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• Revenue: INR 361 crores, 23% YoY growth.

• EMIA Region Revenue Growth: 21% YoY.

• India Region Revenue Growth: 19% YoY.

• APAC Region Revenue Growth: 53% YoY.

• US Region Revenue Growth: 17% YoY.

• License Sales Growth: 52% YoY.

• Profit After Tax: INR 70 crores, 47% YoY growth.

• R&D Expenses: 9% of revenues.

• Sales and Marketing Expenses: 22% of revenues.

• Net Trade Receivables: INR 442 crores as of September 30, 2024.

• Net DSO: 217 days.

• Six-Month Revenue: INR 676 crores, 24% growth.

• Six-Month Profit After Tax: INR 118 crores, 51% growth.

• Warning! GuruFocus has detected 4 Warning Sign with NSE:NEWGEN.

Release Date: October 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Newgen Software Technologies Ltd (NSE:NEWGEN) reported a strong quarter with a 23% year-over-year revenue growth, reaching INR361 crores.

• The APAC region showed impressive performance with a 53% year-over-year growth for the second consecutive quarter.

• The company witnessed a substantial increase in license sales, growing by 52% year-over-year.

• Significant deals were closed, including a project worth INR25 crores with a large insurance company in India and a USD 1.5 million order from a financial leasing company in Saudi Arabia.

• Newgen Software Technologies Ltd continues to receive accolades, being recognized in Forrester's automation software landscape and content platform landscape for Q3 2024.

Negative Points

• Annuity-based revenue growth was softer this quarter at 14%, falling below 20% for the first time in ten quarters.

• The US market showed slower growth at 17% year-over-year, with challenges in closing deals and a slower deal velocity.

• The company's net trade receivables increased to INR442 crores, resulting in a net DSO of 217 days.

• There is a concern about the slower realization of revenues from large deals due to extended execution cycles.

• Despite strong growth in certain regions, the banking revenue growth was slightly lower than the company average, raising questions about sustained traction in the medium term.

Q & A Highlights

Q: APAC has shown over 50% growth for the second consecutive quarter. Is this growth sustainable? A: Diwakar Nigam, Managing Director: The growth in APAC is due to substantial license deals on a weaker base from last year. These deals will be executed over the next 18 months, indicating a long tail of revenue. The growth is driven by license wins and new logo acquisitions.

Q: Annuity-based revenue growth was softer this quarter. Can you explain the reason and future trajectory? A: Diwakar Nigam, Managing Director: The shift from smaller to larger accounts in the US has impacted annuity growth. Execution cycles for large wins have stretched, delaying revenue realization. This is expected to be transient, with recovery anticipated in one to two quarters.