Intense Technologies Limited (532326) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Intense Technologies Limited Q3 and 9 months FY '25 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Richa Singh from CDR India. Thank you and over to you, ma'am.

Thank you, [indiscernible]. Good afternoon, and thank you for being with us on Intense Technologies Q3 and 9 Months FY '25 Earnings Conference Call. We are joined today by Mr. C.K. Shastri, Managing Director and his senior leadership team. Today's discussion shall be led by Mr. C. K. Shastri, who will be followed by Mr. Nitin Sarda, CFO; Ms. Anisha Shastri, Director; and Mr. Jayant Dwarkanath. We are also joined by Ms. Pratyusha, Company Secretary of Intense Technologies. Before we commence, please note that some of the statements made on today's call could be forward-looking in nature. A note to that effect has been included in the earnings presentation of the company, which is also available on stock exchange and on our company website. We would now like to invite Mr. Shastri to give us a brief introduction. Over to you, Mr. Shastri. Thank you.

Good afternoon, everyone. As usual, it's a pleasure to interact with you all on every quarter basis and take your valuable inputs and feedback. This is the third quarter or the 9 months ending results for the company after we have initiated the Project Butterfly about 1.5 years ago. And the positive is that as per the trends we are seeing, we have done fairly well compared to last year. Last year, we had done INR 83.35 crores in 9 months. And this year, we have done on INR 114.47 crores, which is a 37.34% increase. Similarly, EBITDA also has gone up in the 9 months basis by 17.79%. And PAT has gone up by 7.68%, actual basis it is INR 13.6 crores vis-a-vis INR 12 crores last year. On the EPS side, also, there has been an increase, INR 5.79 versus INR 5.38. As such detailed operations overview will be given by Anisha and the detailed financials will be provided by [ Nitin ]. All I could tell you is that we are investing majorly into sales and marketing to scale up and grow because this is only the opportunity we got in the history of Intense where we have the required resources to invest and scale the business to the desired level. We are pretty ambitious company. For us, this is -- the company is only our life and we are giving our best. Over to you, Nitin. Please share the detailed numbers.

Thank you so much, CK sir. Good afternoon, ladies and gentlemen. Thank you for taking off your time to join us here on Q3 plus earnings call. So overall, at the organization level, you've seen that our revenues for the 9-month period has increased from INR 83 crores to INR 114 crores. And the composition of this is our core revenues in terms CCM reach and CPaaS business has contributed about 58% of revenue and the green shoot segment that we had introduced as part of Project Butterfly being able to increase our wallet share has contributed about 42% of the revenue for the 9 months ended December 2024. So overall increase in revenue is definitely coming from the green shoot segments, where we are seeing great tractions from our discussions with the existing customers where we have a long-standing relationship and also in our hunting target -- hunting efforts that we are trying to have more logos with Intense. See, also revenue from Managed Services has increased. So just to give you a breakup of the green shoot segment, Managed Services contract has actually increased from INR 11 crores for the last 9 -- last year, 9 months ended to about INR 27 crores in this particular 9 months December 2024. Professional Services [indiscernible] from about INR 3 crores last year to about INR 10 crores. Revenue from data services, where we see a lot of value addition to the customer and to the company and there we see a great deals in terms of ability to provide AI value addition and data messaging data qualification and all. So that has also increased substantially from [indiscernible] about INR 6.7 crores during this 9 months ended. So in addition to this, our further more offerings in terms of CCM reach and low-code platform solutions has increased from -- to about -- from INR 67 crores to INR 70 crores. So overall what we've seen is each of our segments are bringing us additional revenue, which is in line with our objectives that we have set as part of Project Butterfly. Also during the current financial year, a large portion of revenue contribution has actually come from implementation of Managed Services. For any Managed Services segment, milestones which are defined are front loaded, whereas the remainder of the revenue is from the later end of the contract tenure. During H1, 3 of our Managed Services contract -- customers have actually sought accelerated delivery of the milestones and Intense had to meet these revised timelines. As a result of which a large portion of revenue got recognized in H1 of the current financial year, meaning Q1 and Q2, and that is where you see our H1 revenue is higher on a quarter-on-quarter basis as compared to Q3. From an expenditure standpoint, our employee costs have increased about from INR 41 crores to INR 47 crores, whereas the total headcount of resources is at 517, not very different from 524 resource that we had in September. So we have taken a conscious decision not to add any resources except for enabling or strengthening our sales function and filling in certain strategic leadership positions and also to have a certain of our resources in U.S. as a market, which you were trying to target for a very long time. This increase of INR 5.24 crores during the 9 months ended has been actually spent towards hiring sales teams and filling this leadership positions. We will see the benefit of this investments because CCM as a segment has a long sales cycle and the benefit probably [indiscernible] 9 months of -- probably from the time we identify a lead to materializing into our customer, we will see that benefit coming from wherein Q2, Q3 of next financial year. But yes, at based on the engagements and the revised reinvigorated sales teams, we are positioned much better. Last year, we had about 10 people in dedicated sales team. Now we have about 30 people in our sales team. Also, I would like to draw your attention to professional consultancy related expenses. As you've seen, the expenditure has increased from INR 4.71 crore for the last 9 months ended, it has increased about INR 11.9 crores. See this particular expenses has a direct correlation to our green shoot segment because they rely on a lot on domain experts that we've onboarded them as consultants to help us provide value-added services. And we've also added a partner in last quarter in U.S. [indiscernible] decades of experience in this segment and who is helping Intense with connect and also position our core offerings and green shoot segments in that geography. So as a result of which, a corresponding increase in green shoot segment -- revenue from green shoot segments has also resulted increase in this particular costs. From an other expense of standpoint, like we mentioned in earlier call [Technical Difficulty] Secunderabad we moved our corporate office to Hi-tech City here in Hyderabad. We have leased premises about with 150 seats [Technical Difficulty] also sort of increase -- we have increased our cost spend there by about INR 1.35 crores. And also we are planning to open a dedicated sales office in Mumbai, the financial capital to engage our customers on a day-to-day basis and have much better [Technical Difficulty] discussions. Also, in addition to this, we have actually been investing quite heavily in updating the skills of our technical teams. We have invested in certain AI-related courses [Technical Difficulty] be able to deploy people. So there's another INR 40 lakhs that we have incurred during the current year, financial year, the INR 40 lakhs increase that we see in the first [Technical Difficulty] traveling and customer engagement cost [Technical Difficulty]. Lastly, our depreciation and amortization has increased to INR [Technical Difficulty] crores during the current financial year. There is an increase of [Technical Difficulty]. The revenue has grown by INR 31 crores for the 9 months, and [Technical Difficulty] which has been invested in treasury functions and fixed deposits and mutual funds. That is the highlight that we have from the financial standpoint. Now Anisha will take over and give you an update on operations. Thank you.

