on that?
Yes. So this is Surya here. So in terms of cash, we are sitting with good cash and what we believe since quite some time, it's like we want keep cash to ensure that we are able to invest it in our revenue, in our tools, in our new technology. Where is the other questions related to buyback or dividend is concerned, that decision will be taken by the Board, and we will update you when we get...
The reason we are saying is because there is obviously, I mean a change which is going to happen from October 1 regarding buyback and all that. So post that buybacks might not be very efficient way. But currently, there is -- so I would strongly are that the Board consider this is my submission.
I will take note of that.
Next question comes from Tushar Vasuja from Yogya Capital.
Hello. You already mentioned your order book figures, but I missed that. So can you please repeat that? What's the order book at the end of Q1 after '25?
You mean order book on pipeline?
So both would be helpful.
So order book at the end of the year that is the amount that we [indiscernible]. Pipeline is decent It's a good pipeline that we took [indiscernible], we cannot give a number to that, but it is counting.
Okay, sir. And the order look that you have right now, when would it be executed?
[indiscernible] probably at an average of 5 to 7 years.
Five to 7 years?
Yes.
Okay. Okay. Okay. And sir, what's your outlook for revenue growth in FY '25?
No. So this is something which we don't it's a forward-looking statement, we don't discuss.
Okay, sir, fair enough. You also mentioned you had some pricing changes and your margins have been quite volatile. So I don't want a forward-looking number, but what can be a sustainable level of margins going forward?
So we cannot say the number. But one thing which we are very confident of, in line purchase steel in quarter 1 is [indiscernible], we are going to improve from that. How much is something we will not be able to quote number.
[Operator Instructions] We have a follow-up question from Vinay Nadkarni from Hathway Investments Private Limited.
I just wanted to know what are the new products that you are launching in this financial year FY'25. Are there any new products lined?
So look, we -- work on these three product which are called as it as FinnOne Neo, the FinnAxia and [indiscernible] which we also talk about. We keep advancing that. So the latest advancement is in FinnOne, we are now building the Islamic version, which is used in the Middle East, Malaysia, [indiscernible]. So that's a significant functionality announcement that we have.
Next question comes from Chinmay Nema from Prescient Capital.
Could you highlight what are the [indiscernible]...
Can we request you to please be a little louder?
Hello?
Yes, better now.
Sure. Could you highlight what are the key areas, top 3, top 4 areas where you see the requirement for improvement? And what are we doing in those areas? This is more in -- more about the somewhat underwhelming new client additions and revenue growth?
So two things. One is, definitely, there is a focus and Mr. Vishnu to talk about or being in talks lot of customers, a lot of prospects. So there's -- that definitely increasing the new sales is definitely one area. On the operations side, the whole idea is how we can more and more improve the overall customer experience. So I had talked about the strategic initiative of [indiscernible], the entire thing is aligned to various smaller initiates improve the customer experience ultimately. These are the two things I would want to talk about.
So do you have any plans of onboarding new people in the senior management in these domains, so a short-term or a long-term perspective?
Sales, senior leadership, yes, definitely, there is a plan. You would be aware that this last quarter, we -- both our CFO and CHRO has joined. So that's where the management team is strong. And as sales side, we definitely plan to onboard leaders in different regions.
That would be the last question for the day. Now I hand over the floor to Swati for closing comments.
Thank you, Pelcia. We would like to thank to all the investors for joining us today on this call. I will now pass it over to Vishnu sir for his closing comments.
I would like to take this opportunity to thank all of you for your continued interest in Nucleus Software and we'd like to reiterate our commitment with long-term value for customers and all of our stakeholders and the society at large. Thank you.
That concludes our conference for today. Thank you for participating. You may all disconnect now.