Thank you so much, Nitin. And thank you, Mr. Shastri, for initiating the call. Thanks, everybody, for joining us. My name is Anisha Shastri, I take care of overall P&L here at Intense. I've been told by the moderators that there are also some first timers who joined the call. So just for the sake of their understanding. Intense is platform-driven services company. We cater to the BFSI, telecom and government sectors. And we have tried and tested platforms in centralized communications, data quality management and local application development spaces, which we use to deliver large managed services contracts. So most of the work that we do is driven around using our platforms and delivering value to customers through managed services. Let me get to a quick sales update now. From a sales standpoint, we set forth a certain target for ourselves for the year at the beginning of the year. And I can assure you that we are well on our way to achieving our targets. This quarter, we added about 3 logos in the communications offering space, including one in insurance -- one life insurance customer. In fact, if you look at our 9-month revenues today, we have surpassed the revenues that we did for the entire of last annual year in the first 3 quarters. So we are well within where we hope to be by the end of the quarter. We went live with a citizen portal app in the Caribbean countries, and this is actually a huge deal, and it was actually launched by [Technical Difficulty] of that country and very well received. We also went live with a couple of other large Managed Services projects for the government. Nitin had already mentioned in his remarks. And this was fast tracked in H1 in order to meet the customers' timelines and which is why we were also [Technical Difficulty] these milestones in the previous half of the year as opposed to in this half of the year. In terms of people updates, one strong focus for us when we started the Project Butterfly was to see how we can strengthen our leadership team, our management team. I am extremely happy to inform you that now on our leadership -- our core leadership team, we've brought on seasoned professionals with extensive industry experience to steer growth for the organization to meet our aspirations. It gives me great pleasure. Let me introduce you to our newest additions to the team. I mentioned last quarter that we had added a Chief Customer Experience Officer. So we've also taken the liberty to bring them both on the call over here today to give you a brief introduction. Venkat Ravuri is our Chief Customer Experience Officer. He comes with over 25 years of experience of working with HCL, where he delivered large, multi-hundred crore, million dollar projects for HCL in the BFSI space, and he managed large clients, international as well as the domestic clients for HCL, and I will let him introduce himself to you. Venkat?

Thank you, Anisha. Good afternoon, everyone. My name is Venkat Ravuri. I joined Intense as Customer Experience a couple of months back. We started focusing to bring more AI into delivery, [ agility within our delivery teams ], productivity improvement and leading to better customer experience. Though adding to above profitability at project level, each and every project, skill improvements, as Anisha mentioned, and readiness to future growth will be also the focus areas going forward over the next couple of quarters. Thank you very much, and looking forward. Anisha, over to you.

Thank you so much, Venkat. One of our strong focuses was to see how we can farm our existing accounts and improve our wallet share. And for that, what is key is to ensure that customer experience is superlative. And Venkat is helping bring in all that experience from his experience of delivering large mission-critical projects for HCL in the past. And helping improve processes and tracking performance and efficiency internally to ensure that we are able to provide our customers a superlative experience. Our next newest addition is a gentleman who has been a sales veteran in the industry. Philips Eapen, he joins us as our Chief Revenue Officer. And before this, he was with Oracle, SAP and organizations like Cordis. So he brings in a tremendous amount of sales experience on how to sell platforms and services around those platforms. Philips, if you could give us a quick introduction, please.

Yes. Thanks, Anisha. Am I audible?

Yes, yes, you are.

Good afternoon to all. Truly excited and honored to be part of Intense Technologies as we embark on the next phase of our growth journey as we continue to create value for our customers, investors and employees alike. So as we move ahead on Project Butterfly, we are aligning our sales strategies around 3 focus areas, if I may. One is clearly to increase our wallet share within our existing customer base by leveraging all our IPs and the related services as we align on their business growth and continue to create value for them. Secondly, we obviously are creating focused GTM strategies around new customer acquisitions, adding new logos and building long-term strategic partnerships for deeper market penetration as we work our way in. Lastly, but equally importantly, increase our business in the international geographies where we operate today, specifically in the U.S., U.K. and the Middle East. So these are some of the areas we have already started working our strategies around. So with this, thanks, and back to you, Anisha.

Thank you so much, Philips. So about 2 years back, we brought on Nitin from the likes of EY to help us run our financial strategy for the organization. Last year we brought in Venkat from HCL to help us streamline our operations and ensure our customer experience is unparalleled. And this year, we added Philips, latest addition to our team to help steer this growth to the next level. Apart from the 3 of them, we also have Phanindra Madhuri who has 25 years plus experience of running government sales. And since we now have the appetite to take on government sales, and the government has enough money to spend, right? So Phanindra is bolstering our government growth. We have Prabhakar Racherla, who has been with Intense through our highs and lows and understands the entire ecosystem ground up and he manages our org excellence. And I take care of the product piece. We may in the future also consider adding someone for products, but until then, we have product owners with extensive experience running each of our platform verticals. With this strengthened leadership team, I'm very confident that the growth aspirations that we have for an organization will be well on track. Apart from the leadership team, last quarter, we also added a few more folks to the sales team. As I mentioned earlier, our focus has been to ensure that we only invest in sales and marketing and growth. We haven't had -- we haven't really added a direct headcount in any other department in the organization. We have only added additional headcount -- full-time headcount on the sales front. And the idea is to see how to create a high potential and high performing sales team. In sales it is always, it's about a 4-, 5-month cycle before you are able to truly identify whether the salesperson is able to deliver to the potential to the pipe requested. And we -- from time to time, we very regularly assess that performance and then see if we need fresh replacements in those place to make that pipe happen. And so a strong focus for Philips, I mean, will both be to see how we can build a high-performing sales team as an organization. Right. On other headcounts that we have added, we've not really added any full-time headcount. We've only added like Nitin mentioned, consultants for certain projects, wherever we needed, based on the margin profile of that project and what the appetite of that project is to be able to onboard consultants, we make those decisions. On a process front, now we are completely moving to tracking our sales growth, our project profitability. Our efforts estimates all of that on well established tools internally. It's been quite a cultural shift for us as an organization over the last few years to move from a more people driving, people centric approach to more process-centric approach, but still with the right human touch that is needed for customers to feel like we're there with them. And that's the reason we've always -- we take pride in the fact that we've never ever failed a project because we're always with the customers. We're a flexible organization serving the customers as per their needs and ensuring that the customer is first in everything that we do. Venkat is also bringing in a lot of best practices from the industry to further see how we can improve productivity, improve efficiency of how we deliver this customer experience, right? On the product front, our emphasis on AI-driven innovation continues. Today, our products can actually guide customers how they can use our platforms to optimize their communication spend. Some of our customers have saved INR 80 crores, INR 100 crores on their communications spend using our platform. This quarter -- actually a testament to that is this quarter, we received 3 new recognitions, 2 from IDC and 1 from Aspire. The IDC recognition was for AI-driven innovation in customer communication management and Aspire's recognition was also on customer experience management. So these kind of recognitions give us the confidence that our platforms are right up there with all the American products that we otherwise compete with and place us very confidently to go now and expand on our hunting efforts as well apart from the farming efforts that we are already currently putting in. So on the operations front, this was a quick update. I think we will now hand it over to the investor audience for any questions that you may have. Thank you so much.

[Operator Instructions] First question is from Aditya Sen from RoboCapital.

First, I'd like to understand why we have so lower margins in this third quarter? We believe it's some sort of one-off, and I would like to understand how will it grow going forward for the next 2 years, FY '26 and FY '27?

Sure, Aditya, there are multiple parts to your question. So coming to the current quarter, margins -- the reason why the margins have been squeezed. Predominantly, like we have mentioned in your opening remarks, there has been a drop in revenue because of the accelerated deliveries on the Managed Services contracts, which where we have these recognized revenues in H1 of the year. And add to it certain investments that we've been making -- bunch of investments that we've been making in sales teams. We've also investing in development, training and development AI technical tools for upgrading our technical talent. So -- and also, we've seen certain rise in our administration expenses because we've moved our registered office to Hi-tech City. So that has also contributed [Technical Difficulty] increase. So all these costs are actually resulted in a lower margin. Add to it, if you look at the depreciation and amortization is also kicking in this financial year which was otherwise low for the company in the previous financial year. So all these factors are actually squeezing the margins. Having said that, this is not really very different thing for us. Of course, revenue growth has been a little muted as compared to -- as an absolute number, but this investments that we're making will definitely pay off and help us develop a very healthy pipeline going forward. From a margin guidance perspective for the next quarters, we remain -- we actually are striving to deliver at least as a target of 18% to 20% PAT is what we aspire to do. And for which, we have sufficient operational levers. So one of the objectives was first to increase our wallet share of revenue. And once we have identified, we will actually bring in operational efficiencies in how we deliver those value-added services.

Typically we're in the investment phase for growth.

So I was asking, are we saying that we can do 18%, 20% in Q4 itself?

No, no. This is something that will come in over time. So the investments that we are making in the Q2, we've started making these investments in the current financial. And typically, if you look at our sales cycle, they are somewhere around 6 to 9 months. So you've just had a -- we are making these investments in sales teams, and we'll see that corresponding benefits to the organization in terms of over the long-term period. So Q4 is next quarter and we would not be looking at that kind of...

Yes, yes. I get that. Yes, I understand that. Okay. And do we have any aspirational sales target for FY '26 and '27? I'm asking this because we have aggressively expanded the team as of now. So basis that what is the aspirational target that we have set out for the company?

Thanks, Aditya. We would probably not want to give out numbers -- absolute numbers at this point, but we can assure you that we are running for good growth.

The next question is from [ Vridhi Shah ] from CR Kothari & Sons.

Am I audible?

Yes, yes, we can hear you.

Congratulations on good set of numbers. My first question was regarding the revenue model like you are trying to move from license-based model to transaction-based model. So what is the update on it, like the customers willing to shift on the model and is that going?

Thanks for your question, [ Vridhi ] So our -- we've these 3 platforms, one of our platforms is a communication product. So while the designer piece of the communication product, the market is still kind of used to buying a license-based model. We've added extensions to it in terms of transmission services, marketing automation services, which can be recurring in nature. In fact, 2 of the logos that we added in the last quarter are logos that give us this recurring billing. So even the green shoots that we've added apart from the Managed Services, even the green shoots that we've added, we are trying to see how we can add more recurring revenue kind of numbers to our existing pipe. So it's -- I still say a combination of license and recurring revenue -- transactional revenue with a focus on seeing how we can add more transactional revenue.

Okay. And my Second question is regarding the international logos. Have we added any international logos in this quarter? And what is the progress of the U.S. and U.K. markets trying to tap in?

We have -- we have not added any new international logos in this quarter, but we have expanded on our existing international engagements.

So are we expecting any update like any positive update from that side in this quarter or in the near term?

Yes. We definitely hope to grow these engagements over the next year and we hope to add new logos also. We've added a couple of sales folks in the U.S., one full time and then we brought one rainmaker, so to speak, with a network in the BFSI space in the Americas and Europe. So we really hope to leverage these connections and see how we can build a nice healthy pipe for American revenues and U.K. sales revenues for next year.

Okay. Okay. And I have one keeping question regarding the trade receivables. So when it was INR 77 crores in H1. So what is the status right now? Has it come down or what...

Because of this recent Managed Services contract we've taken in the government side, our receivables remain range bound. We currently -- our net working capital in terms of number of days is about 140 days.

Okay. And as you mentioned in the last call that 40% of the receivables was recovered in October, I guess. So are you still on that like we are trying to bring it more now?

Let us very quickly pull up and give you the current receivable number.

Yes, that will be great.

The current receivable that we have is about INR 55 crores. So definitely whatever was billed in Q2, we've realized it. But also in the current quarter, we have had additional Managed Services portion of this contract that we are continuing to implement, so which why the INR 77 crores has come down to INR 55 crores for the -- as of December 2024.